Formula for Calculating Maximum Standard Annuity - Tier 1 or 2
Years of Service times Percentage Factor times Average Highest 3 or 5 Years of Salary
Equals Yearly Maximum Standard Annuity
EXAMPLE
35 years x 2.3% = 80.5 x $70,000 Average Salary = $56,350
Maximum Standard Annuity for 12 monthly benefit amounts of $4,695
Tier 1 uses the Average Hightes 3 Years Salary
The standard annuity may be reduced due to early age, retirement annuity payment option selected, PLSO or other reductions required by law.
The example above is hypothetical for illustrative purposes only. Each individual situation will be different. Please consult your financial or tax professional or Jay A. Finn, CPA LLC regarding your circumstances.
$4,345 per month throughout the retiree’s lifetime. At the retiree’s death, the same payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary.
If the primary beneficiary dies before the retiree, the retiree’s future monthly annuity payments will increase to the amount of the standard annuity as if the member had elected the maximum standard monthly benefit at the time of retirement. This is known as the “pop-up provision.”
$4,514 per month throughout the retiree’s lifetime. At the retiree’s death, one-half of this payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary. Also subject to the “pop-up provision” (see Option 1).
$4,681 per month throughout the retiree’s lifetime. If the retiree dies within 60 months after the date of retirement, payments are made to the primary beneficiary (or beneficiaries) for the remainder of the 60 month guaranteed period.
$4,648 per month throughout the retiree’s lifetime. If the retiree dies within 120 months after the date of retirement, payments are made to the primary beneficiary (or beneficiaries) for the remainder of the 60 month guaranteed period.
$4,427 per month throughout the retiree's lifetime. At the retiree's death, three-fourths of this payment amount continues during the life of the primary beneficiary, based on the age of the beneficiary. Also subject to the "pop-up provision" (See Option 1)
**Options 1, 2 and 5 are calculated based on the age of the beneficiary at time of retirement. For purposes of these illustrations, the beneficiary's age is considered to be the same as the retiree's age.
When a member meets the requirements for an early age service retirement and applies to retire, the member is entitled to receive a payment of a lifetime monthly annuity. For service and age requirements, please refer to the TRS handbook.
Most TRS members will fit into Tier 1, 2 or 3.
Tier 1 is everyone who achieved “grandfathered” status in 2005, while Tier 2 is everyone who was working in 2005 but was not eligible to be considered “grandfathered.” Two basic premises are that Tier 1 uses the highest 3 years annual salary and Tier 2 uses the highest 5 years annual salary. Another difference is that Tier 1 employees are eligible for the PLSO at the Rule of 80 (age at retirement plus years of service equals 80) while Tier 2 employees are eligible for the PLSO at the Rule of 90 (age at retirement plus years of service equals 90). A Tier 2 employee can still retire for full retirement under the Rule of 80 but must meet the Rule of 90 to be eligible to withdraw under the PLSO.
Tier 3 is also employees who are not “grandfathered” and the normal age eligibility for retirement is either age 65 with 5 years or more of service or you must meet the Rule of 80. All Tier 3 employees were hired on or after Sept. 1, 2007.
Source: TRS Website - trs.texas.gov
Learn more about the Teachers Retirement Services program.
Your eligibility for service retirement is determined by your age and years of TRS service credit. In combination, your age and years of service credit, along with the date you joined TRS and your eligibility for grandfathering, determine when you are eligible for an unreduced, normal-age retirement annuity or for an early-age retirement annuity reduced according to actuarial tables or based on a flat percentage rate.
At retirement, an eligible service retiree may select a partial lump sum option (PLSO) distribution in addition to either a reduced standard annuity or a reduced optional form of annuity. Learn more >
