A cost-of-living adjustment (COLA) is an annual adjustment applied to your retirement income to reflect changes in the economy (inflation). Most DRS retirement plans offer a COLA, but Plan 1 members in PERS and TRS only have a COLA if they selected it during retirement. View the 2025 COLA percentages by retirement date and plan. When will I receive the 2025 COLA? LEOFF Plan 1 COLAs take effect April 1 and start with April 30 benefit payments. All other DRS Plan COLAs take effect July 1 and start with July 31 benefit payments. You need to be retired by July 1 for at least one year to be eligible for a COLA. Once you’re eligible, you’ll receive any COLA starting with the pension payment issued at the end of July, and every year after. You don’t need to apply to receive the COLA – it’s automatic. How much will the COLA be? The maximum annual COLA you can receive for most DRS plans is 3%. If inflation that year is above 3%, the additional amount is applied to future adjustments (called COLA banking). Any year inflation is lower than 3%, the COLA can pull from banked amounts in prior years. This happens automatically and the adjustment is made for you. You could receive a different adjustment each year, depending on the amount available in your COLA bank. Will PERS 1 and TRS 1 receive a benefit increase? If the legislature changes the current law, most of these retirees could receive a one-time increase in July. There are several bills that could affect this decision. You can track all bills here.

Retirement is a topic and a mindset our culture tends to reserve for those who are perceived as old enough for it. You know, people with grandchildren, no mortgage payments and a subscription to AARP. The thinking goes, once you meet those standards, then you can start planning for retirement. Why waste today on a faraway goal, right? Well, you might want to think again. There’s a teacher in Washington state who holds a very different view. Her name is Ms. Allison McFadden, and she teaches kids about their personal finances, so they’ll be well equipped for a future retirement. Allison McFadden “It will be much easier for them than delaying important decisions until the deadline is near,” she says, adding “the theme for the school year is always ‘Planning for Your Future Self.’” Allison has spent the past 42 years teaching business and personal finance to kids at Olympia’s Capital High School. She earned her degrees at the University of Washington (Business Education) and St. Martin’s University (Masters, Computers in Education). But her parents taught her the basics when she was just a kid herself. She decided to blend her business and education disciplines, which led her to teaching. “If I had stayed in just the business side then I probably would have ended up in an accounting or finance pathway somewhere. I also considered going into real estate but with kids, teaching fit our lifestyle better.” Allison is married and has two children and four grandchildren. “They’re all local so I get to spend a lot of time with them,” she says. Her classes emphasize that decisions made today impact what you can do tomorrow. Multiple topics related to personal finances include saving, budgeting, credit, insurance, taxes and investing. “Retirement is woven into every unit and then we end the year with a specific retirement unit,” she says. The class is an elective, so most students take it willingly. Many have even said that personal finance should be a graduation requirement.* And the feedback after graduation has been positive. Lots of students have checked in with their mentor. “They’ve said how glad they were that they had a foundation of knowledge to be able to make decisions on their own,” says Allison Retirement advice from a teacher who knows Most of us probably haven’t been lucky enough to have a teacher like Ms. McFadden in high school. But that’s ok – she has some advice and resources for us so we can start planning if we haven’t already: Everyone focuses on the wealth accumulation phase, but the wealth distribution phase is just as important! And, hopefully, just as long. Don't leave it to the last minute to start working on it. Create a plan that includes minimizing taxes and maximizing gain while considering your risk tolerance level; you want to be confident that you won’t outlive your money when you make the decision to retire. There are a lot of factors to take into account and there isn’t a “one-size-fits-all” strategy. Also, it’s a lot of work to quit work. But that’s not all! Allison uses the DRS website to check her plan information. She also watches the videos and follows along with the Retirement Planning Checklist. And then there’s an array of other non-DRS resources, including books and other websites she refers to. “I might already know the information, but then someone explains it in a different way that makes me re-evaluate how it applies to me,” she says. “I use a lot of resources like books and websites and listen to finance podcasts daily.” So what will Allison do in retirement? “We built a house about five years ago and still have a to-do list to get to the ‘maintenance’ stage. My grandkids are all involved in sports and activities so my calendar is pretty full. I’m going to enjoy having more ‘me’ time as well.” Congratulations on your upcoming retirement, Ms. McFadden. Well done! Well done indeed! *KREM 2 News featured Ms. McFadden along with a bill that was introduced in Washington state to make personal finances a requirement for high school graduation.

There are two ways to contribute to Washington’s Deferred Compensation Program (DCP). You can choose to invest a set dollar amount every month, or you can opt to invest a percentage of your gross pay. DCP is a savings program, that helps you invest for the retirement lifestyle you want to achieve. One way to make sure you’re putting away a smart amount is to think of your savings as a pennies-on-the-dollar amount rather than a percentage. If you’re saving 10% of your income, that’s 10 pennies for every dollar earned. Making cents of the numbers A recent study by Voya found that workers who saw their savings as percentages chose to save an average of 6.9%. But workers who saw their savings in pennies for each dollar saved an average of 8%. The UCLA Anderson School of Management says that this change in how information is shown could increase retirement savings by almost 20% if it’s used over a whole career. Over time, saving just a few pennies more can add up to thousands of dollars of retirement funds. Saving automatically DCP has easy, smart investment options. You can either select your investments, or have your contributions automatically invested in the target date fund for your age. All funds are managed by the Washington State Investment Board. When you save with DCP, your contributions are deducted from each paycheck and you have the option to increase or cancel your contributions at any time. DCP also offers an auto-escalation option, which automatically raises your contribution based on a frequency you choose. Take action: Log in to your DCP account, visit “Contributions and Savings”, “Manage Contributions” and “Choose Set up Now” to create an automatic increase for your contributions. Ultimately, no matter your financial situation, it’s important to save today. Saving now allows you to benefit from the power of compound earnings. Compounding is taking the money you earned from your investments and reinvesting it to earn even more, which helps your savings grow. Estimate future potential DCP savings. Find out how much you can save, withdraw and how long your money will last with the DCP calculator. See the list of employers who offer DCP. Sign up by filling out the quick online enrollment form.

Most of us don’t know exactly what we’ll be doing 30, 20 or even 10 years from now. And yet, when you chose a retirement plan, you were faced with deciding just that. Which plan will serve me better for my lifetime? It’s a big decision. And in the case of your DRS retirement plan, a permanent one. Occasionally, DRS hears from customers who question if the retirement plan they chose is the right one for them. This buyer’s remorse is a natural human reaction to many financial related situations. As you learn more, or life circumstances change, you may prioritize different features in a retirement plan. But here’s some good news. Both Plan 2 and Plan 3 are strong, solid retirement plans designed to benefit you. Each plan includes different features that may be appealing depending on your life circumstances and preferences. Both plans include a pension - a monthly retirement benefit you receive for life. For more, visit  Plan 2 and Plan 3 comparison. What if you still have buyer’s remorse? Both plans have a lot to offer. But what if you still aren’t happy with your plan? Well, fortunately there are some ways to adapt your plan to better fit your needs. How to make Plan 2 behave more like Plan 3 Common issue: When it comes to account balance and flexibility, you might have seen how Plan 3 can really escalate a member’s retirement savings. DRS calculates your retirement pension based solely on your years of service, income, and a factor of 2%. This lack of control and flexibility over retirement income can lead some Plan 2 members to regret choosing their plan. Potential solution: Consider additional savings through Washington’s Deferred Compensation Program (DCP) or similar voluntary retirement savings plan like 457, 403b or IRAs. The Plan 3 members who are contributing 10 or 15% of their income into their investment account may have more flexibility for options like early retirement. For similar flexibility, some Plan 2 members may set their DCP contribution rate to be the difference between 15% and the current Plan 2 rate to treat Plan 2 more like Plan 3. Similar to the Plan 3 investment component, you can withdraw your DCP savings any time after you separate, making options like early retirement more available to you. How to make Plan 3 behave more like Plan 2 Common issue: With a 2% defined benefit calculation, the Plan 2 pension benefit is twice as large as Plan 3, which uses a 1% calculation. Why? Because both the employer and the employee fund the Plan 2 pension. In contrast, your employer funds your Plan 3 pension benefit. Your Plan 3 contributions go into your separate investment account. This difference in pension payouts often leads some Plan 3 members to regret choosing their plan, because of the smaller, guaranteed benefit. Potential solution: Consider annuity options offered by DRS—these provide a lifetime monthly benefit similar to your pension. TAP annuity, purchased with your Plan 3 investments Plan annuity, purchased using DCP or other similar savings Annuities can often be misunderstood, and many people don’t want to give up the flexibility that an investment account with a large balance can provide. However, if you are looking for more stability in your monthly income, an annuity may be right for you. Without a built-in profit margin, Washington’s annuities provide the maximum benefit to you.   You can purchase a plan annuity using your DCP savings or other approved funding sources. The plan annuities increase your monthly pension and therefore offer the same survivor option and COLAs, as well as a balance refund. If you or your survivor pass before the original purchase amount is fully paid out, your beneficiaries will receive the remaining balance. You must purchase Plan annuities at the time of retirement. Plan 3 members can also purchase the TAP annuity. You can buy a TAP annuity at any time after you separate from employment. The TAP annuity requires a minimum purchase amount of $25,000 but has no maximum limit. It can only be purchased using your Plan 3 investments and is a payment separate from your pension. This annuity was designed to act like a monthly pension. It guarantees an annual 3% COLA increase, a survivor continued payment option, and a balance refund if you or your survivor pass away before the annuity amount is fully paid out. You can purchase a TAP annuity at any age, but you can only purchase one per plan. In addition to an annuity, DCP is a great way to help supplement those additional savings especially if wish you had selected a bigger contribution rate in Plan 3. DCP allows for a minimum monthly contribution of 1% and depending on your age, a yearly maximum of $23,500 or $31,000. You can learn more about limits by visiting the DCP section of our website. Summary With multiple options, it’s important to identify the unique strengths and advantages that will benefit you most. Take the time to learn the features your plan offers. This will help you maximize your benefits in the long run. Both plans offer powerful, flexible tools to save for retirement. If you have questions about your plan’s features, visit your plan page or contact us securely through your online account.   More resources: Episode 21 – DCP earnings and annuitiesEpisode 44 – All about the Plan 3 TAP Annuity