What Is the Rule of 85 with Retirement?

The Rule of 85 might qualify you to receive your pension earlier than usual.

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The Rule of 85 is a provision in certain pension plans that allows you to retire when your age plus the number of years you worked at your employer is 85 or greater. Some plans also include other requirements, like a minimum age or minimum years of service, and some plans have other, similar rules for certain employees, like a Rule of 75. In some cases, these numeric rules are part of early retirement plans and you can get different benefit packages by waiting until you hit a minimum age to retire rather than leaving work as soon as you hit the minimum pension plan number.

Variations on the Rule

In its simplest form, the Rule of 85 allows anyone whose age plus years of service is 85 or greater to retire with pension benefits. It's common with public employment contracts at various government agencies. Generally, it applies to so-called defined benefit plans, those traditional pension plans where people are promised a certain level of pension payment after they retire depending on various factors, rather than defined contribution plans such as 401(k) plans, where employees and sometimes employers contribute a certain amount every year or month.

Some employers have additional restrictions, like requiring you to be a certain age, such as 60 or above, before invoking the Rule of 85. Other employers may have a similar numerical rule, like a Rule of 75 or a Rule of 90, that functions essentially the same way with a different total number of years you can hit to collect your pension. In many cases, pension systems have evolved over time, so the rule that applies to you may depend on when you first began working for your employer.

The rules are usually defined as part of employee agreements, not by any standardized regulation from the Internal Revenue Service or other agency, so it's usually best to check with your employer, your union or a financial adviser to make sure you understand the retirement options available to you.

Considerations in Invoking the Rule

The Rule of 85 and other numerical variants are often considered to be part of early retirement plans, which means they may not offer quite the same benefits that are given to people who wait until they're a certain minimum age to retire.

It's also generally not mandatory to retire as soon as you hit the minimum number of service years and years of age. Some people may also want to wait to retire until they've hit the age to collect Social Security benefits, until other investments pay off or for other considerations, like a spouse's retirement, before putting in for a pension.

Many pensions are also defined based on your highest paid years of employment, so if you recently received a raise or anticipate the possibility of working a lot of overtime, it can be worth waiting to retire.