Tag Archives: retirement planning

June Article Roundup

What To Do When You Haven’t Saved Enough For Retirement

The good news is that a portion of your retirement income will be covered by protected, monthly, lifetime payments you earned from your LAGERS service. The bad news is that your LAGERS benefit likely won’t be enough to produce the lifestyle you want in retirement. This article gives some helpful tips on catching up on retirement savings.

Read the article here.

 

Here’s how thieves use your data after a breach

Hearing LAGERS IT guy talk about all of the cyber security threats we face today is enough to make you never want to use the internet again. This article breaks down how cyber criminals use your information if they are able to hack into an online database and how to protect yourself against these threats.

Read the article here.

 

How to Spot the Lies Financial Advisors Tell

I am a huge proponent of seeking financial advice to help you navigate retirement savings and other investments. However, I am just as passionate about warning people to be very careful on who they choose as their financial advisor. This article will give you some ammo for selecting and advisor or to identify when you’re current advisor is not working in your best interest.

Read the article here.

 

Jeff Kempker
Asst. Director, Member Services

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Back By Popular Demand: What’s the Best Payment Option?

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LAGERS offers several retirement payment options for you at retirement. And, believe it or not, there is not one option that is better than the other. In fact, the payment options themselves are designed to ultimately pay the same total amount to you or your beneficiary once both of you have passed away. That fact does not really help you make the decision as to which payment options you will choose. Because, while there is no better option than the other, there is an option that may better fit your needs in retirement. Here are some things you should be thinking about when determining which payment option you will choose.

Does my spouse have a pension of their own? Sometimes, both spouses have a pension. When considering your payment option, consider what retirement income your spouse will be receiving from his or her own pension. Depending on the circumstances, this may lessen the need for you to provide a monthly benefit for your spouse. Option A and Option B are joint survivor options that offer varying amounts payable to a spouse. For example, my wife is a public school teacher and if she works her entire career as a public school teacher will have a significant pension benefit when she retires. This may dictate the payment option I choose in retirement knowing that she will have her own pension income.

Do I want to provide for my children? Currently, there are a few options that allow for a non-spouse to receive a monthly benefit Under Option A and Option B, the beneficiary must be a spouse of two or more years or a person who is 40 or older and has received more than half support from you for two or more years. Also, Option C allows you to list someone other than a spouse as a beneficiary. Another way to provide for your children is through the Partial Lump Sum (PLUS). If you choose, the funds from the Partial Lump Sum can be directly transferred to a qualified retirement account (IRA, 457, 401, etc.). Once the funds are transferred, you can set your beneficiaries of the qualified account to also include your children. This is a way for you to leave a legacy to your children and / or grandchildren.

I don’t have a spouse or any children, what options do I have? As a single person, you have two options available to you. You may choose the Life Allowance which pays you the highest monthly amount and when you pass away nothing else is payable unless you have employee contributions remaining. If so, the employee contributions will be refunded to your beneficiary of record or your estate. The other option is Option C. It is the only option that pays a monthly benefit and allows you to list whomever you choose to be the beneficiary.  This would include a trust or charitable organizations.   And remember, you may be able to choose Option A or B if you are financially supporting another person that is at least age 40.

What if my spouse significantly younger than me? If you are choosing a spousal option, there are additional adjustments to the member’s benefit based on the age difference between you and  your spouse. Option A and Option B both have additional reductions to compensate for the spouse being younger. However, your younger spouse will still receive a benefit for their lifetime upon your death. So, you might think that the additional reduction is well worth a lifetime spousal benefit.

Can I take a piece of the partial lump sum to pay off my mortgage? One quick way to receive a sum of money to pay off unpaid debt is the Partial Lump Sum. However, you can’t receive just a portion of the lump sum. Also, if you receive the lump sum and deposit it into a checking account, it is fully taxable. So, if you need only a portion of the lump sum, you could choose  a direct rollover of the funds into a qualified retirement account. Once the lump sum has been transferred, you may withdraw only what you need from the account to pay off your mortgage. That way you are only taxed on the funds you withdraw and not the entire lump sum. Keep in mind, that when you withdraw from your qualified retirement account, the funds have the taxation characteristics of that account and your withdrawl will be subject to those characteristics. So, before doing anything like this, you should seek advice from a professional accountant or CPA.

As you can see, there are several different scenarios that could play out and several more that were not illustrated here. Bottom line: there is not one option that is the best. However, there may be an option that fits your needs better than the others. So, do your research, attend a seminar and make an educated decision.

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Jeff Pabst, CRC Senior Communications Specialist

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Single? You Have Options at Retirement!

Diner, Senior, CoffeeWhen presenting at a Pre-Retirement Seminar, many of the attendees ask me questions about what their spouse will receive from LAGERS once they pass away. There are a couple of options that married members may choose at the time of retirement that will pay to their spouse upon their death. Read this blog for more information about spousal options.  On the other hand, I do get some questions from single members wondering if they have any options. Don’t worry; even if you’re single, you have some options with your retirement benefit.

The options a single individual has to choose from at retirement are the Life Allowance and Option C. Also, the Partial Lump Sum can be added to each of those options. So, which one do you choose? When determining which payment option to choose at retirement, you may want to consider a few items:

  • What are your fixed expenses in retirement?
  • Do you plan to travel or pursue a hobby that will have an impact on your expenses?
  • Will you have additional sources of income?
  • Are you planning to leave a legacy in the form of inheritance?

All things to consider when choosing your payment option.

Now, let’s explain your options as a single person.

Life Allowance. The Life Allowance is the largest monthly benefit you can receive in retirement. But, when you pass away, there is no monthly benefit payable to a beneficiary. The only instance where there is something payable under the Life Allowance is when you have a balance remaining. This balance can be from the 4% contributions made at any point in your career from which you did not receive a refund or funds used to purchase service (if applicable).

For example, if you have $20,000 in employee contributions, the first $20,000 you receive in your retirement benefit is your employee contributions. Since LAGERS pays out your employee contributions through your retirement benefit, if you pass away before the total of $20,000 has been paid out, your beneficiary will receive a lump sum of the remaining contributions.

Option C. This option is called the 10 Year Payment Certain plan on your benefit estimate. This  can be somewhat misleading because it makes it sound like you will only receive payments for 10 years. There is no option that you could choose under LAGERS that does not pay you for the rest of your life. Option C guarantees at least 120 payments are made to you or your beneficiary in retirement. Specifically, if you pass away within 120 months after retirement, your beneficiary will receive the remaining payments until a total of 120 payments have been made.

For example, if you elect Option C when you retire and pass away 96 months in to retirement, your beneficiary will receive the remaining 24 monthly payments. But, if you live more than 120 months after retirement and pass away, your beneficiary will receive nothing under Option C.

Partial Lump Sum Feature. This feature can be added to the two previous options listed above. It pays you a lump sum 90 days after retirement that is equal to 24 months of your Life Allowance benefit. This option can be a great way to get a large amount of money early in retirement that you could use for many different purposes like paying off your mortgage, leaving a legacy for your children and grandchildren, or many other purposes. Also, you can roll your Partial Lump Sum into a qualified retirement account to delay the up-front taxation, potentially grow the funds throughout retirement, and set the beneficiaries of that account to whomever you choose. Read more about the Partial Lump Sum in this blog post.

So, as you can see, even if you are single, you have some options as to what to do with your LAGERS benefit at retirement. To get an in-depth explanation of your options, attend a LAGERS Pre-Retirement Seminar or call the LAGERS office.

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Jeff Pabst, CRC Senior Communications Specialist

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Decoding your Member Annual Statement

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Very soon, you will be receiving your Member Annual Statement. While this piece of paper may not seem like much, it is a beneficial tool in your retirement planning arsenal. As you may know, your LAGERS retirement benefit will provide you with a secure stream of income when you retire. Coupled with your own personal savings, Social Security, and other sources of income, your LAGERS benefit will help you achieve financial independence when you decide to retire in the future. So, one of the first things that your annual statement may help you do is plan your retirement saving efforts by you knowing how much to expect from your LAGERS benefit.

Your annual statement gives you a wide range of information to interpret. So, I thought I would discuss some of the terminology on your annual statement

  • Personal Information will include your hire date, your date of birth, your vested status and your total years of service credit.
  • What you’ve earned as of December 31, 2016 will show how much you have earned as of the end of the year. In other words, if you were to terminate employment in the near future, this is approximately what your benefit would be at normal retirement age. Keep in mind, this amount is based on your service to December 31, 2016 and as you continue to work, you continue to earn months of service credit that will increase your future benefit.
  • What you could earn if you keep working will show you a projection of your LAGERS benefit if you work until your retirement age. This section shows you how remaining with your current employer under LAGERS will assist you in becoming financially independent in retirement.
  • Beneficiaries this is your current beneficiary(s) listed with LAGERS. If you need to update your beneficiaries, you can do so online through the myLAGERS portal or submit a Change of Beneficiary Form from our website.
  • Your LAGERS Account Balance will show your employee contribution balance including any contributions for purchasing service credit. If you do not make any employee contributions or have not made contributions at any time in your career, the balance will not be listed. This account balance does not have an effect on your benefit amount as your benefit is determined using a formula.
  • Your last 10 years of Salary Reported to LAGERS will show the last 10 years of wages reported to LAGERS. If you do not have 10 years of service under LAGERS, it will show what wages have been reported for the service you have earned.

 

Member Annual Statement vs. Benefit Estimate. The annual statement is an excellent way to understand what your LAGERS benefit will pay you in the future and a great tool to help you plan your retirement savings. However, another tool at your disposal when you near retirement is a benefit estimate. The benefit estimate has some similar functions to your annual statement, but it is a benefit projection based on an estimated retirement date you provide. Additionally, benefit estimates illustrate each of your available payment options, including the partial lump sum and what your potential beneficiary would receive with each option. You can generate and save benefit estimates on the myLAGERS portal 24/7. If you’re not signed up for a myLAGERS account, simply click this link and click “Enroll Now.” However, if you do not wish to have a myLAGERS account, you can have an estimate mailed to you by calling the LAGERS office at 1-800-447-4334.

So, the next time you look at your retirement savings plan, be sure to look at your annual statement to help you know what to plan on from your LAGERS retirement benefit. As always, if you have any questions regarding your statement or any other aspect of your LAGERS benefit, feel free to contact the LAGERS office!

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Jeff Pabst, CRC Senior Communications Specialist

 

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When is the Best Day to Retire?

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When?

Perhaps the biggest question to answer when planning your retirement is “when?” When is the best month to call it quits? When is the best day? When will I start drawing benefits? When will I start receiving Social Security? When do I need to apply for benefits? When is enough, enough? There are a lot of questions that begin with “when.” Relax. LAGERS can help fill in some of the answers for you.

When is the soonest I can begin to draw my LAGERS retirement benefit?

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You must have at least five years of LAGERS service and be retirement age to begin drawing your monthly benefits. Also, you cannot be actively employed with a LAGERS-participating employer and begin drawing your monthly benefit. The age you may choose to begin receiving your monthly payments is different than your Social Security age. The earliest the benefits may begin is when you reach age 55. If you are a police officer or firefighter, benefits may begin even earlier, at age 50. However, choosing to initiate your monthly benefit at the earliest possible age does come with a cost. Age 55 for general employees and 50 for police and fire are LAGERS’ early retirement ages, so the monthly benefit will be reduced by 6% for every year you are younger than your normal retirement age (the actual reduction is 0.5% per month). Normal retirement age is 60 for general employees and 55 for police officers and firefighters.

Some of you reading this may gain access to your monthly benefits even earlier than age 50 or 55, without any reduction, if your employer has chosen to provide the Rule of 80 (AKA, 80 and Out). The Rule of 80 allows eligible employees to begin their monthly benefits when their age + service = 80. For example, a 50-year-old LAGERS member with 30 years of service could begin monthly payments at age 50 with no reduction. Only about one-in-five participating employers provide the Rule of 80 as it does cost more for this option.

When is the best month to retire?

As far as LAGERS is concerned, it doesn’t matter. You may initiate your monthly benefit any month you choose. You receive credit for every month you work in a LAGERS-covered position so you don’t need to worry about working a certain number of months throughout the year to increase your benefit. Your benefit increases every month you work!

The most popular retirement effective date is January 1st. LAGERS sees more members call it quits in December each year with benefits beginning in January than any other month. This doesn’t necessarily mean that this is the best date for you, however. You will definitely want to be aware of any benefits your employer provides that may affect your retirement date. Are there any post-retirement benefits provided by your employer? What about unused sick and/or vacation payouts? Some of these benefits may be better or worse depending on when you leave your job.

The October 1 Myth. There is a myth amongst LAGERS members that if you retire after October 1st in a given year that you will be missing out and your benefits will forever be less than they should be. This is absolutely false. Don’t believe this myth. I won’t go into the specifics here, but I have written another entire blog about it.

When will my benefits be paid to me?

Once you have made the decision to take the leap into the next chapter in life and all of the paperwork is complete, your LAGERS benefit is always paid on the first of the month for that month. So, if you decide your last day of work will be December 23rd, your retirement effective date (the date you will be paid) will be January 1st. Almost all LAGERS retirees opt for electronic payment of their benefit so they know their payment will be in their bank account on the first banking day of each month.

The partial lump sum is an option retirees may choose if they want some money up-front in addition to their monthly benefit. If you decide the partial lump sum is right for you, this will be paid to you 90 days after your first payment date. You can choose to roll this payment over to another retirement account or extend payment of the partial lump sum out to 150 days if you want to reduce your tax burden. The partial lump sum is a big topic, so we cover it in another blog.

When is enough, enough?

This is a question only you can answer. Believe it or not, there are many benefits to showing up to work every day. It keeps you engaged physically, mentally and socially. But at some point, enough is enough. When all of the financial and emotional planning is done and you have determined you can handle retirement all that’s left is walking up to the edge and making that final jump. When you get to this point, you’ll know.

When? This question can keep us up at night. But we here at LAGERS can help you get at least some answers. The most important answers, however, are up to you.

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

 

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The #1 Thing Most People Overlook When Planning for Retirement

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What are you going to do when you don’t have to do anything?

Many of us dream of these days when we can fill our time doing the things we never had time for while working. Sounds great doesn’t it? Waking up every morning with a completely clean slate. Go fishing, work in the garden, watch TV, meet up with friends, it’s all up to you. But if you don’t plan for what you will do when you retire, you could end up wishing you would have stayed in the workforce. This is because figuring out your finances before retiring may be the most important, but it cannot be the only focus. Figuring out your personality and what makes you happy is essential for a great retirement.

I know what you’re thinking right now, “This will not be a problem for me! You should see the list of all the things I want/need to do!” But you now have all day, every day to work on your list. Think about all of the time you spent, not just at your job, but the commuting to and from. All of that activity is gone. So, even if you have a long retirement to-do list, with all of your extra time, that list might be complete in a couple of months, or less. Then what?

We need to take a more global approach to retirement planning than just making sure we have enough money to survive day-to-day. We don’t want to just survive, we want to thrive! To help ensure you do not overlook the emotional side of retirement planning, here are some questions to ask yourself.

How will I spend my time?

Look beyond your to-do list. When everything is checked off the list, what will you do with the rest of your life? Get to know yourself and what you need. Are you the type of person that can remain active without a routine or schedule? Maybe you need some commitments in your life to keep you motivated like volunteering or a part-time job. Are you a social butterfly who needs regular interaction with other adults, or are you OK with being alone most of time? Answering these questions will help you get to know yourself better in order to identify how you will fill your time productively and happily.

What do you really like to do?

This may seem like a simple question, but think about it. Do you even remember what you really like to do? Some us haven’t been able to pursue our own interests in so long this question is harder than you think. Think about the times in your life when you were the happiest. What were you doing? What was going on in your life that made you feel this way? Do you like to stay physically and mentally sharp? What about travel, how much and where to? How about restarting a forgotten hobby or starting a new one? Spend some time thinking about what you enjoy doing and then do that!

What will motivate you to get out of bed every morning?

Unfortunately many retirees experience periods of deep depression because they have nothing to look forward to. Making a long-term plan and setting retirement goals will help to find the answer to this question. Set out on a quest, start a business, plan social events with old work buddies, sign up for a class, or get a part time job. Anything that will propel you to jump out of bed in the morning will work. Set goals and make a plan about how to achieve them.

How will I react to not working?

Retirement is a mindset just like working is a mindset. When work is suddenly ending, it’s like slamming on the breaks at 100 miles per hour. How will your mind and body react to this new lifestyle? Will you be bored? Will your health begin to deteriorate without the routine that is the working life? This question may take some deep thought, but if you know yourself and can be honest, you will find the right answer.

 

These are four seemingly simple questions that have very complex and meaningful answers. Thinking hard about these questions before leaving the workforce is key to a successful and happy retirement. Don’t get caught up focusing only on the financial aspect of retirement, the emotional aspect must be addressed in order for you to live the lifestyle you want.

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Decades from Retirement? Visualize Your Future to Ensure Financial Independence

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We all recently received our annual benefits statements showing an estimate of our future retirement income from LAGERS.  For those of you close to retirement, congratulations, you are one year closer and may be sniffing the finish line within a few months.

But for many of us in the millennial generation, the annual benefit statements are easy to ignore.  I mean, it’s so far away it may even be a little depressing (I have at least 20 more years to go).  But you know what else I think about when I see my annual statement?  Financial independence.  Isn’t that a goal for all of us, at any stage in our lives?  It should be.  It’s the freedom to do what you want, when you want, and not have to rely on your family, friends, or the government to support you.

Financial independence, to me, represents dreams and aspirations.  It means contentment and well-being.  It’s good health and low stress.  It’s a cabin in the woods and vacations.  Man, all of that sounds great.  Yep.  That’s what I want, now and into the future.  OK, I have a goal, now how do I get there?

It’s hard.  I have two hilarious, smart, happy young daughters.  I want the best for them.  I want them to have the best education, the most supportive home life, great friends, awesome experiences, and so much more.  So much of me (and my income) gets poured into making sure they are taken care of to the level they deserve.  But I also know I have to take steps now to ensure my financial independence, not only for tomorrow, but for 10, 20, 30, 40, 50 years from now.

Wow.  That’s a little overwhelming.

The good news is that some of the income I will need in retirement has already been earned and protected with my LAGERS benefit.  Of course I know it’s not going to be enough, but it gives me great comfort knowing that if I continue to work hard and put in the time, my LAGERS benefit will help me towards the retirement lifestyle that I want.  It’s great to get my statement each year and see how my benefit grows with another 12 months of service.

Receiving my statement gives me a chance to dream of all of the things I want to do in retirement.  I visualize the things I want to see, the places I will go, the kind of lifestyle I will have, how my wonderful wife and I will look when we’re in our sixties.  How many grandchildren will we have?  Where will my daughters be living?  Where will I be living?  For me, visualization is the key to financial independence.

My parents never made a lot of money.  Neither is a college graduate.  They had to fight, scratch, and sacrifice for everything they ever had.  They are hard workers.  My parents are also great visualizers.  They never take their eye off the ball.  They provided my sisters and I with a great childhood and helped us start lives of our own.  Now, because of the sacrifices they made and a ton of planning and visualizing along the way, my dad was able to choose to retire at age 60 and my mom is very close.  They travel often.  Their stress is low and both are in great health.   When they were my age they visualized the life they wanted and they now have it.

My parents won.  It was hard.  I can win too.  So can you.  Visualize your future.  Our goal is financial independence, today, tomorrow, indefinitely.

So, for all of you who are decades away from retirement like I am, I have a challenge for you.  The next time you look at your annual statement, take a moment to visualize your future.  Close your eyes, stare out the window, whatever you need to do to focus for just a few seconds.  Picture yourself.  What do you look like?  What is your life like?  Is your visualization a picture of the life you want?  The life you dream of?  If so, are you on track?  If not, what do you need to change now to ensure your financial independence when you get there?

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Retirement Planning Doesn’t Have to be Scary! We Can Help.

 

Ghouls and goblins will be knocking on your door this week asking for sugary sweets. Horror films will be played on a continuous loop on cable television channels, teenagers will be sneaking toilet tissue and eggs from their parents’ houses.  But maybe most terrifying of all, many LAGERS members will be preparing for retirement at the end of the year!  Oh, the horror!

A little dramatic, I know, but retirement is a truly terrifying new chapter in life.  I have seen the fear first-hand in hundreds of wide-eyed, soon to be retired, LAGERS members at seminars over the years.  The fear is real.  But it doesn’t have to be so frightening.  LAGERS provides several resources to help keep the retirement boogey man away from your door.

Pre-Retirement Seminars

Almost 1,000 people attend LAGERS pre-retirement seminars each year.  Nine out of ten folks that attend these seminars rate them as ‘Excellent’ and, more importantly, 99% say that they believe they have received adequate information to make informed decisions about their LAGERS retirement.  LAGERS staff conducts about 20 of these seminars each year across the state.  We offer full-day, afternoon, and evening meetings to accommodate anyone’s schedule. In addition to the regional seminars, we also conduct several smaller seminars where we travel to a participating employer and speak with that employee group.  Pre-retirement seminars are the best way to ensure you have all the information you need to make a sound decision about your LAGERS benefits.

One-on-One Counseling

LAGERS has benefit specialists on staff who are experts in all areas of LAGERS retirement.  Stop by our office (appointments are preferred) or conduct a counseling session over the phone.  We would love to walk you through the payment options, application process, and anything else related to LAGERS retirement!

Benefit Estimates

A benefit estimate is a document that shows your estimated retirement benefits based on a retirement date of your choosing.  This is different than your annual LAGERS statement because an estimate shows all of the payment options that are available to you. It is also more accurate as it is based on your most recent information.  You can get a benefit estimate by contacting our office, or you can generate as many as you want online using the myLAGERS web portal.

These estimates are extremely beneficial in retirement planning.  But you would be surprised how many people retire without ever requesting one.  “When I started at LAGERS 14 years ago, I was blown away by how many people retired without ever getting a benefit estimate from us!” said Tami Jaegers, LAGERS’ Assistant Director.  “Now, that has changed dramatically.  About 9,000 estimates were calculated in the last 12 months.  Staff did 4,400 and members did 4,600 online using myLAGERS. So members ran more estimates than LAGERS staff!  That is great!”  Great, yes, but there is still plenty of room for improvement.  LAGERS still sees far too many members retire who are seeing their benefit amount for the first time about two weeks before they walk away from work.  Now that is scary!

myLAGERS

The online myLAGERS web portal has been mentioned throughout this blog, and for good reason.  It is a great tool for retirement planning.  If you haven’t enrolled in myLAGERS yet, stop reading this blog and do so right now!  While the greatest feature (IMHO) is the benefit estimator, you can also change your beneficiaries, address, view annual statements, estimate service purchases, apply for benefits, and more.  And no need to worry about the security of this portal.  LAGERS hires a third party company each year to evaluate the security of our system.  This past year, LAGERS received the highest score possible for security of our system.  Your information is protected and secure with us.

Annual Statements

For members who are still decades away from retirement, the annual statement is a great way to help keep your retirement planning on track.  After all, your LAGERS benefit is not going to be enough to fully fund your retirement.  So the annual statement helps you know what your base monthly income will be so you can save additional funds for retirement appropriately.  It is also a wonderful annual reminder to do a little retirement planning check-up on yourself.

With these resources available, what is there to be afraid of?  We will help you every step of the way.  So go ahead and curl up with some popcorn and leftover Halloween candy and change the channel to a thriller on TV.  The LAGERS retirement process is one less thing to be frightened about.

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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