Retiring early but waiting for a pension


Q. I’m a state employee. What are the pros and cons of me retiring after 25 years of service at the age of 56? I am a Tier 1 employee so I would get a full pension, but do I have to wait to start receiving it?
— Planning

A. We appreciate your question, but first and foremost, the only way to get accurate answers to most of your concerns would be by contacting the pension department or your union representative.

That’s because each branch of New Jersey state employment has its own specific benefit policies.

But in general, Tier 1 employees who attain the age of 55 and have 25 years of service will have no reduction in their full pension benefit, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

Exactly what your pension benefit would be based on several factors, most importantly what your full salary is at retirement, Gallo said.

It would basically be 45 percent of your average salary for the last three years of employment, he said.

For example, if the average of your last three year’s salary is $80,000, your annual pension benefit will be approximately $36,000, he said.

“What I cannot tell you is at what age your payments will begin,” Gallo said. “[The state pension for teachers] does not start until the retiree reaches the age of 60 regardless of their date of retirement but then again, each branch of employment has their own rules.”

There’s a lot that goes into whether you’re actually ready to retire, and whether your finances are ready to keep up with you.

Other things to think about would be health insurance costs under your retirement status as compared to those while employed, Gallo said. Your human resources department will be able to go through all that with you.

Also keep in mind that you are not eligible to collect Social Security benefits until at least age 62, he said, so you need to make sure your income can cover your expenses.

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This story was originally published 0n July 24, 2019. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.