The NYPD Final Withdrawal
Leave it, take the excess, or take it all (Tier 2)

Back to Articles

New video every week on NYPD, FDNY and 9/11 family money questions. Subscribe on YouTube

The pieces: required amount, excess and shortage

Tier 2 contributions earn 8.25% interest a year and build toward what the booklet calls your required amount: “the amount necessary to remain in the account to receive a retirement benefit with no reduction.” It stops growing once you’re eligible for service retirement (Tier 2 booklet, June 2026, p.7).

Money above the required amount is your excess, and a balance below it is a shortage (p.13). Waiving ITHP and joining 50% Additional are the usual ways an excess builds (pp.8-9). An unpaid shortage reduces the pension for life: the booklet’s own example is a member who retires at 45 with a $50,000 shortage and has the pension cut by $4,088 a year (p.13).

If you leave the excess in, the booklet says “the pension will be increased by the actuarial value of the excess” (p.10), meaning its worth paid out as a lifetime amount. The service retirement formula carries it as the “Annuity value of ASF in excess of the required amount” (p.19).

One name to keep straight: the Annuity Savings Fund is part of your pension account at the Police Pension Fund. It isn’t the annuity fund your union runs, which has its own rules (Your NYPD Union Annuity Fund at Retirement).

Choice 1: leave it

Take no final withdrawal and nothing comes out of your account. The excess, if you have one, is added to your pension as a lifetime amount, and any shortage you haven’t paid off is still taken off it.

Choice 2: take the excess

There are two routes. With 20 or more years and no shortage, you can apply for a refund of the excess (p.10). Or the final withdrawal itself can include “some or all of their excess” (p.14).

What it costs is where the booklet goes unclear. Page 10 says leaving the excess in increases the pension, so taking it gives up that increase. Page 14 says a final withdrawal “has the same effect as creating a shortage; therefore the member’s pension will be reduced for the life of the pension.” But page 13 defines a shortage as the balance falling below the required amount, which taking only money above it can’t do. The booklet doesn’t settle which reading applies to the excess, and we don’t pick one. Ask the Fund, in writing, what your pension would be with the excess and without it.

If some of your excess came from 50% Additional, part of it may be money you already paid tax on. That’s covered in The After-Tax “50% Additional” Money in Your NYPD Pension.

Choice 3: take it all

“All” has a ceiling. Members “may withdraw up to 90% of their required amount, as well as some or all of their excess, if applicable” (p.14). Page 12 of the same booklet prints only the 90% part, so you may see the smaller figure quoted.

Taking any of the required amount drops your account below it, which is a shortage by the booklet’s own definition (p.13). That’s the reduction page 14 describes: “the member’s pension will be reduced for the life of the pension.” The Fund prints your Available Final Withdrawal on your statement, and our statement reader shows how it’s built from your required amount and your excess.

A fixed yearly cut against cash today

The booklet states a pension cut as a number of dollars a year, for life. Its own example is $4,088 a year for a $50,000 shortage at age 45 (p.13), and nothing in the booklet raises that number as prices rise.

That shapes the trade. The cash is worth its full amount the day you take it. The cut is the same number of dollars every year, so if prices keep rising, it takes a smaller bite out of what things cost in year 20 than in year one. The other side of the same trade: the cut lasts as long as the pension does, and the cash lasts only as long as you make it last.

None of this says which choice is right for anyone. It’s why the comparison needs your own figures from the Fund: the cash amount, the yearly cut and your age.

Taxes on the cash

The booklet says the withdrawal “can consist of both taxable and/or non-taxable funds” (p.12). The non-taxable part is money you paid in after tax.

On the taxable part, the Fund withholds 20% for federal tax unless you choose a direct rollover to an IRA or other qualified account (p.12). It may also carry a 10% early-withdrawal penalty unless you’re over 50 or have 25 years of uniformed service (p.12). Under the federal rule, the age test is leaving the job in or after the year you turn 50. That exception removes only the penalty, not the withholding. A direct rollover avoids both, but money in an IRA no longer has the age-50 exception for later withdrawals.

These are federal rules with real exceptions, so take your own case to a tax professional before you choose.

What to ask the Fund, in writing

• What would my pension be with no final withdrawal, with only my excess taken, and with the full amount taken?
• How much of my Available Final Withdrawal is excess, and how much comes from my required amount?
• How much of it is after-tax money?
• Will you split a direct rollover between pre-tax and after-tax money?

The decision itself is on the first form you send when you file: the My Retirement Preferences Form asks for “Your decision on taking a Final Withdrawal” (see How to File for NYPD Retirement).

Common questions

Is the final withdrawal a loan?

The Fund sometimes calls it a “final loan,” but it isn’t paid back. The booklet says it has the same effect as creating a shortage, so the pension is reduced for life (p.14).

How much can I take?

Up to 90% of your required amount, as well as some or all of your excess (p.14).

Does Tier 3 have a final withdrawal?

No. The Tier 3 booklet doesn’t describe one; the final withdrawal and the Annuity Savings Fund are Tier 2 features.

Is taking only the excess free?

Don’t assume it is. Leaving the excess in raises your pension, so taking it gives that up, and the booklet doesn’t settle whether it also counts as a reduction. Ask the Fund for both figures.

Retiring from the FDNY? Firefighters are in a separate pension fund. Run the FDNY pension calculator or get the free FDNY Pension Book.

Working with us: Sirmium Capital works with NYPD members and retirees. What we do, how the firm is paid and how to start.