Tag Archives: Retirement

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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Use These 5 Simple Hacks to Ease Financial Stress

 

April is Stress Awareness Month and we all know that finances are the root of much of the stress we face. If you haven’t ever lost a little sleep worrying about a money-related issue, I would question whether or not you had a pulse. It’s almost inevitable that, at some point, we all will have a financial difficulty that wears on our mind, and ultimately, maybe even our body.

Financial Finesse is a financial wellness firm that offers coaching to over 2.4 million people in the U.S. In the firm’s 2016 Financial Stress Research, they reported that 1 out of every 4 people say that they suffer from high or overwhelming financial stress and 6 out of 10 people reported losing sleep over at least one financial problem. The good news is that there are some fairly simple steps we can take to ease financial stress. Here are some that have worked for me.

Resist the consumerist culture we live in.

My wife and I just recently realized we had too much stuff. Not only did we have too much, we wanted even more. The culture we live in is constantly in our face about purchasing items that are supposed make us happy; new clothes, beauty products, cars, toys for your kids, electronics, apps for your phone. The never-ending assault on our desire for more is relentless. Our home was bursting at the studs with things we didn’t need and all of that stuff was causing stress. So we decided to get rid of it. Anything in our home that is not useful or doesn’t bring us joy is sold, thrown away or donated. And, we have begun to use the same criteria for our purchases. We are spending less money on things that have no lasting value and using those resources to focus on experiences and priorities that truly make us happier. We are still in the beginning stages of this journey, but it’s amazing how much less stress we have.

Create an emergency fund.

According to a recent survey by Bankrate, 57% of Americans don’t have enough cash on hand to cover an unexpected $500 expense. Now that is stressful! Sticking money into an account and resisting the urge to touch it can be tough, but here is a quick hack I have used for years to help with this. Create automatic transfers from your checking account into a savings account. Most of us now have our paychecks directly deposited into our checking accounts and most banks allow you to set up automatic recurring transfers. So, set up money to transfer every payday to a savings account and you will likely not even notice it’s gone. It doesn’t have to be a large amount; it will feel great just to get started!

Make a plan.

Simply having a plan in place to manage your finances can be a huge weight off of your shoulders. Knowing your monthly income and essential expenses is the first step in figuring out a budget and sticking with it. When my wife and I decided she would leave her career and stay home with our girls a couple of years ago, we both lost sleep over the financial impact this would have on our family. So, we sat down together and calculated our monthly income and bills. From there we identified some expenses we could easily reduce (like our satellite bill) and figured out how much we would have left for discretionary expenses (it wasn’t much). Having this plan in place made us both feel better and gave us some peace of mind knowing we could make this work as long as we stuck to the plan.

Talk about money.

Perhaps the most important thing you can do to ease financial stress is to talk to your spouse or significant other about money. These are not always easy or fun conversations and they may even end with one person being upset. But don’t give up. It is vitally important for you and the person you are sharing your life with to be on the same page about finances. A seemingly simple rule my wife and I have always used is that we will ask the other person before we make a purchase that is over a certain threshold. When we were first married and had very little in the way of financial resources, the limit was $50. For example, if I wanted to buy new decoys for turkey hunting and they were going to be more than $50, I had to run it by my wife first. While our threshold has grown since we were newlyweds 12 years ago, we still have this rule in place. It may seem silly, but it is a subtle way to ensure we are both on the same page about how the family’s money should be spent.

Visualize your future.

Your future self wants to be financially independent. Taking steps now toward that end will ease stress today and have a lasting impact later in life. What does your future look like? What do you want do? What will you be doing when you are 65, 75, 85? A great first step in planning for your financial future is to visualize the life you desire. This will help you to know if you are on track today to achieve the life you are picturing. My wife and I frequently talk about our dreams for our life after work and what we want to do. Sometimes these conversations are just two people dreaming together and sometimes there is a little more planning involved, but either way, it is helpful. Be kind to your future self, take action today to reduce stress now in order to avoid tension in the future. Read my blog about this here.

 

Stress can kill. And financial problems are one of the leading causes of anxiety. There are many money problems that may be fixed using simple hacks like the ones above, but for serious issues, you may need to talk to a professional to get help. The key is to take control of your money and allow yourself some better nights of sleep!

 

Jeff Kempker
Manager of Member Services

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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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The Significance of Your LAGERS COLA Benefit is Larger Than You Think . . .

This year LAGERS retirees will receive a COLA (Cost of Living Adjustment) of around 1%. This increase will be reflected on October 1st and it means much more than just a slight increase to your monthly benefit. It shows the strength and overall financial security of your LAGERS pension system.

By now you know you’re rather fortunate to have a defined benefit pension plan as the foundation of your financial future. As a retired local government employee, LAGERS provides you with an exceptionally strong and secure pension plan. However, the added stability of your COLA is also something to be thankful for. More and more, we find other pension plans are not able to provide this to their retirees, ever, much less on a yearly basis, as LAGERS has historically been able to do. This means as time goes on; your benefit keeps pace with the economy and spending levels on goods and services, and won’t lose value every year.

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Source:NRTA Pension Education Toolkit

“LAGERS cost of living adjustments are granted annually based upon the retirees date of retirement and applicable changes in the ‘consumer price index’ (CPI). Though this process may seem unnecessarily complex, I am extremely proud to share that 100% of LAGERS retirees have received increases equal to the CPI thereby maintaining 100% purchasing power in retirement,” says Keith Hughes, Executive Secretary.

Below are some things to understand about the benefit of having a COLA with your LAGERS benefit:

  •  It is based on inflation and the consumer price index and is designed to keep your benefit at 100% purchasing power.
  • The LAGERS board meets annually to determine the COLA adjustment based on the financial solvency of the system. The COLA is not an automatic benefit, but don’t worry, LAGERS is fiscally sound and even though it isn’t automatic every year, LAGERS has historically been able to provide this to retirees consistently. In order to continue to keep benefits at a high level of strength and security for years to come the COLA will never be over 4% in a year. However, if the CPI is higher than 4% in any given year, this will be considered and additional increases will be given in future years to “catch up”.
  •  The LAGERS plan is exceedingly stronger than other plans of similar nature – Without going into the weeds on the specifics, just know that the fund we use only for paying our retirees’ benefits is slightly over 100% funded. Yes, you read that right. Overall, LAGERS is around 94% funded when the industry average for similar plans is around 73%. This means LAGERS is in a better position to meet all of our obligations to retirees for decades to come.
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Source: NRTA Pension Education Toolkit

To give you a real life example of the power of having a COLA, the oldest of our members currently receiving a retirement benefit is 107. She retired in 1979 at the age of 70 and is currently receiving more than three times her original base benefit with accumulated COLA’s applied.
While this is obviously an extreme case, as we won’t all live to 107, it does show the significance of your COLA and how it affects your purchasing power in a positive fashion.

More good news, right? Keeping your benefit at pace with inflation is significant, especially when looked at over the lifetime of a retirement. So while the annual number may look insignificant, now you know that over time it matters much more than at first glance.
ALL retirees will receive a paystub in October showing your individual increase.

 

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September Article Roundup

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It seems like we are constantly hearing things like, “age 60 is the new 40,” and “age is just a number.” There is also a changing view of retirement from a period of leisure to more of a phased approach, where people aren’t stopping work altogether, but just scaling back or starting something new. Does this mean retirement is now a dirty word? Are the days of celebrating retirement over?

Read “When did retirement become a dirty word?”

 

Talking to a financial advisor is a great way to stay on track with your goals. Wading through the investment and benefits waters can be overwhelming if you try to go-it-alone. Financial advisors can be great resources, but there are some things you need to know before deciding who to trust with your fiscal future.

Read “10 Questions to Ask Before You Hire a Financial Advisor”

 

The American retirement savings crisis is well documented. About half of US workers don’t have access to employer-sponsored retirement plans and those that do, for the most part, are not saving enough. The Americans who have the steepest hill to climb are those that probably need the most help – those with lower levels of education.

Read “Workers without college degrees fare worse with 401(k)s”

 

The National Institute on Retirement Security released a report last week that shows the profound economic impact of public pensions in the U.S. Public pensions, like LAGERS, pay retirees steady monthly income. That income is not stuffed under mattresses, but put to use purchasing local goods and services. LAGERS, for example, pays over $250 million per year to retirees – $230 million stays in Missouri! The full report and state-by-state information can be viewed here.

Read “Pension Spending 7.1 million jobs, $1.2 Trillion Economic Output across the U.S.”

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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It’s Time to Review Your Savings Goals

America Saves WeekIt’s America Saves Week! This week is dedicated to instilling us with good savings principles. Last year, we showed you what some of our current savings goals were. Now that a year has passed, I thought it would be a good idea to review a few of our savings goals and discuss how we are doing to meet our goals.

 

Dana America SavesI had the opportunity to speak with LAGERS Benefit Specialist, Dana Eichholz about her goal of saving for a new house and what she is doing to meet her goal. She told me, “We are trying to make extra principal payments on our current house each year to get it paid off quicker. We set a goal to have it paid off within the next couple of years. In the short term, we decided to forego some of our favorite hobbies. I have decided to pass on a few vacations (which is a bummer L) for the next few years and my husband has had to give up rebuilding tractors. Also, I have set up the use of automatic savings through our cafeteria plan that allow us to save some money on our daycare expenses.”

 

Dennise America Saves WeekAlso, I spoke with Dennise Schaben about her goal of saving for her husband’s retirement since he does not have a pension. She was delighted to say, “Saving for my husband’s retirement has been right on track. We have an IRA set-up for him and are having the monthly amount automatically withdrawn from our checking account. That way we don’t miss it or spend it on something else. We have a long way to go to meet our goal but we are confident we will achieve it.”

 

JP America SavesFinally, I thought I would do some reflection of my savings goal. At the time, I was saving for a new car because my wife and I were expecting our second child and I had a two door vehicle that would not be a very good fit with two kids. So, we decided that we were going to save for a new(er), bigger car. We started by setting up an automatic deposit into our savings account and I put my car up for sale. With the automatic savings and sale (instead of trade) of my old car, we were able to pay for 75% of a used minivan in cash.

Since I pulled the trigger on my previous goal, I now have a new, more medium term goal. My wife and I are looking to upgrade to a newer, larger home. As you may know, the more people (kids) you have, the more space you need! So, to do this, we have set up another automatic savings deposit and we are making more principal payments towards our current house (just like Dana J)

Savings goals can be difficult and you may have to give up some of the things you love to do to achieve your goals. However, the tools necessary to start saving are easy to access and not too difficult to implement. First set your goal, then come up with a plan for that goal, review the savings plan regularly, and make it easier on yourself by setting up automatic savings deposits.

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Jeff Pabst, CRC Communication Specialist

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What to Expect During Your First Year in Retirement

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Your first year in retirement is a little like starting a new job, only without all the work.  But still, it involves establishing a routine, figuring out when your money will come in, building new relationships, and feeling excited about the future.  Starting a new job means dealing with a lot of unknowns, and beginning a new chapter in life as big as retirement is no different.  Here is what you can expect from LAGERS during your first year.

 

Your benefit is paid at the beginning of each month.

You will receive your retirement benefit from LAGERS on the first of each month.  A benefit received on February 1st is your payment for the month of February.  Your payment will arrive on the first banking day of each month if you have chosen to have your benefit automatically deposited into your bank account.  If you have chosen to receive a paper check, LAGERS mails those out on the last mailing day of the previous month.

No matter if you choose direct deposit or a paper check, we cannot pay you sooner than the first of the month.  For example, the first banking day in 2016 is January 4th, so that is when your benefit will be added to your bank account.

Also, you will not receive a monthly payment stub from LAGERS if you have signed up for direct deposit.  We will mail you a stub, however, any time the net amount of your benefit changes because of cost of living adjustments, tax withholding changes, or for any other reason.

 

Your Partial Lump Sum (PLUS) is paid no sooner than 90 days after the date of your first LAGERS payment.

Many retirees select the Partial Lump Sum (PLUS) option in order to get some money up-front in exchange for a reduced monthly amount.  The soonest LAGERS will pay out the PLUS is three months after the date you first received a payment from us.  For example, if your first benefit payment is February 1st, the soonest LAGERS would pay the PLUS could be May 1st.  You may choose to extend the PLUS payment out as far as five months.  Extending the payment allows some people to push the PLUS into the next tax year.

If you choose the PLUS and decide not to directly roll it into another retirement account, LAGERS withholds 20% of the taxable portion of the PLUS and forwards it onto the IRS.  LAGERS is required to withhold this amount in all circumstances.  However, if your tax liability ends up being less than what was withheld, you can apply for a refund at the end of the year.  The entire amount of your PLUS will be sent to one of your eligible retirement accounts if you choose a direct rollover.

So why do we wait three months to pay you the PLUS?  This is to ensure we have all information from your employer about your final wages and service so we can double check that your benefit amount is correct.  This is also why you may see your monthly amount change slightly three months after you retire.

 

You are eligible for your first cost of living adjustment on October 1st of your second calendar year of retirement.

LAGERS Board of Trustees may grant an annual adjustment of retiree benefits in order to keep pace with inflation.  If approved, these cost of living adjustments, or COLAs, are paid to retirees on October 1st each year.  In order to be eligible for your first COLA, you must be retired for 12 full months including an October 1st.  For example, any person that retires in 2016 won’t also receive a COLA in 2016.  You would, however, receive a COLA in 2017 if your retirement is effective January 2016 – October 2016.  If your retirement will be effective in November or December 2016, you will be eligible for your first COLA on October 1, 2018.  But, you would also receive a little more than everyone else so that we can ensure your benefit is worth the same as it was when you retired.  The point of COLAs is not to increase your benefit, but rather to make sure you can buy the same goods and services today as you could in the past.

 

The first year of retirement can be a wonderful adjustment into the next stage of your life.  Knowing what to expect will help this be a smooth transition so that you can focus on all of the great aspects of retirement!

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Thinking About Taking a Job After Retirement? Read This First!

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Americans are embracing a new view of retirement that includes staying active, volunteering, or even taking on a part time or full time job.  And while the #1 reason people take a job after retiring is because they need the money, the #2 reason is boredom.  If you are thinking about accepting a job after you retire, there are several things you should know before jumping back into the workforce.

Non-LAGERS Employment

I have talked to several LAGERS members who have said their dream is to retire and then become greeters at Wal-Mart.  I’m not really sure of the attraction to this occupation, but I can tell you that this would be allowed under LAGERS’ rules.   Your retirement benefit will not be affected if you go back to work either part-time or full-time for any employer that is not in LAGERS.

Part Time LAGERS Employment

You can go back to work part-time for a LAGERS employer, even one from which you are receiving a benefit, and the current benefit will not be affected.  Be careful here, however, as LAGERS defines part-time differently than a simple 40-hour work week.  Each LAGERS employer has chosen a full time definition of either 1,500, 1,250, or 1,000 hours per year.  Check with our office about how many hours you can to work if you plan to work for another LAGERS employer after retirement.

Full Time LAGERS Employment

What about working full time for a different LAGERS employer than the one from which you retired?  This is allowed too, but you must have at least one-month break between your last day of work or your retirement effective date (whichever is later) and the date you start work at the new employer.  For example, if your last day of work is December 23rd and your retirement effective date is January 1st, you could not start working full time with a different LAGERS employer until after February 1st.  If you don’t have that one month break, we would have to suspend the monthly benefit you are currently receiving.  So take a month off, you deserve it!

You would again be covered under LAGERS at your new employer after you complete the one month break.  You would then be eligible for a second benefit after 12 consecutive months of employment.  All the while, receiving your full, uninterrupted benefit from your first employer.  The benefit from your second retirement would be calculated independently from your first retirement and would simply be added atop the first benefit when you retire the second time.  All of this can get a bit tricky, so if you are planning to go back to work for a LAGERS employer, either part-time or full-time, please contact us so we can walk you through it!

There may be a situation where you must go back to work full time for the employer that you retired from.  The current monthly benefit from this employer would be suspended, you would again become an active member of LAGERS, and would be eligible for a second benefit, calculated independently of the first benefit, after 12 consecutive months of employment.

What about contract or consulting work?  I am asked frequently about going back to work for the same employer on a contract basis since true contract workers are not covered under LAGERS.  This is OK too, so long as the nature of the position is truly contractual.  This means that your former employer is contracting with a company you work for and you are then providing services to your former employer.  In this case, your employer is the company, not your former local government employer.  Simply signing a contract with your former employer does not make you a ‘contractual’ employee in LAGERS’ eyes.  You are likely eligible for LAGERS coverage and not able to continue receiving your monthly retirement benefit if you are on the payroll of your former employer and working the right number of hours.

If there is one take away from this blog it would be to contact LAGERS BEFORE you re-employ either part time or full time with a LAGERS employer so that your benefit is not interrupted unexpectedly.

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

 

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The Top 5 Questions on LAGERS Retirees’ Minds

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LAGERS retirees are an inquisitive and engaged group.  They ask wonderful questions to better understand their LAGERS benefits.  I have compiled a short list here of some of the most frequent questions we get from our retired crowd.  Let me know if we need to add some more to this list!

Can I retire and then come back to work for another employer?

Absolutely!  I once talked to a member who said his dream was to retire and then become a greeter at Wal-Mart because he assumed that was truly a job with zero stress.  While I’m not qualified to speak about the stress levels of Wally World employees, I can tell you that this would be allowed under LAGERS’ rules.  A person who retires from a LAGERS employer can go back to work either part-time or full-time for any employer that is not in LAGERS and the monthly benefit will not be affected.  A LAGERS retiree can also go back to work part-time for a LAGERS employer, even one from which she is receiving a benefit, and the amount of the benefit will not be affected.  Be careful here, however, as LAGERS defines part-time differently than a simple 40-hour work week.  If you plan to re-employ after you retire with another LAGERS employer, check with our office first about how many hours you are allowed to work how this may impact your monthly retirement income.

What about working full time for a different LAGERS employer than one you retired from?  This is allowed too, but you must have at least one-month break between your last day of work or your retirement effective date (whichever is later) and your re-employment date.  If you don’t have that one month break, we would have to suspend the monthly benefit you are currently receiving.  So, take a month off, you deserve it!  If you do this, you would again be covered under LAGERS at your new employer and eligible for a second benefit after 12 months of employment; all the while, receiving your full, uninterrupted benefit from your first employer.

All of this can get a bit tricky, so if you are planning to go back to work for a LAGERS participating employer, either part-time or full-time, please contact us so we can walk you through it!

Who guarantees that my LAGERS benefit is secure?

People want certainty these days and a constant question we get from active members and retirees alike is, “how do I know my benefit will continue being paid, in full, for my lifetime?”  The good news is that receiving a retirement benefit from LAGERS is about as certain as one can get.  One reason for this is because your monthly payment is not affected by benefit changes your employer may make after you retire, nor is it affected by the economy or market swings.  Another reason is because your retirement benefit is pre-paid.  This means that at the time you retire, LAGERS sets aside, in a separate fund designated only for retirees, enough money to pay you for the rest of your life.  This protected trust is solely for the benefit of LAGERS retirees and beneficiaries.   And, that fund, as of June 30, 2015 is slightly above 100% funded, meaning we have all the money we need on hand today to pay the protected lifetime benefits for our 18,000+ current retirees.

When will I receive my tax forms from LAGERS? 

LAGERS mails the 1099-R form (which is basically a W-2 for retired people) annually to each of our retirees.  The IRS requires the 1099-Rs be mailed no later than January 31st each year so retirees can expect this form in their mailbox in early February.  You may be able to get a copy about one week sooner by logging onto the myLAGERS web portal and printing it from there.

Can I waive the 20% tax withholding on the Partial Lump Sum?

If a retiree chooses the Partial Lump Sum (PLUS) and decides not to directly roll it into another retirement account, LAGERS withholds 20% of the PLUS and forwards it onto the IRS.  LAGERS is required to withhold this amount, in all circumstances, even if the retiree is disabled.  However, if your tax liability ends up being less than what was withheld, you can apply for a refund at the end of the year.

I need a pension award (income verification) letter, how do I get that?

A pension award letter is basically proof that you are receiving monthly income from a retirement plan.  This may also be called an income verification letter which may be needed if you are applying for a loan or some other type of credit.  There are a couple ways you can get this letter.  One is online through the myLAGERS web portal.  After logging into your account, click on the “Income Verification” link on the menu and then select “Download Income Verification.”  Another way is to simply call our office.  We will need to verify your identity over the phone, and then we will send the letter to you in the mail.

This has been a small sample of the questions we frequently receive from retirees.  Please comment on this blog if you believe we have missed some.  We always love to write about the topics you care about most!

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Then vs. Now: How the Retirement Landscape Has Changed

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Have you turned on your television lately and heard an advertisement by a financial planning company? Your answer was more than likely a resounding YES! Retirement planning has become a huge business and industry. However, it has not always been this way. Let’s discuss where we came from and where we are now.

Prior to the 1930’s, retirement did not exist for the vast majority of Americans. For the most part, people just worked until they died or were physically unable. So, retirement is actually a relatively new phenomenon. In August of 1935 the Social Security Administration was created by the federal government. The idea was to allow people to leave the workforce death or disability.

Defined Benefit (DB) pension plans have been around since the times of the Revolutionary and Civil Wars. However, the majority defined benefit plans were established in the 1950’s and 1960’s. The primary purpose of defined benefit plans was to allow employees to leave the workforce in a dignified manner. And up until the late 1970’s, Social security and a pension were the means by which most of the population was able to retire.

In the 1980’s, Defined Contribution (DC) plans became increasingly popular. When defined contribution plans were established, they were intended to allow an employee to defer some income on a tax free basis for retirement purposes. The idea was that a defined contribution plan could supplement their retirement income they were already accruing with Social Security and their pension. However, the movement has changed in recent years to eliminating pensions and only providing a Defined Contribution Plan. But that may not be the best way to provide retirement security for Americans.

Below is a table illustrating the differences between a defined benefit plan, like Missouri LAGERS, and a defined contribution plan.

DB vs DC

The movement to eliminate defined benefit pensions has created a retirement savings crisis across the nation. Many Americans are unable to leave the workforce in a dignified manner because they have not properly saved and their only other source of retirement income is Social Security. As of March 12, 2015, the median retirement account balance is only $2,500 (National Institute on Retirement Security)! Furthermore, the median retirement account balance for Americans nearing retirement age (55-64) is a mere $14,500 (National Institute on Retirement Security). This is hardly enough to draw from for a person’s retirement.

The original spirit of the defined contribution plans was to be a supplement to a person’s retirement income and not a person’s sole source of financial security. Currently, we are seeing what happens when a person has to rely on Social Security and a defined contribution plan. Americans believe they are going to have to work until they are unable to do so. Social Security, defined benefit plans, and defined contribution plans were intended to all work together to allow hard working Americans to leave the workforce with a little pride and a little dignity. Having all 3 sources of retirement income is the best and most efficient way to accomplish a secure retirement for all hard working Americans.

Jeff Pabst, CRC Public Relations Specialist

Jeff Pabst, CRC
Public Relations Specialist

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