Retirement Systems By State: Which State Has The Best Retirement System?


Every state has a public employees retirement system, but they aren’t run with federal involvement.

Each state creates their own system and manages it, some more effectively than others.

Public pension plans have common features (lifelong payouts, medication discounts, etc.), but not every state is well equipped to meet the needs of their retirees.

This list is here to showcase some of the best public employees retirement programs in the country, while disclosing the intimate benefits, and why they’re better than other states.

What is a Retirement System?

Looking At Monitor

USA retirement systems use pensions or a 401(k) plan to help you plan for retirement.

Public pensions are funded by taxpayer dollars as part of their state income and sales taxes. It’s up to every state to individually fund their public pensions.

These pay for government-employed local services such as trash collection, grounds keeping, the fire department, and more.

Workers will also pay a portion of each paycheck over the term period towards their retirement fund.

Retirement systems are intended to be paid out once a month for the rest of your life.

The longer you work in a public position, the larger your pension fund will be, and you can enjoy a more comfortable retirement.

Almost. Some states aren’t on track.

While they’re financially obligated to pay these pensions for the service of public workers, many states have been falling behind and borrowing billions of dollars (sometimes internationally) just to keep the pension funds afloat.

Then you have some states that have it all figured out. Let’s take a look at the best public employee pension plans in the United States, and explain what makes them tick.

What State has the Best Public Employee Pension Plan in the United States?

It comes to a close seven-way tie, and for different reasons.

Apart from providing a check each month, pension programs have different benefits that can greatly enrich your life.

The thing is, some people don’t need the added benefits, while others live off of them.

If we were to judge based on ease of access to funds, Wisconsin has the best public employee pension plan.

If we were going off of funding and reliability, New York state has the best pension. Let’s look at the details, and a few other states with good pension programs.

Arizona Retirement System

Welcome To Arizona Sign

The Arizona retirement system pays out on the very first day of the month unless there is a holiday, in which they pay on the last day of the previous month.

Their rigorous payment system and easy-to-access healthcare is what sets them apart.

ASRS offers medical, dental, vision and prescription drug discounts through a card program. It isn’t free, but it is greatly discounted.

The one major downside of the ASRS system is that any retirees pensions (from 1989 to current) are taxable.

Arizona residents are required to pay taxes on distributions that originate from the ASRS over the sum of $2,500.

The ASRS also has a back to work program that allows retirees to continuously gather income from their pension while working in another job.

There are specific rules and regulations, but the program is more flexible than most.

Florida Retirement System

The Florida retirement system offers one of the most wide-reaching series of investment opportunities while you build your retirement fund over time.

There are over twenty-two different methods to invest, including US stocks, brokerage accounts, global stocks, money market and multi-asset accounts.

There are financial guides and information available to you through their website.

FRS is a long-haul sort of system. Your pension funding starts off slowly, but accumulate faster the longer you stay.

Your pension is subject to financial markets and is not guaranteed.

Benefits include health insurance subsidies and others, but it can take a long time to get into this system—ten years on average.

FRS also offers two payout options, one of which gives you a preconfigured amount of money at intervals throughout your retirement.

The other option is a ten-year high yield payout system, but your benefits will dry up after that. It’s best to consult a financial advisor before choosing this option.

Virginia Retirement System

Virginia State Flag

The Virginia retirement system offers a program known as COLA (Cost-of-Living Adjustment).

This graduates your payments with the current amount of state inflation, so you aren’t stuck making adjustments as life gets more expensive.

Seemingly endless information is available on the official Virginia Retirement System website, including quarterly asset allocation reports for the investment portion of the public pension.

Virginia also offers a money management database to better handle your pension, and make smart financial decisions.

VRS paid out over $4.6 billion in benefits to retirees in 2018 alone, and ranks as one of the top fifty pension systems in all of the world.

VRS is still working on more and more legislation.

Where most programs have everything figured out, there’s a bit of a fight to pass bills to include certain diseases and other inclusive disabilities into the pension program.

Wisconsin Retirement System

The Wisconsin retirement system works differently than you would expect. While they don’t have as big of a pension program, there is a greater deal of benefits.

You’ll receive death benefits while actively working for the WRS, and if you upgrade your account to an annuity upon retirement, your rates for death benefits will change depending upon the annuity that you select.

There are separation benefits, disability benefits, and an investment option (which many public pensions do not offer). It’s a good system, but not perfect.

You are not allowed to withdraw any additional contributions in the future unless you first terminate WRS coverage, which means quitting the job that offers those benefits.

Since 2011, it has become slightly harder to enlist in the WRS program.

You now have to work for five years in a creditable service that the WRS covers before receiving benefits. That’s five years of not building on your retirement.

New York State Retirement System

Statue Of Liberty

The NYS retirement system is the third largest in the country, which provides some of the best benefits for public sector workers.

Upon writing this article, there are a recorded $210.2 billion dollars in assets, held in trust for pensions benefit holders.

The pool of active and vested employees is around 650,000, while the retiree number rests around 450,000.

With such a powerful pension program and a vast public funding pool, this is one of the most secure public pensions in America.

On average, the state of New York outputs $11.45 billion dollars in benefits paid to retirees, showing that the program is funded for well over a decade with new income being compounded daily.

Beneficiaries will undergo a rigorous process to verify a death report in order to receive benefits.

The NYS retirement system is careful, and while that offers security for everyone, it can be difficult to work with.

South Dakota Retirement System

South Dakota is one of the highest funded public retirement systems in the United States, rivaling with New York state.

SRS welcomes Roth 457 contributions, which allow you to withdraw money from your pension completely tax-free. Few states have implemented an option like this.

The SRS program also offers convenient tables of information and contribution amounts on their website, simplifying the process.

The only major downside that we can see is the yearly administrative cost that is applied to your account.

This pays for newsletters, admin support, as well as account statement distribution and your account.

The fee is $12 per year, unless you balance exceeds $7,500, at which point a 0.16% fee will be applied (up to $500 maximum).

North Carolina Retirement System

Road Sign

As one of the most funded public retirement programs in the country, North Carolina offers stability, as well as a few benefits.

Vision, dental, and even identity theft protection are all offered under your retiree plan. You may even be eligible for prescription drug and general medical coverage.

Employer contributions in North Carolina are high, and their track record for payouts is nearly spotless since 1941.

NRS annually earns around 7.3% interest on all accounts, but even when the market doesn’t allow for it, they pay the difference so you never miss a beat.

So What Makes a Good Public Pension Program?

Funding. First and foremost, funding.

There are problems all across the country with actually funding these public pension programs, and among them, Kentucky is one of the worst.

In December of 2018, the Kentucky retirement system (KRS) reported that it was $37 billion in debt to the retirees that it pays for.

Issuing money to retirees without impacting the state economy is paramount to economic sustainability. Unfortunately, Kentucky isn’t the only state with sustainability problems.

States like New Jersey, Illinois, Connecticut, Colorado, Hawaii, Rhode Island and ten others fall underneath the 63% funding mark.

Responsible states like New York have their pension plans funded for well over the next decade, even with suspected growth rates.

The problem is, a pension is supposed to be guaranteed by the terms it has set, unlike a 401(k).

Pensions are non-volatile agreements, so the states can’t just pull out of them. That doesn’t mean there can’t be cuts or problems with payments, though.

Just because a state is supposed to upkeep that arrangement doesn’t mean that they always will.

It’s important to get into a plan that isn’t just well-funded, but properly funded for years to come.

There are a few other things you should look for when considering a pension.

Health Benefits

Illustrated Heart Over Stethoscope

Your own health insurance might not be enough to cover all of your costs.

Some pension plans offer comprehensive discount packages for medication, appointments, and other medical expenses.

These are usually done in the form of cards that you present at the time or purchase or payment.

Discounts can range from as little as 15% to 90% on average, depending on which state your pension belongs to.

You won’t find concise coverage that acts as your complete healthcare coverage. It is possible to link some pension plans to your Medicare or Medicaid; most states offer this service.

Death Benefits

Permanent life insurance. Since a pension is designed to pay out for life (provided you don’t opt in to a ten-year pension), you can expect to cover your love ones in the event of your death.

While these are similar to life insurance policies, they don’t offer the same investment opportunities.

Those are in separate areas of your pension, so you cannot contribute to your life insurance policy in the hopes of secured investing.

Investment Opportunities

Speaking of investment opportunities, they’re one of the best things about a pension plan.

A pension is different from a savings plan, since you are able to see your interest grow with investments.

Similar to a money market account, your money is held and used by the bank that the pension plan uses in order to fund loans and other bank products.

From that, you get an annual interest rate that can compound on your current balance.

Compound savings will be deposited into your account, and your interest rate will be determined based off of your new balance.

There are other ways to invest and receive yields from your pension as well. Global and United States stock options are available, though these do come with some risks.

Lifelong Payouts

stopping 401k contributions why?

Pensions are the opposite of a 401(k)—you receive payments made out to you, every single month, for the rest of your life.

However, some public pension programs have a different approach.

They may offer a secondary option, where you get higher payments made to you each month, but it dries up after ten years. The point of a pension is security.

We recommend opting for the long-term plan that pays you for the rest of your life, unless a serious medical diagnosis has given you less than ten years to live.

Retiree Work Status

Retirement is well-earned, but it can be… dull. There’s still fire in your heart and pep in your step, and if you want to get out and work, your pension program should allow that.

It’s odd that pension programs disallow some retirees from working. Your pension plan may allow for part-time work while still receiving benefits, just be certain that it’s in the fine print.

Upon reading the terms of your pension, make sure that it doesn’t say anything about forfeiting your pension if you decide to work another job in retirement.

For public pensions, most states recognize your public service, and reward retirees with the ability to work a job of their choosing without being penalized.

Related Questions

What’s the Difference Between a Pension and a 401(k)?

401(k) plans are more restrictive, and slightly more volatile. Where a public pension is guaranteed by the government, 401(k) plans are not.

Pensions may be subject to partial taxation, but 401(k) plans are subject to full taxation, no matter what .

The benefit is that when you contribute to a 401(k) plan while you work, the money is attributed to the account tax-free.

You pay taxes on that money when it’s taken out during retirement.

A 401(k) plan may also allow you to pull out a lump sum, potentially at a higher tax rate. With a pension plan, you get what you get.

If you were to make a large purchase or needed immediate funding for medical or emergency reasons, a 401(k) would work in your favor.

If you have good insurance and are prepared for financial disasters, a well-adjusted pension plan will be better for you.

Can I Turn My Pensions Into an IRA?

401k Ira Large

Yes, you can turn your pension into an IRA account.

This is called a rollover account, but it does come with risks. You could be hit with penalties through the pension program for doing this.

When rolling money over into an IRA, you will not be hit with a tax until you withdraw the money.

Many retirees will take a portion of their pension and turn it into an IRA.

This gives you the ability to take small amounts of money from that account each month, but also gives you a lump sum option.

If you need to remove a large sum of money, an IRA or Roth IRA will allow it.

Some retirees will put half of their pension into an IRA as emergency measures, whether for personal asset protection or because of the public pension crisis in their state.

Does My Spouse Receive Retirement System Benefits When I Pass?

In most states, yes, your spouse will receive benefits after you have passed.

It all depends on the formula that your pension system used to determine your benefits. The longer you work in that position, the more money your pension will payout.

While it varies from state to state, on average, your spouse will receive half payments until they pass.

If you were receiving $1,500 per month for your pension, they will receive $750 per month.

In most instances, they will lose access to medical, dental, and vision coverage from your pension.

Some pension programs also offer a death benefit package, similar to a life insurance policy.

This can be a separate lump sum that does not impact the pension payments that your spouse would receive.

These packages might be called a joint annuity, or a survivor annuity. These are different from single life annuities, which as you might imagine end when the pension holder passes.

Can I Transfer a Pension from One State to Another?

Happy Senior Couple

Yes, you can transfer your pension from state to state. Nobody is expecting you to live in one state for the rest of your life.

If you’re planning on moving to a state like New York where the pension plans are better funded, that would be a wise decision.

There are steps you need to take before transferring your pension.

  • Ensure that your pension is vested. This can take between five to ten years of service in your chosen position. The state retirement system website of your choosing will have the term outlined.
  • Contact your pension administrator at least six months prior to your retirement age. Lengthy forms and/or seminars may be required to continue.
  • Verify that your pension has been properly transferred to a deferred retirement account, otherwise you could face penalties for moving it out of state.

How do I Maximize My Pension Payouts?

The longer you work in the position that you earned the pension under, the better your benefits will be. You can maximize your payouts using a simple formula.

Your years of service, times your final average salary (for last 3 years of work), times your benefit multiplier. The end result is your pension benefit.

The less time you put into that position, the less you’re going to get out of it. This is how most pension systems work, but some may value one aspect over others.

For example, some pension programs will factor in the final salary as a more valuable aspect of your pension than the actual multiplier.

Your multiplier can be anywhere from 1.0% to 2.5%. It may not seem like a lot, but over the course of 20-30 years, it piles up.


New York state and Wisconsin have some of the best public pension retirement systems.

Public pensions have been in danger since 2000. States like Kentucky and New Jersey are billions in debt with no clear signal of when those crises are going to end.

While state governments are obligated to pay pension retirement systems, there’s no telling what will happen if we hit another national financial storm.

You can always transfer part of your pension/roll it over into a 401(k) or Roth IRA and bring it with you to your next public service position in a new state. It’s tricky, but it can be done.

Last updated on:

Leave a Comment
