Participating in the Deferred Retirement Option Program (DROP) is a significant milestone for Florida Retirement System (FRS) participants. It marks the start of retirement benefit accumulation while you continue working and earning your regular salary. However, the decisions you make during and after DROP participation will directly influence your long-term financial well-being. 

Financial planning after DROP is about more than managing a lump sum payout — it’s about developing a strategy to balance your income needs, protect your savings, and align your finances with your retirement goals. Here’s how to think beyond DROP and build a financial plan that supports your next chapter. 

The Importance of Planning Beyond DROP 

Your DROP participation period is relatively short — up to eight years for most participants. What happens after you exit DROP, though, will shape your financial future for decades to come. This transition requires careful coordination between your DROP benefits, pension income, personal savings, and any additional retirement accounts. 

Key Financial Planning Considerations After DROP 

• Creating a Sustainable Income Stream 

• Tax-Efficient Withdrawal Planning 

• Investing for Growth and Preservation 

• Healthcare and Long-Term Care Costs 

• Estate and Legacy Planning 

Building Your Income Plan After DROP 

Your DROP benefits, combined with your FRS pension, Social Security, and personal savings, form the foundation of your retirement income. Structuring these sources to support your desired lifestyle while avoiding unnecessary tax burdens requires careful planning. 

Key Components of a Retirement Income Plan: 

• Monthly Pension Payments — Begin once you fully retire from FRS employment. 

• DROP Lump Sum Payout — Available as a lump sum, rollover to a retirement account, or a combination of both. 

• Social Security Benefits — When to start receiving benefits affects your overall income and tax picture. 

• Personal Savings and Investments — Withdrawals from IRAs, 403(b)s, and other accounts can supplement income. 

Coordinating these income sources can help you manage cash flow, keep taxes under control, and extend the life of your savings. 

Tax-Efficient Strategies for Managing DROP Benefits 

How you handle your DROP lump sum payout plays a critical role in your post-DROP financial health. Options include: 

• Rollover to a Qualified Plan — Keeps funds growing tax-deferred and provides flexibility for future withdrawals. 

• Partial Lump Sum with Rollover — Allows immediate access to part of your payout while preserving the rest in a tax-deferred account. 

• Full Lump Sum Payout — Provides immediate liquidity, but can trigger a substantial tax bill. 

Working with a financial professional can help you evaluate the tax impact of each option and choose a strategy that aligns with your income needs and long-term goals. 

Investment Planning After DROP 

Once you’ve handled your lump sum payout, attention shifts to how your retirement savings are invested. A well-balanced portfolio can help support your retirement income while accounting for inflation and market changes. 

Investment Considerations After DROP: 

• Balancing Growth and Preservation — While growth remains important, preserving capital becomes a priority in retirement. 

• Income-Producing Investments — Dividend-paying stocks, bonds, and income funds can supplement your monthly cash flow. 

• Diversification — Spreading funds across different asset classes, which may help manage risk. 

• Periodic Reviews — Regularly reassess your portfolio to align with your evolving needs and market conditions. 

Healthcare and Long-Term Care Planning 

Healthcare expenses are often one of the largest costs retirees face, especially as they age. Planning for these costs, including Medicare, supplemental insurance, and long-term care, is essential. 

Considerations for Healthcare Planning: 

• Medicare Enrollment and Coverage Options 

• Supplemental Health Insurance 

• Long-Term Care Insurance or Savings Strategies 

• Setting Aside Funds for Out-of-Pocket Expenses 

Planning ahead for healthcare expenses helps ensure they don’t disrupt your broader retirement goals. 

Estate and Legacy Planning After DROP 

Your DROP payout and ongoing retirement income will likely represent a significant portion of your overall estate. Ensuring these assets are protected and passed on according to your wishes requires thoughtful planning. 

Estate Planning Steps: 

• Update Beneficiary Designations — Make certain they align with your broader estate plan. 

• Consider Trusts — To provide structure and protection for your beneficiaries. 

• Incorporate DROP and Pension Benefits into Your Will or Trust — To facilitate smooth asset transfer. 

• Review Your Plan Regularly — Life changes, tax law updates, and personal goals can all impact your estate plan. 

How BENCOR Supports Financial Planning After DROP 

BENCOR has worked with Florida public employees for decades, helping them navigate DROP participation and the financial decisions that follow. From understanding your payout options to coordinating with your broader retirement and estate plans, BENCOR offers tools and resources designed to help you build a comprehensive retirement strategy. 

Whether you need help rolling over your DROP funds, coordinating income sources, or planning for taxes, BENCOR can work alongside your financial and legal professionals to help you make informed choices. 

Final Thoughts on Financial Planning After DROP 

Your DROP participation is just one piece of your retirement puzzle. To make the most of your benefits — and to protect your financial future — it’s important to create a financial plan that addresses income, taxes, investments, healthcare, and legacy goals. 

If you’re ready to develop a plan that helps you manage your DROP benefits and build financial confidence in retirement, we can help. For personalized advice and in-depth planning, please schedule a free consultation with our team at BENCOR DROP support.