The Fundamentals of Planning Your Retirement

Transcription

1 The Fundamentals of Planning Your Retirement Duval County Public Schools Presented By: Robert Ard, CCO TSA Consulting Group, Inc.

2 The Fundamentals of Planning Your Retirement What is retirement? FRS Retirement Options Employer Sponsored Voluntary Retirement Plans Drop Special Pay Plan Money after Retirement

3 Successful Retirement Freedom Financial Freedom Freedom of Time Freedom of Choice Travel Health Care Covered

4 When to retire? After 30 years of service More years equals a higher factor Is 62 years old enough? Can you work longer? What will your Social Security Benefit be? Do you have enough saved?

5 Retirement At a Glance YOUR RETIREMENT OPTIONS AS AN EMPLOYEE OF DUVAL COUNTY PUBLIC SCHOOLS

6 Retirement Options Florida Retirement System All Full-time employees Pension Plan Investment Plan

7 Florida Retirement System Pension Defined Benefit Plan Years of Service Age Average Final Compensation Investment Plan Defined Contribution Contributions amount Investment Results

8 FRS Pension How much income can I expect? AFC x YOS x Factor Example: $50,000 x 30 x 1.6% = $24,000 What are my Benefit Payout Options Life only Life with 10 year certain Joint with 100% to the Survivor Joint with 2/3 to Survivor

9 FRS Investment Plan Defined Contribution Plan Benefits based on Employer contributions Investment Returns Your investment skills Portability If you move from an FRS employer to a different employer, this money moves with you.

10 FRS Pension & Investment Plans Health Insurance Subsidy Contribution made each month by employer to provide a benefit for the payment of health insurance premiums during retirement Benefit amount = $5.00 per month for each year of creditable service Example: 30 years x $5.00 = $150/mo.

11 FRS Pension & Investment Plans Changing your mind Pension to Investment Actuarial Value of Account Smaller in early years Investment to Pension Buy in at Actuarial Value Investment results important

12 Pension Plan Comparisons Pension Investment Plan Design Defined Benefit Defined Contribution Vesting Transfer-ability Retirement Age Investment Management 6 Years (If after years) No Only FRS Employer 62 or 30 Years of Service (Age 65 if employed after 7/1/11) FRS 1 Year Yes Any eligible plan Governed by IRS Rules Self DROP Eligibility Yes No

13 Considerations Career Choices The longer you stay in the system, the more the FRS Pension looks good. The more mobile you are, investment control (Investment Plan) may be more important If you are undecided, you have the choice of changing later. Problem with this is if market forces change, change may no longer be an option.

14 Retirement Your Part!

15 Personal Savings Options Non-Employer sponsored savings Tax Deductible (if you qualify) IRA Mutual Funds Annuities Stocks, Bonds, etc. Non-Tax Deductible Stocks, Bonds Real Estate Annuities Commodities Etc.

16 Your Pre-Tax Retirement Savings Types of plans available through Duval County Public Schools 403(b) Tax Sheltered Accounts 457(b) Deferred Compensation Program 401(a) Special Pay Plan

17 After tax vs. Before tax Before tax savings (Pre-tax) Immediate Savings In a 25% Federal Income Tax bracket you can increase your savings by 33%. Pre-Tax savings lower your taxable income each year After Tax Savings Pay taxes before savings. same take home pay Pay taxes at your higher tax bracket Contribute less with

18 $100 per 6% for 30 years = $76,223 (after tax) OR $133 per 6% for 30 years = $134,268 (before tax) Before Tax vs. After Tax Savings $140, $120, $100, $80, $60, Before Tax Savings $40, $20, $ After Tax Savings 25 30

19 403(b) Retirement Savings Available to Education and Qualified Non-Profit Organization Employees Pre-tax savings and accumulation Savings made through salary reduction Deposits made to the authorized vendor of your choice Tax Deferral Account grows without current taxation

20 457(b) Retirement Savings Available to Governmental Employees Governed by IRS and Plan Document Pre-tax savings and accumulation Savings made through salary reduction Deposits made to the authorized vendor of your choice Tax Deferral Account grows without current taxation

21 Rules for using accounts Withdrawals Governed by Internal Revenue Code Only pay taxes when withdrawn Loans Loans up to ½ of account to $50,000 Retirement Income Take income as you need it after retirement (Subject to Internal Revenue Guidelines).

22 Contribution Guidelines for 403(b) and 457(b) Basic Limit $18,000 in 2017 Aged Based Addition $6,000 additional contribution if you are over 50 years old Service Based Catch-up Up to $3,000 additional contributions - 403(b) only Subject to Years of Service and Prior Contribution Restrictions

23 What is DROP? FRS Pension benefit that was designed to allow an employee to work past normal retirement age and increase their personal wealth through accumulations in their DROP account.

24 DROP Only available to FRS Pension Plan Participants After Reaching Qualified Retirement Employee retires from Pension Plan Payments made to a trust earning 1.3% Money available at full retirement Portability You may take distribution in cash, utilize a rollover, or combination of two.

25 DROP When can you DROP? 30 years of Service or Age 62 and vested Age 57 if later Over age 57 if instructional What happens if I don t DROP? Normal Pension Lose DROP options after one year if you have reached age limit

26 DROP How long can I DROP? Up to 5 years What if I want to keep working after five years Must come back as a new employee after being retired for at least one year

27 What happens at DROP termination? DROP Accumulations for most participants $100,000 to $200,000 DROP Options Take Cash Pay taxes Rollover Defer taxes Combination Cash & Rollover

28 Your Bencor Special Pay Plan

29 Contributions Made to the Bencor Special Pay Plan Accumulated Sick Leave Accumulated Annual Leave

30 Why do you have the Bencor Special Pay Plan? Taxes Taxes Taxes

31 Tax Savings & Deferrals FICA SS and MediCare Taxes Federal Income Taxes

32 FICA & Medicare taxes Without the BENCOR Plan you pay up to 7.65% in Social Security and Medicare payroll taxes With the BENCOR Plan Avoid all Payroll Taxes Example: $20,000 x 7.65% = $1,530 savings

33 Federal Income Taxes Without the Bencor Plan you could pay 25%, 31%, 36% or higher in income taxes With the Bencor Plan Defer all Income Taxes Control Payment of Income Taxes

34 Special Pay Comparison Without Bencor Plan $ 10, , Fed Tax FICA Medicare With Bencor Plan $ 10, $ 0 Fed Tax Deferred $ 0 FICA Saved $ 0 Medicare Saved 6, Net Pay $ 10, Deposited

35 Contribution Limits Annual Maximum Limits 100% of Salary up to $54,000 Multiple Contributions Made over Drop Years, or Final years prior to retirement (subject to employer s Board Policy)

36 Contributions during DROP Multiple Annual Contributions Increasing percentage of Sick and Bank Point leave at end of each year of DROP. 5 Year example: Year 1 20% Year 2 25% Year % Year 4 50% Year 5 100%

37 Other Features Liquidity & Flexibility Safety Tax-Deferred Earnings Optional Investment Accounts Loans

38 Employee Instructions Complete Enrollment Forms Address Beneficiary Investment Direction

39 Employee Account Information BENCOR Administrative Services Administers accounts for BENCOR Offices in Westchester, OH

40 Employee Account Information Using your account (Subject to IRS Guidelines) Withdrawals at employment separation Use as income or take as you need Loans ½ of account balance up to $50,000 (one time $100 fee) Change Investments Over the phone, online Rollovers In & Out

41 Your Money After Retirement

42 DROP or Special Pay Rollover DROP Accumulation IRA 403(b) & 457(b) 401(a)

43 DROP or Special Pay Rollover DROP Accumulation IRA Existing IRA Rollover IRA 59 ½ Minimum Age Subjects $ to IRA restrictions Fees and Charges

44 DROP or Special Pay Rollover DROP Accumulation 403(b) & 457(b) Existing account only Evaluate any fees & surrender charges

45 DROP Rollover DROP Accumulation 401(a) Existing Account No surrender charges Make final decisions at later date

46 Questions & Answers