Are You Ready to Retire from Arizona State Employment?
If you're an Arizona state employee approaching retirement eligibility, you may be wondering whether this is the right time to retire. It's a question that keeps many soon-to-be retirees up at night.
While there’s no universal answer that works for everyone, there are general guidelines that can help you make an informed choice. This framework will help you evaluate whether you're truly ready to retire from Arizona state employment, and if not, what steps you need to take to get there.
Financial Readiness Factors
Before you set a retirement date, you’ll want to know that you’ll be able to support yourself through your golden years.
Understanding ASRS Eligibility
As a state employee, the Arizona State Retirement System (ASRS) represents a significant part of your financial future. The ASRS offers several paths to retirement eligibility, and which ones apply to you depends on when you were hired.
If you joined ASRS before July 1, 2011, you can retire with a full pension if any of the following apply:
You are 65 years old.
You are 62 with at least 10 years of service for the State of Arizona.
Your age and years of service add up to 80, known as the "rule of 80." (For example, if you are 55 with 25 years of service, you could retire under the rule of 80.)
If you joined ASRS on or after July 1, 2011, you have different retirement options:
You are 65 years old.
You are 62 with at least 10 years of service for the State of Arizona.
You are 60 with at least 25 years of service.
You are 55 with at least 30 years of service.
Early retirement is also possible as early as age 50 with five years of service, though your benefit would be permanently reduced.
Supplemental Income
ASRS eligibility is just the starting point when gauging your retirement readiness. Unfortunately, your pension alone probably won't cover all your retirement expenses. You will likely need supplemental income to support yourself through retirement.
What additional sources of income do you have? Common options include a 401(k), 403(b), or 457 deferred compensation plan. Traditional and Roth IRAs are also great opportunities to grow your wealth, along with personal investment accounts and a health savings account (HSA).
The amount you'll need depends on your anticipated lifestyle and expenses, but having supplemental savings provides a critical buffer and allows you to delay Social Security for higher benefits.
The Healthcare Challenge (Early Retirement)
If you're planning to retire before age 65, healthcare costs deserve serious attention. This gap between your employment-provided coverage and Medicare eligibility can be one of the most expensive stages of early retirement.
For 2025, a 40-year-old would pay approximately $500 per month for a "silver" plan on the ACA Marketplace without subsidies, significantly higher than younger enrollees. However, many people qualify for subsidies that can substantially reduce their premiums.
Options for bridging the healthcare gap include:
COBRA continuation coverage (typically 18 months)
ACA Marketplace plans
Your spouse's employer coverage
ASRS retiree health insurance benefits
Short-term health insurance with limited coverage
Don't underestimate these costs. A couple retiring at 60 could face tens of thousands more in healthcare expenses before Medicare eligibility, depending on health status and plan choices.
Getting Your Financial House in Order
Debt is a common concern for retirees. Carrying significant debt into retirement can dramatically increase the income you'll need. Ideally, you should enter retirement with your mortgage paid off or at least manageable payments, no high-interest credit card debt, car loans eliminated, and no outstanding personal loans.
If you're juggling debt, consider whether delaying retirement by a year or two could allow you to eliminate these obligations and enter retirement on firmer financial ground.
Income Replacement
Financial planners commonly recommend targeting an income replacement ratio between 70%–80% of your pre-retirement income. This doesn't mean taking a pay cut. Instead, it reflects that you'll no longer be paying certain work-related expenses or saving for retirement.
The replacement ratio assumes you'll maintain approximately 100% of your actual pre-retirement spending since it accounts for the fact that you won't be paying payroll taxes, saving for retirement, or covering work-related expenses like commuting and professional attire.
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The Numbers: Can You Afford to Retire?
Now that we’ve gone over the general rules, let's get practical. Here's how to calculate whether you can actually afford to retire.
Step 1: Add Up Your Guaranteed Income
Start by calculating your reliable income sources:
ASRS pension: Log in to your myASRS account to see your estimated monthly benefit. This calculation considers your average monthly compensation and years of service.
Social Security: Visit ssa.gov to get your benefit estimate. (Remember, claiming at age 62 permanently reduces your benefit, while waiting until age 70 maximizes it.)
Other pensions: Include any other defined benefit pensions from previous employment.
Step 2: Calculate Your Expenses
This step requires honesty and detail. Track your current spending for at least three months, then adjust for retirement. Some expenses will decrease in retirement, such as:
Commuting costs
Work clothes and dry cleaning
Retirement savings contributions
Payroll taxes
Other expenses may increase:
Healthcare (especially before Medicare)
Travel and leisure activities
Home maintenance (you'll be home more)
Many expenses will likely remain stable, like housing, food, and insurance.
Step 3: Calculate the Gap
Subtract your guaranteed income from your projected expenses. This gap must be filled by withdrawals from your supplemental savings. For example:
Monthly expenses: $6,000
ASRS pension: $3,500
Social Security (at 67): $2,000
Monthly gap: $500
That $500 monthly gap ($6,000 annually) must come from your savings. Using a conservative 4% withdrawal rate, you'd need approximately $150,000 in supplemental savings to safely fill this gap.
Step 4: Budget for Healthcare Costs
For healthcare specifically, budget between $6,000–$15,000 per year per person for coverage before Medicare, depending on your age, health status, and plan choice.
For 2025, the standard Medicare Part B monthly premium is $185, with an annual deductible of $257. But before you reach Medicare eligibility at 65, costs can be significantly higher. This is often the largest surprise expense for early retirees.
Step 5: Don't Forget Inflation
Currently, the 30-year average inflation rate is 2.63%. While any single year may be higher or lower, planning for approximately 2.5%–3% annual inflation is prudent.
A simple rule to keep in mind: Your expenses will roughly double every 24–28 years with 3% inflation. Your ASRS pension includes cost-of-living adjustments, but you'll need your supplemental savings to keep pace with inflation as well.
Beyond the Numbers: Emotional and Social Readiness
Being financially ready for retirement is necessary but not sufficient. Many financially secure people struggle in retirement because they haven't prepared in other ways.
Identity Beyond Work
For many state employees, especially those with long careers, work provides significant identity and purpose. Ask yourself:
Who am I beyond my job title?
What gives me a sense of contribution and meaning?
How do I introduce myself if not by my profession?
It’s always a good idea to answer these questions before retirement, not after.
Social Connections Matter
Work provides daily social interaction, camaraderie, and shared purpose. In retirement, you must be intentional about maintaining and building social connections. Consider these questions:
Which work relationships do you want to maintain?
What activities or organizations will provide regular social interaction?
How will you combat potential isolation?
Research consistently shows that social connections are among the strongest predictors of happiness and health in retirement.
Finding Your Retirement Purpose
Retirement isn't just freedom from work; it's freedom to do something meaningful with your time.
Successful retirees often have:
Hobbies they're passionate about
Volunteer work that aligns with their values
Part-time work or consulting that provides purpose
Learning goals (classes, skills, travel)
Family involvement (grandchildren, caregiving)
The happiest retirees aren't those who stop everything. They're those who start something new.
Health Considerations
Your health significantly impacts both your ability to enjoy retirement and your retirement costs. Consider:
Are there activities you want to do while you're healthy enough?
Do you have health conditions that might benefit from less work stress?
Can you afford potential long-term care needs?
These questions deserve honest answers before you set a retirement date.
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Are You Ready to Retire?
Even if you meet ASRS eligibility requirements, that doesn't always mean you should retire right now. Consider these factors when deciding whether to work longer.
Warning Signs You're NOT Ready to Retire
If you see any of these red flags, you may want to keep working.
Significant Debt: Carrying substantial debt into retirement creates unnecessary stress and reduces your financial flexibility. If you have credit card balances, car loans, or a large mortgage, consider working longer to eliminate these obligations.
No Plan for Healthcare: Unfortunately, "I'll figure it out" is not a suitable healthcare strategy. If you're retiring before 65 and haven't researched your options, calculated costs, and enrolled in coverage, you're not ready.
Haven't Calculated Actual Expenses: Guessing at your retirement expenses is a recipe for disaster. If you haven't tracked your spending and created a realistic retirement budget, you're missing critical information.
No Post-Retirement Vision: If retirement feels like an escape from work rather than a transition toward something positive, you're likely to struggle. Retirement should be moving toward something, not just away from something.
Insufficient Emergency Reserves: If an unexpected $5,000 expense would devastate your finances, you need more cushion before retiring.
Your Identity Is Tied to Your Work: If you can't imagine who you are or what you'll do without your job, consider taking more time to develop interests and identity outside of work before taking the leap.
Signs You ARE Ready to Retire
On the flip side, these indicators suggest you're well-positioned for retirement.
ASRS Eligibility: You've reached retirement age with sufficient service to receive full benefits.
1–2 Years of Expenses in Cash: You have liquid reserves to cover expenses without immediately drawing from investments, providing flexibility if markets decline.
Healthcare Plan in Place: You've researched options, calculated costs, enrolled in coverage, and budgeted appropriately for the pre-Medicare years.
Clear Retirement Vision: You have specific plans for how you'll spend your time, maintain social connections, and find purpose.
Emotional Preparedness: You've thought through the psychological transition, discussed retirement thoroughly with your spouse or partner, and feel excited rather than anxious.
Financial Margin: Your guaranteed income plus conservative portfolio withdrawals comfortably exceed your projected expenses with room for unexpected costs.
Partner Agrees: If you're married or partnered, you're both on the same page about timing, lifestyle, and expectations.
Working After Retirement
If you're considering returning to work after retirement, understand that working for an ASRS-covered employer has specific rules that can affect your pension.
The 20/20 Rule: If you return to work for an ASRS employer and work 20 or more hours per week for 20 or more weeks in a fiscal year, your pension will be suspended and you'll resume active membership (unless specific exceptions apply).
365-Day Waiting Period: If you retired at normal retirement age, you must wait 365 days from your termination date before you can return to work full-time (20+ hours per week for 20+ weeks) for an ASRS employer without suspending your pension.
No Restrictions for Non-ASRS Employers: You can work unlimited hours for non-ASRS employers without affecting your pension.
Early Retirement: If you took early retirement, stricter limitations apply until you reach normal retirement age.
Violating these rules can result in pension suspension, and you may be required to repay benefits received while working improperly. Always complete the Return to Work form in your myASRS account before returning to work for an ASRS employer.
When Professional Help Makes Sense
Retirement planning involves countless moving parts: Social Security timing, tax-efficient withdrawals, healthcare coverage, and ensuring your money lasts. A qualified financial advisor can help you coordinate all these pieces into a cohesive strategy tailored to your specific situation.
This is especially valuable if you're thinking about retiring in the near future and need help creating a sustainable distribution strategy that minimizes taxes and maximizes your retirement income. Consider working with a financial professional when:
You're planning to retire within the next few years.
You're unsure whether you can afford to retire.
You need a comprehensive distribution plan that works for you.
Your financial situation is complex (multiple income sources, significant assets, tax considerations).
You need help with tax-efficient withdrawal strategies.
Look for a fee-only fiduciary advisor who specializes in retirement planning and doesn't earn commissions on any products they recommend.
Ready to Take the Next Step?
Deciding when to retire from Arizona state employment is one of the most consequential financial decisions you'll make. It requires careful analysis of your ASRS benefits, supplemental savings, healthcare options, and personal readiness.
The right time to retire isn't when you first become eligible. It's when you're financially prepared, emotionally ready, and excited about the next chapter of your life.
At TrueWealth Financial Partners, we specialize in helping you navigate the transition from work to retirement with confidence. As a fee-only fiduciary, we provide unbiased guidance focused entirely on your best interests: no commissions, no product sales, just clear advice tailored to your unique situation.
Ready to find out if you can retire? Schedule a free introductory call to discuss your plans for retirement.
Your greatest adventure is waiting. Let's make sure you're ready for it.
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Arizona State Retirement Readiness FAQs
How far in advance should I submit my ASRS retirement application?
The ASRS recommends submitting your retirement application approximately three months before your planned retirement date. This allows sufficient time for processing and ensures your first pension payment arrives on time. You can request a benefit estimate 6–12 months before retirement to help with planning.
Can I change my ASRS retirement date after I've submitted my application?
Yes, you can change your retirement date before it becomes effective by contacting ASRS. However, once your retirement is effective and you receive your first pension payment, you cannot change your retirement date or return to active membership without following specific return-to-work rules.
Can I collect my ASRS pension if I move out of Arizona?
Yes, your ASRS pension follows you wherever you live. You can receive your pension payments via direct deposit to any U.S. bank account, regardless of which state you reside in during retirement.