WRS News Online

When Should I Retire?

Couple on deckShould you retire before the end of the year, or wait until just after the start of the new year? There is no one-size-fits-all answer to this question. Picking a date that provides the optimal retirement annuity amount depends on your individual Wisconsin Retirement System account history.

A few things to consider in your decision-making process:

  • Is your projected annuity amount higher under the Formula or Money Purchase benefit calculation?
  • What are the effective rates projected to be for the current year? (for both the Core Fund and, if applicable, the Variable Fund)
  • Do you currently participate in the Variable Fund or have you participated in the past?
  • If you currently participate in the Variable Fund, what is your Core Fund account balance?

How do I find out which benefit calculation would produce a higher annuity amount? If you are within a year of retirement, request an official WRS retirement benefit estimate; this information is included on your estimate. Or, see section 10 of your most recent annual Statement of Benefits. Use any of these tools to calculate your own benefit projection:

Effect of Interest Crediting
Individual circumstances vary, but interest crediting may play a role in providing a higher benefit, depending on the effective date of the annuity. This scenario illustrates how interest crediting works:

WRS member Joe is thinking about retiring soon. According to Joe’s account:

  • He participates in the Core Fund only;
  • He has never participated in the Variable Fund; and
  • He has a Money Purchase calculation that would pay a higher annuity amount than the Formula calculation.

If Joe decides to make his annuity effective date on or before December 31, 2015, his WRS account balance will be credited with prorated 5% interest for the 11 months he worked in 2015 (which comes out to 4.583%).

  • If Joe decides to make his annuity effective date on or after January 1, 2016, his account balance will receive the actual effective rate of interest for 2015. This rate is announced in late February/early March, after SWIB reports the net investment return for the calendar year and the effective rate is calculated by ETF.

The point: In any year in which the actual Core effective rate is less than 4.583%, 11 months of prorated 5% interest would be higher -- how much higher would depend on the actual Core effective interest rate.

You’ll find other interest crediting scenarios and information in our helpful online document, When Should I Retire? These include the effect of interest crediting on Variable participation, WRS formula benefits and more.

We also suggest you participate in our webinar, Choosing When to Retire. Topics include the “December versus January” decision, and how retirement timing at any point during the year can affect your retirement annuity amount and other employee retirement benefits.