Showing posts with label 401k. Show all posts
Showing posts with label 401k. Show all posts

Rollovers & MO Deferred Comp

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When I began employment with the State I did a 401k rollover of my previous employer. How does this effect my retirement and Backdrop ? Is it already in the "benefit estimate." ?
 A 401(k) rollover has no impact on retirement eligibility or monthly or BackDROP lump-sum payment amounts. The rollover is not shown on the “MSEP 2000 Benefit Estimate” from MOSERS. See below for more details.

First, it is important to clarify where your rollover funds are kept. As a state employee, you have both a defined-benefit pension with MOSERS and a supplemental defined contribution account with MO Deferred Comp. If you had retirement funds from a previous employer, it was rolled over into MO Deferred Comp.

The Defined Benefit (DB) Plan (MOSERS)
The DB plan is non-contributory for members employed before January 1, 2011. As such a member, you do not pay money toward your DB plan. Your employer pays the necessary contributions to MOSERS while you are actively employed so that you may receive a future monthly retirement benefit and potential survivor benefits. Since you do not pay contributions, you are not eligible to withdraw funds from the retirement system. You do not have a separate account, rather the state’s annual contribution toward your benefit is pooled with investment returns and employee contributions (from members first employed on or after 1/1/2011) to fund the retirement system. Once you are vested with MOSERS, even if you leave state employment, you will be eligible for a lifetime monthly benefit once you meet the age and all other legal requirements and retire under a MOSERS defined benefit pension plan.

The Defined Contribution (DC) Plan (MO Deferred Comp)
The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and Social Security benefits in retirement. The deferred comp plan provides a convenient way to save extra money for retirement through payroll deduction. Unlike pension and Social Security benefits, YOU have control over how much you save in this plan throughout your career, how your dollars are invested, and how you will withdraw those savings in retirement. While voluntary, many employees find this plan crucial for accumulating additional savings that can add another layer of financial security in retirement.

Once you leave state employment, you can keep your money in deferred comp, even if you're retired or simply working outside state employment. Furthermore, you are not required to start withdrawing your savings until you reach age 70½. Keeping your money with MO Deferred Comp is a smart way to maintain access to all of the great features you enjoyed while you were working. Once retired, the deferred compensation plan provides a variety of manual and automatic payment options to help you access your hard-earned savings.

BackDROP Options
When you retire with MOSERS, you will be asked if you want to elect BackDROP* (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. Doing so is an attractive choice for many because it allows employees to consolidate the lump-sum payment with their existing retirement savings. This makes managing their savings in retirement easier and grants them continued access to the Plan’s low fees and custom investment solutions. Another popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.

On your MOSERS defined benefit plan “MSEP 2000 Benefit Estimate”, if you are eligible for BackDROP, your benefit payment amounts and options at retirement will be shown, both with and without BackDROP. We encourage you to discuss your options with a MOSERS benefit counselor, and use our online Comparison Calculator to see which option might be most advantageous to you over the long-term. This short Comparison Calculator video provides an overview of how the calculator can be helpful in comparing various benefit payment options. MOSERS benefit counselors are available by phone at (800) 827-1063 or you may make an appointment to meet with a counselor in person.

*BackDROP is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility

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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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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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