Temporary Added Annuity Option

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The temporary added annuity is a temporary increase in retirement benefit (then a permanent decrease) for members who retire younger than age 62. Members who see the most benefit retire significantly under age 62. Members retiring near 62 (like at 61) will probably not find much advantage in this benefit.

The amount of the temporary increase in retirement benefit is based on the amount that the Social Security Administration estimates your social security benefit to be if you take the early retirement at age 62.

The increase is paid out with your monthly retirement allowance each month until you reach age 62, at which point your retirement benefit will be permanently reduced by full amount of the Social Security benefit estimated at retirement regardless of whether you actually receive Social Security.

There a few additional things to consider:

  • Because Social Security benefits are estimated, retirement reduction at age 62 may be more or less than actual Social Security benefit.
  • Requires that retiree submit Social Security Estimate to ACERA, to be used to determine factors for calculation of advance and reduction of ACERA benefit only.
  • Temporary advance is from ACERA; there is no communication or link to Social Security benefits, and the two benefits are independent of each other.
  • May not be provided if retirement allowance is based on disability retirement.

How to Explore This Option

  1. Call Social Security and ask for an estimate where you’re stopping work before retirement age. Tell them an estimated date when you’re thinking about stopping work. Ask for an estimate for the early Social Security retirement at age 62.
  2. Submit a Retirement Estimate Request to ACERA. Check the Retirement Allowance Estimate box and fill in the date of retirement you’d like an estimate for. Also check the Other box, and write in “Temporary Added Annuity Estimate.” Along with the Retirement Estimate Request form, include a copy of the estimate you got from Social Security. ACERA will do some calculations and provide you an estimate for the increase to your retirement allowance prior to age 62, and then the decreased amount of your allowance at age 62 and beyond.

Examples

Example With Temporary Added Annuity

You’re going to retire at age 50. Your monthly lifetime retirement allowance is estimated to be $2,000 per month. Your estimate from Social Security for stopping work at age 50 and collecting Social Security at age 62 is $1,000 per month. Based on your Social Security estimate, ACERA will provide with you a temporary annuity increase of $400 per month, which will make your monthly retirement allowance $2,400 per month. You’ll get cost of living adjustment (COLA) increases on the larger allowance each year; your allowance would be approximately $3,040 by age 62 assuming a 2% increase each year.

At age 62, ACERA will decrease your retirement allowance by $1,000, the amount of the original Social Security estimate. Your new allowance would be $2,040 at age 62 and beyond, plus cost of living adjustment increases. At this point you can start collecting the $1,000 from Social Security, as long as their original estimate was accurate. Your total income between your ACERA pension and Social Security at age 62 would be $3,040.

Example Without Temporary Added Annuity

You’re going to retire at age 50. Your monthly lifetime retirement allowance is estimated to be $2,000 per month. Your estimate from Social Security for stopping work at age 50 and collecting Social Security at age 62 is $1,000 per month. You decide to not take the temporary added annuity, so your beginning retirement allowance is $2,000. You’ll get cost of living adjustment (COLA) increases on your allowance each year; your allowance would be approximately $2,530 by age 62 assuming a 2% increase each year.

At age 62 you can start collecting the $1,000 from Social Security, as long as their original estimate was accurate. Your total income between your ACERA pension and Social Security at age 62 would be $3,530.

As you can see, your total income without taking the temporary added annuity would be $490 or 16% greater at age 62. You will continue to receive cost of living increases on this larger amount for the rest of your life. 

So the bottom line is that the temporary added annuity gives you a temporary boost at retirement, but can result in a significant decrease to your total retirement earnings over your lifetime.