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When Should You Retire?

When is the best time to retire – before the end of the year, or just after the start of the new year? Many members ask this question and our response is always the same: Picking a retirement date that provides the optimal annuity amount depends on your individual Wisconsin Retirement System account history.

Here are some key to-dos every member should know and factor into their decision-making process:

  1. Know whether your projected annuity amount would be higher under the Formula or the Money Purchase benefit calculation. How to find that out? Request an official WRS retirement benefit estimate; see section 10 in your most recent annual Statement of Benefits; or use our WRS Retirement Benefits Calculator.
  2. Learn how interest crediting affects your benefits. Specifically:
    • Know what ETF's calculations for effective rates are projected to be for calendar year 2017 (we use an actuarial assumption of 7.2%).
    • Take a look at 2017 calendar year-to-date returns for the Core and Variable Trust Funds (keep in mind: effective rate calculations are based on returns for the full calendar year – 12 months).
    • And speaking of the Variable Fund: know whether you currently participate in the Variable Fund and/or whether you have participated in the past; participation in the Variable may affect your benefit amount.

How does interest crediting affect my retirement benefit? Although it depends on your circumstances, interest crediting could play a role in providing a higher benefit, depending on the effective date of your annuity. The scenario below illustrates how interest crediting works:
WRS member Joan is thinking about retiring soon. According to Joan's account:

  1. She participates in the Core Fund only;
  2. She has never participated in the Variable Fund; and
  3. Her Money Purchase calculation would pay a higher annuity amount than her Formula calculation.

If Joan decides to make her annuity effective date in December, her WRS account balance will be credited with prorated 5% interest for the 11 months she worked in 2017 (which comes out to 4.583%).

If Joan decides to make her annuity effective date on or after January 1, 2018, her account balance will receive the actual effective rate of interest for 2017. This rate is announced in February and it incorporates 2017 calendar year investment performance.

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