You are apparently confused about the $34K. If you have to use it to purchase you can not withdraw it to invest.

Purchasing the service credit is adding years to your retirement. Depending on your age, length of service, and retirement plan adding that year might boost the percentage when you do retire. Simply an example but some plans if you have 24 years of service you might receive 1% a month or 24% of your pay. With 25 years of service you might receive 2% which would be 48%. You have to look at your plan and ask for a printout of what it will do for your retirement so that you actually know what it will do. I purchased 9 months of time about ten years before I retired. I gave me enough in service time to retire when I wanted to.

While not your original question be aware that some states treat teachers pensions differently than regular pensions or other public service pensions for paying state income tax so you need to talk to someone about knowledgeable about taxes.

Thanks for the advice. After I posted it occured to me to calculate the break even based on how long the 34K + earnings would last if I withdrew the difference (between the amounts I would receive with and without the additional service credit) each month. It looks like the break even point is about 16 years, which isn’t too bad compared to the fixed life annuities I found online and used as a comparison - one of which cost over 50K for the same monthly pay out.

You really need to talk to someone about this. Your posts are very confused. Small things like do you need to purchase an annuity or just receive a pension.

Laura, did you do it on a present value basis? Check the PV functions in a spreadsheet or even on Google Drive (sheets). All are pretty self explanatory.

A similar issue that I think many overthink is when to start Social Security, not realizing that the alternatives are actuarially equivalent. If one could know for certain age at death, assuming you can afford to delay the start, it would be an easy choice. Otherwise, it's a guess. And what you're facing is a guess and may also be actuarially equivalent.

Someone may be confused but I don't think it's the OP.

I don’t believe I am confused at all about pensions vs annuties. I’m considering the purchase of service credit, which is essentially an annuity, to increase my monthly pension And I plan to purchase the service credit using pre-tax funds from my 457K plan. Meanwhile, I will look at PV calculators. Thanks!

No, I don't think you are either.

Present value is the real story. Looking at gross dollars is incorrect and likely misleading.

Laura as a retired federal employee when I retired I had the option of either having a pension or purchasing an annuity. While different employers offer several different types of retirement plans I can not say which ones you have available.

With all of the differences along with some states having their own plans is why if where you work can provide estimates of each of the various pension options available you should look at all the options. You should be able to shop for an annuity outside of any pension plan that is offered by your employer. You may have already done so.

As an example. The annuities I had available either had a flat payment for as long as you lived. A payment that started out low but increased a little over time. A couple that I did not even look at paid out only for a certain length of time. A couple had a provision that if I died before a certain percentage was paid out to me a payment would be made to my heirs. If I had selected an annuity I was told that I would pay state income tax on the payment.

I selected the pension because although the immediate payment was lower if I lived long enough the payment would increase. Until my total income reaches $85,000, pension, SS, and 456/401 I pay not state income tax on that. Of course the state legislature can change that in a flash. I pay a little state income tax but not as much as if all of those things were taxed.

The idea is to have your employer provide you what options they have with all the math completed so that you can compare them in front of you.

As a state employee, the only options I have are to take a reduced pension in order to provide a full or partial benefit to my beneficiary upon my death and/or to purchase service credit In order to retire earlier. My employer provides a calculator for determining monthly retirement benefits based on years of service and the 36 highest months wages. However, they don’t offer any help with calculating the break even point for purchasing service credit. Most people purchase service credit to make themselves eligible to retire before age 60 (known as buying time] but I’m already eligible to retire, so I’m considering it simply to increase my monthly pension payments - but only if it makes sense financially.

I did a quick calc for you as an approximation, round numbers. To get a present value of $34,000 for a stream of $3000 per year for 12 years gets you to a discount rate of 2.5 percent, which is pretty poor. Looking at it another, way, at a 5% rate, the present value is about $27.5K so to pay $34,000 for that isn't a good deal.