Pensions & Overtime

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:

  1. Fully understand final average salary (FAS) for your Pension Plan, Tier, and appointment date.
  2. NYC employees who are consistent overtime earners should carefully compare their 3 year average (if applicable) with their final 12 month average (if applicable).
  3. Perform various pension calculations using different FASs, years of service, age, pension contributions, etc.
  4. 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.
  5. 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.
  6. Just because your co-workers, partner, boss, etc is retiring doesn’t mean you must retire.
1 reply
  1. Jim B
    Jim B says:

    Pete,
    Very informative and factual piece on the age old question of retirement. My outlook today and always was is that what’s right for your friends, coworkers, etc. may not be right for you. So many factors come into play, most of which you listed above. Retirement truly is an INDIVIDUAL decision based on individual circumstances.
    While a 20 year retirement sounds great and is a selling point on recruitment posters, In most cases its not a reality living in this city.
    Retire because your able to, not because you can!

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