Deferred Retirement

Here is an example of deferring a retirement benefit: Mary has 20 years of earned service and qualifies for retirement at age 55. She will be terminating her employment by age 55. Her monthly benefit of $1,000 is decreased by the age penalty of 12% (2.4% per year for each year under 60 for the “Rule of 75” option). Her retirement benefit would be $880 until cost of Living Allowances begin at age 65. Deferring her benefit to age 60 would increase her benefit to $1,000 (no age penalty) but cost her $52,800 ($880 x 12 months x 5 years) in lost pension income. Mary would begin her admittedly larger pension $52,800 in the hole. She would break even on this option just before her 87th birthday.