The Why and What of Retirement Systems

Retirement systems will vary from state to state. Each system provides a public pension benefit plan to qualifying retirees within a certain industry such as teaching.

Government workers may qualify for civil service benefit plans just as other workers may meet certain criteria for systems in created for their industries. Military may also have its own criteria.

When looking for a system to provide a good public pension, one has to look at his or her industry, years of service and location to calculate the potential pension.


A Few Examples of Benefit Plans

Many states have their own plans to aid teachers. For instance, members of one of the teacher’s retirement systems in Illinois can receive a monthly retirement annuity at age 62 with five years of service or at age 60 with 10 years. Members are also eligible for a discounted annuity at age 55 with at least 20 years but less than 35 years of service with the early retirement option.

Civil servants in the state of New York have a similar tiered benefit plan for qualified members of the state and local retirement procedures or systems. In addition to pension benefits, established members can receive special loans, service credit and other incentives. Members within the higher tiers of this system must contribute to a fund for a contributory retirement plan, but lower tier members are not required unless they are covered by a contributory plan. However, withdrawing these contributions will subject them to federal income taxes.


The Pros and Cons of Retirement Plans or Systems

There can be many benefits of investing in retirement systems. These systems can help one create a financial plan in order to prepare for retirement. They offer guidance and assistance to their members to help them understand their retirement needs and get them on the right track. Furthermore, members of these plans may have access to loans and other funds that may prove useful.

However, there can also be drawbacks to using retirement systems. Members are usually required to invest a certain percentage of their salaries in order to qualify for membership. Depending upon the plan, most benefits are only eligible to those who have spent a minimum amount of years in service to a particular industry. The terms of leaving some systems are rather strict and those who have not fulfilled the minimum time requirements can get a refund but lose all other privileges of membership.


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