Once you’re eligible to retire, you can select any date as your retirement date. But selecting the right retirement date can ensure you have maximized your pension allowance and avoided a few pitfalls that can occur. Consider these 5 things when choosing your retirement date.
1. Know Your Age Factor Percentage Dates
If you haven’t yet reached the maximum age factor percentage for your tier, you’ll want to make sure you’re not choosing a day that’s right before one of the quarter year dates based on your birthday. Those days are simply your birth date 3, 6, and 9 months later. For example:
| Example birthday |
January 15 |
| 1/4 year date |
April 15 |
| 1/2 year date |
July 15 |
| 3/4 year date |
October 15 |
So in this example, you wouldn’t want to retire on July 14 because you would miss the age factor percentage increase you would get by retiring on July 15 or later. Each one of these quarter days you pass and don’t retire, your pension allowance increases by about 1% just from the age factor alone. But don’t worry too much about these days; if you’re retiring midway between these days, it’s not a big deal—we just don’t want you to miss out on the 1% increase if you’re retiring near the day.
2. Think About the Cost of Living Adjustment (COLA) Date of April 1
No matter when you retire during the year, when April 1 comes you will get a cost-of-living adjustment (COLA), which is an annual increase to your retirement allowance. If you’re planning to retire in the springtime, you must retire on or before April 1 to be eligible to receive the annual cost of living increase for that year. If you retire after April 1, you’ll have to wait until next April 1 to get next year’s COLA increase.
Timing Your Springtime Retirement Date to Get the COLA
If you’re planning to work right up to the COLA date, your last day in active pay status should be a day you normally work on or before March 31 (it’s okay to be on leave on this day). Your retirement day should be the next day, on or before April 1. Otherwise, you simply need to choose a retirement before April 1 to get the cost of living increase on April 1.
3. What to Do If There Is a Dilemma Between the COLA and Age Factor Percentage Increase
If you plan to retire in the spring, sometimes there’s a dilemma if your birthday or quarter year date comes right after the April 1 COLA increase. If you choose your retirement date to get one, you’ll miss the other.
To solve this dilemma, check our COLA page starting in early February for the COLA amount for that year. If the COLA for new retirees will be the maximum of 2% (Tiers 2 & 4) or 3% (Tiers 1 & 3), then the COLA increase will likely be better than the age factor percentage increase of between 1% and 1.9%. These easiest way to figure this out for yourself is to run two estimates for yourself on our website. Log in to your ACERA account. Click on Estimate a Benefit in the menu.
Estimate 1 With COLA Increase
- Run the estimate for a date on or before April 1
- You need to calculate the increase for the COLA yourself. Multiply your estimated monthly retirement benefit by 1.02 for a 2% increase or 1.03 for a 3% increase.
Estimate 2 With Age Factor Percentage Increase
- Run the estimate for a date after your next age factor percentage increase after April 1. That’s all you need to do.
Compare
- Then compare the two estimates. Maybe retiree on the date that gives you the largest retirement allowance.
If you’re not retiring in the spring, or there’s no dilemma with the dates, don’t worry about this.
4. Retire on the Day After Your Employment Separation Date (if Going From Active Work Into Retirement)
Retiring From Active Work
If you’re retiring from active work (rather than deferred status), your Retirement Date should be the day after your last day of work or leave that’s a normal work day for you. Your last day of work should also not be a holiday. This last day of work is known as your Employment Separation Date (it’s sometimes called your Termination Date), and it’s your last day on your employer’s payroll.
Example
| Sun |
Mon |
Tue |
Wed |
Thu |
Fri |
Sat |
| |
|
|
|
|
Employment Separation Date
(Last Day on Payroll in Active Status)
- Should be a day you’re scheduled to work or be on leave
- Should not be a holiday
- Doesn’t have to be a Friday; can be any day that meets the first 2 criteria
- It’s okay to be on leave this day
- Write this date in your letter of resignation to your employer
|
Retirement Date
|
This means that you go straight from active ACERA membership into retired ACERA membership, and you avoid spending even one day in deferred ACERA membership, which would cause you to lose all your sick leave so it would not convert to service credit.
If you put in any work or leave hours on a day, you can’t retire that day; you would have to have your first day of retirement be the next day.
Retiring From Deferred Status
If you’re going to retire from deferred status, which means there’s a gap between your Employment Separation Date and your Retirement date, you can simply choose any day that works for you to retire. You may still want to be mindful of the Age Factor Percentage dates and the COLA date as described in tips 1-3 above.
How to Enter Employment Separation Date and Retirement Date on Your Retirement Application
Scroll up and read tip #4 above. If your plan is to go straight from active work into retirement, make sure your Employment Separation Date and Retirement Date are on consecutive days as described. If you’re retiring from deferred status, there will be a gap between these two dates, and that’s okay.
