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Can a person work after "retiring" and receiving a pension?

For example, in Illinois public workers are eligible to "retire" at age 59 and receive 75% of their salary at the time. So, for example, a school superintendent making $268,000 a year, can "retire" and immediately start drawing a pension of $200,000 for their rest of their life that automatically goes up 3% every year for "inflation" (even if the money supply is deflating).

Can the superintendent then just apply to another school system and become a principal or superintendent somewhere else and then make another $250,000 on top of the $200,000 they are already drawing as a pension?

molnarm
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Five Bagger
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4 Answers4

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It will depend on the terms of the pension. There may be non-compete clauses or something similar for superintendents (or even teachers) that prevent them from drawing a pension while working for another school system. But other than that there's generally no restrictions on being able to work in other professions, or perhaps even other schools in a different state (so they're not "double-dipping" from the same budget).

D Stanley
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Yes. The rules will depend on the rules of the pension fund, though. In Illinois,

If you return to state employment on a contractual basis, […] or for the private sector, your SERS benefit will not be affected.

So to continue employment, the superintendent would need to go to a different state, or work in the private sector. In general, this is the same for most states and true of the private sector (there's nothing stopping you from taking out of a retirement fund given you meet all the requirements to draw from it).

In fact, the state of Alabama had a program specifically designed to prevent experienced employees from going to work for the benefit of other states in their early retirement years called DROP that basically mimicked the effect of pension+salary to keep them in Alabama.

Back to your example. In order to retire receiving 75% of one’s salary (based on the formula on the page I linked to), the employee would need to have worked a little over 34 years continuously. If retiring at age 59, there is a reduction of benefits by up to 6% as opposed to age 60 (0.5% per month before age 60), so the full benefits would not be realized.

Note, however, that educators do not pay into (and thus do not receive, barring other employment) Social Security in the state of Illinois. If teachers did (and I'm guessing there are some who did way back when and the law may have changed, else it wouldn't be in the calculation formula), they receive only 1.67% instead of 2.2% per year, which requires 45 years of employment for maximum benefits — impossible for a 59-year-old employee.

user0721090601
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For State Service in California:

A State Retiree/Retired Annuitant is a person retired from California state civil service. The state may rehire this person as a retired annuitant to work up to 960 hours in a fiscal year (July 1 through June 30) without the loss of CalPERS retirement benefits.

PER: https://boomerang.ca.gov/sr_eligible.aspx

Eric W
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tl;dr: It varies wildly depending on your state.

In the Texas teacher retirement system, you have to take a break in service after retirement, or you lose your pension payments for the months you're working.

  • One full calendar year before returning to full-time work*
  • One full calendar month before returning to part-time work*

*Note that these are required breaks for returning to work with any system in the state that uses TRS (not for some random private employment).

Source: https://www.trs.texas.gov/TRS%20Documents/employment_after_retirement.pdf

recoup
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