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Washington retirement system

The Washington Retirement System, managed by the Department of Retirement Systems (DRS), is a somewhat sprawling collection of retirement plans. While all systems are primarily defined benefit plans, many plans introduced a defined contribution portion for members hired more recently in order to supplement what the employers and pension fund will have to pay out.

As you’ll see, things can get complicated in Washington. It’s easy to get overwhelmed by the different plans and what’s actually applicable to you. SmartAsset’s SmartAdvisor tool will connect you with up to three financial advisors in your area who can talk you through the ins and outs of what’s best for your retirement strategy.

Types of Retirement Systems in Washington

The state of Washington has a fairly complicated set of retirement systems. There are seven broad categories for employees and several subcategories within those seven. For most systems, your monthly benefit in retirement will be a function of your years of service and your average final compensation (AFC). Your AFC will likely be the average of your 24 consecutive highest paid months on the job.

Washington Retirement Systems
Plan Title Eligible Employees
Public Employees’ Retirement System (PERS) – State or local government employees with at least 70 hours of work per month for at least five months of each year
Teachers’ Retirement System (TRS) – Teachers compensated for at least 70 hours of work per month for at least five months from September to August
School Employees’ Retirement System (SERS) – Employees of Washington state public school districts or Educational Service Districts (ESD) compensated for at least 70 hours of work per month for at least five months of each year
Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF) – Full-time law-enforcement officers (police chiefs, sheriffs, city police officers, etc.) and full-time firefighters (volunteers or part-time employees are excluded)
Washington State Patrol Retirement System (WSPRS) – Full-time Washington State Patrol officers compensated for at least 70 hours per month for at least five months of each year
Public Safety Employees’ Retirement System (PSERS) – Employees of state agencies like the Department of Corrections, Gambling Commission, Department of Natural Resources or Liquor Control Board. Visit website for full criteria.
Judicial Retirement System (JRS) – Judges elected or appointed to Superior Court, the Court of Appeals or the Supreme Court of Washington

Overview of Washington’s Retirement Systems

Washington Retirement System

Public Employees’ Retirement System (PERS)
This is the largest system within the Washington DRS. Members of PERS are eligible for a full retirement benefit once they turn 60 and have at least five years of creditable service. There are also some early retirement options if you have enough years of service. Your monthly benefit payment amount will be dependent your years of service and AFC. If you were hired on or after March 1, 2002, you will also have a defined contribution portion to your account.
Subcategories within this system are as follows:

  • Plan 1: Employees who established membership before October 1, 1977
  • Plan 2: State employees hired on or after October 1, 1977 but before March 1, 2002 OR local employees hired on or after October 1, 1977 but before September 1, 2002
  • Plan 3: State employees hired on or after March 1, 2002 who chose Plan 3 OR local employees hired on or after September 1, 2002 who chose Plan 3

There are some members who were initially in Plan 2 and then transferred to Plan 3. Therefore, it’s possible for you to have established membership before March 1, 2002 and still be in Plan 3. Furthermore, state or local employees hired after March/September 1, 2002 got to choose between Plans 2 and 3, so it’s also possible for you to have established membership after September 1, 2002 and still be in Plan 2.

Teachers’ Retirement System (TRS)
Washington’s TRS comes with several survivor options as well as potential health coverage and death and disability insurance. You’re eligible for a full retirement benefit once you turn 65 and have at least five years of service under your belt. If you have 25 years of service and you’re at least 55, you’re eligible for early retirement, although you’ll have slightly reduced benefits. Plan 3 members will have a defined contribution portion as well as a defined benefit portion.
Subcategories within this system are as follows:

  • Plan 1: Employees who established membership before October 1, 1977
  • Plan 2: Employees who were hired on or after October 1, 1977, unless transferred to Plan 3 OR employees hired on or after July 1, 2007 who chose Plan 2
  • Plan 3: Employees who were hired on or after July 1, 1996 but before July 1, 2007 OR employees hired on or after July 1, 2007 who chose Plan 3

School Employees’ Retirement System (SERS)
The Washington SERS offers similar benefits to the PERS and TRS. Your monthly benefit will depend on your years of service and your AFC. You may be eligible for health insurance coverage depending on your employer. You’ll also have access to death and disability coverage, which will vary depending on your years of service.
Subcategories within this system are as follows:

  • Plan 2: Employees hired before July 31, 2009 who haven’t transferred to Plan 3 OR employees hired on or after July 31, 2009 who chose Plan 2
  • Plan 3: Employees hired between September 1, 2000 and July 1, 2007 OR employees who have chosen Plan 3

Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF)
This system is for those full-time employees who are commissioned to either enforce the law or fight fires. Your monthly benefit payment in retirement will depend on your specific plan, your years of service and your AFC. You’ll become eligible to start receiving benefits at age 50 or 53, depending on your plan and years of service.
Subcategories within this system are as follows:

  • Plan 1: Employees hired before October 1, 1977
  • Plan 2: Employees hired on or after October 1, 1977

Washington State Patrol Retirement System (WSPRS)
In this system, you become vested and earn the right to a future monthly benefit after five years of service. You’ll be able to begin receiving that benefit either once you turn 55 or once you have 25 years of service under your belt. Your monthly benefit will be dependent on your years of service and your AFC.
Subcategories within this system are as follows:

  • Plan 1: Employees hired before January 1, 2003
  • Plan 2: Employees hired on or after January 1, 2003

Public Safety Employees’ Retirement System (PSERS)
Your monthly benefit will be dependent on your years of service and your AFC. You’ll be able to receive benefits either at age 65 with five years of service or age 60 with 10 years of PSERS service. If you have 20 years of service and you’re at least 53, you can choose to retire early, but your benefit may be reduced.

Judicial Retirement System (JRS)
This system allows for judges to retire either at age 60 or with 15 years of service. If you meet certain requirements, you’ll have disability and survivor benefits as well. Like the other systems, your monthly benefit will depend on your years of service and your AFC.

Retirement Taxes in Washington

Federal
You can outrun federal income tax with many retirement plans, but it will always catch up eventually. Pension plans are no exception. When you make contributions to your pension fund, you’ll be doing so with pre-tax dollars. This will allow you to contribute more, which means more interest. However, your funds will be taxed once you begin to receive payments in retirement. You may wish to keep the tax man at bay even longer, though. If so, you can roll your pension over into an alternative retirement account like a 401(k) plan. If you do that, you’ll just pay the taxes once you begin to make withdrawals from that account.

If you’d rather pay your taxes as an employee instead of as a retiree, you have two options. You can have the taxes withheld from your paycheck or you can make estimated tax payments. Estimated tax payments are payments you make quarterly that you calculate to be roughly what you would owe in taxes. While this route requires some math on your part, the withholding option involves little to no work for you. You may also get a refund or a charge after tax season if the IRS withheld too much or too little.
State
Washington has no state income tax, so you won’t have to factor that into your calculations whatsoever.

Current Financial Health of the Washington Retirement System

Washington Retirement System

Overall, the Washington Retirement System is in good shape. As of 2016, it had an 84% funded ratio (total assets divided by accrued liabilities). That was good for ninth in the country. The Washington State Investment Board (WSIB) manages the retirement fund, investing mostly in public equity, private equity and fixed income assets, as of June 30, 2017. Another good sign for the state? It currently has more active employees contributing to the fund than it does retired or inactive employees receiving benefits.

Tips for a Less Stressful Retirement

  • Navigating the complexities of retirement accounts and what you’ll need to supplement your pension can be a lot to keep straight. Finding a financial advisor that can explain the ins and outs of each option can reduce a lot of the headache of planning for retirement. With SmartAsset’s SmartAdvisor tool, you can answer a series of questions about your financial needs and preferences, then the tool will pair you with three financial advisors in your area.
  • As your pension will likely need supplementing in order to maintain your lifestyle in retirement. Having a concrete set of financial goals will help you to determine what you need to save. From there, you can plan the steps to take to get there.

Photo Credit: ©iStock.com/adrian825, ©iStock.com/fatcamera, ©iStock.com/f11photo

Hunter Kuffel, CEPF® Hunter Kuffel is a personal finance writer with expertise in savings, retirement and investing. Hunter is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He graduated from the University of Notre Dame and currently lives in New York City.
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