We know that you may want to retire, and could even have a retirement date in mind (along with a countdown clock) but will you be financially ready?
As part of your retirement plan, you may be considering DROP, but do you know how to make the most of this option? Suncoast can help you understand the basics.
What is DROP?
The Deferred Retirement Option Program (DROP) allows eligible employees of the Florida Retirement System’s pension plan to retire while continuing to work for up to 8 years. In other words, you are technically “retired” but you keep working as you normally would.
Upon completing the DROP, you will receive a lump-sum payment of the accumulated DROP benefits (minus taxes) in addition to your regular retirement benefits. You also have the choice of rolling the amount over to an eligible retirement plan or you can do a combination of a partial lump-sum and direct rollover.
Why should I enroll?
DROP allows you to start receiving retirement benefits while continuing to draw a salary. The DROP benefits will accumulate in an FRS Trust Fund that will earn an annual rate of 4% per year compounded monthly (effective July 1, 2023)
To maintain your current lifestyle in retirement, most people need at least 80% of what they are currently making. DROP can help you continue to add to your retirement savings and maximize the value of your pension benefits without having to stop working.
Who is eligible?
Employees in the FRS Pension Plan once vested and have reached the normal retirement date.
I’m nearing DROP termination – what can I expect?
Approximately 90 days prior to your last day of employment, FRS will mail you a DROP termination kit which includes your DROP Selected Payout Method form. It is important to have a plan in place and know which payout option is best for you. If you do not select a payout method within 60 days after your termination date, you may be issued a lump sum payment that could trigger significant incomes taxes. You may miss opportunities for investment growth to keep pace with inflation, as well as out of pocket health and long-term costs.
How do I know if DROP is right for me?
Like anything related to retirement, be sure to take into account the pros and cons of all your options prior to making any major decisions. DROP offers many perks in exchange for working a little longer. But just because there’s money on the table doesn’t mean that remaining in the workforce is definitely the right choice for you.
One of your best assets when planning for your retirement is a relationship with a trusted financial professional. Through Educators Choice, you have access to no-cost one-on-one counseling with a financial professional who can help you address the important factors and common concerns.