Teachers & Educators

The Washington Teachers’ Retirement System Plan 3 (TRS Plan 3) is a hybrid retirement plan that combines:

• A defined benefit pension
• A defined contribution investment account
• Optional deferred compensation savings opportunities

Understanding how these pieces work together can help teachers make more informed retirement planning decisions.

Most educators think of this portion of the plan as their pension. Once vested, eligible participants may receive a lifetime monthly retirement benefit beginning at retirement age.

For many TRS Plan 3 members, the pension benefit at age 65 is calculated using the following formula:

Years of Service × 1% × Average Final Compensation (AFC)

Average Final Compensation (AFC) is generally the average of your highest-paid consecutive 60 service credit months.

EXAMPLE:

30 years of service with an AFC of $8,500/month:

30 × 1% = 30%

30% × $8,500 = $2,550/month
Or approximately $30,600/year*

*Hypothetical example for illustrative purposes only. Actual benefits depend on factors including years of service, compensation history, retirement age, and benefit elections.

When you began working for a Washington school district, you selected a contribution option for your TRS Plan 3 account. The most common selection is Option A, which contributes 5% of gross monthly compensation into the investment account.

Participants in TRS Plan 3 are responsible for selecting and monitoring the investments within their defined contribution account. If no election is made, contributions are invested in the plan’s default option selected by the Washington State Investment Board (WSIB).

Investment selections should align with factors such as:

• Retirement timeline
• Risk tolerance
• Overall financial goals
• Other retirement assets and income sources

Many participants benefit from periodically reviewing their allocation strategy as retirement approaches.

In addition to TRS Plan 3, many teachers have access to the Washington Deferred Compensation Program (DCP), which allows participants to save additional funds for retirement on a tax-advantaged basis.

Depending on the employer, teachers may also have access to additional retirement savings options such as a 403(b) plan.

These plans can help supplement pension income and may provide additional flexibility for retirement and tax planning.

Can I retire before age 65?

Yes. Early retirement options may be available depending on age and years of service. However, retiring early can reduce pension benefits depending on the retirement option selected.

Participants should review current Washington DRS early retirement rules and benefit reduction schedules before making retirement decisions.

How do I know if I am vested?

According to the Washington Department of Retirement Systems (DRS), TRS Plan 3 members are generally vested when they meet one of the following criteria:

• 10 service credit years
• 5 service credit years with at least 12 months earned after age 44
• 5 service credit years earned before July 1, 1996

Participants can contact the Washington DRS directly for personalized eligibility and benefit estimates.

How should I choose a survivor benefit?

Survivor benefit elections can significantly impact both monthly retirement income and long-term family financial security.

Factors that may influence this decision include:

• Spouse income needs
• Other retirement assets
• Insurance coverage
• Health considerations
• Estate planning goals

Because each situation is unique, many retirees review these options carefully before retirement.

How should my defined contribution account be invested?

Each investor should evaluate their investment options, time horizon, retirement goals, and risk tolerance when selecting investments.

A diversified investment strategy and periodic reviews may help participants stay aligned with their long-term retirement objectives.

Should I contribute to a DCP or 403(b)?

Additional retirement savings plans such as DCP and 403(b) accounts may help supplement retirement income and provide tax-advantaged savings opportunities.

The appropriate contribution strategy depends on factors such as:

• Retirement goals
• Current income
• Tax considerations
• Pension expectations
• Overall financial plan

Some common retirement planning mistakes educators make include:

• Relying solely on pension income
• Not reviewing TRS Plan 3 investment allocations
• Underutilizing DCP or 403(b) opportunities
• Claiming Social Security without coordination planning
• Failing to evaluate survivor benefit options
• Ignoring tax planning during retirement

• Washington Department of Retirement Systems (DRS)
  
• TRS Plan 3 Guide
  
• Early Retirement Factors Information
  
  Important Disclosure

The information provided is for educational and illustrative purposes only and should not be construed as investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Individuals should consult with qualified financial, tax, and legal professionals regarding their specific situation.

Wealthmark Advisors is not affiliated with or endorsed by the Washington Department of Retirement Systems (DRS) or the Washington State Investment Board (WSIB).