DROP retirrment

[ExplorerXpress]

Hey all,

im approaching retirement at my north east department. I will be 42 when I go. I can collect 50% of my pay immediately after 20 years
of service.

im 90% sure I’m moving to Florida when I retire and am considering a second career in LE. We don’t have DROP and not many people know what it is, including me.

I met a retired Indiana guy who is a new deputy and loves it down here (I’m currently visiting for the holiday).

can you please explain how it works and why wouldnt you stay in your pension system as long as possible to grow it? One of the other guys I spoke with told me he earns 3%/year for every year of service and will be retiring after 25 with 75% of pay. Guys enter their DROP their last few years to earn cash in a savings account?

thanks for your insight.

[SJR1709]

Hey, I'll try to answer for you as best as I can and I'm sure others will chime in. So, you basically speak of two different things in your post. First being the DROP and then the later is the pension. The guy you spoke with concerning the 3% per year earning 75% after 25 years, that is his pension multiplier. Some agencies have better, some have the same, some have worse. It's like what you are going to be getting with your 50% for your 20 years of service. The multiplier here in generally higher. The DROP is a program that most agencies down here have. It usually ranges from 5-8 years, depending on what the agency uses. You can do all of it, none of it, some of it, etc; it's up to you. Basically it's a retirement account while you are still working. Prior to entering the DROP though, so signs a "resignation letter" that states that at the completion of the maximum allowable time, you will retire. To be eligible to enter the DROP, you must be eligible for retirement. For someone in your case who is older going into it, you may need to do 10 years and/or be age 55, etc. You'll have to look into the exact terms of the agency that hires you. Anyway, so when you enter the DROP, you are still actively working, but whatever your pension checks would be for your retirement begin going into a DROP account. Remember, you are still actively working so you will be getting your regular paycheck, but the pension checks you would be receiving if you had retired and left, go into the DROP account. Over the time you are in the DROP program, however many years you do, that account grows. So at the end when you do actually leave, you have the DROP account, which could at that point have a good chunk of change, then you will start receiving your pension checks, It's a good thing.

[jnhdrac]

Not being from Florida I am a little envious of the DROP. Having said that, a couple of things to think about. It sounds like to max out the DROP you will work until you are 60. Some do, but that is a long time.

Purely from the standpoint of money, be very selective about where you go to work. The difference between a multiplier of 3 percent and 2.5 percent is huge. In my opinion the option for the DROP does not make up for a lower multiplier, but run the numbers carefully and consider your own priorities. A 3 percent multiplier and a DROP is a nice way to build a pile of money.

The upside of a DROP is you end up with a pile of your own money. That does not inherently mean you will have more income in retirement, but there is certainly something to be said for a pile of your own money.

[ExplorerXpress]

Anyway, so when you enter the DROP, you are still actively working, but whatever your pension checks would be for your retirement begin going into a DROP account. Remember, you are still actively working so you will be getting your regular paycheck, but the pension checks you would be receiving if you had retired and left, go into the DROP account. Over the time you are in the DROP program, however many years you do, that account grows. So at the end when you do actually leave, you have the DROP account, which could at that point have a good chunk of change, then you will start receiving your pension checks, It's a good thing.

so I enter drop making say 1500/week…I’m still working….but my “pension” I would collect Is say 4,000/month….that 48/year goes into an account and after say 5 years when I have to leave, I’m getting a check for just under 200, plus my 4,000 pension?

that kind of seems like double dipping. What is the benefit to the agency/retirement system? They’re paying you double in a sense, no?

[jnhdrac]

The agency pays your salary and the pension pays your pension check to the DROP. The agency gets an experienced employee and the pension makes the pension payment you have qualified for, but into the DROP. One upside for you is you no longer contribute to the pension and I believe the employer ceases contribution as well. You do not continue to amass years towards your pension.

[SJR1709]

so I enter drop making say 1500/week…I’m still working….but my “pension” I would collect Is say 4,000/month….that 48/year goes into an account and after say 5 years when I have to leave, I’m getting a check for just under 200, plus my 4,000 pension?

that kind of seems like double dipping. What is the benefit to the agency/retirement system? They’re paying you double in a sense, no?

Yes, that's essentially it man. As the other poster stated, the agency keeps you, an experienced officer, for a while longer. Also, neither you or the agency are contributing toward your retirement (pension fund) anymore. So that becomes a savings to both of you while the pension fund pays into your DROP account. It's a good deal. So yes, at the end you walk away with a good chunk of change in your DROP account and now instead of those $4,000 a month checks going to the DROP account, now they start coming to you. The DROP is a really nice thing. Now, the other thing is pension systems. You'll have to look at whatever agencies you are interested in and see if they have a private pension fund as most cities do, or if they use the State Retirement, also known as FRS, which is used by all State agencies, Sheriff's Offices, and some municipal police departments. I'm NOT a fan of FRS at all. I personally think it's terrible and would steer clear at all costs, but everyone has to make that choice for themselves and that's a whole different discussion all together. Best of luck.

[Florida Smokey]

DROP is a great program if you are in the state retirement system. You'll have several hundred thousand dollars when you are done depending on what your salary was when you entered DROP.

[ACCAV]

One other thing. Once you enter drop, your pension percentage (multiplier) no longer increases. Some people choose not to go into DROP and increase their pension amount; get a higher percentage of their pay when they retire. Some choose a lower pension payment, but a bigger DROP account.

I retired from a large department before taking my current job. I get my pension and my DROP account (now called a PROP account) draws interest so it gets bigger every year.

[ExplorerXpress]

Thank you all for the responses. Seems almost too good to be true. That would NEVER fly up my way!!! Lol!!

[LA Copper]

I know we're not Florida, but LAPD has had DROP for about 18 years now and it's been very successful and very welcome by the troops. Definitely a good thing.