If you work for the State of Wisconsin, a school district, the University of Wisconsin System, or most local government employers, chances are you are already enrolled in the Wisconsin Retirement System, commonly known as the WRS. For many Wisconsin public employees, the WRS will be one of the most significant pieces of their retirement income. Yet despite how important it is, a surprising number of people do not fully understand how it works or what choices they will face when the time comes to retire.
Here is a clear, straightforward look at how the WRS works and the key options you will need to consider.
What Is the WRS?
The WRS is a hybrid defined benefit plan. It contains elements of both a 401(k)-style defined contribution plan and a traditional defined benefit pension plan. With roughly 704,000 individuals participating, and approximately $153 billion in assets as of October 2025, it ranks among the 10 largest public pension funds in the United States. Wisconsin Department of Employee Trust Funds
The WRS is administered by the Department of Employee Trust Funds (ETF) and provides retirement, disability, and death benefits to employees of the state of Wisconsin, school districts, and participating local governments. This includes all state agencies, the University of Wisconsin System, and approximately 90% of public employees in Wisconsin. Wisconsin Department of Employee Trust Funds
One thing that sets the WRS apart from many other public pension plans in the country is its financial health. The WRS is 100% funded as of December 31, 2024. While the national median funding level in 2024 was 77.8%, the WRS has remained consistently fully funded due to its unique plan design and robust governance. Wisconsin Department of Employee Trust Funds
Who Is Covered?
The WRS covers employees of the State of Wisconsin and local government employers who elect to participate. This includes the Universities of Wisconsin, local police and firefighters, and all publicly employed teachers. Wisconsin Department of Employee Trust Funds
Participation is automatic for all eligible employees, with coverage beginning on the first day an employee is eligible. You may not opt out of the WRS. University of Wisconsin
How Is It Funded?
The money to pay WRS benefits comes from employee and employer required contributions and investment earnings. The largest portion comes from investment earnings. Employers pay 50% of the total required amount and employees pay the other 50%. Wisconsin Department of Employee Trust Funds
Contribution rates are adjusted annually based on investment performance and actuarial analysis. Effective January 1, 2025, both the employee and employer contribution rate for general and teacher employees was 6.95% of salary, an increase of 0.05 percentage points from 2024. Elmbrookschools Then, the ETF Board approved a 2026 employee contribution rate of 7.2%, slightly higher than the 6.95% rate in 2025, due to revised actuarial assumptions and higher-than-expected salary levels, partially offset by favorable investment performance. Wisconsin Department of Employee Trust Funds
The employee contribution is deducted on a pre-tax basis, which helps lower your current taxable income. Keep in mind that WRS benefits will be taxed as ordinary income when you receive them in retirement.
When Are You Vested?
Vesting determines whether you are eligible to receive the employer-funded portion of your benefit.
If you first began WRS employment on or after July 1, 2011, you must have five years of WRS creditable service to be vested. One year of creditable service is based on the hours you work: teachers need to work 1,320 hours and all other employees need to work 1,904 hours to earn one year of service. If neither of the vesting laws apply to you, then you were vested when you first began WRS employment. Wisconsin Department of Employee Trust Funds
This is an important distinction. Employees hired before July 1, 2011, who did not have a break in service were vested from day one.
How Is Your Benefit Calculated?
This is where the WRS gets interesting. ETF calculates your retirement benefit using both the formula method and the money purchase method, and you will automatically be paid the highest amount. Wisconsin Department of Employee Trust Funds
The Formula Method is the traditional defined-benefit pension calculation. Your formula benefit is based on your three highest years of earnings, a formula multiplier based on your employment category, your years of creditable service, and an actuarial reduction if you retire before your normal retirement age. Wisconsin Department of Employee Trust Funds Formula multipliers for WRS creditable service performed before 2000 are higher than the multipliers for WRS creditable service performed after 1999. Amazon AWS
The Money Purchase Method works more like a 401(k) calculation. Your money purchase benefit is calculated by multiplying your total account balance (employee and employer contributions plus accumulated interest) by a factor that corresponds to your age at retirement. The older you are when you retire, the more favorable this factor becomes.
The fact that you automatically receive whichever method produces the higher benefit is a meaningful safeguard. For many employees, especially those with strong investment returns in their account, the money purchase calculation can sometimes exceed the formula benefit.
When Can You Retire?
Vested members are eligible to receive a retirement benefit at age 55 (age 50 for protective category members such as law enforcement and firefighters) once they terminate all WRS employment. Wisconsin Department of Employee Trust Funds
However, retiring at the minimum age is not the same as retiring at your normal retirement age. Retiring before your normal retirement age results in an actuarial reduction applied to your monthly benefit, since the WRS expects to pay your benefit over a longer period. The specific reduction depends on how many years early you retire. For general and teacher employees, the normal retirement age is 65, though there are circumstances in which an unreduced benefit may be available earlier. ETF can provide an official benefit estimate once you are within 12 months of your minimum retirement age.
The key takeaway: the earlier you retire, the smaller your monthly check will likely be. Working longer directly increases your benefit in two ways: it adds to your years of creditable service, and it typically increases your final average earnings.
The Two Investment Funds: Core vs. Variable
This is one of the most important choices an active WRS member can make, and many people do not give it enough thought.
Your contributions go into the Core Trust Fund by default. You may also choose to put half of your contributions into a higher-risk investment fund called the Variable Trust Fund. Each fund is credited with a separate effective rate of interest each December, based on how the funds perform each year. Wisconsin Department of Employee Trust Funds
The Core Fund uses a five-year smoothing method. Smoothing helps cushion the effects of the ups and downs of the stock market, tending to make annuity adjustments more stable so you will see less of a change from year to year. Investment returns of the Variable Fund are not smoothed, meaning gains or losses are applied in full to the Variable Fund each year. Wisconsin Department of Employee Trust Funds
In 2024, the Core Fund returned 8.5% while the Variable Fund returned 18.7%. Cmers
This difference can be substantial over time, but it cuts both ways. Strong equity markets can make the Variable Fund very attractive. In down years, it can reduce your account balance significantly and even reduce your monthly annuity payment after retirement if you participate. There is no guaranteed floor for the Variable Fund portion of your retirement payments. Wisconsin Department of Employee Trust Funds
Whether to elect Variable Fund participation is a personal decision that depends on your risk tolerance, how many years you have until retirement, and your broader financial picture.
Annuity Adjustments in Retirement
The WRS does not offer guaranteed cost-of-living adjustments the way some pension plans do. Instead, annuity adjustments are based on the investment returns of WRS trust funds and actuarial factors. As a result, your monthly payment may increase or decrease from year to year. Investment returns of more than 5% can produce an increase in a retiree's annuity. Wisconsin Department of Employee Trust Funds
In 2025, WRS retirees received a Core annuity increase of 2.3% and a Variable annuity increase of 15%, both reflected in May 1, 2025 payments. Wisconsin Department of Employee Trust Funds
On the downside, poor investment years can result in a decrease. The Core annuity does have a floor, meaning it will never drop below its original calculated amount, but the Variable portion has no such protection.
Annuity Payment Options
When you apply for retirement, you will choose how you want to receive your benefit. The monthly amount you receive varies depending on the potential death benefits of the option you select. If you choose an option that continues payments to a named survivor or a beneficiary, that higher death benefit is funded by reducing your monthly benefit. As the potential death benefit increases, your benefit decreases. Wisconsin Department of Employee Trust Funds
Your main choices include:
Life Only: The highest monthly payment available, but it stops when you die. No payment continues to a spouse or anyone else. This makes sense for single individuals, or for couples who have other substantial income sources for the surviving spouse.
Joint and Survivor Options: A reduced monthly payment during your lifetime, with a portion (typically 50%, 75%, or 100%) continuing to a named survivor after your death. The reduction depends on the option selected and the age difference between you and your named survivor.
Annuity Certain: Payments are guaranteed for a set number of years. If you pass away before that period ends, payments continue to your beneficiary for the remainder of the term.
Choosing the right annuity option is one of the biggest financial decisions you will make at retirement. There is no universally "right" answer. It depends on your health, your spouse's health, your other assets, and how you want to plan for the unexpected.
What If You Leave Before Retirement?
If you end all WRS-covered employment before your minimum retirement age or before you are vested, you can either leave your money in the WRS to accumulate interest or close your WRS account by requesting payment of your employee required contributions and any interest. If you take a separation benefit, you will lose any employer required contributions in your account. UW-Madison Human Resources
This is an important warning. Taking the separation benefit may feel like getting your money back, but it means walking away from the employer match entirely and giving up your right to the defined benefit pension. For someone who is vested and simply changing jobs or taking time off, leaving the account alone is often the smarter long-term move.
Ways to Increase Your WRS Benefit
You can increase your overall retirement savings through additional voluntary contributions, buying service credits, or participating in the Wisconsin Deferred Compensation program. Wisconsin Department of Employee Trust Funds
The Wisconsin Deferred Compensation (WDC) program is a 457(b) plan, which functions similarly to a 403(b) or 401(k). It is a voluntary, supplemental savings vehicle that can meaningfully improve your retirement readiness on top of your WRS pension. This is worth considering if you are hoping to retire closer to the minimum age and your WRS benefit alone may not cover your lifestyle.
How WRS Fits Into Your Broader Retirement Picture
The WRS is a strong foundation, but for most people it is not the whole story. High-income employees in particular need to think carefully about how their WRS annuity interacts with Social Security timing, IRA and 403(b)/WDC balances, investment portfolios, and tax planning.
For example, your WRS annuity will be taxable income. If you also have IRA or brokerage accounts, the combination of WRS income, Social Security, and required minimum distributions from retirement accounts can push you into a higher tax bracket than you might expect. Planning ahead for that interaction matters.
The annuity option you choose at retirement is also irrevocable in most circumstances. It is not a decision to make quickly or without reviewing your full financial situation.
At Dreyer Wealth Management, we work with clients who have WRS pensions as part of their retirement income plan. We can help you think through your annuity options, coordinate your WRS benefit with Social Security and other income sources, and make sure your overall financial plan is working together the right way.