Friday Top Five: Retirement Related News for 1/30/15

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From The Wall Street Journal: Pensions Are a Mathematical Issue

Steven Malanga (“The Pension Sink Is Gulping Billions in Tax Raises,” Jan. 13) is true to form, as he cites the problems selected states and localities have as a result of their pension plans. Yet public pensions in most states are in reasonably good shape. They are recovering nicely from the steep market decline of 2008-09 and, importantly, public pensions provide both vital income for millions of retired public workers, and an important source of economic stimulus throughout the country, especially in rural areas.

From USA Today: Some states move to help spur retirement savings

Survey after survey has shown the same dire forecast: Americans are dangerously ill-prepared for retirement. We haven't saved, we haven't planned, and some of us haven't even starting thinking about it.

Here's just a few of the warnings.

From WWLP: Average retirement savings at highest level in four years

Americans have increased their retirement savings to record levels, but 22News reporter Kaitlin Goslee found out why more still needs to be done to boost your savings fund.

Building your retirement savings isn’t easy says car mechanic for over 30 years, Roland Madzunovick, from Holyoke.  He told 22News, “all the expenditures are going up and the pay check has either flat lined or is going the other way.”

From Forbes: 7 Tax Time Retirement Savings Tricks

What if you could boost your retirement savings, courtesy of Uncle Sam? Some of the most generous provisions of the tax code are incentives to save whether via a workplace 401(k), an Individual Retirement Account, a Roth IRA, or one of many retirement plans for the self-employed. Yet year after year taxpayers fail to take advantage or make costly mistakes.

Here are some tricks to make the most of the breaks, and traps to watch out for, courtesy of David Prokupek, chief executive officer of the Jackson Hewitt tax prep chain. “A lot of people like handholding, especially around retirement; it’s a lot of math,” he says.

From Wall Street Journal: Why the Government Must Teach People to Save More

What one policy should Washington pass to benefit older Americans in 2015?

It’s not practical for the government to do much for those who are already elderly other than increase welfare of various kinds. This is a formidable task considering that the elderly population is growing so rapidly while the numbers to support them with taxes is diminishing proportionately.

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Are State Pensions Taxable?

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When I retire my state pension is not taxable in Misssouri, is this true no matter what my household income is ?
Actually, that’s not true. As long as you reside in Missouri, your retirement benefits are subject to Missouri state income tax and federal tax.

However, there may be some portion of your pension payment that could be exempt, depending on your situation. As mentioned in the winter issue of RetireeNews, there is a public pension exemption that can be deducted from your retirement benefit, if you are eligible. Depending on a variety of factors (including, but not limited to, income, filing status, and age) you may be able to deduct a portion of your public retirement benefit on your Missouri tax return, to the extent the amounts are included in your federal adjusted gross income. MOSERS recommends you contact the Department of Revenue or a qualified tax advisor for additional information or answers to your specific questions about the public pension exemption.

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Friday Top Five: Retirement Related News for 1/23/15

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A retirement system official said Thursday a report showing that some public employees who retire collect more in pension benefits than they did while working was based on less than 2 percent of beneficiaries.

The analysis also does not reflect changes to the retirement plan made in 1985 that reduced pension payouts, said Tina Leiss, executive officer of the system.

The conclusions in the report issued by the Nevada Policy Research Institute, a conservative think tank based in Las Vegas, do not account for the vast majority of the members and retirees of the Public Employees’ Retirement System, she said.

Many retirement plans just don’t make the grade. And one that does get high marks may never become reality.

The American Academy of Actuaries just released its assessment of five types of actual and proposed retirement plans from the U.S. and elsewhere. And the assessment isn’t pretty.

At 76, Sue Miller-Gillman has heard the question that’s inevitably asked of any working person of a certain age: When are you going to retire?

The Columbus woman said she simply isn’t ready.  She loves her job as a communication liaison at OhioHealth Riverside Methodist Hospital, arranging for family members to meet with a doctor to discuss a loved one’s prognosis after surgery. At such stressful times, she said, families appreciate a smiling face.

Maybe your 401(k) is invested in a target date fund, or you're considering a target date fund for your IRA. You should know about the growing debate around an important question: How well do these funds work as retirement savings vehicles? Read on for the pros and cons of these popular funds.

The target date fund (TDF) works like this: You choose a fund based on your desired retirement year and the fund re-balances itself based on how close you are to retirement, saving you the effort of tweaking your stock and bond allocation.

When you're young and retirement is just a far-off daydream, your TDF will give you more exposure to risk and more potential for reward -- translation: A higher percentage of your holdings will be in stocks and a lower percentage in bonds.

Later, when you're approaching retirement, your portfolio allocation will be less risky (think bonds, CDs and money market accounts) on the theory that a more conservative approach is appropriate as you get closer to your non-working years.

The nation’s actuaries used the State of the Union Tuesday to call on President Obama and Congress to address the needs of the nation's aging population in the last two years of his administration.

“A concerted national strategy on policies to support systems such as retirement security and lifetime income, health care and long-term care for the elderly and public programs such as Social Security and Medicare, is long overdue,” the organization said.

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Getting Started

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I am completely lost when it comes to planning for retirement. I grew up in a family that my parents will work until they die. So when I am trying to figure all this out to plan ahead I am lost. I am now 23 and have worked for the state for 2.5 years. I want to make sure that I am on track to retire. Obviously I have quite a few years ahead of me. I just really need some help
Congratulations to you on thinking about your financial future now!  It’s never too early to start planning for retirement.

Here is the big picture--as a state employee, your benefit package includes three sources of potential retirement income:
  1. The MOSERS defined benefit (DB) plan. You automatically participate in this plan when you are hired.
  2. The State of Missouri Deferred Compensation Plan. New employees hired after July 1, 2012 are automatically enrolled in this plan.
  3. Social security. You and your employer both pay into social security.
All three of these arrangements will contribute to a financially secure retirement for you.
In a DB plan, once you are vested (work in a MOSERS-benefit eligible position for 10 years for employees first hired on or after 1/1/2011), and meet the age and service requirements, you are guaranteed a monthly benefit for life. This benefit is calculated using your final average pay and years of service. So, the longer you work and the higher your salary – the higher your benefit will be. You will get a set amount each month and it will not run out as long as you live. It, along with social security, forms the foundation of your financial security in retirement.

Your deferred contribution plan allows you to save and invest money to supplement your DB and social security retirement benefits. The amount of income it produces for you in retirement depends on a number of factors, like  how much and how long you contribute, the investment returns you receive on those contributions, and when you start accessing your accumulated savings in retirement. The deferred compensation plan offers many tax advantages, investment options that are both simplified and low cost, and convenient payroll deductions that making saving with each paycheck easy.

Now that you know how it works, what should you do?
  • MOSERS: For your DB plan, all you have to do is keep working in a MOSERS-benefit eligible position.
  • State of Missouri Deferred Compensation Plan: If you’re unsure how to invest your money, the deferred compensation plan offers custom Target Date Funds. These are unique investment options designed specifically for state of Missouri employees. You simply choose the fund that’s closest to your anticipated retirement year and the target date fund will automatically rebalance your portfolio – from aggressive to conservative – as you move toward retirement. Since you’re 23, you have the power of time on your side. The sooner you start saving, the better.  The good news is, because you were hired after July 1st of 2012, you were automatically enrolled in the deferred compensation plan and defaulted into the 2055 Missouri Target Date Fund. That means you’ve already been saving 1% of pay with each pay check. You can log on to view your balance through the ESS portal or by visiting and clicking on the blue, “New User – Register Now” button. Remember, you can adjust your contributions at any time or schedule your contributions to increase by a specific percentage using the auto increase feature mentioned in this DC Update.
If you’d like to learn more about financial topics like pension and social security benefits, budgeting, the value of state employee benefits, saving, and investing, then be sure to attend a Pocket Change financial seminar.  This new training session, presented by deferred compensation plan education specialists, will address many of the questions you seem to have and should help point you in the right direction as you begin your financial journey.

The Pocket Change seminar is available via special HR request only, so be sure to have your human resource department contact the deferred compensation plan’s local plan manager, Tasha Reinkemeyer, at 800-392-0925, option 2, ext. 15 to bring the training to your agency.

Retirement benefit estimates are available from the various benefit providers and you can access them at any time during your career:
The RetiremenTrack calculator on the State of Missouri Deferred Compensation Plan’s website can be used to calculate your future savings and see if you should be doing more to reach your goals. Print Friendly and PDF

Friday Top Five: Retirement Related News for 1/16/15

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Last month, then-state Controller John Chiang launched a new website with details of the future costs of the pensions from the California Public Employees’ Retirement System, the pension provider for most state and municipal employees.

The numbers from the Controller’s Office were not new. They are drawn from regularly required reports. Chiang, for the first time, simply consolidated the reports in one place, making them easily accessible.’

Contrary to many editorial and news reports, Chiang did not sound an alarm, but went out of his way to say that firefighters, teachers, police officers and other public servants deserve the retirement security they’ve earned.

In the U.S., roughly 10,000 people reach retirement age every day. And though not everyone who turns 62 or 65 retires right away, enough do that some companies are trying to head off the problem.

Dave Tobelmann, who for 33 years developed new products for General Mills, retired five years ago at age 57 — around the same time as a number of other colleagues. "Yeah, I went to a lot of retirement parties," Tobelmann says.

Losing veteran workers is a challenge, even for big companies like General Mills.

If you're looking to put the finishing touches on your retirement plans, a study from MassMutual has a suggestion on timing: "Retirees who expressed the highest levels of satisfaction in retirement are also those who took concrete steps to put both their emotional and financial lives in order at least five years or more before retirement."
Related -  PreRetirement Seminars
Parents often find themselves between a rock and a hard place when it comes to doing what's best for themselves and their children. One financial adviser offers a formula to make it easier.

It’s a uniquely Gen X personal finance dilemma: Should those of us with young children be socking away our savings in 401(k)s and IRAs to make up for Social Security’s predicted shortfall, or in 529s to meet our children’s inevitably gigantic college tuition bills? Ideally, of course, we’d contribute to both—but that would require considerable discretionary income. If you have to choose one over the other, which should you pick?
Related -  Make the MOST of College Savings.

From American Institute for Economic Research: Rethinking Retirement Guidelines

The retirement landscape has undergone a seismic shift. According to research from the Boston College Center for Retirement Research, in 1983, 88 percent of workers covered by a retirement plan had a traditional defined benefit pension plan and only 38 percent had a 401(k)-type defined contribution plan (26 percent had both). In 2013, only 30 percent had a defined benefit plan while 84 percent had a defined contribution plan (13 percent had both).

The shift in coverage was expected. When 401(k) plans started gaining traction in the early 1980’s, they were lauded for allowing individuals to control their own finances. What could be more American? With the shift in coverage came newspaper and financial magazine articles propagating two retirement planning guidelines that we challenge in this brief.

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Survivor Benefits Before Retirement

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My question is I have 15 years service in doc if I was to die tomorrow what form do I have to have completed that gives my spouse lifetime retirement benefits of the years of service I have ?
There is no form that you need to fill out at this time. If you are married, vested* in MOSERS, and die before retirement, your surviving spouse would be eligible for a survivor benefit.>
The monthly benefit for your spouse will be based on the benefit you have accrued as of your date of death and calculated according to the Joint & 100% Survivor Option. The survivor benefit will be paid monthly for the remainder of your spouse's lifetime.

Benefit payments can begin the first of the month following your date of death,  but your spouse must submit an Application for Survivor Benefits and any necessary documentation. More information is available on the Survivors page on our website. There is nothing you need to do for your retirement benefit, but we do encourage you to make sure your life insurance beneficiaries are current (if you have life insurance with MOSERS).

*If you aren’t sure which plan you belong to or the vesting requirement, check the Which Plan Am I In? section of MOSERS’ website.

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Purchasing Military Service

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Me as a veteran would like to know is it true I can buy as many years of service as I want. And how much is one?
Once you are a vested member of MOSERS, you may purchase eligible prior active-duty military service credit. If you elect to purchase your active-duty military service, you must purchase all that you served (total months and days) up to a maximum of four years. Members of MSEP and MSEP 2000* are allowed to purchase military service at a subsidized rate. If you are interested in doing so, complete and submit the Application to Purchase Active-Duty Military Service a long with your DD214 or other military discharge paperwork. The application is on our website.

Once we receive the completed application, we can determine if your service is eligible for purchase, and if so, the cost of purchasing. In addition to this calculation, you will also receive an estimation of your retirement benefit with and without that service, a brochure on tax free rollovers, and an election form to purchase the service. There is no charge for submitting the application or getting estimates.

Any eligible purchases must be applied for and paid in full prior to applying for retirement.  

*Note: members of the MSEP 2011 may get automatic credit if they were employed by the state immediately prior to entering the armed forces and return to state employment within the timeframe specified by USERRA. However, purchase of prior active-duty military service credit is not available to members of MSEP 2011.

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Friday Top Five: Retirement Related News for 1/9/15

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If you're thinking of retiring but don't want to make a complete break from the workforce, you're not alone. More Americans are transitioning slowly into retirement by working part time, volunteering and developing other businesses. According to the Merrill Lynch "Work in Retirement: Myths and Motivations" study, 47 percent of today's retirees say they either have worked or plan to work during retirement. A whopping 72 percent of pre-retirees over 50 say they actually want to keep working after they retire.

Let's start with a look at four reasons people work well into their golden years.
Feeling pleased that I had survived another year and the annual predictions of the apocalypse, I made the mistake of picking up “Falling Short: The Coming Retirement Crisis and What to Do About It” (Oxford University Press).

Written by Alicia H. Munnell, the director of the Center for Retirement Research at Boston College, with Andrew D. Eschtruth, a colleague there, and Charles D. Ellis, a widely respected consultant and author, “Falling Short” does a fine job of clearly laying out the whats and whys of the impending crisis. It also provides a number of reasonable sounding alternative paths to avoiding financial Armageddon for the coming generations of seniors.
The oldest members of Generation X are turning 50 in 2015.

Few financial services companies acknowledge Generation X’s (born between 1965 and 1980) most troubling financial planning concerns, according to a study from Weber Shandwick, a communications strategist for financial services companies.

Weber Shandwick observed that often when financial services firms do segment investors and retirement plan participants by generation, they tend to focus on Millennials and Baby Boomers, but not on Gen X, making it an important opportunity for the industry. “They don’t have the numbers and the wealth compared with Boomers and even Millennials,” says Brooke Worden, senior vice president of financial services at Weber Shandwick.
Consider the following choices:

1) You are offered a snack to eat now - would you prefer a chocolate bar or an orange?
2) You are offered a snack now to eat next week - would you prefer a chocolate bar or an orange?

People predominantly choose the tasty but unhealthy snack for immediate consumption, but pick the healthy snack for the future. However, once that future date arrives, if given the option to switch, they again go for the high-sugar high-fat chocolate bar.

This example highlights one of the main behavioral challenges in saving for retirement: as humans, not only do we tend to overweight our experiences today at the expense of those in our future, veering towards instant gratification, but we also change our preferences over time. In effect, we make choices today that our future selves would prefer not to be making, whether it's to eat healthier or quit smoking. This is known as the present bias. In today's post, I'll take a look at this phenomenon - and several others - that investors often face when saving and investing for retirement.
Health care reform has given employers new ideas about providing health benefits to pre-65 retirees.

Over the next two years, more than half of employers surveyed by Towers Watson that provide health care to pre-65 retirees are planning significant changes to their medical benefits and how those benefits are delivered.

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What Happens to BackDROP if You Are Fired?

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Yes, assuming you are eligible for and elect the BackDROP* (you must work in a MOSERS-covered position at least two full years beyond your normal retirement eligibility date). Upon retirement, BackDROP will be one of your benefit payment options listed on theRetirement Election form.
MOSERS will send you a personalized election form with all of your retirement options as step 2 of the two-step retirement process, after you have submitted the Retirement Application. If you would like to create a benefit estimate based on other scenarios, visit How to Create Your Benefit Estimate.

An exception would be if you were fired because you were found guilty of a specified felony committed in connection with your job as a state employee on or after August 28, 2014 under provisions of HB 1217 which was passed by the Missouri legislature in 2014.

(*BackDROP is not available to members of the MSEP 2011.)

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