How Do I Calculate Teacher Retirement in Indiana?

How Do I Calculate Teacher Retirement in Indiana?
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The state of Indiana offers its teachers two kinds of retirement plans, and it can be hard to determine what your benefits are. If you're enrolled in one and need help figuring this out, a teacher retirement pension calculator can help. There is the Teacher's Retirement Fund Hybrid Plan (TRF) and the My Choice: Retirement Savings Plan (PERF); new hires are automatically entered into the first and can switch over to the other one after ​60 days​.

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What Are PERF Retirement Benefits?

PERF stands for Public Employees' Retirement Fund Hybrid Plan and comprises a pension benefit plus an annuity account. According to the writers at TeacherPensions.org, teachers in the plan can contribute from ​3 to 10 percent​ of their annual salaries to the fund; employees also contribute ​5.5 percent​ of their salary to the system's defined-benefit portion for a total range of ​8.5 to 15.5 percent​ per year. When the teacher retires, the total value of the defined benefit (DB) is determined by a formula that uses their final average salary and years of service.

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Teachers are vested in the DB after ​10 years​ of service with PERF retirement benefits. However, if they choose to leave the jobs when fully vested, they can only bring their own contributions across state lines. Purdue University's HR Department says that the PERF retirement age is normally 65; however, to get the full benefits, teachers must be this age and have ​10 years​ of service. Those who qualify for normal and early retirement will receive a monthly benefit for life.

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The TRS Rule of 85

The TRS rule of ​85​ can apply to Indiana teachers who wish to retire before reaching ​age 65​. These educators are eligible to retire if they are ​65 years​ old with ​10 years​ of service, from ​60 to 64​ with ​15 years​ of service, or if they are ages ​55 to 69​ and the age and service equals ​85​ when added together. So if you are ​55​ and have ​30 years​ of teaching experience, you may be able to take early retirement.

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Retiring before meeting any of those requirements means that the teacher would receive a reduced retirement benefit. Also, you should keep in mind that tax laws apply as well; if you are under the age of ​59 1/2​ when you retire and take a distribution, you might have to pay an additional ​10 percent​ in tax. There are certain exemptions for this, so check with your human resources department or tax professional.

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PERF Budget Calculator

The Indiana Retired Teacher's Organization shares a chart that shows the benefit percentages that are given for teachers who retire from ​ages 50 to 59​. Those who are ​50​ will receive ​44 percent​ of their benefits; it goes to ​age 59​, with ​89 percent​ of the benefits. If you would like to retire early, you'll need to factor in your other retirement savings and investments, Social Security and any other sources of income. It's all about cash flow, and if you can afford it, it might make sense to retire early.

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The writers at the Indiana Public Retirement System website have some free calculators that can help you determine your teacher retirement benefits. You must enter your date of birth, average salary and PERF and TRF service years. Enter your projected retirement date, name a survivor and the calculator will do the work. You can also enter your Social Security benefits information into this calculator for a number that integrates your projected pension amount with it.

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