Retirement Planning in Springfield

Pension Reform Remains Uncertain

Illinois operates under a two-tier pension system. Tier 1 applies to employees hired before 2011 and offers more generous benefits. Tier 2, covering newer hires, provides lower payouts and limited cost-of-living adjustments. In 2025, lawmakers again delayed reforms aimed at making Tier 2 more equitable and federally compliant (MyJournalCourier, 2025).

Although a $75 million reserve fund was set aside to address legal concerns, no structural changes have passed. Pension protections in the Illinois Constitution remain strong, but funding gaps persist. The state’s pension debt stands at more than $140 billion, with some systems funded below 50 percent.

Retirement Accounts Offer More Flexibility

While pensions dominate headlines, Illinois employees also have access to a 457(b) deferred compensation plan. This plan allows for higher annual contributions than traditional IRAs and does not penalize early withdrawals after separation from service. In 2025, the contribution limit is $23,500, with larger allowances for older workers (CMS.Illinois.gov, 2025).

Additionally, the SECURE 2.0 Act has pushed required minimum distributions back to age 75 and increased catch-up contribution opportunities. These changes give public employees more room to grow retirement savings later in their careers.

Consider Roth IRAs and Secure Choice

For those without access to employer-sponsored plans, Illinois Secure Choice offers Roth IRAs with automatic payroll deductions. The program is portable, and contributions grow tax-free for qualifying withdrawals.

Even employees in the pension system should consider Roth or traditional IRAs to diversify income sources. The state does not tax retirement income, making Illinois one of the more retirement-friendly states in that regard.

Health Coverage and the Long View

Some state retirees may retain group health benefits depending on years of service and hire date. Medicare usually becomes the primary insurer after age 65, but supplemental state coverage can remain a valuable benefit.

The key takeaway for Illinois state employees is this: do not rely on pensions alone. Build personal savings, stay informed on legislative changes, and take advantage of tax-advantaged accounts. A secure retirement in Springfield is possible, but it requires proactive planning today.