Friday Top Five: Retirement Related News for 7/31/2015

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From NIRS: State Financial Security Scorecards

NIRS' new State Financial Security Scorecards summarize the economic outlook for retirement security in every state. The two-page downloadable State Scorecards are designed to serve as a tool for policymakers to help identify potential areas of focus for state-based policy interventions to improve Americans’ retirement prospects.

 Each State Scorecard gauges the relative performance of the fifty states and the District of Columbia in three key areas: anticipated retirement income; major retirement costs like housing and healthcare; and labor market conditions for older workers.

From The Conversation: Danger strikes when foolish humans are left in charge of their financial futures

Much standard economics research is based on the “homo economicus” decision-maker. This is an entirely rational being. An unbiased, unemotional, non-psychological maximiser of the expected usefulness of things and events. Furthermore, this perfect decision-maker is far-sighted, and has complete self-control.

If that seems instinctively problematic, then you’ll be pleased to know that behavioural economics research instead recognises that real-world “homo sapiens” decision-makers are not fully rational, are biased, are emotional satisfiers. Furthermore, such decision-makers are myopic, and lack self-control.

From BenefitsPro: 10 states where $100 buys the most

Been feeling a little flush lately? If you’ve been spending a tad more freely, but your check seems to be lasting longer, maybe it’s because of where you live.

From Forbes: Three Powerful Retirement Moves To Consider Now

There are so many benefits to getting a smaller domicile, let me count the ways. You can reduce your monthly mortgage/rental costs, maintenance, property taxes and utility bills.

The bottom line is that you don’t need to pay for all of that space. Even better is that you can sell your house and downsize to a condo/townhouse/apartment or smaller home.

From Plansponsor :Mich. High Court Approves Forced Pension Contributions

The Michigan Supreme Court has upheld the constitutionality of a 2011 law that forced 15,000 state workers to contribute 4% of their salary to maintain full pension benefits, the Detroit News reports.

Under the law, state employees who did not contribute 4% of pay into the retirement system had their earned pension benefits frozen and were moved to a defined contribution (DC) retirement plan for the remainder of their state government career. The news report said state employees affected by the law were hired before 1997, when the Legislature closed the state government pension fund to new employees and began offering a DC plan to future workers.
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Travel Assistance Through MOSERS

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Do state employees and retirees still have travel insurance (Frontier Medex) through our health insurance? 
Yes, members and retirees who have MOSERS’ basic life insurance are eligible for travel assistance. (Just to clarify: This is through your MOSERS life insurance benefit, not through your health insurance administered by MCHCP or other providers.) The name of the travel assistance provider has changed from Frontier/MEDEX to United Healthcare Global, but the benefits are still the same. There is nothing you need to do, except print out the wallet card and take it with you when you travel 100 miles or more from home or international trips of up to 180 days. We also had an article in the summer PensionsPlus newsletter that has more information. Print Friendly and PDF

Friday Top Five: Retirement Related News for 7/24/15

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From MarketWatch: 6 things to tell your grandkids about saving for retirement

Retirees: imagine starting over in your 20s, armed with what you know now. There would be no limit to what you could accomplish with decades of experience on your side.

Until scientists find a way to turn back the clock, the next best thing you can do is offer advice to the younger generation, particularly your grandchildren, so that they can avoid the pitfalls that only experience could help them navigate safely.

As your grandchildren graduate college and start their first jobs, now is the perfect time to teach them the importance of proper retirement planning, and the key tenets that got you to where you are today are still paramount: don't spend too much money, don't take on too much debt, and always plan for a rainy day. Continue to reinforce these concepts in the same manner your parents and grandparents did for you.

Retirement plan participants have suffered in numerous ways in the switch from defined benefit plans to defined contribution plans—and one of those ways is not understanding how their DC plan balance translates into retirement income.

But they’re far more concerned with the performance of their plan investments than with how much that will amount to once they’re retired.

From News Tribune: Zweifel seeks more ‘transparency’ in MOSERS investments

State Treasurer Clint Zweifel says the Missouri State Employees Retirement System (MOSERS) needs a better system for measuring the total cost of fees from private equity investments.

“Private equity can be a valuable asset class for public funds, but as with any instance of handling public money, transparency is essential,” Zweifel wrote this week in a letter to MOSERS board members. “The gaps in transparency and consistent fee reporting have made it difficult for investors to determine the true cost of private equity investing without a substantial and burdensome amount of research.

From Time Money: Why Millennials Aren’t Saving More for Retirement

Their savings habits are better than boomers, but one big expense is holding them back.

Another Millennial myth may be biting the dust. Apparently, millennials have better retirement saving habits than Baby Boomers.

 From FOX Business: Don’t Let Debt Blow Your Retirement

We have all heard the saying: “I am in debt up to my eyeballs.” Well, for baby boomers close to or in retirement and the Generation Xers next in line, being saddled with debt can potentially push those golden years out of the picture.

Living with debt has become a way of life for both Generation X (Gen X) and baby boomers, as the stigma of owing money is gradually disappearing, according to Generations ApartSM* –  a new study from Allianz Life Insurance Company of North America on how these generations are facing their financial future.

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Death Before Retirement

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What happens to money that is in an individuals retirement account if he/she passes away before retiring?
Members do not have individual retirement “accounts” with MOSERS; they earn benefits payable to them or their eligible beneficiary(ies).

If you are a general state employee, married, vested* in MOSERS, and die before retirement, your eligible surviving spouse will receive survivor benefits. 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.

If there is no eligible spouse, a survivor benefit may be paid to your natural or legally adopted child(ren) who are younger than age 21. This benefit is dependent on the law in effect at the time of your termination. If there is more than one eligible child, the benefit will be divided equally among them. The survivor benefit for each child will stop when the child becomes age 21 (unless a child is totally disabled and you terminated service with the state on or after 8/28/2001).

If  you die without any eligible survivors, no retirement benefits will be paid on your behalf. The state’s annual contribution is pooled with investment returns (and employee contributions from MSEP 2011 members) to fund the retirement system. If you made employee contributions to MOSERS and die without any eligible survivors, a refund of your contributions will be made to the beneficiaries you have listed on your Contribution Beneficiary(ies) form or otherwise according to law.

On a related issue, we encourage you to make sure your life insurance beneficiaries are current (if you have life insurance with MOSERS) so proceeds will be paid according to your wishes.

If your circumstances are different than those described above, you may contact a MOSERS benefit counselor who can help you understand how the law would apply in your specific situation.

*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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Friday Top Five: Retirement Related News for 7/17/15

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From Forbes: Social Security Q&A: At Who's Full Retirement Age Should I File and Suspend?

Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s Social Security question is about the ideal timing for filing and suspending.

Question: I am reading your book. I am particularly interested in the file and suspend with spousal benefit option as described. Here is my question: I am 16 months older than my spouse. Would I be better off filing and suspending when my spouse is just about to turn 66 instead of filing and suspending when I turn 66? My reasoning is that at 67 and four months I would be getting a bigger benefit, so the spousal benefit of half would be larger than if I filed and suspended at 66. So my spouse would have four years of this larger benefit or is there something that requires that the older spouse file and suspend at 66? Then at 70 each of us would file for “full” benefits. What do you think?

From Cincinatti: Going solo into retirement? Consider this

There’s a common presumption in many financial news stories that’s no doubt frustrating for quite a few people: it’s the presumption that everyone is preparing for retirement as a couple. When “rules of thumb” for saving and spending are discussed, singles are left wondering, “Do I just divide those numbers in half?”

The reality is that many, many people are indeed spending some or all of their retirement days single. According to recent U.S. Census data, when it comes to people age 65 or older, 47 percent of women and 18 percent of men now live alone. For historical context, since 1970, this percentage is almost double for women and about 25 percent higher for men. And while some are single by choice, many are single because of late-life divorce or death of a spouse.

From Huffington Post: Retired Women Are Twice As Poor As Retired Men: Report

Democrats in Congress often lament the fact that full-time working women in the United States earn 78 cents for every dollar men earn, but less attention is paid to the much wider and harder-hitting income gap for women in retirement.

According to a report Sen. Patty Murray (D-Wash.) released Thursday, the average total income of women over age 65 is just 55 percent of older men's income, and those women are nearly twice as likely as men to live in poverty. Women's median retirement income is about $16,000 a year, while men's is nearly $30,000. And while more women depend on Social Security benefits than men, men 65 and older receive an average of $18,000 a year in benefits, compared to only $14,000 for women.

From Fox Business: 3 Ways Spending Habits Change in Retirement

When you retire, your spending budget won’t be the same.

The good news is some expenses will be eliminated or reduced; but others will remain the same … or even increase.

According to Savant Capital Management, there are three ways spending changes in retirement.

From AJMC: Most Americans Would Keep Medicare, Medicaid Intact, Poll Finds

On the eve of their 50th anniversary, Medicare and Medicaid enjoy broad support among the American public, although support for Medicare, which virtually everyone will use if they live long enough, is stronger than the program designed to help the poor, according to a new poll.

The Kaiser Family Foundation poll, conducted ahead July 30, 2015, gauged support for the healthcare programs that formed the foundation of President Lyndon Johnson’s Great Society initiative. Among other purposes, Johnson sought close the gap between the “haves” and the “have nots,” starting with the ability to obtain healthcare.

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How MOSERS Determines Funding

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I was wondering if you saw the article in the New York Times about use of actuaries with pensions. It made me wonder how MOSERS uses actuaries with the state pension plan.

Most likely, you are using a much more sound approach than the village of La Grange, Illinois, but wanted to make sure.
 According to the funding policy, MOSERS is required to work with our actuary to conduct an experience study once every five years that examines, among other things, mortality rates, and actual experience of our members. The actuary makes recommendations based on our member data for our annual valuation. The experience study was last conducted in 2012, where the board of trustees recommended new mortality tables that include longer life expectancies on a going-forward basis. As indicated in the funding policy below, our next experience study will cover the five year period ending June 30, 2016, and the board will determine at that point if further adjustments should be made to our mortality tables.

The MOSERS funding policy reads, in pertinent part, as follows:

Validation of Actuarial Assumptions

The law stipulates that the board shall consult with the actuary on the adoption of actuarial assumptions to be used in the actuarial valuations.  By practice, the board also consults with others, such as the executive director, chief investment officer and general asset consultant with respect to the economic assumptions to be used in the actuarial valuations.

As required by section 104.510 RSMo., the retained actuary shall conduct an experience study comparing actual experience with assumed experience during the period being examined. The next such experience study report shall be presented to the board in 2017, covering the five-year period ending on June 30, 2016. The experience study report shall include, but not necessarily be limited to analysis of and recommendations regarding the following assumptions.
                                                        i.   Pre-retirement withdrawal rates 
                                                      ii.   Retirement rates
                                                    iii.   Disability rates
                                                    iv.   Pay increase rates
                                                      v.   Mortality rates both before and after retirement
                                                    vi.   Investment returns considering both real return and inflation, which must be consistent with the investment ends policy

The experience study report will serve as the basis for determinations by the board regarding whether or not demographic or economic assumptions should be modified for future valuations. Such an experience study shall be conducted every five years.

Validation of the Work of the Retained Actuary
An actuarial audit report shall be prepared by an actuarial firm, other than the retained actuary, selected by the Board. The next such audit shall be presented to the board in the first quarter of 2018, covering the experience study report for the five-year period ending on June 30, 2016 and the actuarial valuation report for the year ending on June 30, 2017. The purpose of this report is to provide the board with an independent assessment of the quality of the work of the retained actuary with respect to both process and reasonableness of assumptions and results and the reasonableness of the related fees. Such an audit shall be conducted every five years.

The Executive Director may recommend changes to the contract with the actuarial firm that is currently providing actuarial services to the Board or the issuance of a request for proposal from additional actuarial firms based on the information provided in the actuarial audit report, or whenever the Executive Director determines it is appropriate to do so.

The key here is that system has a process in place for assuring that the work of the system’s actuary is based on assumptions that reflect our actual experience.

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Friday Top Five: Retirement Related News for 7/10/15

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If ever there was a time for would-be retirees to get creative, it is now. Many people approaching the traditional retirement age of 65 are looking into a financial abyss: They have no pension, their savings are inadequate and the job market, although not uniformly hostile to those over 50, is not especially encouraging either. And they could live another 25 to 30 years, maybe in good health if they are lucky.

So what can 50- or 60-somethings without trust funds or secret stashes of cash do?

While all Medicare beneficiaries are entitled to receive the same set of core benefits, seniors shouldn’t assume all plans are created equal. Some Medicare plans offer additional benefits, while others may have limits that could affect when and where you get care. Premiums can also differ between plans, and you might even pay extra depending on when you enroll.

Here are some of the key plan differences and seven ways to make the most of your Medicare coverage

Early retirement isn’t always enjoyable, and some people go back to work.

Being able to retire early is the pinnacle of financial planning. It brings together years of hard work, discipline and compromises to a joyful celebration. Just thinking about the days when I won't need to work gets me excited. But not everything will be rosy with an early exit. Here are some of the challenges of early retirement:

It’s easy to understand how a retirement is built — steady saving, prudent investments and time. But so many of us fail at it because we get stuck trying to make just the first moves.

As the saying goes, “A journey of a thousand miles begins with a single step” and that’s true. You really have to set aside the first dollar somewhere, somehow, with the intention of not spending it but instead growing it over years.

Living overseas can save you money and offer new experiences, but you must look at the whole picture.
Related: Check out page 7 of the MOSERS Annual Report : Benefit Recipients by Location
Many Americans are happily spending their retirement years in Mexico, France, Spain, Panama, Thailand, Costa Rica and other spots around the world, but packing up and moving your life from Port Charlotte, Florida, to Puerta Vallarta, Mexico, requires some planning. However, experts say, it's easier than ever to find information and start your new life abroad.
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What Does Final Average Pay Mean?

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When determining your pension amount that you receive once you retire is it based off the last three years of wages you receive or the highest wages you received for the past five years?
If you are a general state employee, your retirement benefit is calculated using a three-part formula:

Final Average Pay (FAP)        x         a multiplier      x          credited service. 

FAP is determined using your highest 36 full consecutive months of pay over your entire work history covered under MOSERS. Practically speaking, for most, that is their last three years, but not always.

The only exception to this would occur under the BackDROP (if eligible). If you become eligible for and elect the BackDROP upon retirement, your highest 36 consecutive months would be determined from your work history prior to your BackDROP date.

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Is MOSERS' Pension Fund Secure?

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Our economy is volatile right now. Is our pension fund secure? If the stock market crashes what affect will that have on our pension payments?
Yes, the MOSERS pension fund is secure. MOSERS is a defined benefit plan. That means the benefit is defined by law and based on a formula that includes credited service and final average pay. Once members meet retirement eligibility and complete the retirement process, they receive a secure, lifetime benefit.

The benefits provided to retirees are obligations of the State of Missouri. Money comes into the fund in two ways 1) Contributions by the employer (and from employees in MSEP 2011), and 2) Investment earnings. Unlike some other states, the state of Missouri has consistently fully funded the amount determined by independent actuaries to be the contributions required to properly and responsibly fund the pension plan. Over the past 20 years, investment earnings have accounted for more than two-thirds of MOSERS revenues. This saves money for the state, but regardless of investment returns, your benefit is secure.

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