Retirement Changes
Recently STRS Ohio made a number of changes to active and retired teachers with the majority of the changes impacting those still working. The perception among teachers and professors is that they will work longer and get less. While this is true it is much more than that. Let’s take a look……
Top Changes:
- COLA Reduction / 5 –Year Blackout: The new 2% COLA will impact your income over the long-term. A retired member today receiving $4,500 per month will have $6,300 to spend per month 20 years from now. This new amount would have been $7,200 before the change from 3%. That is $900 LESS per month.
- Contribute more from your pay: 1% more per year over four years. This is a 40% increase in contributions. The 14% you will pay if you are making $75,000 will increase from $7,500 (2012) to $10,500 per year (by 2016) for a smaller benefit in the future.
- Eligibility – the “30 and out” rule of thumb is a thing of the past for most teachers after 2015. Should you retire before 2015 is the most important question to answer.
- Final Average Salary (FAS): The combination of the three highest years will change to the five highest years starting in August of 2015. If your FAS was $75,000 at retirement than it will now be approximately $72,750. This is a 3% drop that will impact you every year in retirement. STRS Ohio is also limiting your FAS to no more than 7% increases.
- Purchasing Service Credit is becoming more expensive: Credit must have been certified by December 31, 2013 and purchased by July 1, 2014. If purchased after July 1, 2014 the cost to purchase this credit will be almost dollar for dollar. This will increase your cost by two to three times.
On the surface this seems manageable for most teachers. However, you may be able to avoid a number of these changes by retiring earlier and with a higher benefit. Call us today to learn if you should retire sooner rather than later.
