Showing posts with label Stock Market. Show all posts
Showing posts with label Stock Market. Show all posts

Effects of "Brexit" on Retirement Benefits?

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With Britain's withdrawal from the EU, how is that going to effect our backdrop and retirement. Will be retiring soon and this development has me very concerned.
 Britain’s withdrawal from the EU will not affect your BackDROP amount or monthly retirement benefit.  Furthermore, your MOSERS pension benefit will not be impaired by any short-term market event because it is based on a formula set by law:  Final Average Pay x Credited Service x Multiplier = Monthly Base Benefit.  (Learn more about MOSERS PreRetirement Seminars, the formula, and the retirement process here.)

MOSERS is a pre-funded plan, which means your employer (as an agency of the State of Missouri) makes ongoing financial contributions which are combined with investment earnings and, as of 2011, contributions from new state employees, to pay all current and future benefits. The state makes contributions to your benefit throughout your career. Those contributions have been, and will continue to be, invested in a long-term investing plan that does not react to short-term political events.

To reiterate, your benefit is secure. Money comes into the MOSERS fund in two ways:
1) Contributions - from employers and from employees in the MSEP 2011 or the Judicial Plan 2011, and 2) Investment earnings. MOSERS’ investment earnings on the amounts that have been contributed have significantly increased the assets available to pay your retirement benefit.

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Stock Market Impact

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How are the continued drops in the stock market impacting our retirement system?
First, MOSERS is a "defined benefit" plan and, as such, your retirement benefit amounts are not impacted by financial market volatility. 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 the MSEP 2011 and the Judicial Plan 2011, and 2) Investment earnings. The two are linked. Over the past 30 years, investment earnings have accounted for approximately two-thirds of MOSERS’ revenues. This saves money for the state, but regardless of investment returns, your benefit is secure because it is an obligation of the state.

Investment market activity has an impact on the state’s annual contribution (as the employer) to MOSERS. The annual contribution rate is approved through the appropriations process. When the market and investment earnings drop, the state’s annual contribution to MOSERS (as computed by MOSERS’ actuarial professionals) may increase. While in any one year, the annual contribution could increase or decrease, the financing pattern over time is fairly consistent and tends to stay within a relatively narrow range. This is by design. MOSERS is structured, by law, to maintain a stable contribution range to mitigate swings in the cost to the state and to fund MOSERS benefit programs over time.

While we are disappointed with our short-term decline in value, it is important to keep in mind that MOSERS is a long-term investor. Our number one investment belief is that diversification is critical because the future is unknown. Over the last few years we have been taking steps to diversify the portfolio well beyond what most institutional investors consider to be mainstream (e.g. excessive reliance on the stock market). The longer-term story (in spite of FY15) exemplifies our patience, fortitude, and willingness to lean against the wind – all qualities which are cornerstones of our success over the years. For additional information, see the 2015 Chief Investment Officer Letter from our most recent Comprehensive Annual Financial Report. Print Friendly and PDF