Friday, December 05, 2014

A Simple Chart To Determine Your Tier 4 Pension.



Despite the many retirements in the last few years, the bulk of educators in the NYC school system are still covered under New York State's Tier 4 pension system.  Therefore, I prepared a simple chart that helps one to determine their pension at retirement.

The chart shows the percentage of the Final Average Salary (FAS) that the educator will receive, based upon age, and years of service.  This chart excludes any educator who participates in the 25/55 program and those who receive a disability pension.

Final Average Salary (FAS):
The FAS is calculated as the highest three consecutive years which are usually the last three years that an educator works.  However, to ensure that the educator doesn't pad their pension in the last year, there is a 10% cap.  That means that if any one year is greater than 110% of the FAS, than that year's salary is capped at 110% and not higher.  To get a present day estimate of your FAS, you can go on the TRS website and look it up under benefit estimates .  However, the TRS website does not include per session, coverages, or 683 money in their pension calculation, just your base salary.

Years of Service:
The years of service is credited when you have completed the year not at the start of the year.

Multiplier:
The multiplier used to determine the educator's pension is based upon the years of service completed.  The table below shows the completed years of service and the multiplier.

Years of Service                    Multiplier
Less than 20 years....................1.67%
20 years or greater....................2.0%
Over 30 years..........................1.5%*


* Note: the 1.5% multiplier is for every completed year above 30.

Age Correction Factor:
No educator can receive a regular pension before the age of 55.  Between 55 and 61 years of age, the pension is reduced by the age correction factor.  However, if the educator is part of the 25/55 program or has completed 30 years of service, no age correction factor is used.

Finally, the chart assumes the maximum single educator payout (option 1).  If you intend to put a spouse as a recipient of your pension, the final pension will be reduced by as much as 15%, depending on the option selected and the age of the spouse.

Example 1:
Educator with 15 years experience with an FAS of $85,000 wants to retire at 57.
$85,000 x 19.8% = $16,830

Example 2:
Educator with 25 years of experience with an FAS of $104,000 wants to retie at 62.
$104,000 x 50% = $52,000

Example 3:
Educator with 34 years of experience with a FAS of $110,000 wants to retire at 55.
$110,000 x 66% = $72,600.

Example 4:
Educator with 19 years of experience with a FAS of $90,000 wants to retire at 62,
$90,000 x 31.7% = $28,530

Example 5:
Educator with 22 years of experience with a FAS of $102,000 wants to retire at 55.
$102,000 x  32.1% = $32,742.

Example 6:
Educator with 10 years of experience with an FAS of $75,000 wants to retire at 55.
$75,000 x 12.2% = $9,150.


27 comments:

Anonymous said...

The FAS is the average of the 3 highest consecutive annual salaries, earned during a teachers credited time of service. Not necessarily in the last 5 years. If you retired in June you better check your final benefit statement. Those yokels at TRS took my last 3 years when my best years was 2008, 09 and 10 by close to 10 grand. When I called they said it would take about 6 months to correct, but don't worry you will get all of it retroactive to the day you retired. So now we don't get the money the city promised us, trs can't even get our pensions right.

Anonymous said...

Do you know how the ASAF % amount, which is added to your pension, is figured out?

Chaz said...

Anon 10:54

Read my post on the ASAF and that should tell you what you need to know about the ASAF.

http://chaz11.blogspot.com/2014/05/demystifying-annuity-savings.html

Anonymous said...

Still trying to figure out the 25/55. I will have 27 years of service at age 55. (Which is when I plan to retire) How do I figure out my pension? Oh yeah, are not most tier 4 teachers in 25/55? Any help with my questions is much appreciated!!!

Chaz said...

Anon 10:47

First, you would get 54% of your FAS at 25/57.

Second, 25/55 only made sense to about 40% of the Tier 4 educators and less than half chose to participate in the program since they had to contribute 1.84%.

If I was eligible, I would have joined.

Anonymous said...

CSa contract agreed to...

Anonymous said...

i did 25/55 and retired June 30. for me it was a good decision with no regrets. however, still waiting for trs to finalized pension and, of course, retro pay and fas adjustment down the road. comfortable that all will work out in the long run. very interesting post today. thank you.

Anonymous said...

Is 35 years the highest you can go?

Chaz said...

No. I just stopped it at 35 years. Just add 1.5% for every year over 35 to get it. For example for 40 years multiply the FAS by 75%.

Anonymous said...

Great post Chaz. Bottom line, those in Tier 4 have it good. REAL GOOD. Those who went to college right after hs and started teaching by age 23-24 will have the 30 year requirement and can say SEE YA at age 55 and never look back. 55 is VERY young to retire from ANY job, let alone with the amazing gift of a 60%-63% pension.

At age 55 with that incredible pension, I will retire to Florida, and live like a KING! A king! Only 10 more years to go.

Not a bad life for a civil servant.

Anonymous said...

The ATR's, including mylself, that are just under 20 years and are only in their early 40's are screwed. Don't see an end in sight for ATR life and I have 13 yrs. before I can retire. So my pension is likely to be 3 dollars a month.

Anonymous said...

Just curious as to what is the highest u can go on percentages over 60%? I know it's 1.5% per year over 30 years so if you're 55 years old and are at 63%, can you go to 65 years old and hit 78%?

Anonymous said...

Not understanding why people believe they will even make it to 25 or even 30 years of service under the current gotcha climate..

Chaz - what if you resign after 12 years of service. What is a teacher entitled to?

ReadyToRetireNow said...

That is if you last that long in this current "gotcha" environment. Even if you are an effective teacher, it makes little sense for some principals to hang on to 100k a year personnel. It's very sad, actually.

ReadyToRetireNow said...

Agreed. Certainly, if you have a good gig with friends on the "inside", you'll stand a better of surviving.

Anonymous said...

Sure you can go to 78% but that would require 30 years at 2% then 12 more years at 1.5% to get to the 78%. Mathematically, you would have worked for 42 years with the DoE. If you started straight out of college at around 22, you would be at least 64 years old. Since you would have qualified for a pension at 55, this means that you would have sacrificed 9 years of pension to simply retire with 1.5% more per year, in my quick estimate that would be close to $500,000. You would have to be Methuselah in order to recoup those losses.

Besides, who wants to stay in the DoE longer than is absolutely necessary nowadays?

Anonymous said...

Most people can get an estimate of their pension by signing up to TRS online. (Google TRS & NYC) It takes about 1-2 weeks, as they send you a pin number et cetera. But once you are in, look around in there and you will see "Retirement Allowance Calculator". NB- it only works for TIER IV members at present, which is the vast majority of those still working and the ones most likely to retire in the next few years. At 27 years of service at age 55 you can retire under TIER V (see: https://www.nystrs.org/main/benefits/service.htm) with 54% but if you are married NYS requires that your spouse be entitled to it unless he/she signs a waiver and you will take probably a 12% hit so 47.52% is my estimate. But if you are in TIER V, which from your writings is what I assume, then you have still enough years to switch out to the suburbs, which I highly recommend. NYC is not the place for a long term career anymore. I have 22.75 years in, thank GOD I did 25/55.

Anonymous said...

Given the continual erosion of pension benefits it makes total sense for anyone in TIER VI (new teachers) to try to do anything they can to do get out to Westchester or Long Island. If your final multiplier is only 1.75, you might as well get paid for it. Better yet, consider working in Connecticut or Pennsylvania, where the multipliers are higher (2% after twenty in Conn, 2.5% after 10 in PA), the retirement age is about the same (60 in Conn, 65 in PA), and you can actually afford a house, not live in your Mom's basement until 40. NJ's bully gov required residency, and lowered the pension amount, now it is yrs/60, so a 20 year is only 1/3, and a 30 is 50%. Conn does not contribute to Social Security, but take that extra 7.5% that you will get and plow it into their 403b7, and you should do fine. Besides, you will be able to afford it because Conn pays better.
Why stick around, especially in NYC, where once you are a senior teacher, you are just an expense?

We need to become as mercenary as the bean counters down at City Hall are, and as ruthless with our career choice location. "Serving our city, giving back, etc", is now all BS!

Look out for yourselves first.

Anonymous said...

So based on the current contract which expires in 2018 and not taking into account any future raises beyond the current contract terms...If a tier 4 teacher retires in 2020 with an FAS that includes 2 years at 119+K(top salary) he will be penalized bc the average of the prior 2 years goes beyond the 110% rule for the 2 yrs the teacher earned top salary. Is this correct?

Anonymous said...

Unfortunately I didn't buy into 25/55. When l turn 55 I will have 29 years. What would be the difference (% wise) if I want out at 55. I realize if I work the 30 years I would be getting 60% of my FAS as a pension. But according to your chart it seems like retiring even 1 year early I would loose 18%. Please clarify.
Thanks.

Anonymous said...

Unfortunately I didn't buy into 25/55. When l turn 55 I will have 29 years. What would be the difference (% wise) if I want out at 55. I realize if I work the 30 years I would be getting 60% of my FAS as a pension. But according to your chart it seems like retiring even 1 year early I would loose 18%. Please clarify.
Thanks.

marcy kotler said...

Unfortunately I didn't buy into 25/55. When l turn 55 I will have 29 years. What would be the difference (% wise) if I want out at 55. I realize if I work the 30 years I would be getting 60% of my FAS as a pension. But according to your chart it seems like retiring even 1 year early I would loose 18%. Please clarify.
Thanks.

KP said...

Chaz if I'm in 25/55, but work until I'm 62 and will have 30 years, do I get back the 55/25 money I paid in?

Anonymous said...

Is there a way to get an estimate of new pension numbers for those who retired in 2014?? I guess every case is different, but a general idea would behelpful. Thanks.

Anonymous said...

Chaz-
Thanks so much for all the info its very helpful. Like the previous posters I'm looking for what seems to be hard to come by clear info. I will hopefully have 30 years at 55, I enrolled in 55/25 as an insurance policy of sorts. Was that a mistake. I was under the impression you cant start collecting retirement until age 62, is that right?
looking forward to you response

Anonymous said...

Chaz I'm curious if in any of the years of 2018, 2019, and 2020 would the retro money be pensionable on top of my salary....and 683 if I retired?

Chaz said...

My understanding is that its pensionable since they will calculate your pension as if we received our two 4% raises back in 2010 and 2011.