DROP Calculator: How to Use It
DROP lets you keep working while your pension accumulates in a separate account. Whether that's a good deal depends entirely on your plan's interest rate and COLA treatment.
What this calculator does
The DROP Calculator shows your projected DROP account balance at the end of your participation period and compares the total lifetime value of two paths: entering DROP and deferring your pension, versus retiring immediately and collecting monthly payments right away.
The comparison accounts for the DROP interest rate, any COLA your plan applies (or doesn't), the lump sum payout at DROP exit, and ongoing monthly pension income after DROP ends. The output shows both paths at multiple ages so you can see where the crossover is.
What each input means
Monthly pension at DROP entry
Your pension benefit as it stands when you enter DROP. This amount is typically frozen for the duration of DROP participation. Check your plan documents for whether COLAs continue to apply during DROP. Most plans freeze the benefit at entry; a few continue to apply annual adjustments.
Find this number from your pension plan's benefit estimate. Your HR department or the plan administrator can provide a formal benefit projection. Use the gross monthly amount before any survivor benefit or other elections.
DROP interest rate
The rate your plan credits to the DROP account balance each year. Florida FRS uses 1.3% for most members. Texas DROP programs vary by city and system. Louisiana LASERS uses a rate tied to the plan's actuarial assumed return. Check your Summary Plan Description or call your plan administrator. Don't guess at this number. It has a large impact on the comparison.
DROP participation period
How many months you intend to participate in DROP, up to your plan's maximum. Most plans cap participation at 36 to 60 months. Enter your actual planned duration. Shorter periods reduce the lump sum but reduce the cost of deferred payments. Longer periods build a larger balance but give up more monthly income.
Annual salary during DROP
Your salary while continuing to work in DROP. Some plans allow pension-eligible salary increases during DROP that don't change the frozen pension amount. Your salary affects any continued employee contributions and your financial picture during the period, but not the DROP account accumulation directly.
Reading the outputs
The main output is your projected DROP balance at exit. It's the sum of monthly pension credits (your frozen monthly benefit times the number of months) plus compounded interest earned on that accumulating balance.
The lifetime comparison shows cumulative income under each path at ages 70, 75, 80, and 85. In the early years, immediate retirement usually leads because you started collecting sooner. DROP catches up as the lump sum and continued pension payments accumulate. The crossover age is where DROP becomes the better financial choice in total dollars received.
What the calculator doesn't model
Tax treatment of the DROP lump sum matters. Most DROP balances can be rolled to an IRA or other qualified plan. If you take the lump sum in cash, it's taxable income in the year received, potentially at a high rate. The calculator shows pre-tax figures. Also not modeled: any required employee contributions during DROP, health insurance continuation rules, and specific plan provisions that vary widely.
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Frequently asked questions
What is a DROP plan?
DROP lets eligible public employees officially retire while continuing to work. Monthly pension benefits are credited to a separate account during the DROP period. When you leave, you receive that accumulated balance plus your ongoing monthly pension.
How does DROP account interest work?
Your plan sets the interest rate, typically between 1.3% and 6.5% annually. Florida FRS uses 1.3%. Some plans credit actual fund returns. The rate compounds on your accumulating balance. This number has a large impact on whether DROP is worth it.
Is DROP always better than retiring immediately?
Not always. It depends on the interest rate, COLA treatment, your salary, and how long you live to collect the pension. The calculator runs both scenarios so you can see the crossover age where DROP produces more lifetime income.
What happens to my pension COLA during DROP?
Most plans freeze the pension at the DROP entry amount and skip COLAs during participation. Some plans continue COLAs. Check your plan documents. A frozen benefit means you're giving up real purchasing power on each deferred payment.
How long can I participate in DROP?
Typically 3 to 5 years, capped by your plan. Florida FRS allows up to 60 months. You must leave employment at the end of the DROP period. Staying past the deadline triggers penalties in most plans.