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Retiring from Washington State is a big change, and it does not happen all at once. There are forms to file, dates to track, and choices about your pension, your health insurance, and your savings. If you miss a deadline, it can cost you real money. The good news is that the whole process breaks down into six clear steps, and if you follow them in order, you can move from state employee to retiree without any nasty surprises.
Think of it like planning a road trip. You would not just start driving and hope you end up somewhere nice. You would map the route first. Retirement works the same way. In this guide, we will walk through each of the six steps, show you a real worked example with numbers, and answer the questions we hear most often from Washington State employees getting ready to retire.
The 6 Steps at a Glance
Before we dig into the details, here is the whole journey in one place. Some of these steps happen years before retirement, and some happen in the final few months.
| Step | What You Do | When To Do It |
|---|---|---|
| 1 | Build a full financial plan | As early as possible, ideally years ahead |
| 2 | Tell your employer or school district you are leaving | Before the end of February |
| 3 | File your pension application with the Department of Retirement Systems | March or April of your retirement year |
| 4 | Set up your medical coverage through PEBB | Within 3 months of retiring |
| 5 | File for Social Security, if you plan to take it | 3 months before you want payments to start |
| 6 | Decide what to do with your retirement savings | After you separate, usually by September |
Now let’s go step by step, so you know exactly what to do and why it matters.
Step 1: Build Your Financial Plan First
The very first step is getting a real financial plan in place. This is not just a savings number in your head. A true plan is something you can hold in your hand, written out, that shows every dollar you will receive from today until the day you pass away, plus how each dollar gets taxed.
A good plan also includes a risk check, so you know your investments are not too risky for someone about to live off that money. Think of it like a blueprint before building a house. You would never let a contractor start pouring concrete without a drawing first, and retirement deserves the same care.
Mistake 1: Waiting Too Long
Many people wait until the year they retire to build a plan. That is like asking a builder to construct your dream house in two months. Corners get cut, and you might not even notice the shortcuts until years later, when it is too late to fix them.
Mistake 2: A Plan That Is Not Complete
Some folks have a simple spreadsheet an advisor handed them, but it does not answer the “what if” questions. What if your spouse passes away early? What if you need long-term care? A real plan needs a Plan B and a Plan C built in, so nothing catches you off guard later.
Mistake 3: Using a Non-Independent Advisor
Not all advisors are the same. Many work for banks, credit unions, or insurance companies, and they may push cookie-cutter solutions that fit their company’s products rather than your needs. An independent advisor has no bias and can custom-tailor a plan to fit your exact situation.
If you already have a plan, it never hurts to get a second look from someone independent, even if you end up sticking with what you have. If you would like a professional to walk through your specific numbers with you, you can schedule a personal meeting to go over your own retirement plan step by step.
Step 2: Tell Your Employer You Are Leaving
Once your plan is in place and you know retirement is happening, let your school district or employer know before the end of February. This gives them enough time to find your replacement, which is simply good manners on the way out.
There is also a financial reason to move quickly. Many employers offer a cash incentive for early notice, often somewhere between $500 and $2,500, depending on the size of your school district or employer. That is real money you do not want to leave on the table just because you waited too long to say something.
Step 3: File Your Pension Application
If you plan to start collecting your pension this year or next, you need to contact the Department of Retirement Systems, often called DRS, and ask for your retirement application. Do this in March or April, since the state needs time to process it, whether you apply by mail or online.
If you are not collecting your pension yet, because you are moving to a new job or you are not old enough yet, you can skip this step until the year you actually plan to start collecting.
Two Important Dates
Your application asks for a separation date, which is usually your last working day, often June 30th. It also asks for a retirement date, which is the month your pension payments actually begin. This second date matters a lot, because it affects your health insurance.
Once your pension starts, you are no longer eligible for your employer’s health insurance. Many people choose July 1st so their pension starts as soon as possible, but that also means paying for medical coverage out of pocket starting in July.
Whether July 1st makes sense really comes down to simple math: is your pension bigger than your new medical cost, or smaller? Here is a real worked example using the numbers from this video.
| Item | Monthly Amount |
|---|---|
| Pension income | $2,000 |
| Estimated medical cost for you and your spouse | $1,200 |
| Money left over each month | $800 |
In this example, your pension of $2,000 comfortably covers your $1,200 medical cost, leaving $800 extra every month. In that case, collecting on July 1st and paying for your own medical coverage right away probably makes sense.
But flip the numbers around. If your pension is smaller than your medical cost, or you simply do not want to pay out of pocket yet, waiting until September 1st can be smarter. That way, you stay on your employer’s insurance through July and August, and your pension does not start until September.
One more thing to watch: your birthday. If you plan to start your pension before you turn 62, you could be hit with an early penalty, so always double check your exact birthday against your chosen retirement date.
Step 4: Get Your Medical Coverage Set Up
Most Washington State retirees move onto the PEBB system, short for the Public Employees Benefits Board. It offers coverage similar to what you had while working, just continued into retirement.
If you retire before age 65, PEBB will be your main health coverage. If you retire after 65, Medicare pays first and PEBB becomes your supplemental plan, paying second. Many retirees who choose PEBB end up paying very little out of pocket for their care.
You will want to file for PEBB coverage within about 3 months of your planned start date. So if you are collecting your pension in July, plan to file in April or May. There are several plan options within PEBB, and the right one depends on your own healthcare needs, so take time to compare them before you decide.
Step 5: Decide on Social Security
Next, figure out when you want to file for Social Security. This decision should already be mapped out back in Step 1, as part of your full financial plan, since the right age to file depends on your whole financial picture, not just this one benefit.
Whenever you decide to file, give Social Security about three months notice. Many people choose January 1st simply because it lines up with a fresh tax year, which keeps things simple if you are still earning other income that could otherwise reduce your benefit.
If you are over 65 when you retire, this is also when you will enroll in Medicare. Even if you plan to keep working past 65 under an employer plan, it is smart to at least enroll in Medicare Part A, since it is free once you reach that age.
Step 6: Decide What to Do With Your Savings
The final step is deciding what happens to the retirement savings you have built up over your whole career, whether that money went in pre-tax or through a Roth account. If you were on Plan 3, this money is generally locked up until you separate from service, and it usually is not available to move until around September.
A common question is whether you have to move that money at all, or if you can just leave it where it is. You are allowed to leave it, but it is often not your best option, since moving it opens up other investment choices, including options built to protect you from a market downturn or provide a guaranteed income stream.
This is also where annuities, including the state’s own annuity option, often come up. Annuities are widely offered and can provide guaranteed income, but they are not automatically the right fit for everyone. There are real pros and cons, so this decision deserves the same careful, independent review as the rest of your plan.
Your state pension and retirement accounts can make up anywhere from 30 to 80 percent of your total retirement income. That is a huge chunk of your future, so it is worth working with someone who actually understands how your specific pension system works, rather than a generic advisor who has never seen a plan like yours.
Frequently Asked Questions
How early should I start my retirement plan?
As early as possible, ideally several years before you plan to retire. Waiting until your final year does not leave enough time to fix mistakes or take advantage of options that could have made a big difference.
When should I tell my employer I am retiring?
Before the end of February, so they have time to find a replacement. This timing can also help you qualify for a cash incentive, often between $500 and $2,500 depending on your employer or school district.
Should I start my pension on July 1st or September 1st?
It depends on your numbers. If your pension covers your new medical costs with room to spare, July 1st gets your income started sooner. If your medical costs are higher than your pension, waiting until September 1st keeps you on employer coverage a little longer.
What is PEBB and do I have to use it?
PEBB stands for the Public Employees Benefits Board, and it is the health coverage most Washington State retirees use. You are free to shop around for other coverage, but many retirees find PEBB works well and keeps their out-of-pocket costs low.
Do I have to move my retirement savings out of Plan 3?
No, you can leave it there. But moving it often opens up more investment choices, including options designed to protect your money from market drops or provide guaranteed income, so it is worth exploring before deciding.
Is the state annuity a good option for everyone?
Not necessarily. Annuities can provide guaranteed income, but they come with real trade-offs. The right choice depends on your full financial plan, so it is worth reviewing with an independent advisor before signing up.
Retiring from Washington State does not have to be stressful. Six steps, done in the right order, take you from state employee to confident retiree: build your plan, tell your employer, file your pension, set up your medical, decide on Social Security, and choose what to do with your savings.
P.S. It’s free to join. Over 150 members are already in it, plus you’ll get free courses and resources to help you plan your retirement with confidence.
