Decision-Making Considerations

These guidelines may help you understand the factors you need to consider before making a choice between the Pension Plan and the Investment Plan.
Once you have made a retirement plan election you have a limited time period during which you may be able to cancel the election. See the following FAQ for more information.
Guidelines The Pension Plan might be better if you... The Investment Plan might be better if you...
FRS Service
  • Have already earned significant FRS service, such as 25 or more years
  • Begin your FRS career later in life
  • Expect to stay long enough to retire from an FRS employer
  • Expect to spend most of your career with an FRS employer
  • Have thus far earned a limited amount of FRS service, such as 10 or fewer years*
  • Begin your FRS career young in life
  • Expect to take a non-FRS job in the next 5 to 10 years
  • May not stay for the years needed to vest in the Pension Plan. Vesting is 8 years if you were enrolled in the FRS on or after July 1, 2011, or 6 years if enrolled in the FRS prior to July 1, 2011.
Salary Growth
  • Receive most promotions and salary increases near the end of your career
  • Receive most promotions and salary increases near the beginning of your career
Managing Your Retirement Benefit
  • Don't want to make investment decisions; and
  • Are uncomfortable receiving objective investment assistance
  • Prefer making investment decisions and setting goals; or
  • Are comfortable receiving objective investment assistance
Investment Risk
  • Are uncomfortable with the risk that your retirement benefit could decrease because of poor financial markets
  • Are unwilling to experience short-term fluctuations in the value of your account
  • Are comfortable relying on long-term investment returns to forecast your retirement benefit
  • Are comfortable with short-term fluctuations in your retirement account in order to possibly earn higher long-term benefits
Retirement Income Options
  • Prefer that your benefit be paid as lifetime monthly checks with no lump-sum options
  • Are comfortable with 1 of the 4 lifetime annuity payment options guaranteed by the Pension Plan
  • Expect to use the DROP program to build a nest egg to meet special or unanticipated spending needs
  • Prefer the flexibility to decide how much of your retirement account is taken as a lump-sum or lifetime monthly benefits
  • Are comfortable with an annuity payment option (if purchased) guaranteed by a highly rated private insurance company
  • Prefer a customized benefit payment schedule to meet your special retirement situation/needs
Early-Retirement Considerations
  • Expect to retire in your 50s with full or reduced monthly benefits (the reduction is 5% per year for each year prior to normal retirement age of age 62 or 65 for Regular Class and age 55 or 60 for Special Risk)
  • Prefer that your HIS benefit begins immediately upon retirement
  • Are willing to receive your benefit as an annuity to avoid tax penalties when drawing this benefit before age 55; or can live on other savings or income until age 55 or don't expect to draw benefits until later in life
  • Are comfortable deferring your HIS until normal retirement age
Survivor Considerations
  • Prefer that your surviving beneficiaries receive lifetime monthly benefits guaranteed by the FRS
  • Expect that only your spouse or other dependents need to be named as beneficiaries
  • Prefer that your survivors have the flexibility to receive a lump-sum benefit or lifetime benefits guaranteed by a private insurance company
  • Expect to name non-family heirs
Purchase Optional Service
  • Want to purchase military or other service credit such as out-of-state service or a leave of absence to increase benefits
  • Have no need to purchase military or other service credit to increase benefits (or have already made this purchase under the Pension Plan)
*According to FRS historical statistics, less than 20% of newly hired employees and 50% of those with over 10 years of service actually stay a full career in FRS employment, given today's mobile society.