Retirement Related News for 12/31/2015

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From Treasurer Zweifel: Treasurer Zweifel’s End of Year Financial Tips for Missourians

Our day to day lives keep us very busy. And when we’re busy, we tend to focus on things which are immediately in front of us. It’s perfectly understandable, but it can be dangerous when we consider the planning and preparation it takes to make consistent, sound financial decisions. So as 2015 comes to an end, think about some of the simple yet meaningful things you can do to keep your fiscal house in order for the New Year and beyond.

From CNN Money: Don't Freak Out About Health Care Costs In Retirement

Planning for retirement is tough. Figuring out how much money you'll need for health care is even tougher.

More than half of people over 50 recently surveyed by Nationwide said they were "terrified" of the uncertainty.

Health care will likely be your biggest expense during the golden years. It's obviously a tough number to nail down and one that will vary by person, but there are estimates out there. A 65-year-old, healthy couple can expect to spend $266,600 over the course of their retirement on Medicare premiums alone, according to HealthView Services. An estimate from Fidelity is a little less: $245,000. Neither include out-of-pocket expenses or long-term care costs.

From PLANSPONSOR: As Investors, Women Have Unique Circumstances

Women in the workplace face special challenges. Over a lifetime’s career, they make less because of lower wages and sometimes stepping out of the workforce to care for children or parents. They lack confidence, but they are interested in saving and learning to invest for their futures.

Women could use a nudge to complete certain retirement planning activities, according to a report from the LIMRA Secure Retirement Institute. LIMRA research consistently shows that the top financial concern for both sexes is saving enough money for retirement (83% of women, compared with 77% of men). But women seem to have an especially difficult time getting ready for retirement, with just 20% of women surveyed saying they are comfortable with their level of financial knowledge.

From Forbes: 10 Resolutions for Your Retirement

If you’re planning to make New Year’s resolutions for 2016, there’s a good chance at least one of them will be related to your finances. Money management issues like big credit card bills or a small savings account balance may be more top of mind on a day-to-day basis, but the beginning of a new year is a great time to tackle more long-term goals like retirement. Here are some retirement-related action steps to consider resolving to do next year:

From Time: The Retirement Guide 2016

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State Employee Pay Raise?

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Hello - will Missouri state employees be receiving a raise in January 2016? Thank you.
MOSERS has no way of knowing if state employees will receive a pay increase, since our responsibilities only include retirement and other fringe benefits, not pay. Those decisions are made by the legislature and the Governor and will be considered during the appropriations process, which begins in January 2016 and ends in May 2016. Print Friendly and PDF

Public Pension Exemption

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My spouse is in LAGERS. He recently received information about something called Missouri Public Pension Exemption. Is MOSERS a part of this, too?
Yes, since MOSERS is a public pension plan, our retirees may qualify also.  We post information on our website as well as include an article each winter in RetireeNews about the Public Pension Exemption as many retirees start preparing their tax information.  MOSERS is required to mail 1099-R retiree tax forms by January 31st. To find out if you are eligible, you should speak to your tax professional or contact the Missouri Department of Revenue. They have a qualification chart on their website. Print Friendly and PDF

Military Service & BackDROP

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I have heard 5 different answers to the rumor that YOU CAN NOT USE MILITARY TIME BOUGHT TOWARDS BACKDROP. YOU CAN ONLY USE TWO OF FOUR YEARS MILITARY BOUGHT TIME TOWARDS BACKDROP.. So what is the true amount of purchased military retirement time that may be used towards backdrop?
Vested members of MSEP and MSEP 2000* are allowed to purchase prior active-duty military service at a subsidized rate.

Missouri law (Section 104.340.4 RSMo) specifies that after discharge under honorable conditions, but prior to retirement, a member may purchase all of their creditable prior military service, not to exceed four years. The more credited service you have, the higher your monthly benefit amount. Purchasing military or prior public service will increase your service with MOSERS, and in most cases, allow you to retire at an earlier date. See the Acquiring Service brochure online for more information. Purchased military service may be used to make you eligible for BackDROP.

We encourage anyone interested in purchasing prior active-duty military service to speak to a benefit counselor, who can provide cost estimates. The primary timing issue for you to consider when making a service purchase is that you need to know, the longer you wait the more it will cost. In other words, it is often to your advantage, in terms of cost, to purchase service sooner rather than later to avoid additional interest costs.

*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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Retirement Related News for 12/23/2015

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From The L.A. Times: Your Retirement Prospects Are Bleaker Than Ever

The vast majority of Americans who expect to retire in the next decade can count on little income other than their Social Security. This is true not only for low-income workers, who have struggled most of their lives, but also for millions of middle-income workers. Although Social Security is a tremendously important program, and provides a solid base that retirees can depend upon, its $16,000 average annual benefit doesn't go very far. Many if not most can expect to see sharp reductions in living standards.

Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save. Many other states, including California, are studying this option.

The reason for such bleak retirement prospects is the disappearance of traditional defined benefit pensions and the failure of 401(k)-type plans to fill the gap. A recent analysis by the Employee Benefit Research Institute found that, in 2011, only 14% of private-sector employees participated in a defined benefit pension plan. The participation rate has been falling quite rapidly, so it was almost certainly lower in 2015.

From Financial Finesse: Top 10 Financial Articles of 2015

I’m a huge fan of lists: to-do lists (yes, I sometimes add things just so I can check them off), best-of lists, pros and cons lists and yes, top 10 lists. Want a reading list to take you through the end of the year? Without further ado, here are my top 10 favorite money-related articles of 2015:

10. How Many Times Has Your Personal Information Been Exposed to Hackers? (New York Times) This article gets the 10 spot not because I dislike it. I find it incredibly useful and I think everyone should click over and take the quiz. It’s just my least favorite topic.

From BenefitsPRO: Parents Spending Retirement Savings on Kids’ Holiday Gifts

The picture of the doting parent, sacrificing to give the kids everything, has just gotten a little crazier.

Not only do parents admit to overspending on their kids’ holiday gifts, they’re tapping their retirement funds to do so.

That’s according to T. Rowe Price’s 2015 Parents, Kids & Money survey, which not only found that 62 percent of parents agreed with the statement, “I spent more for my kids over the holidays than I should have,” but that 7 percent of respondents actually admitted to using their retirement accounts as holiday spending cash.

From Forbes: Millennials: Your Strategic Plan For Life

Life seems to just happen, doesn’t it? Days turn into weeks, weeks into months, and months into years. Ask any Baby Boomer about where the time went. They’ll tell you about their plans to save money, which were pushed off for more immediate concerns. The kids wanted summer camp, the car broke down, the boiler blew up, or they lost their job. There is always another pull for immediate cash; real pulls, not frivolous ones.

When it comes to retirement, a 2015 study from the Insured Retirement Institute says it all; “… half of all retired boomers are living off Social Security income, pensions, and other forms of recurring income, rather than retirement savings…” And, according to Employee Benefits Research Institute, Baby Boomers have only saved about $150,000 for their retirement. These are the more wealthy Baby Boomers, by the way. Now, they have to keep working to be able to live

From PLANSPONSOR: Illinois Idea to Tax Retirement Income Gets Pushback

With the state’s deficit growing, Illinois lawmakers trying to establish a budget are batting around the idea of taxing retirement income.

According to news reports, no formal legislation has been put in writing. And, some state legislators and lobbying groups are trying to preempt any such legislation.

A resolution was recently introduced in the Illinois House urging the legislature not to consider taxing retirement income. “With many retirees on a fixed income and worried about how they are going to pay for healthcare, the last thing we need to do is suddenly tax their income,” says State Representative Dwight Kay, a co-sponsor of the bill.
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Marriage After Retirement

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What happens if you are single but marry after you retire. Is there a way to change your election so that your spouse receives your benefits after you die?
Yes, but only under specific circumstances. If you were single at retirement, and you elected the Life Income Annuity option, then you married after retirement, you have one year from the date of your marriage to change your election to either of the joint & survivor options (within the plan you elected at retirement). Please contact MOSERS for a Designation of New Spouse as Beneficiary for Retirement Benefits form. You must submit a copy of your spouse’s proof-of-age document and marriage certificate with this form.

There is one other situation in which you may change your benefit payment option after retirement:  If you were married at retirement and elected a joint and survivor payment option and your spouse died, resulting in your benefit reverting to the Life Income Annuity, and you remarry, you have one year from the date of remarriage to elect a joint and survivor option and name your new spouse as beneficiary. If your spouse dies, please notify MOSERS as soon as possible. You may be eligible for the “pop-up” provision, which would increase your monthly retirement benefit. Please contact a benefit counselor regarding your specific situation.

This information is included in the winter issue of RetireeNews.

Please note: This information primarily applies to general state employees. If you are a judge, administrative law judge, statewide elected official or a legislator, please refer to your MOSERS handbook or contact a MOSERS benefit counselor for specific guidelines.

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BackDROP Period

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Please explain backdrop. When looking a retirement date it may state 2 yrs and 2 months then another category will state 2 yrs, another 1 year.
The BackDROP is an option available to eligible members of MSEP or MSEP 2000 which provides a way for you to receive a lump-sum payment at retirement in addition to your ongoing monthly benefit. To be eligible for the BackDROP, you must work at least 2 years beyond your first normal retirement date but you may work longer.  Once you have worked at least 2 years or longer past your first normal retirement date you will have options for the BackDROP period including 1 year, 2 years, or more, depending on how long past your first normal retirement date you worked and the plan you elect (if applicable). The maximum BackDROP period is 5 years.  Generally speaking, if you elect a longer BackDROP period, your lump sum will be more, but your monthly payment will be less. You are not required to take BackDROP, and you don’t have to notify MOSERS of any decisions about BackDROP until you retire.
This graphic may help explain the big picture, or you can read the BackDROP brochure on our website for more information. We have also answered a variety of Rumor Central questions on the topic.
BackDROP is one of the benefits addressed in our PreRetirement Planning seminars, which are conducted around the state for members of the MSEP and MSEP 2000. Most members find that an in-person presentation and discussion of this topic is very helpful! View the 2016 schedule, and log in to register for a location in your area. You will also receive a benefit estimate by attending a PreRetirement seminar, and you can specify when you register that you would like the estimates to include BackDROP.
Remember, MOSERS benefit counselors are available by phone at (800) 827-1063 or in person M-F, 7:30 a.m. - 4:30 p.m., if you would like to discuss your options.  We understand that retirement is a big decision.

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Retirement Related News for 12/18/2015

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From Pensions & Investments: DB plans consistently outperform DC — Center for Retirement Research

Defined contribution plans consistently underperform defined benefit plans, most likely due to higher investment fees, said a new research brief issued Tuesday by the Center for Retirement Research at Boston College.

Even after factoring in plan size and asset allocation, defined benefit plans outperformed defined contribution plans by an average of 70 basis points per year between 1990 and 2012, the report found.

The full report is available on the center's website.

From CNN Money: How to Tell Whether You Can Afford to Retire Early

I'm 62 years old and concerned that I might lose my job. If that happens, would I be able to retire early on the $500,000 I have in my retirement accounts? --Michael M.

The answer comes down to how much annual income you can realistically expect to count on the rest of your life if you stop working now and whether that income would be sufficient to fund a retirement lifestyle you consider acceptable.

It's impossible, of course, for me to give you a definitive answer without having a lot more specifics about your finances as well as what sort of post-career life you envision. But I can suggest a process that should at least enable you to come away with a decent idea of how you might fare.

From The Huffington Post: The Year in Retirement Security: A Look Back at 2015

For years firefighters, nurses, teachers, social workers, roads crews and others across the country have paid a percentage of their salary toward their retirement security. Notably, in Illinois and New Jersey irresponsible politicians did not do the same. Instead, they skipped or reduced annually required contributions to their pension systems. Between 2001 and 2013, Illinois paid less than 80 percent of what it should have to its pension systems. New Jersey paid less than 40 percent of its obligation over that same time period.

In 2015, workers across the country learned if they work in a state that is naughty or nice. Responsible states that make their yearly required pension contributions, not surprisingly, have pensions that are fully funded and in some cases have surpluses. That protects both taxpayers and workers.

From Forbes: As Trillions Move Into IRAs And 401ks, High Fees Bite Retirement Security

A new study covering investment returns from 1990 to 2012 finds that 401(k)s and other defined contribution plans underperformed traditional defined benefit pension plans by an average of 0.70% a year, even after differences in asset allocation were taken into account. The likely explanation? The high mutual fund fees workers pay when they invest their 401(k) stash—fees that far exceed the investment costs of traditional company run defined benefit plans, conclude authors Alicia H. Munnell, Jean-Pierre Aubry and Caroline V. Crawford of the Center for Retirement Research at Boston College.

While a 0.70% difference might not sound like a big deal, it means a worker who contributes to a 401(k) over his whole 40 year career will have about 15% less in assets at retirement, the CRR calculates.

From BenefitsPRO: Women’s Pension Protection Act introduced in House

The House version of the Women’s Pension Protection Act (H.R. 4235) was introduced by Representative Jan Schakowsky, D-Illinois, and Senator Patty Murray, D-Washington.

Earlier in the year, Murray introduced the Senate version of the legislation.

Among the provisions of the proposed legislation is an increase in spousal protection that requires spousal consent before a married worker can take money out of a retirement account; currently, only defined benefit plans offer such protection, but the WPPA would extend spousal protections to defined contribution plans, including 401(k)s.
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Retirement Related News for 12/11/2015

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From MOSERS: Rick Dahl Receives Lifetime Achievement Award

MOSERS' CIO, Rick Dahl, was presented his Lifetime Achievement award from CIO Magazine at the Industry Innovation Awards on December 3rd.”

From the CIO award honoree information:

Rick Dahl's "investment acumen is light years ahead of many of his peers," according to Chris Ailman, CIO of California State Teachers' Retirement System. "His willingness and ability to develop synthetic portfolios and exposure is unique."

From the Jefferson City News Tribune: Our Opinion: State Workers Extend Spirit of Generosity

We commend Missouri’s state employees for extending their tradition of personal generosity.

The results of this year’s Missouri State Employee Charitable Campaign (MSECC) continue to be impressive. Consider these numbers reported Tuesday by the Missouri Office of Administration, which coordinates the campaign.

• State employees this donated more than $1,089,249 to 885 Missouri charities.

• This marks the 12th consecutive year contributions have exceeded $1 million.

• In its 31-year history, the state campaign has raised more than $28 million.

From CNN Money: Retired? How Much Money Should You Keep In Stocks?

Considering how many retirees must grapple with this issue and the fact that allocating one's assets between stocks and bonds is a key element of any retirement income plan, you might think that there would be a stocks-bonds mix that most retirement experts would generally agree is correct.

But there's not, so I can't give you a specific percentage to shoot for.

I can, however, point you to three ways that investors typically deal with this issue, and then tell you what I think you should do to arrive at a reasonable blend of stocks and bonds for your own nest egg.

From Forbes: Three Warning Signs Your Aging Parent Needs Help Handling Finances

Family get togethers can be eye openers. If you haven’t seen aging loved ones in awhile, the visible evidence that they are getting older can be a wake-up call. It can be hard for all of us to accept the effects of passing years on our minds and bodies. We want our aging parents to stay how they used to be. For adult children, and I’m one of them, we understand that our aging loved one just needs more help as time goes by. In our family, it’s about mobility. In other families with cognitive decline as an issue, it can be about taking charge of things you’ve never dealt with before. Finances are one of those things, always a touchy subject. But that’s an area where we need to be ever vigilant.

Holidays near year-end are a time when a lot of people feel generous and do their charitable giving. A lot of scammers know this and seek out the elderly, targeting them for special attention and attempts to get their money. The Federal government’s Office for Older Americans publishes warnings about this regularly. Somehow, these warnings do not necessarily reach the very ones they are intended to protect. So, it’s up to us, the family to be on the lookout.

From PLANSPONSOR: New Model of Retiree Spending Highlights Role of Marriage

New research from the Michigan Retirement Research Center shows important differences in the retirement outlooks of singles and couples.

Findings from a new research paper, “Couples’ and Singles’ Savings After Retirement,” by Mariacristina De Nardi, Eric French and John Bailey Jones, suggest singles “live less long than people who are part of a couple, but are more likely to end up in a nursing home in any given year.”

For that reason, the researchers suggest, a single should expect to have higher medical spending than a member of a couple.
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Deferred Compensation Match?

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What ever happened to the proposed $75.00 per month that was to be a benefit to state employees that are in the deferred compensation plan?
State statute (Section 105.927) provides for an employer match of up to $75 dollar per month, however this match is subject to annual appropriation approval by the General Assembly.  The maximum match that has ever been appropriated was $35.00 per month.  The state has not provided any match since 2010.

The General Assembly did appropriate a $25 monthly match in the FY15 budget, but that money was withheld and therefore the match was not provided.  Each year, there is a possibility of a match being appropriated, but until the state budget is passed in late April/early May, we do not know what is included in the final state budget and even then, that approved budget is subject to withholdings by the Governor’s office.  In the 2016 legislative session, the General Assembly will provide appropriation approval for the state’s FY 17 budget.

As always, we will keep our members updated on pension-related information on our website, Rumor Central, and social media. 
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Retirement Related News for 12/04/2015

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From The Transamerica Center: The Current State of Retirement: Pre-Retiree Expectations and Retiree Realities

This new study compares and contrasts the retirement outlook of age 50+ workers with the actual experiences of retirees. In TCRS' first-ever retiree survey, it finds that pre-retirees' ideas of retirement are different than the actual experiences of retirees. While many age 50+ workers expect to work beyond age 65 and/or work in retirement, those who are currently retired entered retirement at a median age of 62. Many retirees retired before they had planned to, often due to circumstances beyond their control.

View the study.

From CNN:: How much income will I need in retirement?

A widely accepted tenet of retirement planning is that you need to replace just 70% to 80% of your pre-retirement income to maintain your standard of living after you call it a career. And on the face of it, this rule of thumb seems to make sense. After all, since you'll no longer have to funnel money into 401(k)s and other retirement savings accounts and many of your expenses are likely to drop after you retire, you should be able to live as well, if not better, on considerably less income than you earned during your career.

But while "replacement ratios" may be useful for gauging how much you need to save each year to build an adequate nest egg when retirement is decades away, they're less helpful once you're within 10 or so years of retiring. At that point, you really want to base your planning on something more concrete -- namely, how much dough you'll actually have to come up with to cover your expenses and maintain an acceptable post-career lifestyle.

From The Wallstreet Journal: Why Recent Social Security Changes Make Sense

It took a few years, but Congress has eliminated the remaining loopholes that allowed people to game the Social Security system.

In 2009, we published three briefs under the title “Strange But True,” that described Social Security claiming strategies that allowed individuals to get more benefits. The idea was to show how they worked, who was most likely to benefit, and how much they could cost. Our hope was that publicity would compel Congress to close down these options.

The most egregious claiming strategy was what we called “Free Loan from Social Security.” The strategy allowed individuals to claim Social Security at age 62, invest those funds, and then reclaim higher benefits at age 70 simply by paying back what they had received to date interest free. In essence, the claimant received an interest-free loan from Social Security. The $6-$11 billion potential annual gain, concentrated among higher-income households, equaled a comparable cost to Social Security. In late 2010, the Social Security Administration (SSA) changed its regulations so that individuals had only one year to change their mind. In other words, score one for the good guys.

From Forbes: 7 Tips To Think Differently About Your Money And Become An Everyday Financial Superstar

One of my favorite types of articles to write is what I call “the financial feat story.”

As collected in the new Forbes e-book, “Money Hacks: Forbes Stories Of Superstar Savers,” which I cowrote with reporter Lauren Gensler, these are tales of people who took on and accomplished impressive, if not seemingly impossible, financial challenges.

From PLANSPONSOR: Retirees Share Realities with Younger Generations

In research from the Transamerica Center for Retirement Studies, retirees shared actionable insights about what they would have done differently in preparing themselves for retirement.
Reflecting on their working years, many retirees say they:
  • Wish that they would have saved more on a consistent basis (76%);
  • Wish they had been more knowledgeable about retirement saving and investing (68%);
  • Would have liked to have received more information and advice from their employers about how to achieve their retirement goals (53%);
  • Waited too long to concern themselves with saving and investing for retirement (48%); and
  • Should have relied more on outside experts to monitor and manage their retirement savings (41%).
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