After years of paying into STRS Ohio, educators realize that it will soon be their turn to collect. This century-old pension was designed to provide security for teachers during and after their working careers.
This summary helps you start thinking about your STRS Ohio pension so you can obtain all the benefits you are entitled to and coordinate STRS Ohio benefits with the rest of your retirement income plan.
Unlike other sources of retirement income, STRS Ohio offers a unique combination of benefits.
By the time you come to the end of a long teaching career, the amount of STRS Ohio income you will be entitled to is well known. The benefit is based on your age, years of service credit, your earnings history. While the amount will vary depending on when you choose to retire and the payment plan you choose, the relative accuracy of your retirement income estimate makes it easy for us to build the rest of your retirement income plan around it.
STRS Ohio offers existing members survivor benefits after 1.5 years of service credit. New members on or after July 1, 2013 must have 5 years of qualifying service credit. This benefit offers a monthly income to qualified family members of the deceased. Usually, this benefit is not considered when purchasing personal life insurance. We find educators reduce their monthly cash flow by buying more life insurance than they need.
Once you have qualified for STRS Ohio retirement, the amount of income you’ll receive is set. Some educators worry that benefits may be cut in the future, but it is highly unlikely that benefits paid to current retirees will be significantly affected by future proposals.
STRS Ohio is one of the few sources of income that can be assured of never running out. At retirement, you also have the option to provide a monthly benefit in the event you pass away. There are currently more than 100 recipients over the age of 100 receiving their STRS Ohio pension.
With five years of qualifying service credit for existing members on June 30, 2013 or 10 years of qualifying service credit on or after July 1, 2013, you are eligible for a disability benefit. This benefit offers educators monthly income protection ranging from 30%-75% of their final average salary.
You become eligible for STRS Ohio benefits by working in an STRS Ohio-covered job. Any certified educator that works for a public school or institution is eligible for STRS membership. These tend to be teachers, professors, school nurses, principals, and superintendents.
STRS Ohio uses the 2.2% Salary Related Formula to determine your monthly income under the Defined Benefit and Combined Plans. Due to eligibility for full retirement benefits, you must understand the reduced and unreduced benefits.
If an STRS Ohio member decides to retire before meeting one of the requirements above for an unreduced benefit, they will receive less retirement income per month.
Knowing when to retire and which payment plan to choose is critical to optimizing your lifetime retirement income. This is one area where STRS Ohio members regularly get it wrong.
Let’s use Retiring Rob as an example. Rob is married to Alice, and they are both teachers. Alice is slightly older than Rob, but they both want to retire at the same time. They decide to retire in June of next year. Rob will be age 60 with 35 years of service. Alice will be age 62 with 31 years of credit.
Our retirement analysis of Rob and Alice’s plan is that they made TWO costly mistakes.
1) They chose the wrong payment plan. They have more money as survivors than they do while they're alive. This irrevocable decision cost them $304,457 in lost income
2) Alice started taking her pension too soon. She could have stopped working and waited to take her pension at 65. Age 62 = 51.83% of FAS. Age 65 = 68.20%.
Rob and Alice have more monthly income while they’re both alive. They maximized their income by making better decisions when taking their pension and which payment plans to choose. As survivors, they have nearly the same amount as their original decision.
The PLOP offered by STRS Ohio allows members to take between six and 36 times their Single Life Annuity amounts at retirement. Any PLOP amount taken will reduce the member’s monthly benefit. The PLOP amount is a pre-tax amount that is fully taxable unless a rollover to an IRA is completed. Understanding the impact of the reduction on you, your family, and your lifetime benefits is crucial before deciding to take the PLOP. This is the most misunderstood benefit. If not analyzed properly, it tends to be very costly. Don’t take a PLOP to buy an expensive annuity!
Your STRS retirement benefit will impact your personal Social Security benefit. Other retirement income, such as distributions from 403(b), 401(k), 457(b) plans, and IRA’s, do not affect Social Security benefits.
Since Ohio is a non-Social Security state, members of the Ohio public pensions do not contribute to Social Security while working in a public-covered position. There are two circumstances in which STRS Ohio members could receive less Social Security.
The Windfall Elimination Provision (WEP) – passed by Congress in 1983, retirees who are eligible for both Social Security and an Ohio public pension may not receive their full Social Security benefit. The most common occurrence is when a teacher qualifies for Social Security with 10 years or 40 credits but has a career pension. The amount needed currently for one credit is approximately $1,500. You can earn a maximum of four credits per year.
Let’s review Retiring Rob’s Social Security. He qualifies with the minimum 40 credits. His Social Security statement shows that he would receive $349 per month at age 67 (Full Retirement Age, FRA).Rob’s reduction will be 40-50%. His Social Security payment after the WEP will be approximately $175 per month.
However, Alice is not eligible with 38 credits. She will need two more credits to qualify for a monthly benefit. Since Alice will wait to draw her pension at age 65, she decided to work eight hours per week at a bookstore. Alice earned approximately $4,160 for the year. She qualified for 2 additional credits. She now meets the minimum 40 credits.
If your spouse will receive a Social Security benefit, you are eligible for a spousal benefit. The GPO does not impact your spouse’s personal benefit. If two-thirds of your monthly STRS Ohio benefit is greater than one-half of your spousal Social Security benefit, your spousal benefit is offset.
You will pay federal and state income tax on your retirement benefit. You may also owe a school district income tax depending on where you live. No city or local tax is due.
Online at www.strsoh.org – for retirement or survivor benefits only (not disability).
In person at 275 East Broad St., Columbus, OH 43215
Have the following information ready when you make your application:
Social Security number
Last day of employment
Retirement Date – always 1st of the month following your last day of paid service
Spouse’s name, date of birth, and Social Security number
Checking account for monthly income
Whether or not you want health care, dental, and vision to start when you retire (this is NOT the only time you can get health care)
*A Notary is required IF you leave a spouse less than a 50% Joint and Survivor Annuity. This form will need to be mailed to OPERS Ohio.
STRS Ohio members are required to wait two calendar months from their retirement date to return to public work. Retired members can return to work in the private sector the next day without impacting their benefit.
If you return to a public position within the two-month waiting period, members will forfeit their retirement check (current month only. Reemployed retirees have a second account with the retirement system in which the position is required to pay into. The second account will accumulate the member's contributions and interest. This account is available when the member stops working.
PLOP stands for “Partial Lump Sum Option.” We will advise you on the tips and tricks when making your PLOP decisions. Should you take a PLOP and how much? If you've been advised to take a max PLOP, call us for a second opinion before you take action.
Plan of Payment (aka J&SA) is a critical part of financial planning for Ohio PERS members. We’ve seen people lose $100k of retirement income by making incorrect decisions. The OPERS guide outlines the plight of folks who have faced the devastating impact of choosing the wrong plan or taking the pension too soon.
OPERS pension decisions can be difficult to navigate on your own. If you are facing this decision, let’s set up a time to talk.
