Will Overtime Affect your Firefighter Retirement?

Let’s talk overtime, pensions, and your retirement – a topic that hits close to home for every firefighter pulling extra shifts. You’re sacrificing time with family, taking on more exposure risks, and pushing your body harder. But does that overtime actually boost your pension or improve the chances of retirement success? And more importantly – should you be banking on it for retirement? 

How Overtime Could Affect Your Pension Numbers

Most firefighter pensions calculate your retirement using this formula: Final Average Salary (FAS) × Years of Service × Multiplier (usually around 2-2.5%). Here’s the critical part – that FAS typically looks at your highest 3-5 earning years, usually at the end of your career.

Let’s imagine that your base salary is $75,000. If you work $15,000 in overtime during each of your FAS years (let’s say it’s your final three years), your FAS could jump from $75,000 to $90,000. With 25 years of service and a 2.5% multiplier, that overtime boost adds $9,375 to your annual pension ($90,000 vs $75,000 × 25 × 2.5% = $56,250 vs $46,875).

Base Salary Only
  • Final Average Salary: $75,000
  • Years of Service: 25
  • Multiplier: 2.5%
  • Calculation: $75,000 × 25 × 2.5%
Annual Pension: $46,875
With Overtime
  • FAS (includes $15k overtime): $90,000
  • Years of Service: 25
  • Multiplier: 2.5%
  • Calculation: $90,000 × 25 × 2.5%
Annual Pension: $56,250
Overtime Impact: +$9,375 per year in retirement
Note: These calculations are examples only. Your actual pension will depend on your department's specific rules, years of service, contractual agreements, and whether overtime is counted in your Final Average Salary calculation. Always verify current rules with your pension system and financial advisor.

That’s assuming your system counts overtime – and that’s where things get tricky.

State-by-State Pension Rules

Your zip code matters more than you might think. Take New Jersey – overtime doesn’t count toward your pension.¹ But cross the border into Pennsylvania, and it’s a different story. Bethlehem, Pennsylvania, lets firefighters hired before 2011 include overtime, while newer hires can’t.² One Allentown firefighter even managed to bump his pension by 20% through overtime³ – but that’s not the norm everywhere.

Bottom line: Know your local rules. Don’t assume what worked for your buddy in another department will work for you.

The Investment Alternative

Even if your overtime doesn’t affect your pension, it can still dramatically impact your retirement if you invest those dollars wisely. Whether through a Traditional or Roth IRA for tax advantages, or a standard brokerage account for maximum flexibility, putting your overtime money to work in the market can create significant wealth over time.

Let’s break it down with an example:

  • Say you invest all of your overtime – we’ll imagine about $5,000 annually
  • Put it in a retirement account or brokerage account focused on long-term growth
  • At 7% average annual return over 20 years, that $5,000 annual investment grows to about $204,000
  • Even better: You control this money completely – it’s yours regardless of pension rules

Growth of $5,000 Annual Overtime Investment Over 20 Years

Important: This chart is for educational purposes only. Past performance does not guarantee future results. Your actual returns will vary based on market conditions, investment choices, and personal circumstances. Investing involves risk, including possible loss of principal. The calculation assumes a hypothetical 7% annual return and does not account for fees, taxes, or inflation. Consult with a financial professional for guidance specific to your situation.

Plus, unlike pension funds, you can access your brokerage account anytime, and retirement accounts often have provisions for early access if needed.

The Hidden Costs: When More Money Costs Too Much

Sometimes overtime isn’t a choice – we get it. But when it is optional, you need to think hard about the real price you’re paying. Every additional call brings another chance of injury or worse, and the statistics aren’t exactly in our favor. Each shift means more exposure to cancer-causing substances, more wear and tear on your body, and another hit to your cardiovascular system.

Then there’s the personal cost. That overtime shift might mean missing your kid’s championship game or another family dinner. These moments don’t come back. And let’s talk about recovery time – your body needs it, especially in this profession. Cutting short your recovery between shifts doesn’t just feel bad – it increases your risk of injury and impacts your long-term health.

Here’s the unfortunate truth: those extra dollars you’re earning through overtime might end up going straight to medical bills down the road. Cancer treatments, physical therapy, cardiovascular care – these costs can quickly wipe out any financial gains you made pulling extra shifts. Sometimes, the smartest financial move is protecting your health first.

Smart Moves Forward: Your Action Plan

Know Your Rules

  • Get your department's pension calculation formula in writing
  • Understand exactly what counts and what doesn't
  • Don't rely on station house wisdom - verify everything

Run Your Numbers

  • Calculate potential pension with and without overtime
  • Compare to potential investment returns
  • Factor in the tax implications of different strategies

Protect Your Most Valuable Asset

  • Balance extra income against long-term health
  • Consider disability insurance coverage
  • Build multiple income streams that don't require physical risk

Create a Flexible Strategy

  • Don't put all your eggs in the overtime basket
  • Build a retirement plan that works whether overtime counts or not
  • Consider multiple retirement accounts to maximize tax advantages

In Conclusion

Look, there’s no cookie-cutter approach to retirement planning that works for every firefighter. Your family situation, department rules, and financial goals are unique to you. The key is striking that balance – between pulling extra shifts when the opportunity makes sense and knowing when to pass because your long-term health and family time matter more.

What works for a single firefighter in year two is different from what works for someone with three kids in year fifteen. Sometimes taking strategic overtime is the right call. Other times, your best move is investing those hours in other ways to build your financial future – whether that’s starting a side business, getting additional certifications, or just being present for your family.

The best retirement strategy isn’t about working yourself to the bone – it’s about working smart and protecting your future. Whether overtime counts toward your pension or not, make sure every extra hour serves your long-term goals, not just your next paycheck.

Need help crunching your specific numbers? Reach out to our team. We’ll help you build a retirement strategy that makes sense for your situation, your department’s rules, and your family’s needs.

Sources: 

  1. https://nj.gov/treasury/pensions/documents/guidebooks/pfrsbook.pdf
  2. https://www.bethlehem-pa.gov/CityOfBethlehem/media/Ordinance-PDFs/ARTICLE0151.pdf
  3. https://whyy.org/articles/is-it-fair-for-city-workers-to-use-overtime-to-spike-their-pensions

 

The information contained in this article is for educational purposes only, this is not intended as tax, legal, or financial advice. One should always consult with the tax, legal, and financial professionals of their choosing regarding their specific situation.

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