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Indiana Public Retirement System

Indiana Public Retirement System (INPRS) > My Fund > Public Employees > What you should know about buying extra service credit What you should know about buying extra service credit

What does service credit have to do with my monthly pension benefit?

INPRS uses three pieces of information to get your PERF or TRF monthly pension benefit amount:

  • your highest five years' salary
  • years you worked in your PERF or TRF-covered job, known as creditable service, and
  • age at the time monthly pension benefits begin.

We also give you the option to buy more service credit to give you a higher benefit amount. There are a lot of things that factor into the final cost of extra service. We don’t know all of these factors at the time you buy the service. However, the two most important pieces of information are the date you stop working and the date you start getting your retirement benefits. The text below explains in more detail how we calculate the final cost for you to buy more service credit. If you still have questions after reading this information, please call our customer service center at (888) 286-3544.

How can buying extra service credit give me a higher monthly pension benefit?

If you buy service credit, that added service will increase your monthly pension benefit amount.

Example 1 [create infographic]:

Linda has 20 years of service and an average salary of $30,000 per year. Here’s how we would figure out her monthly pension benefit:

.011 x $30,000 x 20 = $6,600, or $550 per month

But if Linda purchases two years of service, here’s how that would increase her monthly benefit:

.011 x $30,000 x 22 = $7,260, or $605 per month

Sometimes having extra service credit also lets members retire earlier than they could without it. For instance, if you have 10 years of service, you can start getting a full monthly pension benefit at age 65. But if you have 15 years of service, you can start getting a full benefit as early as age 60.

Or, with 30 or more years of service credit, you can even start your full pension benefit payments as early as age 55 if your age and service are equal to or more than 85. This is known as the “Rule of 85.”

Example 1 shows how buying more service credit will give you a higher monthly benefit. It can also allow you to retire sooner than you’d be able to without the added service credit. But if you don’t know exactly how old you’ll be when you retire, we can’t tell you if you’ll be able to retire sooner with the added service. And the value of that service could be very high.

Example 2 [create infographic style table]:

John is 57 years old with 12 years of service. He could buy two more years at a fairly low cost since his service would be brought up to 14 years.

He still won’t have enough to retire at 60 with a full monthly pension. But, if he buys two more years and then works another year, he could quit his job at 58 and start his benefits at age 60. He would have 15 years (13 worked, plus the two he bought). He could still quit at 58 without the two years of purchased service, but wouldn’t be able to start his benefits until age 65.

However, if John instead buys two years at age 57, quits at 58, and then starts his benefits at 60, that would put the two extra years at a much higher value than the amount of his increased benefit.

How do I decide if I want to buy extra service credit?

When INPRS estimates your cost to buy service credit, we assume two things to make sure the value of the extra service won’t be more than the amount of your pension benefit:

  • That after you buy service, you’ll choose to stop working. [1]
  • Once you stop working, you’ll start your monthly benefit at an age that gives you the best value for the service you bought. [2]

We give you an estimate that allows you to see examples of how buying different amounts of service credit at different ages changes the cost. For instance, you would have to pay much more for extra service that lets you retire earlier or that allows you to retire with full benefits by reaching the “Rule of 85” sooner.

[insert table/infographic with example pricing based on three types of fictional member info]

This is information we’ll give you so you’ll get the best value for service you may want to buy:

  1. The cost to buy the service
  2. The amount that your benefit will be increased with the extra service
  3. The age you would stop working, and
  4. The age you would start your retirement benefit

Service credit forms

PERF

TRF

1977 Fund

Excise, Gaming and Conservation Plan


[1] Known as your Termination Age.
[2] Known as your Commencement Age.