Ask Jack Jack Ehnes

With 30 years of service, what are the benefits/costs of deferred retirement if I stop work and retire at age 62 instead of 60?

In your situation, deferring your retirement would increase your retirement benefit, although you would have to weigh this increase against the cost of foregoing of benefit income.

Normal retirement eligibility requires that members must be age 60 and have five years of service credit under the Defined Benefit Program. The single benefit formula uses service credit, times your age factor, times your final compensation to equal your complete retirement benefit.

Service Credit x Age Factor x Final Compensation = Retirement Benefit

The benefit formula calculation includes an age factor of two percent of final compensation for each year of credited service at age 60. The age factor increases to a maximum of 2.4 percent at age 63.

However, for those members with 30 or more years of credited service, a “career factor” of an additional 0.2 percent of final compensation per year of credited service is added to the age factor so long as the combination of the career factor and age factor do not exceed 2.4 percent. So, those members with 30 or more years of service will reach the maximum age factor of 2.4 percent at age 61 and six months.

Here’s an example of what the single formula looks like at age 60 versus age 62:

Age 60  
Service credit 30 Years
Age factor (2% for age 60 + .2% career factor) x .022
Final compensation x $6,000/month
Monthly retirement benefit = $3,960
Age 62  
Service credit 30 years
Age factor (2.267% for age 62 + .2% career factor, 2.4% cap) x .024
Final compensation  x $6,000/month
Monthly retirement benefit = $4.320

Although your monthly benefit will be greater if you retire at age 62, rather than age 60, you also must consider the fact that you are forgoing two years’ worth of benefit income, which would amount to, in this example, about $95,000. Also note that in your situation, once you reach age 61 and six months, further deferment of your retirement will not increase your benefit.

Because the combined age factor and career factor may not exceed 2.4 percent, if you retire at age 61 and six months, your monthly benefit will be the same as it would be at age 62.

You may also use the online calculators to calculate your specific benefits, or if you are nearing retirement, it’s highly recommended you schedule an appointment with one of our benefit counselors.