Ready to Retire

Answering these questions may provide some insight into how well prepared you are to retire. It's also a good idea to use the Countdown to Retirement checklist.

  • Do you own your home free and clear? If not, will you have enough income to pay for it?
  • Have you planned for the future of your children or others financially dependent on you?
  • Have you estimated how much retirement income you will receive from all sources? Is your estimate between 60-80 percent of your preretirement income?
  • Have you included a realistic inflation factor in estimating the income you will need throughout retirement?
  • Have you considered your future health care costs when projecting your income needs in retirement?
  • Have you saved for or planned for major expenses such as home repairs or an automobile purchase you expect to make during retirement?
  • Do you plan to maintain cash in reserve for a family emergency?
  • Have you considered that at a time of increasing life expectancies, greater demand is placed on your personal savings and investments since they must last for a longer period of time?
  • Do you already have a fulfilling leisure time activity or hobby you plan to devote more time to in retirement?

The more "yes" answers you have, the more adequate your retirement preparation and the more likely you'll be able to preserve your standard of living.

Things to Consider

Some people are ready to go the minute they're eligible. Others like to weigh every factor before deciding on a date. Below are some things you might want to consider when choosing your retirement date.

Retirement effective date.

Your retirement effective date is the first day of the month following the month in which you satisfied retirement eligibility requirements, and you terminated employment with the Michigan State Police. In addition, you must submit your completed retirement application to ORS at least 30 days, but no more than 90 days, prior to your retirement effective date.

Medicare.

When your Medicare coverage begins, typically at age 65, we will reduce your portion of the state health insurance premiums deducted from your pension. For information on social security benefits, go to www.ssa.gov, call toll-free 800-772-1213, or visit your local SSA office.

Taxes on your pension.

Your pension is subject to state and federal income tax (except for any portion of the pension representing service credit purchases made with post-tax dollars). Taxes will be withheld from your pension according to the withholding instructions you give us when you retire. If you live outside of Michigan, you should check the state and local income tax regulations in your area.

Deferred compensation and other savings.

Before choosing a date, it would be wise to think about how, and when, you plan to draw your savings, deferred compensation funds, and other retirement accounts. Your 401(k)/457 plans administrator can give you payout options and tax ramifications. You might also wish to consult a financial advisor who can help you gauge how long your savings might last into your golden years, and maybe even tell you how to minimize taxes and make your money go further.

Effects of divorce.

If you divorce while you are an active or deferred member, the court may order that a portion of your pension be paid to an alternate payee such as your former spouse or dependent child. The order (known as an eligible domestic relations order, or EDRO) must be on file with ORS before your retirement effective date. ORS has developed an online fillable EDRO form to allow members to create accurate and complete EDROs that can be administered under the retirement statutes. It is the preferred document to file with ORS. Background information and instructions are provided separately in Eligible Domestic Relations Orders: Background and Instructions (R0911X).

Note: The retirement statute prohibits continuing insurance benefits for a former spouse after a divorce.

Are you buying service credit?

If you're thinking about or are in the process of purchasing service credit, remember that the purchase must be paid in full while you are still an active, working member of the retirement system. It's especially important if your pension eligibility depends on the purchase you are making. Don't stop working until you are positive that all service credit payments have been received by ORS. Start working with us early so we can help you coordinate your payoffs.