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Typically, retirement income comes from three sources; your pension,
Social Security, and your personal retirement savings. Below is a method
to quickly estimate how close your pension and Social Security will come
to meeting your income needs in retirement. This will give you an idea of
how much personal savings you may need to supplement your retirement.
- Most experts agree that you will need to replace
70% to 85% of your pre-retirement income to maintain your standard
of living in retirement.
- Social Security will replace roughly 20% of your
pre-retirement income. The exact amount depends on your age at retirement
and your work history.
- The pension for PERS, TRS and LEOFF plans 1 and
2 will replace 2% of salary for each year of service. For example,
with 15 years of service, the pension would be 30% of salary (15
x 2%). However, the pension is reduced if you retire early, or if
you elected a survivor option to provide income to a spouse after
your death.
The pension for PERS and TRS plan 3 will replace 1% of salary for each year
of service. However, plan 3 members also have a defined contribution savings
component to their PERS or TRS retirement.
- If Social Security and your pension do not meet
your salary replacement goal, the difference would need to come from
personal savings.
- If you are a member of PERS 3 or TRS 3, you will
also need to estimate the income from the savings side of your retirement
plan.
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Example:
- Terry's goal is to replace 75% of salary with
retirement income.
- Terry's Social Security will replace about 20%
of salary.
- Terry will retire
at age 65 with 30 years of service, and a base pension
of 60% of salary. However, Terry will elect a full benefit
to a spouse who
is 4 years
younger. The survivor benefit reduces Terry's pension
from 60% of salary to 45% of salary (or about 75% of the full
pension).
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Goal |
-75%
of income |
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Social Security |
-20% of income |
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Pension |
-45%
of income
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Personal savings |
-10%
of income |
Result: Terry will need enough personal
savings to replace 10% of
salary during retirement.
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Investment Choices for Retirement Plan Savings
To find out more about saving for retirement through payroll deduction,
see the Supplemental
Retirement Plan (SRP) or the Deferred Compensation
Plan. Also see our web page on Investing for Retirement. For a
more detailed calculation to determine whether you're on track
for retirement, try the step-by-step method.
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