Planning to retire from your school district soon? There’s a real process behind it, and the choices you make along the way, like which date you pick to separate from your job, can change your health care coverage, your cost of living raises, and even your monthly pension check. Here are the seven steps every TRS, PERS, or SERS member should walk through before their last day of work.
Step 1: Get a Written Financial Plan
Before you tell anyone you’re retiring, start with a written financial plan. This is simply a document that lays out your income and expenses from today until the end of your life, so you can see the whole picture in one place instead of a bunch of scattered guesses.
A good plan also shows you what happens under different scenarios, like what happens if you or your spouse passes away early, or if one of you needs long-term care later on. Seeing it all on one sheet of paper, instead of as separate fragments in your head, is often what finally gives people peace of mind about retiring. Some people who go through this process realize they could have retired years earlier than they thought.
Step 2: Tell Your School District Early
Once your financial plan confirms you’re ready, let your school district know before the end of February that you don’t plan to return the following school year. Districts often give an incentive or bonus for early notice, since it gives them time to find your replacement. The bonus amount depends on your district, but it can run as high as $1,500 just for telling them early.
Step 3: Notify DRS and Double-Check Your Estimate
Next, notify the state so DRS can send you a retirement benefit estimate. This estimate shows your payment under Option 1, plus the survivorship options (Options 2, 3, and 4) if you have a spouse. Keep in mind that choosing a survivorship option locks you into that benefit, though if your spouse passes away before you, your payment automatically steps back up to the Option 1 amount.
Don’t just take the state’s number at face value. Go back and check your own top five years of salary against the pension formula for your plan. Errors happen more often than you’d expect, usually because some income never got reported to DRS, like extra coaching pay or work done in a different district.
This happened to a custodian in Yakima who worked with our office. His statement came back about $200 a month short. It turned out he’d also worked as a coach in a different school district, and that income had never been reported to the state. Once it was added back in, his benefit went up by roughly $300 a month, which adds up to thousands of extra dollars a year he would have missed out on if the error hadn’t been caught.
Step 4: Apply for Retirement and Pick Your Dates Carefully
Once your estimate checks out, fill out your retirement application, either on paper or through the DRS website. Paper applications can take two to three months to process, so if you’re aiming for a summer retirement, request it in February or March. Applying online tends to move faster.
The application asks for two separate dates: your date of separation and your date of retirement. These aren’t the same thing, and which dates you pick can affect both your pension and your health care. You have to be separated from your district before you can start collecting your pension, so the two dates always need some gap between them.
Most people use June 30th as their separation date, since school is over by then, and July 1st as their retirement date. July 1st matters because DRS pays cost of living adjustments on July 1st each year, but only after you’ve been retired a full year. Retire any later than July 1st and you’ll wait closer to two full years for your first raise instead of one.
| Retire July 1st | Retire September 1st | |
|---|---|---|
| Pension payments | Start in July | Start in September, but you still collect your normal salary through August |
| SEBB health coverage | Ends when you separate | Continues through August |
| Service credit | Stops in June | Two extra months, slightly higher pension |
| First COLA timing | About one year later | About one year later |
Under the SEBB health plan, your coverage stops as soon as you separate from service or start collecting your pension. So a July 1st retirement date starts your pension sooner, but ends your SEBB coverage sooner too. Waiting until September 1st keeps your SEBB coverage and adds two months of service credit, at the cost of two months of pension payments. Either way, you can switch onto PEBB retiree health coverage once you’re eligible, so you’re never left without options.
Step 5: Get Your Health Care Lined Up
Most retirees move from SEBB into PEBB, which is the Public Employees Benefits Board health plan for public retirees. Rates are generally reasonable, and anyone retiring from a school district can enroll if eligible.
PEBB has different plan options depending on whether you’re pre-Medicare or already on Medicare. If you retire before age 65, your premiums will run higher, since that plan has to cover more on its own. Once you’re on Medicare, PEBB works as a supplement, and costs typically drop quite a bit. Many retirees choose Regence BlueShield through PEBB and report solid experiences, including major procedures like knee and hip replacements with little to no out-of-pocket cost. It’s still worth comparing total cost against coverage before you commit to a plan.
Step 6: Decide When to Start Social Security
You can start Social Security as early as age 62 or delay it all the way to age 70. Starting earlier means smaller monthly checks for a longer stretch of years, while waiting means bigger checks starting later. For most people, the breakeven point between collecting early versus late lands somewhere in the early 80s. If you’re married, there are additional strategies worth discussing with a financial professional to help coordinate both spouses’ benefits.
Submit your Social Security application about three months before you want payments to start, to leave time for processing and fixing any errors. If you retire mid-year, say in July, it’s often smart to wait until January 1st to start Social Security, so your income for benefit purposes resets to zero. Social Security has income thresholds, and crossing them can temporarily reduce your benefit. Some retirees who filed shortly after retiring got a letter saying they’d earned too much and had their benefit reduced, which took time and hassle to sort out.
Step 7: Decide What to Do With Your Retirement Savings
If you’re on Plan 3, you also have a separate pot of savings to decide what to do with. Think of it like a bank account that’s yours to use, but one that needs to stretch across your entire retirement, and one that’s still pre-tax, meaning taxes are still owed whenever the money comes out.
You can leave the money with the state, roll it into an IRA to keep growing it, or use it to purchase an annuity for guaranteed income. There’s no single right answer for everyone, so it’s worth comparing your options, including whether leaving it with the state or moving it elsewhere gives you a better long-term result.
One more thing to plan around: if you leave Plan 3 money untouched because you don’t need it yet, the IRS eventually forces the issue. Required minimum distributions currently begin at age 72, meaning you have to start withdrawing and paying taxes on that money whether you need it or not. Many retirees find it worthwhile to be proactive here, meeting with an advisor or accountant to look at strategies for managing that future tax bill while today’s rates are still relatively low.
Mistakes to Avoid
The most common mistake is skipping the written financial plan and jumping straight to filling out paperwork. Without seeing the full picture, it’s easy to be surprised later by income that’s lower, or expenses that are higher, than expected.
The second is trusting the state’s benefit estimate without checking it yourself. Missing income, like coaching pay or work in another district, can quietly shrink your monthly check for the rest of your life if it’s never caught.
The third is picking a retirement date without thinking through how it affects health care, service credit, and your first cost of living adjustment together. These three things move as a package, not separately, and getting the timing wrong is hard to undo once your application is submitted.
Retiring from a school district involves more moving pieces than most people expect, and small timing decisions can add up to real money. If you want help walking through your own dates, benefit estimate, and options, you can schedule a personal meeting and we’ll go through it together.
Frequently Asked Questions
What’s the difference between my separation date and my retirement date?
Your separation date is when you stop working for your district. Your retirement date is when your pension officially begins. They have to be different dates, since you must be separated from service before you can start collecting your pension.
Why do so many people use July 1st as their retirement date?
DRS pays cost of living adjustments on July 1st each year, but only after you’ve been retired a full year. Retiring on or before July 1st gets you to your first COLA sooner than retiring later in the year.
Will I lose my health insurance when I retire?
Your SEBB coverage as an employee ends once you separate or begin your pension. From there, you can move to PEBB retiree health coverage if you’re eligible, so you shouldn’t go without coverage, but the transition timing depends on the dates you choose.
When should I start collecting Social Security?
You can start as early as 62 or as late as 70. Earlier means smaller checks for longer, later means bigger checks for a shorter stretch. The typical breakeven point is the early 80s, so your personal health and financial situation should guide the decision.
What happens to my Plan 3 savings if I don’t touch them?
You can leave the money invested, but required minimum distributions currently begin at age 72, at which point you’re required to start withdrawing and paying taxes on the account whether you need the income or not.
P.S. Retirement from a school district isn’t just one decision, it’s seven of them, and they all interact with each other. Getting the order and timing right the first time saves you from costly do-overs. Come learn alongside other Washington state employees working through the same steps.
