Any retired PA teachers? Question for you

[Frwinkley]

I am a PA teacher with 10 years to go before retirement. I want to make certain that I am understanding something correctly.

For the heck of it, I went to the PSERS retirement calculator. Am I right in my thinking that I will get a lump sum payment (contributions plus interest), in additional to a monthly pension payment?

I realize there are many different scenarios, options, etc., but right now I am just trying to gather some basic understanding.

 

[jam217]

Yes, that is correct. I am not yet retired but a few years ago I went to one of those daylong PSER workshops. It was very helpful in explaining the different monthly options.

 

[Frwinkley]

Thank you very much!

 

[disney junky]

Yes. I retired in 2015. You will get your contributions plus interest if you choose. You can choose not to take the lump sum and take a larger monthly income, but PSERS recommends taking the lump sum. That's what I did. I rolled it over into a qualified account. Keep in mind the age and length of service factors. At 55, the largest penalty drops off. With 35 years of service, all penalties drop off. Age 60 with 30 years of service, all penalties drop off, and at 62 with any years of service, all penalties drop off.

 

[Frwinkley]

Thank you. What do you mean when you talk about "penalties"?

I will be 63 with 20 years of service. My district offers an early retirement incentive, provided you have at least 17 years of service and are 55. I began teaching in my 40s.

 

[disney junky]

There is a 3% per year penalty for not meeting certain criteria. I had friend who started teaching at 22, and at 55 retired. He had 33 years of service, not the 35 for full retirement so he incurred a 6% penalty off his monthly pay (he was short two years). But he also had two more years of income in retirement. Your plan should incur no penalty (20 years x 2.5% x 3 top years average income). There have been some changes, but I don't know under which changes you got into the system. Keep in mind, your income is based on the three highest years of earning, not the final three years. Sometimes people don't realize that.

Our district would occasionally offer incentive for early retirement. I got a little bit for some of my unused sick days. That varies from contract to contract and district to district.

 

[Frwinkley]

I begin teaching in 2003. We hit our highest pay at 17 years, so my plan is to retire at 20 years. The district also continues to cover your medical insurance (family included), until you are eligible for Medicare.

Can you tell me what the 2.5% is? The PSERs calculator just gives you straight numbers--no factors mentioned.

Any idea what "present value" means when talking about option 1 as it pertains to how you'd like to receive your money.

Thanks so much for all of your help!

 

[disney junky]

Present value is a total value assigned to your account. If it hasn't been completely paid out upon your death, your beneficiary receives the balance.

The 2.5% is the multiplier. They multiply years of service, in your case 20 times 2.5%, to get the percentage of your highest average three years salary you would get, so 50%. Taking the lump sum reduces that, but you have the money in hand rather than in the system. My years of service were 30.54 so my percentage was 76%. I took my lump sum and I also took a reduced monthly so my spouse continues to get a reduced benefit after I die, assuming she outlives me. Keep in mind, your income is already reduced by your contribution which is probably 7.5%, PA income tax, social security contribution and perhaps union dues. PA doesn't apply income tax to pensions and you don't pay social security on a pension either. So in real money in pocket, it's not as much of a reduction as it may seem just doing the numbers.

PSERS does a good job of explaining the system, and most people just want to know the numbers. I found it fascinating, so I dug into it to understand. I got to the point where I could look a the monthly amount and say, this is enough. We should be fine. I actually took a customized option.

I'm old enough to take social security, but currently, I'm holding off on that. At your planned age of retirement, you will be able to immediately start collecting that if need be.

 

[tvguy]

Wow, that is a great retirement plan.

 

[disney junky]

It is a great retirement plan. I am thankful every day.

 

[Frwinkley]

Thank you! You have provided me with some really useful information. I feel like you--the whole thing is fascinating to me and I will continue to dig deeper.

 

[CPT Trips]

It is a great retirement plan. I am thankful every day.

What's a retirement plan?