For some NYC employees overtime pay is an important consideration when determining whether to retire. A common statement/question that people often ask is, “I had a great year of overtime this year, I have to retire. Right?” Having a great year of overtime should not be the sole criteria of the retirement decision. Pre-retirees may want to review the following before retiring:
- Fully understand final average salary (FAS) for your Pension Plan, Tier, and appointment date.
- NYC employees who are consistent overtime earners should carefully compare their 3 year average (if applicable) with their final 12 month average (if applicable).
- Perform various pension calculations using different FASs, years of service, age, pension contributions, etc.
- Review basic retirement planning concepts.
–Can you afford to retire?
-Do you still like your job or hate it?
-Have you reached “top pay”? Possible promotion in the near future?
-Are you taking “risks” at your job?
-How is your health? Are you taking months/years off your life trying to reach a goal?
-What are you going to do? Do you have a job lined up? Any skills?
-Fully retiring at a young age (40s and early 50s) you need a substantial amount of money besides the pension.
- Don’t forget, in most cases the balances in your 457, 401k, Union Annuity Plan, etc are pre-tax. For example, a $250,000 balance in the 457 plan may incur taxes of at least 30% (20% to Fed & 10% to State/City) which results in an after-tax balance of $175,000.
- Just because your co-workers, partner, boss, etc is retiring doesn’t mean you must retire.