Monthly Archives: May 2015

Three Things You Must Think About before Taking the Partial Lump Sum at Retirement

Money growing concept, isolated on white background

To take the Partial Lump Sum or to not take the Partial Lump Sum?  That is the question.

The Partial Lump Sum, or PLUS, is an option available to LAGERS members at retirement.  The PLUS provides a retiree the choice to receive 24 monthly payments up-front, as a lump sum distribution.  Retirees choosing the PLUS will receive a reduced monthly benefit for the remainder of their life and that payment will begin immediately.  The PLUS can be chosen with any monthly payment option and can be rolled over into another eligible retirement account to delay paying taxes.  The monthly benefit is reduced by 16% for a member retiring at age 60.

The alternative to the PLUS is to simply choose to receive the full monthly benefit, without the up-front  lump sum payment and without the PLUS reduction.

For example:

Monthly Payment = $1,000

PLUS Amount = $24,000 (Monthly Payment x 24)

Monthly Payment if PLUS is chosen at age 60:  $840

 

How do you know what is right for you?  Each individual’s situation is unique and you want to make sure you make the best decision to maximize your retirement benefits.  It may seem like the easy choice to opt for the lump sum money, but you may be better off in the long run to choose the higher monthly benefit.  Here are some things to consider when deciding whether or not the take the PLUS.

 

1.  How long do you expect to live?

Are you a healthy person?  Do you always wear your seatbelt?  Does your family have a history of long-lives?  These are important questions to ask yourself when thinking about if you should take the PLUS.  Why?  Because if you live long enough, it may be best to leave the PLUS alone.  Some simple math can illustrate this.

PLUS ExampleLet’s look at two retirees of identical age and benefit amount.  The first retiree chooses to receive a $1,000 monthly benefit and does not choose the PLUS.  The second retiree receives a $24,000 PLUS and a monthly benefit of $840.  To make things easier, we will also assume no cost of living adjustments on the monthly benefits and that the PLUS amount is not invested so there is no return generated from this money.

As you can see from this chart, choosing the PLUS is advantageous for the first several years in retirement.  But look what happens at age 72.  The retiree that did not choose the PLUS but opted for a higher monthly benefit actually comes out ahead.

Now let’s look at the same two retirees, only this time we will add in a 2.88% annual cost of living adjustment.  Again, the retiree who chose the higher monthly benefit has more money, this time surpassing the retiree who chose the PLUS at age 70.

PLUS w COLA

Obviously, none of us know when we will expire.  However, we must at least try to estimate it so we can make the best possible decisions about our retirement income.

 

2.  What do you plan to do with the PLUS?

So you might by thinking, “Wait a minute!  I’m going to invest that PLUS and watch my money grow.  Then let’s see who ends up with the most money!”  Wonderful idea!  LAGERS members that wish to put their money to work have the option to directly roll the PLUS into another eligible retirement account.

This chart shows the 30-year retirements of three retirees. The green line shows the income for a retiree that chooses to re-invest the PLUS and receives a 5% annual return on that investment.    The blue line illustrates the growth of income for a retiree that chooses the full monthly benefit without the PLUS.  The red line is the retiree that chooses the PLUS but does not invest the money.  Each of these retirees receives an annual 2.88% cost of living adjustment.  Here, the retiree that chose to re-invest the PLUS starts out ahead and remains there over the entire 30 year period.

PLUS Invest Line Graph

I have heard several LAGERS members say they are choosing the PLUS to pay down debt.  This may be a good strategy since it is advantageous to enter retirement debt free.  Other members have said they will be using the PLUS to buy a toy, re-model their kitchen, or to take a dream vacation.  The main thing to remember about the PLUS is that it is YOUR money.  You earned it.  You get to decide what is best for you!

 

3.  Do you want to leave a legacy?

Another comment I often hear from members is that LAGERS payment options tend to favor married couples because there are options where payments continue to a spouse after the LAGERS member retiree passes away.  Members that wish to leave a legacy to someone other than a spouse may wish to use the PLUS for this purpose.  The PLUS can be rolled over into another eligible retirement account or you may receive the money directly.  If you choose to receive the money directly, the full PLUS amount will be taxable.  Once you have rolled the PLUS over or deposited it into some other account, you can then choose to whom the funds will be paid after your death.

 

Deciding whether or not to choose the Partial Lump Sum at retirement is an individual choice.  It is crucial not to simply pick the largest number on the page and assume that is the best option for you.  Thinking about how long you will live, what you will do with the PLUS, and if you want to leave a legacy are all important considerations when making this decision.

 

Jeff Kempker, RPA, CRC

Jeff Kempker
Manager of Member Services

Tagged , ,

2015 Legislative Session Closes with Little Passed

Rooftop.Capitol.Zoom.OCT.2007The gridlock that held many bills hostage in the final days of Missouri’s 2015 Regular Legislative Session made no exceptions for three LAGERS bills, all of which stalled in the final days of session last week.

LAGERS entered 2015 hopeful that this would be the year that the “Local Plans” bill would pass.  LAGERS filed similar language in the 2014, with Senate Bill 675(2014) being Truly Agreed and Passed; however the bill never made it to law as it was vetoed by Governor Nixon last summer.  House Bill 494 and Senate Bill 283 were LAGERS top priority this year, and with modified language to address the Governor’s veto concerns, LAGERS felt confident that this was year we could achieve a legislative solution for those member employers wishing to transfer the administration of their frozen pension plans into LAGERS.

Both House Bill 494 and Senate Bill 283 looked promising as they initially moved through their respective chambers meeting no opposition and with legislators agreeing that this language is good, common sense policy for Missouri’s taxpayers and local municipalities.

Unfortunately, SB 283 became weighted down with extra amendments, many of which were unrelated to LAGERS, and eventually succumbed to its injuries in Conference.  HB 494 sailed through both its House and Senate committees, and looked as though it was on track to the governor’s desk.  However it became one of the countless pieces of legislation held up in the final days of the filibuster that shut down the Senate in its last week.

It was a tough year politically to accomplish anything at the capitol, but LAGERS still firmly believes that this legislation is great policy for Missouri’s taxpayers and for our members.  We will continue to work towards a legislative solution that could potentially enable political subdivisions who wish to get out of the pension business to do so.

LAGERS’ other bill, House Bill 643, which would have allowed employers the option to classify certain public safety personnel as either ‘police’ or ‘fire’ employees for LAGERS purposes, also suffered a similar fate in the final days of session.

LAGERS looks forward to continuing to work with law makers next year to help ensure that the best policy for Missouri and Missouri’s taxpayers can be reached.  And while 2015 did not move forward as hoped, LAGERS is reminded that our ultimate focus is to ensure that our members’ benefits are secure and protected today and into the future, something we continue to do every day.

Elizabeth Althoff Public Relations Specialist

Elizabeth Althoff
Public Relations Specialist

Tagged , ,

LAGERS is 2015 Plan Sponsor of the Year, Public Defined Benefit Category

PSOY315-Winner-DB-logo

How we do our jobs speaks volumes. Members of LAGERS go to work every day, labor behind the scenes, making a better community for the local governments where they live. That same work ethic is matched by the LAGERS board and staff to provide a secure retirement to the membership in their retirement years. We strive to provide the very best in retirement benefits administration, so you the membership are not distracted from your daily task worrying about the future. LAGERS has it covered.

LAGERS was recently chosen for the 2015 Plan Sponsor of the Year award because of strong one-, three- and five-year investment returns of 19.0%, 12.2% and 15.0% respectively, innovative participant services, strong plan design features, leadership in public policy, and an overall focus on the membership. This award covers the full spectrum of benefits administration, from delivering benefit checks on time to having a user friendly web site. Every team member must be focused on their specific task which ultimately leads to a secure retirement for LAGERS members.

The LAGERS Board of Trustees is a group of dedicated individuals that provide vision and direction in the governance of the system. This group provides focus to the tasks that are important to provide retirement security to the membership. Without their efforts, none of this work would be possible. This direction permits the staff to perform their jobs at a high level. The LAGERS staff is truly dedicated to ensuring we are getting it right for our members. This effort is confirmed when career employees retire and receive monthly benefits that promote a secure financial future.

The Plan Sponsor of the Year Award is further evidence to the local government employees in Missouri that the LAGERS system is getting it right. Just as I was quoted in the PLANSPONSOR article, the key to plan success is simply being focused on the members.  In anything and everything you do, stay focused on the members and you will always get the right results.

 

Keith Hughes, Executive Secretary

Keith Hughes, Executive Secretary

Tagged ,

What It Takes to Be a Public Servant

West Main Fire 2a_REV

You see them every day in your local community. Whether they are a police officer patrolling the streets, a parks and recreation employee picking up trash at a local park, or the clerk who processes your monthly utilities bill, you see a public servants make a difference in your life every day. They are the people who work hard to give back to our communities to make them great places to live. So, what does it take to be a public servant? Here are just a few of the intangibles it takes to be a local government worker.

Deep love of your community. A local government worker must have a deep love for their community to continually serve on a daily basis. Love of community can be seen as going the extra mile or doing the job because it needs to be done.

We recently had a chance to discuss the value of public service with some of LAGERS members. Deborah Baker from Pulaski County Health Center had this to say about public service:

“When you get into the field [of public service] it sort of consumes you. So, you’re always looking for ways to do more and go that extra mile…Sometimes I go the extra mile and do things that no one knows that I’m doing because I just take my job to heart.”

I believe that Deborah has a deep love of her community and it pushes her to serve her community on a daily basis. She doesn’t do the job because she has to; she does the job because it’s the right thing to do for the community she loves.

Strong Dedication. Dedication is a trait that is a must have for public servants. You don’t want a fire fighter, police officer, or any public servant performing their job and not be completely committed. I couldn’t imagine what it would be like to have a fire fighter who is not dedicated to their job attempting to save my life. Same is true of the person who picks trash at your local parks. Someone has to be devoted to wake up every morning and decide they want to pick trash that day.

Marilyn Baugh is a long tenured dedicated employee from Jasper County and here is what she had to say about public service:

“I’ve been with Jasper County for 39 years! It’s been a variety of things over those years…and on a daily basis, I go to work and try to do the best job I can do.”

Marilyn is the definition of dedicated. When you have been with the same employer for as long as she has, you’re dedicated to the task and you always want to make sure the job gets done.

A desire to make an impact. Public servants make an impact on the continuation and improvement of our communities. They repair our streets, fight crime, provide recreational sports, and much more. One trait I have noticed when speaking with public service is their undying desire to help their communities become greater every day.

Karen Bailey is another long tenured employee from the City of Sikeston and here is what she had to say about public service:

“We make a difference in the lives of 20,000 people every day. We make the community safer; we make the community cleaner. It’s nice to work somewhere where you can make that kind of an impact…I am the HR Director / City Treasurer for the City of Sikeston…I work with employees every day to make their lives better…So, I’m helping those who help others. Pretty rewarding!”

Karen has a deep understanding of what it means to make an impact on her community. She has been with the City of Sikeston for over 30 years and she does it because she has a desire to make an impact on her community through her work with the City’s employees.

These are just a few of the thousands public servants that are working daily to make our communities better. Our communities would not be the places they are today without these dedicated, invested and driven people who are continuously working for our communities to make them the best they can be.

Jeff Pabst, CRC Public Relations Specialist

Jeff Pabst, CRC
Public Relations Specialist

%d bloggers like this: