Exploring the Rule of 85: It’s Role & Impact


If your employer offers a guaranteed pension plan, then you may wonder whether it’s possible for you to retire early and still get your full pension benefits. Many pension plans follow the Rule of 85, which says that if your age and years of service to your employer total at least 85, then you can retire early without giving up any of your pension benefits.

This calculation is by no means universal. That being said, it’s probably among the most common formulas you will find in the pension arena today. In this article, we will go over the Rule of 85, how it works, what its limits are, and how you can use it in your retirement planning for income and other financial goals.

How Does the Rule of 85 Work?

The Rule of 85 is a basic calculation that you can use to see whether you can retire early. The full retirement age for most pension plans is 65 years of age. Therefore, if you want to retire before you reach full retirement age, generally you will have to meet the Rule of 85 instead.

Both private-sector and public employers offer pension plans, so the Rule of 85 can apply to pensions in which private-industry employees and government employees participate. You can check with your employer for more details.

How Do You Calculate the Rule of 85?

As mentioned previously, the Rule of 85 is a very simple formula. Just add up your age and your years of service to your employer, and if the total is at least 85, then you can retire early with full benefits.

If you are 55 years old and have put in 30 years of service to your employer, then you can sail off into the sunset without forfeiting any of your pension benefits. Of course, this assumes that your employer follows the Rule of 85 in its pension plan and its provisions.

Do All Employers Follow the Rule of 85 with Their Pension Plans?

Some companies’ pension plans adhere to this rule while others don’t. The pension plans that do allow employees to easily discover whether they can retire early with full benefits or must continue to work for a few more years to reach this goal.

Other companies may use other guidelines, such as the Rule of 82 or 88 as their cutoff ages, for this formula. For example, under the rule of 82, you could be 62 years old with 20 years of service and would then qualify to retire early with full benefits.

What Are the Limits of the Rule of 85?

In many cases, applying the Rule of 85 isn’t as simple as merely adding your age plus your years of service. You may have to reach an absolute minimum age before you can apply this formula.

For example, you may need to be at least 60 or 62 years of age to be eligible for this formula. Say that your plan requires you to be 60 before you can retire early. In that case, you can’t retire at age 55, even if you have 30 years of service under your belt.

Other plans may require that you have at least a minimum number of years of service, such as 25 years before you can use this rule. Some plans stipulate that only certain classes of employees are eligible to use this rule, while others can’t.

Covering Income Gaps, Even with Full Pension Benefits

If your employer uses the Rule of 85 and you can retire, you may still have a gap between your retirement income and your expenses tied to your retirement lifestyle. This is where personal savings come into play.

Your employer may have offered a defined-contribution retirement plan during your working years. If your employer is in the private sector, that workplace plan may have been a 401(k) plan. And if you are a federal employee, you had access to the Thrift Savings Plan or if you were a public employee, such as someone working in a public school district, you might have had a 403(b) retirement plan.

If you built up retirement money in your plan, then you can use it to create an income stream that fills those financial gaps. In many cases, pensions and Social Security benefits alone won’t be enough to cover all of your living expenses. For example, educators and other public employees may retire only at a percentage of their salary, from what their pension will pay them. This is one reason why financial professionals recommend also saving for retirement using defined-contribution plans at work or personal IRAs.

Seeking Help for the Rule of 85 and Other Retirement Planning

To see if you have any income gaps and you can do anything else to reach your goals, consider working with a financial professional whether or not you qualify for the Rule of 85. They can help you map out your expenses in retirement and then see if your income will be enough to maintain your lifestyle.

If you are looking for ways to close the gap and have more peace of mind, an annuity can provide you a guaranteed income stream as part of an overall strategy. This is income that you will be able to count on for the rest of your life, regardless of what happens.

Of course, the rest of your money would be well-positioned in a personalized financial plan that keeps up with inflation, grows your money, and provides you with liquid funds. But for covering your living expenses in retirement, only annuities can provide guaranteed lifetime income.

How to Find Out if Your Pension Plan Follows the Rule of 85

The easiest way to find out whether your pension plan adheres to the Rule of 85 is, of course, simply to ask your pension administrator. They should be able to provide you with a direct answer, along with any other information that is pertinent to retiring early.

You will need to know whether there is a required minimum age or minimum number of years of service. Your plan administrator can also clarify whether employees in your class or level are eligible for this rule.

Final Thoughts on the Rule of 85

Although this rule may tell you whether you can retire early, it’s not wise to bank on it being able to give you a secure retirement all by itself. You may still have a sizeable gap between your income and your spending in retirement. So, you can supplement your pension with a defined-contribution savings plan such as a 401(k), 403(b), or 457 plan, or a traditional or Roth IRA.

A financial advisor can help you to create an overall plan of action to help you reach your savings goals. In some cases, this may mean that you will work for a few more years even if you satisfy the Rule of 85 so that you can sock away some more money in your retirement accounts. If you participate in Social Security, delaying your benefits gives them more time to accrue, thus boosting your retirement income.

The Bottom Line

Consult your financial advisor today for more information on retirement planning, especially if you plan on retiring early and satisfy the Rule of 85. They can help you work through your pension options and what important “what-ifs” relating to your financial future. You may also wish to look into working with someone that is independent, meaning they can offer products and strategies from multiple financial services companies, not just one parent company.

If turning to an independent, experienced financial professional sounds right for your needs, many are available at SafeMoney.com to assist you. Get started by using our “Find a Financial Professional” section to connect with someone directly, where you can discuss your goals, concerns, and personal situation. Should you need a personal referral, please call us at 877.476.9723.

Next Steps to Consider

  • Start a Conversation About Your Retirement What-Ifs

    retirement planning services next steps

    Start a Conversation About Your Retirement What-Ifs

    Already working with someone or thinking about getting help? Ask us about what is on your mind. Learn More

  • What Independent Guidance
    Does for You

    independent vs captive advice

    What Independent Guidance
    Does for You

    See how the crucial differences between independent and captive financial professionals add up. Learn More

  • Stories from Others
    Just Like You

    safe money working with us

    Stories from Others
    Just Like You

    Hear from others who had financial challenges, were looking for answers, and how we helped them find solutions. Learn More

Proud Member