The Old Debate is Back Again

Retirement written on an envelope with dollars. Savings concept.Those on both sides are arguing the merits and the downfalls of the 401(k). The Wall Street Journal’s article earlier this week, then a couple of responses to it from Bloomberg and Forbes have shown that the argument of whether or not a 401(k) type investment can be the sure path to retirement security has people on both sides trying to convince you, dear reader, which way to go when planning your future. Yep, the old debate is back again. .

LAGERS View

Our position is simple, and accurate. We agree with the Wall Street Journal’s article (which comes straight from the source of those who designed the 401(k) system in the first place) that 401(k)’s were never meant to take over as a viable retirement security mechanism for the average worker, but rather, to supplement a traditional pension.

What’s the Real Goal?

“What’s being lost in the rhetoric is the point of what we’re ALL trying to accomplish – or what we should be focusing on:  better products and services for customers. We want people to focus on working hard and doing their jobs, and when they’ve fulfilled that part of the deal, allow them a mechanism to retire with some dignity and security. A pension provides that. That is the point of a retirement plan,” Says Bob Wilson, LAGERS Assistant Director, Member Services. “The point of a 401(k) is wealth accumulation, which can be a good tool to help supplement a pension plan.”

Wilson says the old “three legged stool” approach still applies.  “Defined benefit pensions were never designed to be the stand alone solution.  Neither were 403 leg stool.png1(k) type investment plans or Social Security.  They were designed to work together, providing diversity and balance.  There is no shortcut or magic pill in retirement planning.  You have to be diligent, work and plan.  Well-designed pensions are a great stable base to add a wealth accumulator like a 401(k), but alone a 401(k) is too volatile to serve as a stand-alone retirement plan.  Having that stable base allows you to withstand the volatility of your 401(k) due to market swings without getting short-sighted, panicking and/or giving up.”

Security – What Matters

The shift of companies away from pensions in favor of 401(k)’s as the main form of retirement security reflects a lack of commitment of the employer to the workers and the communities. The fact that the creators of the 401(k) system have regrets about the path they started for the American worker in the early 80’s shows that they can be unreliable on their own.

We at LAGERS want our members to worry about serving their communities that they work in, not their retirement security. We want good employees to plant roots within their communities and stay.  A pension offered by an employer helps employees to feel a little more secure about their futures. “The driver of these plans is to make the communities better and give some security to those who serve. We all want to retire with dignity,” says Wilson.

The Solution to Retirement Security

So what’s the solution? A combined approach. A commitment to work. A commitment to save. A commitment to employers and our communities.  A long term mentality. The promise of a dignified exit from the workforce. That’s what’s going to create retirement security for all of us.

Growth in 2016 – 12 New Employers Added!

2016-new-employersThe team at LAGERS is proud to announce that in 2016 we added 12 new employers! This reflects our incredible growth over the past few years, as well as our constant commitment to our organization’s vision, which is embodied in the phrase “A Secure Retirement for All.”

We strive to live out this vision statement every day when we come to work and will continue our efforts to bring retirement security to existing and new employers and members in 2017. We have a lot of exciting new ways we plan to accomplish this in the future, so keep watching our blog and following us on social media to keep up with us in the New Year.

We wanted to give you a few examples as to why these new employers decided that LAGERS was the right choice for them.  It comes down to our commitment to help our employers recruit and retain top talent while giving them the opportunity to exit the workforce with dignity when that time comes.

“We wanted a better retirement plan for our employees; one that offered more financial security for them. Providing a great retirement plan like LAGERS should improve the district’s employee recruitment and retention goals, and possibly provide some added financial comfort.” Bill Florea, Director of Operations, Nodaway County Ambulance District.

“Our board wanted to provide a better retirement for all our employees. LAGERS will be a great addition for the benefit package of our current and new employees in the future.” Vickie Mitschele, Office Manager, Laclede County PWSD #3.

“We had recently conducted a study to audit our current retirement system, and found that a defined benefit plan would have a greater return on investment than the defined contribution plan that we had. That makes LAGERS a better retirement solution for us, and will give our employees a better outlook on their retirement future. We’re looking forward to the switch!” Greg Vogel , Fire Chief, West Overland EMS & Fire Protection District.

We’re thankful to them that they are joining our family, and we can’t wait to make great things happen for their employees, our new members. Here’s to a great start to 2017 for all of us!

December Article Roundup

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Trying to figure out if, how, and when Social Security benefits fit into my retirement plan makes my head spin. For me, I tend to err on the side of caution when planning for retirement and assume it won’t be there at all when I’m ready to retire in another 25 years. This article is part of a great 30 day series dispelling some of the common misconceptions about Social Security benefits. While there are several articles in this series that are worth a read, this one in particular tells us 20 and 30 somethings a more realistic way to include Social Security in your retirement plan without overestimating what you most likely will actually receive in benefits.

Read: Dispelling Social Security fears and myths

 

As we gather with our loved ones this time of year, here is something that you can add to your list of things to talk about. Studies show that financial decision-making peaks around age 53 and gradually begins to decline thereafter meaning that many retirees may eventually need help managing their finances. The solution? Get your family involved in your financial plan now. Suzanne Schmitt, VP of Family Engagement with Fidelity Investments says, “by engaging in conversations now and having a strong support system in place, families can help loved ones gracefully transition into that next phase of their lives.”

Ready to get talking? Read: Family Should Be Included in Retirement Planning

 

Even though your LAGERS benefit is a great base for building your retirement security, you most likely still need to be saving on your own to help ensure you can live out your retirement comfortably. If you are ready to start saving more for retirement in 2017, here are three super easy ways to get started.

Read: 3 tips for saving more for retirement in 2017

 

While I’m not typically an avid Dear Abby reader, this particular entry struck a chord with me. I hear very similar comments from our members all the time about couples not seeing eye to eye on their retirement plans. In this particular case, I think Abby has some great advice. My advice to all couples: remember that retirement planning should be about more than just money: make sure you are talking to each other about your expectations for retirement well in advance of actually retiring…it could help avoid major conflict down the road.

Read: Dear Abby: Wife resists husband’s retirement move  

 

Even this old dog gets to retire. My last article this month is just for fun, but it made me smile, and I’m sure it will make you smile too! Not all public servants are humans, but even our K9 counter parts work hard and eventually need to retire. Congratulations on your retirement Inga!

Read: Inga the sheriff’s bloodhound follows her nose into retirement

 

I Wish I Could Bottle Up the Holidays

 

This time of year is sometimes a mess. It’s dark when we go to work and dark when we head home, the weather is cold, dreary and unstable. And the kids secretly plot against us and take turns deathtostock_slowdown1being sick (I swear they do). We’re all especially busy and should be at our wits end.

But we aren’t.

To me, this time of year always seems different. My most enjoyable part of the holiday season is the almost random consideration that seems to overcome most of us. At this time of year we as a society seem, for whatever reason, to look beyond the surface of our fellow man and actually see the commonality of goodness we share. Whether at the gas station, store, at work or even passing each other on the street; we look at each other differently. We don’t look past each other as we scurry on our busy paths. We actually look into each other’s eyes – past that outward shell and actually SEE each other; maybe even say “hello”.  Have you noticed? So simple, yet so wonderful.

Whether a kind word, a thank you, a smile or even a simple nod of the head – signaling we appreciate the smallest of gestures. Even though we should be more stressed, we’re actually all a little more happy than normal during the holidays. Really. If you haven’t, noticed I urge you to keep an eye out on the way home from work tomorrow. You may experience the kind of subtle kindness that I’m talking about. It is so refreshing.

If I could bottle the holidays I surely would. If we could somehow carry that over to the rest of the year what great things we could accomplish. That’s my thought for the New Year.

From all of us at LAGERS, we thank you for the honor to serve you and we wish you the very best this time of year, and all year round!

 

Robert Wilson, Asst. Director

Robert Wilson, Asst. Director

ICYMI: Top LAGERS Bloggers Posts of 2016

bigstock-159845417-new-year-2017We’re in our third year as bloggers here at LAGERS. Every year we’re thankful that we can use this medium to promote and educate the public and our members on retirement security, pensions and topics relating to the next phase in life after our careers end.

This year our most popular blogs ranged widely in topics and subject matter. The top 4 are listed below, in case you missed them.

  1. You probably don’t know a lot about how much your employer pays for your LAGERS pension, and that’s OK (let the folks in finance and payroll worry about that). But if you’d like to know why it matters and why it doesn’t, read Manager of Member Services, Jeff Kempker’s, interesting read on how your employer finances your lifetime benefit.

Read “WHY IT DOESN’T MATTER WHAT YOUR EMPLOYER IS PAYING FOR LAGERS BENEFITS (AND WHY IT DOES)”

  1. Want to know how LAGERS’ staff ensures the safety and security of your retirement benefit at the capitol? Elizabeth, a Sr. Communications Specialist and one of our legislative experts, gives a wrap–up of the year’s policy initiatives and what we do everyday to educate our lawmakers and politicians on pension security and local government issues that face our communities.

Read “2016 LEGISLATIVE SESSION WRAP UP”

  1. “Let’s face it, governments are usually easy targets, but in reality, much of what is poked fun at is simply not true.” In second place is Elizabeth’s take on the misconceptions that face government workers. She provides insight into how we can change this mindset, and how to shed light on the falsity of these untrue stereotypes.

Read “THREE MISCONCEPTIONS ABOUT LOCAL GOVERNMENT WORKERS THAT JUST AREN’T TRUE”

  1. At the top by a wide margin was Jeff Kempker’s behind–the-scenes look at what it’s like to be a public servant who helps save lives in their community everyday. This is just one group of people that we are proud to serve at LAGERS, and it was definitely a privilege for Jeff to experience this peek behind the curtain at what they face every day when they go to work.

Read “3 THINGS I LEARNED FROM BEING A FIREFIGHTER FOR A DAY”

We hope you enjoy reading our blog as much as we enjoy bringing all this great information, education and commentary to you. Please share it with your friends and co-workers if you find this information useful and informative. We look forward to providing you with more blog content in 2017!

Merry Christmas and Happy New Year!

It’s Time to Review Your Retirement Plan

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During this time of year, we are usually focused on buying presents for our loved ones, Christmas gatherings, and drinking egg nog. You should be doing these things and enjoying the company of your friends and family – I know I will be. However, when you’re not focused on all of the holiday festivities, think about reviewing your retirement plans to ensure you’re on track.

Annually around the New Year I review my retirement savings plan. I do this to ensure I am saving enough money to meet my goal of financial independence for my future retired self. It is generally accepted throughout the retirement planning industry that you will be comfortable in retirement if you replace around 80% of your pre-retirement income. However, 80% is a general number that may not apply to you. It depends on the lifestyle you would like to live in retirement. If your lifestyle will be more expensive, you will need to replace more than 80%. Likewise, the opposite is true if your lifestyle will be more modest.

Quick Tip. There is a simple way to calculate the percentage that will be replaced by your LAGERS benefit at retirement. To complete this calculation, take the years of service you plan to work times the multiplier your employer has elected. The result of the calculation will give you the amount of your pre-retirement income that will be replaced by your LAGERS pension. At that point, you will likely realize that your pension may not cover as much as you expected. The additional necessary retirement income can come from personal savings or another source of income in retirement.

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Some Available Planning Tools:

As a LAGERS member, you have a couple tools that can help you better understand what you are going to receive from your pension. The first of these tools is your member annual statement. You receive your annual statement in the first quarter every year and it shows you a couple different calculations. The first of those calculations is called “What you’ve earned as of December 31”. In other words, if you are vested and terminate employment, this calculation shows what you would receive at retirement based on your service as of December 31. Another calculation on your annual statement is a projection of your future benefit called, “What you could earn if you keep working.” This section is extremely beneficial for your retirement planning. It gives you a calculation of what to expect from your pension if you continue working until retirement age. You can view your past annual statements on myLAGERS.

Another tool that you have at your disposal at any time is the myLAGERS portal. Among other things, this online portal allows you to generate benefit estimates. The benefit estimator on the myLAGERS portal allows you the freedom of projecting your benefit to a specific retirement date with the ability to project things like salary increases and potential tax withholding of your benefit. You can generate as many estimates as you want on myLAGERS and save up to 10 of them. The estimate also illustrates all of the different payment options available within the LAGERS system. Additionally, the myLAGERS portal allows you to apply for your retirement benefit, change your personal information, estimate a purchase of service and much more.

When considering your savings plans, there are several sites out there that can provide you retirement planning tools to assist you in projecting your retirement savings and income. Some of you may have these tools available through your Defined Contribution (457) provider. I personally use a couple of online tools from my Defined Contribution (457) provider and 360degreefinancialliteracy.org. Specifically, I utilize their projection tools that allow me to enter information about my pension, Social Security, and my current savings plan. These types of retirement planning tools are an excellent way of evaluating your current plan and whether or not you need to increase your retirement savings.

I know some of you may be saying that I cannot afford to save for retirement for one reason of another. I can completely understand and relate because I have two children in daycare. As many of you know, daycare is incredibly expensive. Yet, I am able to save a little bit of my paycheck every month to help ensure that I am going to be able to retire comfortably. It’s not a large amount of savings, just a small amount. Secondly, if your employer is offering you a match program, it’s like they are paying you to save money. So, if you can afford it, save at least up to the match amount.

If you are already saving, that’s great! Now is a good time to review your savings plan and make adjustments, if needed. On the other hand, if you are not already saving, what a wonderful way to start the New Year and embark on the path of creating financial independence for your future self.

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Jeff Pabst, CRC Senior Communications Specialist

Top LAGERS News of 2016

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It’s hard to believe 2016 is coming to an end and 2017 is closing in on us like a blustery Missouri cold front. In case you missed it, a lot happened with your retirement system over the last 12 months! Here is a brief compilation of the top news-worthy events.

Important Legislation was Passed

The 2016 Missouri Legislative Session saw the passage of HB 1443, a bill that LAGERS proposed. This important legislation allows local governments in Missouri who are running their own pension plan to choose LAGERS as the administrator of that plan. This will permit these smaller plans to take advantage of LAGERS’ expertise and economies of scale, resulting in lower administrative costs for the local entity and ensuring that these plans maintain financial stability. LAGERS staff has been working diligently to begin accepting these new plans since Governor Nixon signed the bill. Read more.

LAGERS Members are Living Longer

Every five years, LAGERS takes an in-depth look at our membership to take stock of changing demographics and other trends. One of the key findings from the 2016 study was that LAGERS members are living longer, which is great news! A 60-year-old male is now expected to live to age 84 and a 60-year-old female to age 88! Because of this, LAGERS’ Board updated the mortality tables we use to reflect the longer lifespans in order to ensure benefits will be properly funded. Read more.

LAGERS Funding Level Reaches 94.7%

Pension funds often measure their financial stability using a “funded ratio.” This is simply a measure of the fund’s ability to meet all of its obligations to members and retirees now and into the future. All pension plans strive for a 100% funding ratio. At 100% funded, a pension plan has all the assets it needs on hand to meet all of its liabilities. This is kind of like being fully paid up on your mortgage. If you paid off your mortgage, you could say your home is 100% funded. Being under 100% funded as a pension plan is not necessarily a problem because all of the participants in the plan won’t need to be paid on the same day. What is important is that there is a dedicated method to pay the liabilities and that the plan is moving toward 100%. A pension plan that is above 80% funded is normally considered to be on stable financial ground. Read more.

12 New Employers Joined LAGERS in 2016

LAGERS continues to be an attractive option for local government employers looking for ways to recruit and retain high-quality workers to serve their communities. Seventy-five local governments have joined LAGERS in the last five years and half of these switched from 401(k)-type plans to the stability and security of LAGERS’ defined benefit approach. Why the switch? We are increasingly hearing from government officials the need to enhance the services of their communities by hiring and keeping the best people to fill those jobs. I attended a city council meeting recently and heard from one official, “We are a service-based industry and to provide the best service to the citizens of this city, we do that through the people we hire.”

The last year was an exciting one for LAGERS and as we look forward to 2017 and LAGERS’ 50-year anniversary we expect nothing but continued success in helping Missouri’s communities accomplish great things!

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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November Article Roundup

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Here’s what I’ve been reading this month:

  1. The retirement crisis is real in this country, but there are ways to salvage your situation if you find yourself short of your goal. You might need to lower your expectations a little bit.

Read “5 Ways to Salvage Retirement”

  1. “Millennials have the benefit of time on their side, so the earlier they consult with a professional and formulate a savings plan, the better they can prepare for retirement.”

One of our goals here at LAGERS is to make sure that younger people take a more active role in their retirement planning, sooner. This leads to more retirement security and less worries later on.  This quick read on a study from Koski Research talks about how millennial men and women view retirement planning differently.

Read “Retirement Outlook Far Different for Millennial Men and Women”

  1. Speaking generationally, have you even heard of Generation Z? If not you should get to know them, because in the next few years they will make up 20% of the workforce. These Post Millennials bring with them a whole new set of challenges and changes to shake up the workforce.

Read about what sets them apart in the article “Welcome, Generation Z”

  1. Now that the election is over, what can we expect from the new administration when it comes to your retirement? This article from Fox Business presents a possible outlook.

Read “What a Trump Administration Means for Your Retirement”

  1. The next read is an essay by one of NextAvenue’s “Influencers in Aging”. I highly recommend you read the whole series, but this particular post by the oldest-working park ranger is a short, poignant look at a life well lived.

Read “Looking Back, at Age 95”

Being Thankful for Public Service

Thankful message Some fall leaves and retro pocket watch with text A Time to give Thanks

“Never doubt that a small group of thoughtful committed citizens can change the world; indeed, it’s the only thing that ever has.” ~Margaret Mead

I’m guessing you don’t often think about your job like this. But this quote really resonated with me. When I think about public service, and our members who dedicate their lives to this endeavor, I realize that even though this group is not normally celebrated and honored I am thankful for them none the less. Public servants truly do change the world for the better, every day.

Here’s why:

  1. They keep our communities running – public sector employees are the glue that holds our communities together. They maintain the books, make sure the roads are smooth and easy, our water is clean and our trash is taken at the curb. From libraries to public works to the county clerk, these jobs might not be glamorous, but without them where would we be?
  1. They protect us – EMTs, fire and police personnel work crazy hours and do the job of protecting the citizens without expecting thanks or gratitude. Most calls they receive are humbling and thankless as well as dangerous. We are safe because of them. Don’t forget that.
  1. They are dedicated – this group of individuals is truly dedicated to their work. They do their jobs out of a genuine love for their city/county/township and a desire to serve the people that are their neighbors and friends. They don’t do it for the recognition, because they do not get enough of that! Wanting to serve is the reason why.
  1. They are experienced – part of the dedication of this group leads them to be incredibly experienced at their chosen occupation. During my time at LAGERS I’ve traveled around Missouri and met with public servants in many parts of the state. I’ve been fortunate and impressed to meet people who have dedicated 35 and even 45 years to their community working for local government in some capacity. That amazing dedication leads to incredibly hard working and experienced workforce.

Mohammad Ali said “Service to others is the payment you make for your space here on earth.” Local government employees have given me lots of reasons to be thankful, and their sacrifices every day for the rest of us are admirable. They are definitely paid in full.

See how LAGERS is Getting it Right every day to work to give them the secure retirement future they so deserve. 

Being Thankful for Public Service

Black Friday and Your Retirement

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There are several special sales and discounts during this holiday season in preparation for the next holiday season. One that I’m sure you are familiar with is Black Friday.  This day gives me some nightmares from my time when I worked in retail. Anyway, Black Friday certainly has some opportunities for you to save a significant amount of money on some of your holiday spending. On the other hand, Black Friday does present you with the challenges of waiting in line and dealing with the crowds.  So, as long as you’re willing to wait in lines and deal with crowds, it may make some sense for you to save some money on a large purchase during Black Friday.

For example, maybe you need a new TV and you plan to wait until Black Friday to purchase it when TVs are significantly discounted. That makes a lot of sense. However, have you thought about what you are going to do with money you saved by waiting to purchase the TV? I have a couple of ideas for you:

Pay down debt. One incredibly important part of retirement planning is knowing the cost of your monthly expenses in retirement. While you are currently working and earning more income than you will have in retirement, you should work to lower your monthly expenses by paying off your debt. This lowers your monthly expenses and also leaves your loved ones with less obligations after you have passed away.  One way that LAGERS can help you with this after retirement is through the Partial Lump Sum. If you are looking to pay of the remainder of your mortgage or other debts, you could use the partial lump sum to pay it off. Of course, the partial lump sum will reduce your monthly benefit and it is taxable, so it comes at a cost. It would be best however, if you can find a way to pay off your debt before you even apply for retirement.

Save for retirement.  Yes, I said save for retirement. Your LAGERS pension will not be enough to provide your entire retirement income needs. In the retirement planning industry, it is commonly said that to be comfortable in retirement, you need to replace at least 80 cents of every dollar you are currently earning. In other words, you need to replace at least 80% of your pre-retirement income. For example, an employee with 25 years of service with the 1.50% benefit program will replace 38.5% of their pre-retirement income with their LAGERS benefit. That’s a difference of 62.5% that will need be replaced in part by Social Security, but primarily through your personal savings. The only way a person can earn 80% of their pre-retirement income with LAGERS is by working a substantial amount of time with their LAGERS employer.

It makes sense to save money on a major purchase on Black Friday. But, when saving such a significant amount of money, start thinking about what you are going to do with the money you have saved. What a great opportunity to build your financial independence by investing in your future retired self and reducing your future expenses in retirement.

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Jeff Pabst, CRC Senior Communications Specialist

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