Retirement Age in Arizona: Early and Normal Retirement

You can take early retirement from the Arizona State Retirement System as young as age 50, provided you have at least five years of credited service and have left every ASRS-participating employer. The trade-off is a permanent reduction to your monthly benefit that lasts for the rest of your life. How steep that reduction is depends on your age at retirement, your years of service, and whether your ASRS membership began before or after July 1, 2011. That last date matters more than most people expect, because it changes both the target ages used in the reduction formula and whether a valuable alternative calculation is available to you. The early retirement age in Arizona under ASRS is therefore best understood not as a single number, but as a range from 50 up to whichever milestone would give you an unreduced benefit.¹

Who Qualifies

Three conditions have to be true at the moment you file your application: you are at least 50 years old, you have terminated employment with every ASRS employer, and you have five or more years of total credited service.¹ You cannot draw an early benefit while still working for an ASRS employer.

Credited service is the time for which ASRS has recorded contributions on your behalf. Part-time work or gaps in covered employment can leave your credited total lower than the calendar time you have been on the job, so verify the number in your ASRS online account before you plan around it.

What Normal Retirement Looks Like

Early retirement is calculated by starting from the full, unreduced benefit you would receive at normal retirement and cutting it down. Knowing your normal retirement milestones tells you exactly what you are giving up by leaving earlier, and in some cases how close you are to eliminating the reduction entirely.

The milestones depend on when your ASRS membership began.² If you joined before July 1, 2011, you reach normal retirement at age 65, at age 62 with 10 years of service, or when your age plus years of service equals 80 or more (the Rule of 80). If you joined on or after July 1, 2011, you reach normal retirement at age 65, at age 62 with 10 years of service, at age 60 with 25 years, or at age 55 with 30 years. There is no Rule of 80 for the newer group.

How Your Benefit Is Calculated Before the Cut

The normal benefit formula multiplies three numbers: years of credited service, a graded percentage multiplier, and your average monthly compensation.³ The multiplier rises with your career length and applies to all of your service years once you cross a threshold:

Under 20 years of service: 2.10% per year
20 to 24.99 years: 2.15% per year
25 to 29.99 years: 2.20% per year
30 or more years: 2.30% per year

Someone with exactly 25 years, for instance, uses 2.20% for every one of those years, producing 55% of average monthly compensation.

Average monthly compensation itself depends on your membership date.² Members who joined from January 1, 1984 through June 30, 2011 use the highest 36 consecutive months of pay. Members who joined on or after July 1, 2011 use the highest 60 consecutive months. Members who joined before January 1, 1984 get whichever of the two averages produces the larger benefit. The longer 60-month window for newer members generally smooths out peak earning years, which can matter if you are close to a raise and considering whether a short delay would move your average.

Reductions for Members Who Joined Before July 1, 2011

For pre-July 2011 members, the reduction is 5% for each year between ages 50 and 60, and 3% for each year between ages 60 and 65, with fractional years prorated.¹ The distance those percentages cover depends on a target age set by your credited service:

20 or more years of service: reduction measured from your retirement date to your 60th birthday
10 to 19.99 years: reduction measured to your 62nd birthday
5 to 9.99 years: reduction measured to your 65th birthday

Long careers get lighter cuts. A member retiring at 56 with 22 years of service has a target age of 60 and four years of distance, all at 5%, for a 20% reduction. The same 56-year-old with only eight years of service has a target of 65 and nine years of distance: four years at 5% plus five years at 3%, totaling 35%.

The Rule of 77 Alternative

Pre-July 2011 members have a second calculation available. If your age plus years of service totals at least 77 but is below 80, you can instead take a reduction of 3% for each point (or fraction) below 80, and ASRS applies whichever method produces the smaller cut.¹

The alternative can be dramatically better. That 56-year-old with 22 years of service has an age-plus-service total of 78, two points below 80, which produces a 6% reduction instead of 20%. On a $2,000 monthly benefit, that is a $280 difference every month for life. Anyone near the 77-point threshold should look hard at whether a few more months of work would push them over it.

If your age-plus-service total already reaches 80, you have hit normal retirement under the Rule of 80 and there is no early retirement penalty at all.

Reductions for Members Who Joined On or After July 1, 2011

Newer members use the same reduction rates (5% per year from 50 to 60, 3% per year from 60 to 65), but the target ages differ and there is no Rule of 77 option.¹

10 or more years of service: reduction measured to your 62nd birthday
5 to 9.99 years: reduction measured to your 65th birthday

There is no 60-birthday target for post-2011 members, even at 20-plus years of service. A post-2011 member retiring at 56 with 22 years of service is measured to age 62: four years at 5% plus two years at 3%, for a 26% reduction. A pre-2011 member in the same position could potentially bring that down to 6% through the Rule of 77. This is one of the widest gaps between the two tiers.

A Worked Example

Suppose Maria joined ASRS in 2005 and wants to retire at 57 with 23 years of credited service. Her highest 36 consecutive months of pay average $5,200.

Her normal benefit is 23 × 2.15% × $5,200, or $2,567.80 per month.³

Under the standard early retirement method, Maria has more than 20 years of service, so her target age is 60. She is three years short, all in the 5%-per-year band, for a 15% reduction. Her reduced benefit is $2,567.80 × 0.85 = $2,182.63.¹

Under the Rule of 77 alternative, her age plus service is 80, which actually means she qualifies for a full unreduced benefit through the Rule of 80. Had she instead been 56 with 23 years, her total would be 79, one point below 80, producing a 3% reduction and a benefit of $2,490.77. This close to 80 points, working a few extra months to hit the Rule of 80 outright is worth serious consideration.

Buying Service to Lower the Penalty

If a service milestone would move you into a better target age, purchasing additional credit for eligible past service can pay off. ASRS lets active members buy credit for qualifying periods such as prior public employment.⁴

Members who joined before July 1, 2010 can start a service purchase at any time while employed. Members who joined on or after that date need at least five years of credited service before initiating one. Either way, you have to begin the process before you leave your job; once employment ends, the window closes.⁴

Purchased credit counts toward both your benefit calculation and the thresholds that set your early retirement target age. If two years of purchased service would shift you from the 62-birthday target to the 60-birthday target, the drop in penalty can far exceed the purchase cost. ASRS can quote a cost estimate through your online account.

Federal Tax Penalty at These Ages

ASRS pension payments are ordinary income for federal tax purposes. The trap that surprises some early retirees is the IRS 10% penalty on distributions taken before age 59½. Distributions from a qualified government pension like ASRS are generally exempt from that penalty if you separated from service during or after the year you turned 55, and public safety employees of a state or local government get that exception at age 50 rather than 55.⁵

Since ASRS early retirement is only available from age 50, a member who retires at 50, 51, 52, 53, or 54 and is not in a qualifying public safety role could face the 10% penalty on pension income until age 59½. Law enforcement officers, firefighters, and corrections officers leaving an ASRS-covered position at 50 or older should not.

How to Apply and When Payments Start

ASRS accepts retirement applications online through the member portal or on paper, with the online path being the standard route.⁶ Log in, select the retirement option in the application section, and follow the prompts. ASRS suggests using the paper application and speaking with a retirement specialist if you are paying off a service purchase with a partial lump sum or re-retiring after returning to work.

Plan for a delay after your retirement date. ASRS states that finalizing a benefit can take up to 90 days, which covers processing the application, auditing service and contribution history, calculating the final amount, and scheduling the first payment.⁶ To ease the gap, most members receive an estimated payment within about 10 days of their retirement date. That first estimate is intentionally conservative, so the finalized amount tends to be somewhat higher.

1
Arizona Legislature. Arizona Code 38-758 – Early Retirement
2
Arizona State Retirement System. Retirement Eligibility
3
Arizona Legislature. Arizona Code 38-757 – Normal Retirement
4
Arizona State Retirement System. Service Purchase
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Arizona State Retirement System. Ready, Set, Retire