How much does an annuity pay?
When you purchase an annuity from the state of Washington, you receive a guaranteed monthly income from that annuity for the rest of your life. Annuities are not impacted by market swings, and you cannot outlive them. Annuity income is in addition to your pension.
Your monthly annuity payment will depend on several factors, including your purchase amount and your age. If you die before you (and your designated survivor) receive your purchase amount in payments, your beneficiary will receive a balance refund.
Keep in mind that once you set up an annuity, you cannot change the income amount. One you begin receiving payments, you cannot cancel the annuity. Annuities are taxable income. It’s important to speak with a tax advisor to understand how that may impact you.
Types of annuities
DRS offers three types of annuities: plan annuities, service credit annuity and TAP annuity.
Purchasing service credit
A service credit annuity allows you to purchase from 1 month up to 60 additional months of service credit, which will increase your monthly pension income as if you had worked that many additional months. The increased monthly amount you will receive from this annuity will add to your pension, but it does not give you actual service credits that are used to calculate your base pension and you cannot use it to reach vesting status or to retire early.
If you’re planning on returning to public service work after retirement, you’ll need to understand the return to work limits and how they may impact receiving your pension and annuity payments.
A service credit annuity has the same survivor option and Cost of Living (COLA) adjustment as your pension and must be purchased at time of retirement. You can use your pretax DCP funds to purchase it. Cash can also be used to purchase this annuity. If you have a DCP Roth balance, you can take a cash withdrawal from your Roth balance to purchase this annuity.
To create an estimate, Log in to your online account and select Purchasing Service.
Plan annuity
Plans 1, 2 and 3 for all retirement systems each offer their own annuity. Plan annuities offer the same survivor and Cost of Living (COLA) adjustment as your pension. Your beneficiary will receive a balance refund if you die before you (and your designated survivor) receive your purchase amount in payments.
Plan annuities must be purchased at the time of retirement and can be purchased with your DCP funds or through other approved funding sources. You’ll continue to receive these payments if you return to work.
How much does an annuity pay?
An age 65 Plan 2 member with no survivor who purchases an annuity for $50,000 could expect to receive an $283 payment added to their pension for the rest of their life.
To create an estimate, Log in to your online account and select Purchasing Annuity.
TAP annuity
TAP annuities are available to Plan 3 members. TAP annuities feature a guaranteed 3% yearly Cost of Living (COLA) increase. They offer the ability to extend your annuity payments to a survivor, and a balance refund if you pass before you (and your designated survivor) have been paid out your purchase amount.
TAP annuities can be purchased any time after you separate from employment but may only be purchased once per plan. You can start receiving payments at any age, but your first payment may take up to 90 days.
This TAP Annuity calculator can help you estimate your monthly income, including the annual 3% increase.
Additional resources:
Transcript – Episode 44 – All about the Plan 3 TAP Annuity
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