Choosing a Date

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

Retirement effective date.

Remember, your retirement effective date is the first day of the month following the month in which you've met all the eligibility requirements and you have terminated employment. The date you terminate your employment is your choice-it can be any time in the year, and any day of the month.

Social security.

Your social security benefit will not affect your pension, but it could affect your overall finances. Your taxable income will be higher, so you may want to take a look at your tax withholding rate when you begin receiving social security. When your Medicare coverage begins, typically at age 65, we will reduce your portion of the 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 office.

Note: If you elect one of the equated plan options, your pension will be reduced at age 62 regardless of when you actually begin receiving your social security and regardless of how much it actually is. Remember, your age 62 pension reduction is based on the social security estimate you provide to ORS when you apply for your pension. 

Taxes on your pension.

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

Early reduced or deferred?

If you're thinking about retiring before age 60 and you're debating whether to take the permanent reduction of the early reduced benefit or defer your retirement until age 60 to get your full benefit, consider the insurance ramifications. If you opt for an early reduced pension, your insurances can begin immediately. As a deferred member you (and your dependents) will not be eligible for the health, dental, and vision insurance until you apply at age 60. 

Remember, too, that the amount of your insurance premium subsidy could be less if you take a deferred retirement, resulting in a higher cost for you. Click here for details about the effects on your insurance subsidy .

Postretirement increases.

MIP retirees will receive a fixed 3 percent, non­compounding increase each October after being retired a full year. Click here to learn more about postretirement increases.

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 contain specific information in a specific format, and must be on file with ORS prior to your retirement effective date. Details and sample language can be found in the ORS publication Eligible Domestic Relations Orders. The EDRO Act doesn't apply to a divorce after retirement.

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 the purchase must be paid in full while you are still an active, working member of the retirement system. This can get tricky when tax-deferred payroll deductions, final paychecks, plan-to-plan transfers, or a combination of payment methods are being used to pay for service. And it's especially important if your pension eligibility depends on the purchase you're making. Don't stop working until you are positive all service credit payments have been received by ORS. Start working with us early so we can help you coordinate your payoffs.