Retirement in 2024 or 2025: Which Year is More Advantageous?

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Methods of Calculating Retirement Pension

Retirement pensions for SSI (Social Security Institution) and BAĞ-KUR (Social Security Organization for Artisans and the Self-Employed) are calculated over three different periods:

1. Partial Pension Before 2000: Calculated using the formula: Indicator x Coefficient x Monthly Binding Ratio.
2. Partial Pension Between 2000 and September 2008 (Inclusive): Found by multiplying the amount increased by the update coefficient of average annual earnings with the monthly binding ratios. In this period, the update coefficient is reached by adding the growth rate to the increase rate in the CPI (Consumer Price Index).
3. Partial Pension After October 2008 (Inclusive): In this period, the update coefficient and the monthly binding ratio of average annual earnings are used, but the update coefficient is determined by a different calculation.

Prior to the October 2008 period, the update coefficient was reached by the sum of the full increase rate in CPI and the growth rate. However, from the October 2008 period onward, the update coefficient is reached by summing the increase rate in CPI with 30% of the growth rate.

Pension Increase Applications

For insured individuals who apply for retirement during the year, the updated pension amount up to December of the previous year is used. The rates of increase made during the year up to the date of the allocation request are then applied. Pension increases are made in January and July.

Monthly Calculation for Insured Individuals Applying for Retirement in 2024

For applications made in 2024, the monthly pensions calculated using the 2023 update coefficient will also include the January and July 2024 salary increase rates.

Considering that the CPI for 2023 is 64.77% and the growth rate is 4.5%, the 2023 update coefficient will be calculated as 66.12% (64.77 + (4.5 * 0.30).

Pensions updated with this coefficient will be increased cumulatively by 86.15% in 2024, with a 49.25% increase in January and a 24.73% increase in July (1.4925 * 1.2473 = 1.8615). Additionally, the salary increase rate for January 2025 will be added to this.

Monthly Calculation for Insured Individuals Applying for Retirement in 2025

For those applying for retirement in 2025, the update coefficient up to December 2024 will be applied, and then the salary increase rate for January 2025 will be added. However, they will not benefit from the increases applied in 2024.

The 2024 update coefficient consists of the full CPI rate for 2024 plus 30% of the growth rate. Since 2024 has not ended yet, the CPI rate is not known, but an evaluation can be made based on official institutional data.

In its second inflation report of the year, the Central Bank of the Republic of Türkiye (CBRT) raised its 2024 inflation forecast by 2 percentage points to 38%. On the other hand, according to the results of the "Market Participants Survey", which monitors the expectations of decision makers and experts in the financial and real sectors through the Central Bank of the Republic of Türkiye, the year-end consumer inflation (CPI) expectation was realized as 42.95% in July and the GDP growth forecast was realized as 3.4%. Translated with DeepL.com (free version)

Based on the Central Bank's inflation forecast and the growth results from the expectation survey, the update coefficient will be calculated as 39.02 (38 + 3.4 * 0.30).

If only the expectation survey results are considered for inflation and growth figures, the update coefficient will be calculated as 43.97 (42.95 + 3.4 * 0.30).

Taking the average of the Central Bank's inflation figure and the expectation survey results, the update coefficient will be calculated as 41.50 ((38 + 42.95) / 2 + (3.4 * 0.30)).

Salary Difference Between 2024 and 2025 in Türkiye

Specific Situations

Workers who have been working at the same workplace for many years and earning salaries above the severance payment ceiling think that it is more advantageous to retire in 2025 in order to benefit from the severance pay ceiling increase.

For public sector workers, there is no risk in waiting until January 14, 2025, as the calendar period ends on that day. Public sector workers who submit their retirement petitions by January 14, 2025, will benefit from the salary increases of 2024 for pension calculations and will receive severance pay based on the 2025 ceiling amount.

For private sector workers, the calendar period ends on December 31, 2024. Therefore, they must submit their retirement petitions by this date. If they retire in 2025, their pensions are likely to be lower, as calculated above. Although the severance pay ceiling will increase in 2025, considering that the pension is paid monthly and will be received for many years, the increase in severance pay will not compensate for the decrease in the monthly pension.

For example, a private sector worker applying for retirement in 2024 will receive a pension of 32,000.00 TRY, while if they retire in 2025, they will receive approximately 21,440.00 TRY. The monthly loss will be 10,560.00 TRY.

Although the severance pay ceiling for 2025 is not yet known, considering inflation rates and civil servant salary increases, if the annual increase in severance pay in 2025 is approximately 10,000.00 TRY, even if the worker has a tenure of 10 years, the calculated 100,000.00 TRY increase in severance pay will only compensate for the pension loss for about 9.5 months. Therefore, we assess that waiting for an increase in the severance pay ceiling would be detrimental to the workers.