deferred state pension benefits- increase in value?

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mesaverde
Posts: 488
Joined: Wed May 02, 2007 4:14 pm

deferred state pension benefits- increase in value?

Post by mesaverde »

Hello,
I am a public school teacher in Virginia and a member of the state pension known as the Virginia Retirement System, VRS.
I am vested and may quit/retire next year (age 47) but do not want to begin taking pension payments until age 65.
According to the VRS website, they estimate my monthly payments starting at age 65 would be $2,228/month. With inflation the value of the $2,228 could easily be cut in half by the time I'm 65.

Hence my question- Typically do deferred state pension benefits increase in value over time (because of pension investment return)?

I've asked the Virginia Retirement System the same question but haven't heard back.
"Learn from the past, live in the present, plan for the future"
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FiveK
Posts: 10967
Joined: Sun Mar 16, 2014 2:43 pm

Re: deferred state pension benefits- increase in value?

Post by FiveK »

mesaverde wrote: Sun Aug 11, 2019 9:42 am Hence my question- Typically do deferred state pension benefits increase in value over time (because of pension investment return)?

I've asked the Virginia Retirement System the same question but haven't heard back.
Don't know about "typically" - anecdotal information suggests "no" - but you really need to know what will happen with yours.

Based on "When you apply for retirement, your benefit will be calculated based on your creditable service and average final compensation at the time you left your position." on p. 62 of https://www.varetire.org/pdf/publicatio ... plan-1.pdf, there doesn't appear to be a benefit increase based only on the fact that you don't start immediately.

But p. 8 of https://www.varetire.org/pdf/publicatio ... ndbook.pdf indicates that Cost of Living Adjustments (COLAs) are applicable.

There might be more specific information somewhere in the Virginia Retirement System site.
CnC
Posts: 957
Joined: Thu May 11, 2017 12:41 pm

Re: deferred state pension benefits- increase in value?

Post by CnC »

mesaverde wrote: Sun Aug 11, 2019 9:42 am Hello,
I am a public school teacher in Virginia and a member of the state pension known as the Virginia Retirement System, VRS.
I am vested and may quit/retire next year (age 47) but do not want to begin taking pension payments until age 65.
According to the VRS website, they estimate my monthly payments starting at age 65 would be $2,228/month. With inflation the value of the $2,228 could easily be cut in half by the time I'm 65.

Hence my question- Typically do deferred state pension benefits increase in value over time (because of pension investment return)?

I've asked the Virginia Retirement System the same question but haven't heard back.

You are asking a very odd question. You want to know if the benefits your pension says you will receive if you retire tomorrow will be higher than what is shown?

First and most obvious. No, unless it specifically stated that your pension payment is shown in 2019 dollars you can assume the number they give you is in real dollars. Even if it has a cola, that only applies to it once you start withdrawing it.

Second and I would think equally obvious. We have no idea what your pension will do. You are the one with the actual pension tools.


What you should do, is go into the calculator and figure it out yourself.



Set retirement age at 47 and withdrawal age at 47. Figure out what that number is. This number is A.
Next
Set retirement age at 47 and withdrawal age at 65. Figure out what that number is. This number is B.

If B is larger than A then yes your payments increase because you deferred your pension.
anonenigma
Posts: 825
Joined: Thu Apr 21, 2011 11:58 pm

Re: deferred state pension benefits- increase in value?

Post by anonenigma »

Your pension should increase between age 47 and age 65 because of the age factor. This doesn't seem to apply to your Virginia pension system, but others thinking the same thought should definitely check the age factor table for their retirement system, as it might max out earlier than age 65, in which case you'd have left money on the table. (For California teachers hired before 1/1/13, the age factor maxes out at .024 at age 63, age 61.5 for those with 30 years of service.)

If you stop teaching at 47, the other two components of the formula - years of service and highest salary - will, of course, be locked in.

Fortunately for you, Virginia teachers pay into Social Security, so you won't be affected by the Windfall Elimination Provision or the Government Pension Offset.

If your district offers retiree health benefits, be sure that you are allowed to defer taking your pension and still qualify for retiree health benefits.
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