Pension at 55: A Starting Point

In a previous post, The Pension Path, I shared an overview of the Wisconsin Retirement System (WRS) and how it works. In this post, I’m taking the next step: exploring a scenario along this path. My goal is to help folks understand how to estimate a pension benefit and how it might fit into a broader financial strategy. I’m a mathematics educator, not a financial advisor, and this post is meant for educational purposes only—like everything else on this site.

If your financial journey includes traveling the pension path, then I think you should, at a minimum, understand what this path looks like. If you are part of the WRS and have never looked at WRS Retirement Benefit Page, consider this a homework assignment. If you are part of another pension system and reading this blog, you are likewise charged to explore your benefits. Although waiting to understand how a system works the last few years of employment might work out fine, I think it very likely you will have missed opportunities unique to your situation.

All of the information I am sharing here is freely available on the ETF website and in their publications. I'm using the WRS Retirement Benefits Calculator to create estimates. This calculator is a great tool for getting a ballpark estimate. That said, as ETF notes on the website "This WRS Retirement Benefits Calculator is a tool that can give you an unofficial estimate of your benefit as you plan for retirement. 6-12 months before you plan to apply for benefits, request an official estimate." I also reference information from the ETF Calculating Your Retirement Benefits (ET-4107) publication as needed.

My goal with the blog is to describe paths that meet the following conditions:

1. Are accessible to most folks in public education in Wisconsin.
2. Do not require complicated financial structures.
3. Do not require complicated behavior.
4. Provide flexibility to adjust direction as life circumstances change.

Understanding the Pension Path

As I previously discussed, within the WRS, there are five variables that determine the pension benefit: 

1. Final Average Monthly Earnings,
2. Formula Factors
3. Credible Service
4. Age Reduction Factor
5. Variable Adjustment

Of these, the Formula Factor is fixed for your employment category (0.16 for teachers), while the others can shift based on your choices, health, and circumstances.

Since the goal here is to illustrate how you can use the estimation tools, I'm less concerned about the actual dollar amounts. Instead, I want to highlight how particular tweaks yield differences. For simplicity, I'm going to use current average salaries rather than trying to predict future salaries. I'm also going to round things to the nearest hundred dollars.

Working Through an Example: Pip's Story

Pip’s Story: The Basics

I'm going to build my assumptions around a teacher I call Pip. I want Pip to be representative of many new teachers just now entering the profession. Pip was born June 1, 2000 and started their first teaching position on August 1, 2023 at the age of 23. Based on WRS guidelines, Pip will be eligible for retirement on June 1, 2055 when they turn 55. Pip also has a spouse who was born on June 1, 2000. 

Let's assume Pip teaches until age 55 and immediately takes the benefit. Further, let's assume they had an annual salary of $60,000 and did not participate in the variable fund. Then we'll have the following values for our variables.

• Final Average Monthly Earnings: $5,000  ($60,000 x 3 / 36)
• Formula Factors: 0.16
• Credible Service: 32
• Age Reduction Factor: 0.904
• Variable Adjustment: $0

We're also going to assume that Pip's projected social security payment at age 62 is $2,000. 

Estimating Pip’s Benefit

Putting this information into the online calculator, we get the following output:

Estimated Monthly Benefit Amounts

As you can see in the picture, there are 14 different annuity options (seven regular, seven accelerated). I am going to focus on two options: "For Annuitant's Life Only" and "75% Continued to Named Survivor". If you would like to explore what the other options mean, check out publication Choosing an Annuity Option (ET-4117). Here are what the two options mean:

Life Annuity Option: For Annuitant’s Life Only

• This option is payable to you for life.
• The monthly payment will end when you pass away. 
• There is no death benefit payable to any beneficiary.

Joint and Survivor Annuity Option: 75% Continued to Named Survivor

• This option is payable to you for life.
• When you die, your named survivor will receive 75% of your monthly payment for the rest of their life.
• If your named survivor dies before you, all payments stop upon your death.
• If your named survivor dies within the first five years that you are receiving your annuity, your annuity increases to the For Annuitant’s Life Only amount.

Looking at the output, if Pip chose the Life Annuity Option, they would receive a monthly benefit of $2,314.24 (~$27,700 yearly). This benefit would be payable for their life and end when they died. Assuming that they took social security at age 62, which we estimated as $2,000, then they would have a combined monthly benefit of $4,314.24 (~$51,800 yearly).

If Pip chose the 75% Continued to Named Survivor option, they would receive a monthly benefit of $2,170.76 (~$26,000 yearly). Assuming that they took social security at age 62, which we estimated as $2,000, then they would have a combined monthly benefit of $4,170.76 (~$50,000 yearly). If Pip died prior to their spouse, the WRS benefit would be reduced by 25% to $1,628.07 (~$19,500 yearly) and paid to their spouse for the remainder of their life. 

Note that Pip's social security benefit may or may not be paid out to their spouse based on Survivor Benefits. If you want to know more about Survivor Benefits, visit https://www.ssa.gov/survivor 

Accelerated Payments

Both options also have an accelerated payments version. As WRS notes:

Accelerated payments are intended to provide you with approximately the same income from your WRS annuity alone (prior to age 62), as your combined income from the WRS and Social Security after age 62. Accelerated payments consist of two components: a lifetime annuity payment and a temporary payment that ends once you reach age 62. Accelerated payments are normally available if your retirement annuity begins before age 62 and your For Annuitant’s Life Only after-age-62 payment meets the annual monthly minimum requirement. The same annuity options are available, but they include an accelerated payment provision. With an accelerated option, you would receive a temporary increase to your monthly WRS annuity payment until the month following the month you reach age 62. (Choosing An Annuity Option, p. 5)

The way that the math works out, if you choose the accelerated option and then decide to collect social security at age 62, the total amount you receive each month should be consistent. 

Back to Pip, if they chose the Life Annuity Option with accelerated payments, the WRS monthly benefit will be $3,549.98 (~$42,600 yearly) until age 62 and then $1,549.98 (~$18,600 yearly) after age 62. Assuming that they took social security at age 62, which we estimated as $2,000, the combined monthly benefit would still be $3,549.98 (~$42,600 yearly) after age 62.

If Pip chose the Life Annuity Option with accelerated payments, they would receive a WRS monthly benefit of $3,453.88 (~$41,400 yearly) until age 62 and then a monthly benefit of $1,453.88 ($17,400 yearly) after age 62. Assuming that they took social security at age 62,  then combined monthly benefit would still be $3,453.88 (~$41,400 yearly). If Pip died prior to their spouse, the WRS benefit would be reduced by 25% to $1,090.41 (~$13,000) and paid to their spouse for the remainder of their life. 

The Big Picture

The previous discussion shows how quickly things can get technical. If we start to focus on numbers, it can be easy to lose track of the bigger choices involved. To help take a step back, I have summarized the different outcomes in a table:

What do you see when you look at this table? Here are some musings I have about the outcomes:

1. If we focus on getting the maximum WRS benefit, the Annuitant's Life Only option wins by about $1,800. This option assumes that Pip could live on only $27,700 per year, which is roughly 46% of their average previous salary. That said, if Pip reaches age 62 and takes social security, their total annual benefit is $51,800 or about 86% of their previous salary. 
2. The annual difference between the annuitant's life only and 75% to Named Survivor is $1,800 in  the regular option and $1,200 in the accelerated option.
3. The regular 75% to Named Survivor option provides $19,500 or roughly 32% of salary to spouse. The accelerated option would provide $13,000 or roughly 22% of salary to spouse.
4. Focusing on accelerated payments:
1. In both cases, the accelerated payments provides about a 50%+ increase in benefit for the ages 55-62 compared to the regular. The trade-off is a 20% decrease in benefit compared to the regular ages 62+.
2. For the annuitant's life only, Pip would earn $42,600 consistently assuming they take social security benefits at age 62. This is 71% of their salary. 
3. 75% to named survivor, Pip would earn $41,400 consistently assuming they take social security benefits at age 62. This is 69% of their salary. 

The question to consider isn’t “which number is the biggest?” but rather “which option best aligns with your goals, resources, and lifestyle?” My hope is that this post has provided a helpful introduction to the WRS tool and a way to estimate what retirement at 55—or any age—might look like. In a future post, I’ll explore how small tweaks to this base scenario can lead to different outcomes. Happy estimating!

Posted May 31, 2025