'It bothers me that it's frozen': I'm 64 and can't get my pension until I retire. Is this common?

By Alessandra Malito

'I would think it should increase a little like Social Security does'

Dear Help Me Retire,

I am a teacher. I enjoy my job and plan on working until I'm 70.

I'm 64 and will qualify for a small employer pension at 65, but I cannot receive this until I stop working. The pension will not increase if I delay claiming it and I cannot receive it until I retire.

It bothers me that it's frozen - I would think it should increase a little like Social Security does if you don't take it. Is this common for pensions?

I just find it interesting how the money was never their money, it was my school paying me, yet the district office holds on to the money and all the interest after 65 if we don't quit.

Pining for My Pension

Related: My husband's pension was $8,000 a month. As his survivor, I only get $1,800. Can I fight this?

Dear Pining,

I'm sorry to hear you're frustrated about your pension, but I encourage you to look at it from a different perspective.

Yes, it is absolutely irritating that you don't get to call all of the shots with your pension given, as you've said, it is your money. But these rules likely didn't change overnight, and they may also help you protect your future financial self.

I say this because, what if you did have access to the money at age 65, but before you retired? Would you start using it right away, or would you save or invest it yourself for your impending retirement?

Think of what drawing it out sooner would also do to the overall pool of money waiting for your old age. By not having access to it until you actually retire, you have this benefit waiting for you when you decide to leave the workforce.

I just want to note that in your letter, you use the word "frozen." This can be a term applied to pensions, where the employer freezes a plan, which either reduces or completely eliminates future benefits accruing. That isn't the same as not receiving a cost-of-living adjustment like one you see with Social Security, though.

Unfortunately, not all pensions offer cost-of-living adjustments like Social Security. Some never offer it, while others may suspend the adjustments because they're having funding issues.

The average adjustment in teacher pension plans was just under 2% in 2023 (and you can see in this list of teacher pension plans from Equable which states provided a cost-of-living adjustment). If you're curious about your pension's funding status, reach out to the state department that manages retirement benefits.

No two pensions are exactly the same. The rules for each vary on so many factors, which include benefit distributions based on your age or years of service. There is also a vesting schedule, which basically dictates that you must work a certain number of years (say, five years) in order to receive any sort of future benefits.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? We want to hear from you. Join the conversation in our Facebook community: Retire Better with MarketWatch.

Pensions can also change, and not always for the better.

An Urban Institute report found most states offered "less-generous pensions" to teachers hired in 2018 than those hired in 2008. Changes included increasing the contributions teachers are required to make to their retirement plans, raising retirement ages or reducing the percentage of one's salary that his or her pension would replace.

But recent changes shouldn't affect you personally. "Because benefit changes generally affect only new hires, not incumbent teachers, the financial impact of recent cuts may not be felt for years," the researchers behind that report wrote.

The National Education Association is a helpful resource for teachers, including when planning for retirement and making sense of your benefits. Your state's office on government retirement benefits would also be a good resource.

There are, in the meantime, a few things you could do right now. First, check your expenses between now and your anticipated retirement year are manageable. These include rent or mortgage, utilities, taxes, groceries, healthcare, a little fun and, of course, emergency savings.

Second, write down other expected income sources, like Social Security if you're eligible for it, or any other savings you may have. Make sure that your income supersedes your debts. This will give you peace of mind as you look forward to retirement.

Third, create a plan in action for your retirement. Find a professional familiar with your pension - a union representative or representative at the firm managing your pension - to go over all the specifics, including your payout options and estimated monthly figures.

You may not be happy about having to wait to access your pension, and that's understandable, but at least you have it waiting for you. In the interim, this is a great time to keep doing a job you love - and preparing for the next chapter of your life.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

-Alessandra Malito

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10-02-24 0955ET

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