Rule of 90: when waiting six more months is worth more than a raise
TESTBy Daniel Okafor, CFP® · Founder & Lead Planner ·
Under Colorado PERA's defined-benefit plan, your monthly benefit depends on your years of service, your age, and your highest average salary, and certain combinations of age and service unlock an unreduced benefit. If you are close to one of those thresholds, waiting a few months can raise a benefit that is paid for the rest of your life. The exact rules depend on your benefit tier, which is printed on your PERA statement.
What "Rule of 90" refers to
Several PERA tiers allow an unreduced benefit once your age plus years of service reach a stated total. The Rule of 90 is the version most mid-career CSU employees ask about: age plus service equals ninety. Miss it by a semester and the benefit may be reduced for early retirement. Reach it and the reduction disappears. The reduction is permanent; the wait is temporary.
Why a raise can matter less than a date
A final-year raise increases your highest average salary, which lifts the benefit modestly. Crossing an eligibility threshold removes an early-retirement reduction, which can lift the benefit by a larger margin, and it does so on every check for life. Faculty who plan a retirement date around the academic calendar sometimes leave that margin on the table without knowing it.
How we translate the statement
Your PERA statement shows your tier, service credit, and projected benefit at several dates. We lay those dates against three other calendars: the academic year, the Medicare eligibility date, and the household cash-flow plan. The right retirement date is the one that works on all four, and it is often not the one you assumed.
The purchased-service question
Some employees can purchase service credit for prior employment or unpaid leave, including some sabbatical periods. The cost is a lump sum; the return is a higher benefit or an earlier threshold. Whether it is worth it depends on how far you are from the line. We run the numbers before you write the check.
Related reading
Which PERA option to choose at retirement: /q/which-pera-option-choose-when-retire. When exactly to retire from CSU: /q/when-exactly-should-i-retire-from-csu. If you want a quick sense of where you stand, the readiness check takes three minutes: /quiz/retirement-readiness.
Questions we are asked
Yes, through added service credit and salary, but at a slower rate than crossing the threshold itself.
You can; whether you should depends on contract terms and how the final salary months count.
On the first page of your PERA statement, and in your online PERA account.
Educational only. Larkspur Wealth Planning is not affiliated with Colorado PERA or Colorado State University. Confirm your tier and eligibility with PERA before making a retirement decision.