Human Resources & Workforce Diversity
UW System Adminstration, IF YOU'RE CONSIDERING EARLY RETIREMENT
ARE YOU CONSIDERING EARLY RETIREMENT?
If the thought of early retirement intrigues you, the University of Wisconsin Fringe Benefits Advisory Committee would like to offer points for your consideration. In the past we have received numerous requests for information from employees who have misconceptions about available options for retirement. We have prepared this brochure to acquaint you with options for early retirement.
WHAT SHOULD I DO IF I HAVE MORE QUESTIONS?
Not all the answers are here. This is just an overview of options available if you ever consider retirement at an earlier than normal age. If the concept interests you, please contact your Campus Staff Benefits Office for additional information.
HOW EARLY CAN I RETIRE?
You are eligible for a retirement benefit if you are 55 years of age or older (50 for those in protective occupations).
HOW MUCH MONEY WILL I GET? HOW IS MY PENSION CALCULATED?
A formula calculation usually determines the amount of your monthly retirement base benefit.
Base benefit = Final Average Monthly Salary x Years of Creditable Service x .016 (Formula Factor).
The formula factor for years prior to 2000 is .0175.
Assuming you work full-time, your final average monthly salary is the total of your high 3 years of earnings divided by 36. Part-time employees have a smaller divisor. Earnings for faculty and academic staff are determined on a fiscal year basis, earnings for classified staff are determined on a calendar year basis.
Years of Creditable Service are the total years for which WRS retirement contributions were made plus qualifying military service.
.016 is the formula factor for most employees. There are different formula factors for those employees in protective occupations and executive positions. The formula factor is higher -- .0175 -- for years of service prior to 2000.
To compensate for the longer anticipated pay-out period, the Base Benefit is adjusted for employees who retire before reaching normal retirement age. Normal retirement age is age 65 (lower ages for protective occupations), but the amount of reduction varies based on age and service as shown in the following chart. The base Benefit is also adjusted for employees who choose an optional payment plan (discussed below).
IS THERE A 'PENALTY'?
Your base benefit may be reduced if you retire early, but the penalty may be less than you think. Employees (other than protective) who retire at age 55 have a reduction of at least 9.6%. However, if you have 30 years of service you can retire at age 57 with no penalty. If you have less than 30 years of service, the additional payments you receive through early retirement may make up for the amount you lose through the reduction. The chart below shows the percentage of the Base Benefit that is payable with various combinations of age and service.
| YRS SVC | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 |
| 20 | 87.20% | 88.80% | 90.40% | 92.00% | 93.60% | 95.20% | 96.80% | 98.40% | 100.00% |
| 25 | 93.60% | 94.40% | 95.20% | 96.00% | 96.80% | 97.60% | 98.40% | 99.20% | 100.00% |
| 27 | 96.20% | 96.60% | 97.10% | 97.60% | 98.10% | 98.60% | 99.00% | 99.50% | 100.00% |
| 29 | 98.70 | 98.90% | 99.00% | 99.20% | 99.40% | 99.50% | 99.70% | 99.80% | 100.00% |
| 30 | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
WHAT IS A MONEY PURCHASE BENEFIT?
The money purchase benefit converts the total value of employee and employer contributions in your retirement account plus interest to a life annuity based upon your age at retirement. There is no additional age reduction. If this calculation provides a higher monthly benefit than the formula calculation, you will be paid a money purchase benefit.
HOW DOES PARTICIPATION IN THE VARIABLE FUND AFFECT MY BASE BENEFIT?
If you receive a money purchase benefit, the portion of your account which is in the variable fund is directly included in the calculation of your annuity. If your benefit is determined under the formula calculation method, a variable adjustment is made to your annuity. The adjustment is based on the variable excess (or deficiency) in your account when you retire which is based on a comparison of the actual balance of your account to what the balance would have been had you only participated in the fixed fund. Under both calculations, if investment experience of the variable trust is negative in a given year, you may see a decrease in the variable portion of your monthly annuity.
WHAT IF I RETIRE BEFORE AGE 62?
You are not eligible to receive Social Security benefits until you reach age 62. For this reason, the WRS allows you to choose an annuity option which pays you more pension dollars until you reach age 62 in return for a reduced amount thereafter. This is known as the accelerated payment option. At age 62, your retirement benefit payment would decrease by roughly the same amount as your Social Security benefit.
WHAT ARE THE RETIREMENT OPTIONS AVAILABLE?
When you apply for a retirement benefit you will choose an annuity option. All of the options provide monthly payments to you for life. The base benefit (adjusted for early retirement as appropriate) is only payable during your lifetime. Two options guarantee payment to a beneficiary if you die before you receive 60 or 180 monthly payments (5 and 15 years). Other options provide continued payments for life to a joint survivor in the event of your death. Accelerated payment options are available if you retire before age 62, to compensate for your ineligibility for social security benefits.
HOW LONG CAN I KEEP THE STATE GROUP HEALTH INSURANCE COVERAGE?
When you retire the State Group Health Insurance can be continued at your own cost, as long as you and/or your spouse live. At age 65, if retired, you must enroll in Medicare.
WHY DO I NEED TO CONTINUE HEALTH INSURANCE? DOESN'T MEDICARE PAY MEDICAL BILLS AT RETIREMENT?
Medicare provides health insurance for retirees at the age of 65 but it does not pay all medical expenses and it requires you to pay annual deductibles and co-pays. Once you are eligible, Medicare becomes the first payer of your health insurance bills, and, if you continue state health insurance, the bills that Medicare does not pay are forwarded to your health insurance plan. The State Group Health Plan that you maintained while an active employee continues into retirement and integrates with Medicare when you turn age 65. Your premiums will decrease to reflect the costs that Medicare assumes.
HOW IS SICK LEAVE VALUED AT RETIREMENT?
Unused sick leave at retirement is converted to a dollar credit amount which is used to pay premiums for your State health insurance plan. Classified employees can multiply the number of hours of sick leave on their earnings statement by their hourly rate of pay. If you are faculty or academic staff (unclassified), divide your gross monthly salary by 174 to arrive at an hourly rate of pay, then multiply the result by the number of hours of sick leave on your monthly leave statement. Gross monthly salary for 9-month appointments is calculated by dividing the academic year salary by 9. In addition, if you retire with at least 15 years of continuous employment, you will be eligible for supplemental sick leave credits based on your actual sick leave balance and number of years of continuous service at retirement.* The following chart identifies the supplemental sick leave credits that may be available.
*For employees covered by a collective bargaining agreement, this supplemental benefit must be negotiated.
| Full years of Adjusted Continuous Service | Maximum Matching Credits - General | Maximum Matching Credits - Protective |
| 15 | 780 | 1170 |
| 16 | 832 | 1248 |
| 17 | 884 | 1326 |
| 18 | 936 | 1404 |
| 19 | 988 | 1482 |
| 20 | 1040 | 1560 |
| 21 | 1092 | 1638 |
| 22 | 1144 | 1716 |
| 23 | 1196 | 1794 |
| 24 | 1248 | 1872 |
| 25 | 1352 | 1976 |
| 26 | 1456 | 2080 |
| For each additional year: | Add 104 Hours | Add 104 Hours |
After you retire the university no longer contributes toward the health insurance premium. The single or family premium is your responsibility. Your Staff Benefits Office will be able to help you to estimate how long your sick leave 'credit' will last. When the account is exhausted, premiums will be deducted from your monthly retirement benefit.
CAN I WORK AFTER RETIREMENT?
You may return to work after retirement with a WRS employer as well as with any private employer. If you accept work with an employer who participates in the WRS, legislation enacted in 1996 requires a 30 day break in employment. The 30 day break is satisfied after the latest of three dates: 30 days after your employment termination date; 30 days after your retirement application is received by ETF; or 30 days after your annuity effective date.You may work and collect Social Security benefits as long as your earnings are under certain annual limits. However, if your earnings go over the limit, some or all of your Social Security benefits will be offset by your earnings.
If you have additional questions, call your Campus Staff Benefits Office to schedule an appointment. Every effort has been made to ensure that the information in this brochure is accurate. If the information should conflict with State Statutes, statutes must be followed.The University of Wisconsin System does not discriminate on the basis of disability in the provision of programs, services or employment.
If you need this printed material interpreted or in a different form, or if you need assistance in using this service, please contact us at (608) 265-5150.
Last updated July 10, 2001.