You can look forward to a fixed 3 percent increase in your pension payment amount (not to exceed $25 per month or $300 annually) beginning the second October after your retirement effective date. For example, if your retirement effective date is December 1, 2015, your first increase will be in October 2017.
Your postretirement increase doesn't compound, but it does accumulate. So assuming you're eligible for the maximum increase, every October you can expect $25 more per month than you received during the previous year.
|Example of a Postretirement Increase|
Mr. Smith retired January 1, 2015, with a monthly pension payment of $1,200. Beginning October 2016 (the first October after he's been retired a full year) he'll begin receiving an additional $25 per month. (Though 3 percent of $1,200 is $36, the postretirement increase is capped by law at $25 per month.)
The first October, Mr. Smith will receive $1,225 ($1,200 + $25).
The next October, Mr. Smith will receive $1,250 ($1,200 + $25 +$25).
The third October, Mr. Smith will receive $1,275 ($1,200 + $25 +$25 +$25), and so on.