A Tale of Two Savers. Age 25. I'm a long way from retirement. I really want to buy a truck...

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1 Page 1 of 8 A Tale of Two Savers These two friends grew up together, and they have similar careers and incomes. See these two savers paths to retirement go in different directions. Which path will you choose? Age 25 I'm a long way from retirement. I really want to buy a truck... Paul Pennywise but I m going to wait. The earlier I start saving on my own, the more money I ll have at retirement. I would rather pay myself $520 a month for retirement than pay the bank $520 a month for a truck my budget won t allow me to do both. Compound interest is awesome, especially at my age!

2 Page 2 of 8 Donnie DeLay so my plan is to hold off saving for retirement. I ll probably be making more money later, so I ll just save more then. I m only 25 I'll have lots of time to catch up. I can get a new truck right now for only $520 a month. Budget? Don t need one. Having a new truck is awesome, especially at my age! Age 45 I took a mid-career look at my retirement picture today... Paul Pennywise and I m in pretty good shape. I've regularly saved $520 a month in my retirement savings account since I was 25 and I have a good chunk of change in there now. Even if I stop contributing today and let compound interest do its thing, my savings will grow pretty quickly. Combined with KPERS and Social Security, I m confident I ll have a secure retirement in 20 years. Donnie DeLay and it isn t good. I ve had a few nice trucks and a great house, but I never started that budget. I only started saving $520 a month a few years ago. I finally have some money in my retirement savings account, but I m a little worried I won t have enough to retire at 65, even when it s combined with my KPERS benefit and Social Security. Age 65

3 Page 3 of 8 I'm really looking forward to retirement... Paul Pennywise and I m sitting pretty with a sizeable retirement savings account. I stopped contributing when I was 45. With the extra $520 a month, I bought golf clubs. The next month I bought golf lessons. That was 20 years ago. Now I play every weekend. After I retire this year, I m taking a golf trip overseas. I asked my buddy, Donnie, to go with me but he can t afford it. Donnie DeLay but I ll have to keep working for a while. My good friend, Paul, stopped saving about the same time I started. While he was buying a new truck and playing golf, I was struggling to keep my old truck running. I wish I would have started at age 25 like Paul. He ll be retiring soon and going on golf trips, while I ll be punching the clock. Which saver do you relate to? Most financial advisors say you ll need at least 70% to 80% of your working income for a sound retirement. Are you heading in the right direction? If not, you can get on the path to a better retirement by saving on your own through a tax-sheltered plan like a 457 (b) deferred compensation plan, a 403(b) annuity plan or an individual retirement account (IRA). State employees can participate in KPERS 457 ( the State s 457(b) savings plan. Many local governments have adopted the State s plan or sponsor similar plans of their own. Most KPERS school members can participate in a 403(b) plan through their school districts. Check with your employer about participation.

4 Page 4 of 8 Get Extra Life Insurance During Open Enrollment KPERS life insurance provides financial protection for your loved ones. You automatically have coverage for 150% of your annual salary. And your employer pays the cost. But what if you need more? You can add optional life insurance. You decide how much you need and pay premiums through payroll deduction. Fall is the perfect time to add extra coverage during annual open enrollment. Cities, Counties and Schools: September 1-30 State and Board of Regents: October 1-31 Guaranteed Coverage During open enrollment, most members can get guaranteed coverage. If you want more than the guaranteed amounts, you can apply and answer a few health questions. Check the open enrollment schedule. Open enrollment flyer ( If you re happy with your current coverage, you don t need to do anything. To start or increase coverage, login (../../mykpers/index.htm) to your KPERS account during open enrollment to apply. It s quick and easy. Who's Covered Coverage Options Guaranteed Coverage Member Spouse Child* In $5,000 increments, up to plan max $400,000 In $5,000 increments, up to plan max $100,000 $10,000 for $1/month $20,000 for $2/month Add up to $50,000 without health questions (to $250,000 guaranteed max) Add up to $25,000 without health questions (to $25,000 guaranteed max) $10,000 or $20,000 without health questions

5 Page 5 of 8 * One premium covers all eligible children in your family up to age 26. Only one parent may have child coverage if both parents are members. No age limit with disabled dependents. Life Insurance Resources 01:38 Optional Life Insurance - Open Enrollment Video ( Not Sure How Much You Need? Estimate Your Life Insurance Needs ( KPERS 101 What is a Fiduciary? Fiduciary (fi-doo-shee-air-ee) noun: A person to whom property or power is entrusted for the benefit of another. It's the highest standard of care and accountability. Did You Know? The Retirement System paid over $1.5 billion in monthly retirement benefits in FY 2017.

6 Page 6 of 8 KPERS serves you as a fiduciary, holding your assets in trust, growing those assets through investments and delivering promised benefits when the time comes. KPERS Investment Snapshot as of 5/31/2017 Target Return = 7.75% Our actuarial projections assume an average, long-term investment return of 7.75%. In some years, returns will be below that rate, and in others, returns will exceed it. While Total Assets = $18.3 Billion investment returns each year are important, healthy returns over time are essential for proper funding. KPERS 25-year return is 8.4%*, exceeding the 7.75% target. (../img/ /moneymatterschart.png) *average annualized total returns as of May 31, 2017

7 Page 7 of 8 Letter from Alan Conroy, Executive Director This summer, KPERS' actuary completed our actuarial valuation. This is a snapshot of our financial health. Think of it like your annual check-up. Your doctor checks your overall health and highlights any problem areas. In much the same way, our actuary reviews how much money came in throughout the year in contributions and investments, then estimates how much we need to pay future benefits. Our latest valuation shows KPERS' financial health is on the right track, but we still have room for improvement. You may recall that the KPERS Board of Trustees changed our long-term investment target to 7.75% last year. We knew this would increase the unfunded liability. The valuation showed an increase of about $600 million. The unfunded liability is the difference between the value of our assets and the cost of future benefits. We may see the unfunded liability increase slightly over the next few years and then it should start to decrease. Even with the change, KPERS' funded ratio held steady at 67%. This is the measure of assets available to pay future retirement benefits. Funding for benefits comes from you, your employer and investments. The valuation helps us calculate how much employers need to pay to help fund the System. Keep in mind, what we do not pay now will cost more later. It is consistent and full employer contributions over time that will make the most difference in the Retirement System's long-term soundness and sustainability. You may be wondering what this means for your retirement benefits. The valuation highlights long-term funding concerns that we need to be aware of. But you should not let it affect your retirement decisions. Your retirement benefits are safe and will be here when the time comes. KPERS is prefunded through member and employer contributions and investment income. Contributions are made and invested during your career to pay for benefits when you retire. Using the most recent annual information available, KPERS received contributions and investment income of almost $2.7 billion and paid out just over $1.4 billion in monthly retirement benefits. Over the years, investments have paid for more than 50% of benefits. Our 25-year investment return is 8.4%, higher than our 7.75% long-term target. If we meet our actuarial assumptions and investments stay on track, the Retirement System should be close to 100% funding by If you would like to learn more about KPERS long-term funding, you can download the 2016 valuation report ( or the valuation presentation ( As always, we welcome your comments and questions. Please feel free to contact me anytime at or aconroy@kpers.org (mailto:aconroy@kpers.org).

8 Page 8 of 8 Contact KPERS: Phone or kpers@kpers.org (mailto:kpers@kpers.org) Our Mission: In our fiduciary capacity, we exist to deliver retirement, disability and survivor benefits to our members and their beneficiaries. The fiduciary standard is our driving force. That means we put the interest of our members first. It is the highest standard of care and accountability. A fiduciary relationship is highlighted by good faith, loyalty and trust. Board of Trustees: Lois Cox (Chair), Kelly Arnold (Vice Chair), Ernie Claudel, Shawn Creger, Jake LaTurner, Ryan Trader, Suresh Ramamurthi, Michael Rogers Executive Director: Alan D. Conroy