Understanding Your Retirement -...

UnderstandingYourRetirement

2015©Teacher’sPension&InsuranceServices

CalSTRSChanges2013AB340


Nolongercanbuy“air0me”

Agefactorchanges-NewHires(startedSTRSa@er1/1/2013)

3yearaverage-Newhires(startedSTRSa@er1/1/2013)

CalSTRSChanges2014AB1469


CalSTRSMemberContributionRateIncreasesMembercontribution increaseswillbephased inover thenext threeyearsand increasebyanadditional2.25percentofpayroll forCalSTRS2%at60members,andanadditional1.205percentforCalSTRS2%at62members.

EffectiveDate PriorRate AB1469IncreasesAllMembers 2%at60Members 2%at62Members*

July1,2014 8% 8.15% 8.15%July1,2015 8% 9.20% 8.56%*July1,2016 8% 10.25% 9.205%*

*TherateimposedonCalSTRS2%at62membersinbasedonthenormalcostofbeneOits.Thecontributionrateshowninfutureyearsassumesnochangesinnormalcost.

CalSTRSmemberswhoperformcreditableserviceonorafterJanuary1,2014,willreceiveaguaranteeoftheexisting2percentAnnualBeneLitAdjustment,alsoreferredtoastheimprovementfactor.Underthenewlegislation,the2percentimprovementfactorcannotbereducedformemberswhoretireonorafterJanuary1,2014.FormemberswhoretiredpriortoJanuary1,2014,thefundinglegislationdoesnotchangetheimprovementfactorbeneLit.

EffectiveDate PriorRate AB1469IncreasesIncrease Total

July1,2014 8.25% 0.63% 8.88%July1,2015 8.25% 2.48% 10.73%July1,2016 8.25% 4.33% 12.58%July1,2017 8.25% 6.18% 14.43%July1,2018 8.25% 8.03% 16.28%July1,2019 8.25% 9.88% 18.13%July1,2020 8.25% 10.85% 19.10%July1,2046 8.25% Increaseformpriorrateceasesin2046-47

DeOinedBeneOitSupplement-(DBS)Account


+

Currentlyfundedbyassignmentsoutsideof

mastercontract(coaching,

summerschool,etc...)

Cannottouchorchangeuntilretirementorseparationof

service

+

SettlementOptions:-  CashOut(PayTaxes)-Rolloverto403borIRA-  AnnuityPayments

fromCalSTRS(NoCash)

+AutomaticallyFundedbyCalSTRSif

teachingfrom2001-2011

PensionReport

5

AnalysisofOptionsatVariousAges,PreparedforSampleClient,August12,2014


VariousoptionvaluesatdifferentretirementagesforSampleClientThegriddisplaystheestimatedmonthlyincomefromthepensionplanforthevariousoptionsavailableinthepensionplanatdifferentages.

Date Age SpouseAge MemberOnlyOption100%BeneOiciary

Option75%BeneOiciary

Option50%BeneOiciary

Option06/2014 55 57 $1,945 $1,792 $1,836 $1,87506/2015 56 58 $2,198 $2,006 $2,061 $2,10906/2016 57 59 $2,465 $2,226 $2,295 $2,35406/2017 58 60 $2,745 $2,509 $2,580 $2,63906/2018 59 61 $3,040 $2,749 $2,837 $2,90806/2019 60 62 $3,332 $2,978 $3,085 $3,17106/2020 61 63 $3,671 $3,240 $3,369 $3,47406/2021 62 64 $4,025 $3,503 $3,659 $3,78506/2022 63 65 $4,340 $3,838 $3,999 $4,11906/2023 64 66 $4,480 $3,906 $4,089 $4,226

BeneOiciaryOptions

6

MONTHLYRETIREMENTBENEFITSUSINGAJOINTAND100%SURVIVORPAYOUTOPTION

MONTHLYRETIREMENTBENEFITSUSINGASINGLELIFEPAYOUTOPTIONANDTHEAIP

INCOMEDURRINGTHELIFEOFTHERETIREE:

•  Singlelifeincomeoption…………………...4,340•  Jointand100%survivorbeneOit………..3,838•  CostofprovidingsurvivorbeneOit………...502•  Retireeincomebeforetaxes……………....3,838

•  Singlelifeincomeoption…………………...4,340•  AIPbeneOitpayablesurvivor……….……..4,340•  MonthlypremiumforAIPoverthelifetimeofthe

retiree…………………………………………….287•  Retireeincomeafterpremiumbutbeforetaxes

…………………………………………………..4,053

Note: thesevaluesdonot take intoconsiderationany incometaxes thatmaybedueonpension incomeundereitheralternative.ThepremiumforAIPispaidwithafter-taxdollars.IndividualshouldconsulttheirowntaxadvisorforadvicespeciLictotheircurrentsituation.


ARevolutionarySolution

7

DisabilityIncome

Moneytohelppayyourbills.

RetirementIncome

Moneyforasecure

retirement.

AcceleratedLivingBeneOits

Chronic,Critical

orTerminalillnessriders.

LifeInsurance

Moneyforyour

family.

LifeInsuranceyoudon’thavetodietouse!


SocialSecurityFacts

8

CaliforniapublicschoolteachersdoNOTpayintosocialsecurity

Currentparticipantspay6.2%oftheirsalarytosocialsecurity.Mosthavesomeother

formofretirement(401k,IRA,Pension,etc)

Currently,teacherspay9.2%intoCalSTRS

WindfallElimination

GovernmentPensionOffset


GovernmentPensionOffset


GPOCalculator

10

CalculateYourBeneOits1.Entertheestimated"gross"monthlyamountofthegovernmentpension(intoday'sdollars)youwillreceiveforworknotcoveredbySocialSecurity:$2.Entertheestimatedmonthlyamountofspouse's,widow'sorwidower'sbeneLitsyouwillreceivebeforeGPO(seeabove):$Compute3.Yourestimatedmonthlyspouse's,widow'sorwidower'sbeneLitamount,afterGPO,is:$

4340

…

…


GPOCalculator

11


4340

2533

…


GPOCalculator

12


4340

2533

0


WindfallElimination


Yearsofsubstantialearnings Percentage

30ormore 90percent29 85percent28 80percent27 75percent26 70percent25 65percent24 60percent23 55percent22 50percent21 45percent

20orless 40percent

DetermineyourGap

14

60626466687072747678808284

12,000

10,000

8,000

6,000

4,000

0

2,000

Client'sAgeIncomeIncomeNeededShortfall

ProjectedAverageMonthlyIncome


IncomeGap

15

$70,000

Begin Working

Retire at 63

28% Net Loss of Spendable Income

$50,400 Teacher Retirement

Income


403(b)/457Income

$50,400TeacherRetirement

Income

$70,000

BridgingtheIncomeGap

16

BeginWorking

Retireat63


Whatisa403b?

17

403(b)-OneofthemosteffectiveLinancialplanningtoolsavailabletoday.

LackofUnderstanding

Beliefthatthemoneywillnotbeaccessible

ViewedasaCOSTRatherthanaBENEFIT

WhyPeopledon’tparticipateina403(b)


403b/457-MeetyourOinancialobjectives

18

Homepurchase

Emergencyfund

Bridgetheretirement

gap

Payoffdebt

Collegeeducation

Pre-taxcontribution

Buybackyearsofservice


403bTSAOptions

19

WhatTypeofAccountFitsYourFinancialNeeds?


Fixed

NoFees

1%-3%

0%--------

Variable

0%--------

+

-

Fees

Indexed

0%

NoFees

+10%

-

403b/457vs.IRAComparison

20

403b/457 IRA

Contributionlimits:-Under50yrsold-$18,000-Over50yrsold-$24,000

Contributionlimits:-Under50yrsold-$5,500-Over50yrsold-$6,500

Contribution-ImmediateAvailableasaRoth(AfterTax)

Pre-taxcontribution-OnTaxesAvailableasaRoth(AfterTax)

NoIncomeLimit/Loansavailable IncomeLimits/Noloansavailable

Availablethroughschooldistrict’sapprovedvendorlist Availablewithanycompany

IRA–IndividualRetirementAccount403b–EmployerSponsoredRetirementAccount

457-DeferredCompensationAccount*YoucantransferyouroldIRAor401ktoyour403b


5yearpayback(monthlyorupto20yearsifforhomepurchase)

Taxandpenaltyfree

Accessyourmoneypriortoretirement

403b/457Feature-Loans


403b/457Feature-Loans

22

$12,000CreditCardDebt(Avg.Payment$225payingoffin135monthsat9.99%)

$3,000TaxDebt($250monthlypayments)

$60,000Ira

(Wasprevious401k)

Rolloverto403b,tobeabletoloan

Take403bloanof$15,000with

monthlypaymentsof$279at4.5%paidbackin60

months


403b/457Provisions

23

Retirementprovisions:•  403b:55andseparatedor59½toavoidIRSearlypenalty

•  457b:Anyageonceseparatedor70½stillworking

Hardshipwithdrawsmustqualify:•  Foreclosure/eviction•  Medicalbills•  Deathofimmediatefamily

•  Tuition

Transfers/Exchanges/Rollovers:•  Rulesforplantoplan•  Previousemployerorexisting

•  Suitable•  TPAProcessandprocedures


Howmuchcanyoucontribute?

24

Calculations Current QuickMax Proposed#1 Proposed#2TaxFillingInformation

FederalStatus/Allow S/0 S/0 S/0 S/2StateStatus/Allow S/0 S/0 S/0 S/2AdditionalAllowances 0 0 0 0

IncomesGrossIncome/Paycheck $4,000.00 $4,000.00 $4,000.00 $4,000.00AdditionalIncome $0.00 $0.00 $0.00 $0.00SummerPay $0.00 $0.00 $0.00 $0.00Pre-TaxWithdrawalsPre-Tax125 $115.00 $115.00 $115.00 $115.00

403(b)$0.00 $2,000 $100 $194.430% 47.9168% 2.5% 4.8608%

Pension $280.00 $280.00 $280.00 $280.00TotalTaxable $3,605.00 $1,688.33 $3,505.00 $3,410.57TaxationFederalTaxes $509.06 $187.31 $484.06 $346.90StateTaxes $124.53 $23.03 $117.93 $92.26LocalTax $0.00 $0.00 $0.00 $0.00FICA&Medicare $297.20 $297.20 $297.20 $297.20MarginalTaxBracket 31.60% 17.20% 31.60% 21.60%TaxSavings N/A $423.25 $31.60 $194.43After-TaxDeduction $158.00 $158.00 $158.00 $158.00NetPay $2,516.21 $1,022.79 $2,447.81 $2,516.21

EstimatedChangeinTakeHomePay: ($1,493.42) ($68.40) $0.00

SamplePaycheckReport


403b/457Plan


Thegriddisplaystheestimatedaccumulatedvaluesfrommonthly403b/457contributionsovertimeillustrationthepowerofcompoundinginterest.

Year Monthly 4% 6% Monthly 4% 6%1 $100 $1,221.84 $1,232.65 $100 $1,221.84 $1,232.655 $100 $6,617.91 $6,948.59 $100 $6,617.91 $6,948.5910 $100 $14,669.60 $16,247.34 $100 $14,669.60 $16,247.3415 $100 $24,465.71 $28,691.18 $200 $31,083.61 $35,639.7820 $100 $36,384.17 $45,343.84 $200 $51,053.76 $61,591.2225 $100 $50,884.81 $67,628.86 $300 $81,968.41 $103,268.6930 $100 $68,527.07 $97,451.25 $300 $119,580.81 $159,042.54

403b/457Plan–TheCostofwaiting……


Thegriddisplaystheestimatedaccumulatedvaluesof(2)25yearoldnewschoolemployees.ClientAstartsaving$500rightawaybutonlysavesfor10yearsClientBwaitsuntilage35tostartsaving$500amonthBothplantoretireatage60.

ClientA Monthly 6% ClientB Monthly 6%

Hiredatage25 $500 $6,163.26 Hiredatage25 $0 $0

Year5(age30) $500 $34,742.89 Startatage35 $500 $0

Year10(age35) $500 $81,236.73 Year10(age45) $500 $81,236.73

Years11+ $0 Year20(age55) $500 $226,719.34

Year35(Age60) $0 $348,657.56 Year25(Age60) $500 $338,144.51

THANKYOUFORATTENDING!2015©Teacher’sPension&InsuranceServices

Welookforwardtomeetingwithyoutodiscussyourindividualquestionsandneeds.

DanielKrause209-765-0592

Understanding Your Retirement -...

Documents

Transcript of Understanding Your Retirement -...