Oregon Educators,
As dedicated educators, your focus is on nurturing the future. Sometimes it can be tough to take some time to think about your own financial future, especially when it comes to the Oregon Public Employees Retirement System (PERS) pension. This blog post is designed to provide you with a deeper insight into the Oregon PERS pension, ensuring you are well-prepared for your retirement journey.
Eligibility
To begin, let's discuss the eligibility criteria for the Oregon PERS pension:
As you begin your career in a PERS-covered position, you are automatically enrolled as a member. Your eligibility for retirement depends on which PERS system you are covered by.
There are three systems: Tier 1, Tier 2, and OPSRP (Oregon Public Service Retirement Plan)1.
Take a look at the following image to decide which one you are most likely covered by:
1 https://www.oregon.gov/pers/mem/Pages/What-plan-am-I-in.aspx
For Tier 1 members, you will be eligible for your full benefits at 30 years of service. You can be eligible for your full benefits before 30 years of service but only at a certain age. Tier 1 “General Service” members, like teachers and other educators, are eligible for full benefits at 58. Tier 2 “General Service” members are eligible for full benefits at 60. Tier 1 and Tier 2 members can retire as early as age 55, but benefits are reduced. Tier 1 and 2 “police and fire” members are eligible for full benefits at age 55 or 50 with 25 years of service. For those “police and fire” members between 50 and 54, but not quite at 25 years of service, early retirement is an option, but benefits will be reduced.
Most recent members are part of the Oregon Public Service Retirement Plan (OPSRP). Members of this program are eligible for full benefits at age 65 or age 58 with at least 30 years of service. Members of the OPSRP can retire as early as age 55, but benefits are reduced. “Police and Fire” members can retire with full benefits at age 60 or age 53 with at least 25 years of service. They can retire as early as age 50, but benefits are reduced.
Calculating Your PERS Pension
Now, let's delve into the mechanics of calculating your PERS pension retirement. Your retirement benefit is based on a simple 3 factor equation:
Service Credits x Benefit Factor x Final Average Salary
Service Credits are the number of full-time years you have been part of Oregon PERS. The more service credits you accumulate, the bigger your pension payout will be.
The Benefit Factor for Tier 1 and Tier 2 employees is 1.67% when fully eligible for retirement. The Benefit Factor for OPSRP employees is 1.5% when fully eligible for retirement.
Your Final Average Salary (FAS) is calculated as the average of your highest-paid 36 months of service.
Simply plug your numbers into the three-part equation: Service Credits x Benefit Factor x Final Average Salary. You will get an estimate for your benefit when fully eligible for retirement. For precise estimations or to calculate estimates for an early retirement, use the PERS online calculator (LINK HERE). It’s a versatile tool allowing you to model different scenarios and retirement dates.
Inflation Protection
One significant advantage of the Oregon PERS pension is its built-in protection against inflation. Your pension benefits are adjusted annually, mirroring changes in the Consumer Price Index (CPI). This annual adjustment helps to safeguard your purchasing power as you journey through retirement.
Survivor Benefit Options
For those retiring with dependent loved ones, protecting your retirement income is of utmost importance. PERS provides various survivor benefit options, depending on your plan.
For Tier 1 and Tier 2, the most common survivor benefit options are Option 1, Option 2, and Option 3. They also provide some lump sum options. For some of the more rarely used survivor benefit options, check out the Oregon PERS Pre Retirement Guide.
- Option 1: This benefit is paid for your lifetime. It provides you with the highest monthly benefit. No benefit of any kind is paid to anyone after you die.
- Option 2: This is a “joint and survivor” benefit and is paid for your lifetime. After you die, your surviving beneficiary will receive, for life, the same monthly benefits you received unless your surviving beneficiary is not your spouse and is more than 10 years younger than you. In this case, due to IRS limits, your beneficiary’s payment is prorated and decreased.
- Option 3: This is a half “joint and survivor” benefit and is paid for your lifetime. After you die, your surviving beneficiary will receive, for life, monthly benefits of one-half the amount you received.
For OPSRP members, the most common survivor benefit options are the Single Life Option, the Full-Survivorship Option, and the Half-Survivorship Option. For some of the more rarely used survivor benefit options, visit the Oregon PERS Pre Retirement Guide.
- Single Life Option: This benefit is paid monthly for your lifetime. No Survivorship options benefit of any kind is paid to anyone after you die.
- Full-Survivorship Option: This benefit is paid monthly for your lifetime. After you die, your surviving beneficiary will receive, for life, the monthly benefit you were receiving at the time of your death. Payments are actuarially reduced to provide the same monthly benefit amount to you for life and to your beneficiary for their lifetime. If you outlive your beneficiary, your benefit is not changed, and all benefits stop when you die.
- Half-Survivorship Option: This benefit is paid monthly for your lifetime and is actuarially reduced to provide one-half the same monthly benefit amount to your beneficiary. After you die, your surviving beneficiary will receive, for life, one-half the monthly benefit you were receiving before you died. If you outlive your beneficiary, your benefit is not changed, and all benefits stop when you di
Beneficiary Designation: Ensure you designate a beneficiary. Failure to do so might result in benefits being distributed according to Oregon PERS rules, which may not align with your preferences.
Other than deciding when to retire, deciding your Survivor Benefit Option is the most important decision educators face when they are retiring. Click HERE to schedule an initial consultation to review your survivor benefit options.
Your Individual Account Program (IAP)
In addition to your PERS pension, Oregon educators also add into the Individual Account Program (IAP). This is a separate & additional pot of money outside of your main pension. As an employee, you invest 6% of your salary into the IAP and it is invested over your career.1 When you retire, this pot of money is yours to save and spend. The amount inside of your ISP depends on your salary and investment performance.
Other Considerations
While the Oregon PERS pension is a cornerstone of your retirement, it typically it will not be enough on it’s own. That’s where additional retirement savings programs come into play like your 403(b), Roth 403(b), 457(b), IRA, and Roth IRA. Click HERE to set up an initial consultation to review your supplemental savings options.
Typically, CalPERS members will also contribute into Social Security during their work years, so they will be fully eligible for their Social Security Income benefit. Click HERE to visit the social security website where you can log in and check your progress.
Resources
For detailed information about your specific plan, benefits handbooks, and forms, refer to the Oregon PERS website.
Visit our YouTube Channel for more relevant content!
Additionally, I encourage you to schedule a complimentary initial consultation. I specialize in working with educators and planning around state teacher pensions like the Oregon PERS pension.
In conclusion, understanding the intricacies of the Oregon PERS pension is vital for your retirement security. By grasping eligibility requirements, the pension calculation process, and the array of benefit options, I hope you can more confidently navigate the path to a financially stable retirement.
1 https://www.oregon.gov/pers/mem/Pages/What-plan-am-I-in.aspx