We all want to retire someday BUT HOW DO WE MAKE SURE WE HAVE ENOUGH MONEY?

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1 We all want to retire someday BUT HOW DO WE MAKE SURE WE HAVE ENOUGH MONEY?

2 Disclaimer We are not financial advisors or professional retirement counselors Information we will share today should be checked and confirmed with other professional sources. Any decisions you make regarding retirement planning should be based on your own research and comfort level. Your best move might be to just leave now before it gets confusing.

3 80% Rule A very common rule of thumb is that you will need 80% of your annual pre-retirement income during your retirement years Why 80%? No more: State Teacher Retirement System (STRS) Payments Retirement saving contributions CTA Dues Work Expenses

4 How to fill the 80% bucket? STRS Defined Benefit STRS Defined Benefit Supplement Account 403b/457/IRA/Roth IRA accounts Other Income in Retirement

5 Let s talk about STRS baby.. Your defined benefit is a monthly income you will be paid by STRS. Your defined benefit is based on three factors: Age at Retirement Years of Service Final Compensation

6 Age at Retirement STRS uses a table to determine your age factor to use in the formula to calculate your defined benefit. There are two different formulas available: 2% at 60, or Classic versus 2% at 62, or New Anyone entering STRS after 1/1/2013 is in the new group

7 Age Factor Table Retirement Age CalSTRS 2% at 60 Retirement Age CalSTRS 2% at % % % % % % % % % % % % % % % % % % % % % % % % % % For members under CalSTRS 2% at 60, a career factor of 0.2 percent will be added to your age factor if you retire with at least 30 years of earned service credit, up to a maximum age factor of 2.4 percent.

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9 Years of Service Simply put, the years you have paid into STRS. This could come in the form of temporary, probation or permanent status either full or part time. Unused sick leave can also count toward your years of service calculation, more on that later!

10 Final Compensation If you have more that 25 years of service, your single highest year of base compensation (not extra duty, summer school, coaching, etc) is used. If less than 25 years of service, an average of your three highest years of base compensation.

11 Here s how it works Age Factor x Years of Service x Final Compensation Equals Annual Benefit / 12 = Monthly Benefit

12 Let s do it for real The STRS website has a great calculator so you can estimate your monthly benefit amount! Free and easy to use, but you should set up your account online first at to access your most recent information.

13 How about some examples Jim is a 45 year old teacher (DOB 2/1/1973) who started in the SUHSD at 27 years old on 8/1/2000. He is in the 2% at 60 STRS system. He is in his 19 th year of service and wants to retire at the end of the school year after he turns 60 years old. Jim is married, spouse s DOB 1/5/75. The date he wants to retire is about 14 years from now, or 7/1/2033. At that point, he will have 33 years of service (no other service credit) He uses an average of 2 sick days per year, so he has 264 unused days Since it s 14 years in the future, let s say he makes $100,000 per year Let s see how his defined benefit looks.

14 Let s plug in the numbers

15 Retiring at age 60 after working 33 years and earning $100,000 in your last year can fill your bucket in different ways Option Benefit Beneficiary Survivor Member Survivor % of Work $$$ 0% $ $ % ($8333) 50% $6063 $3031 $ % ($8333) 75% $5867 $4400 $ % ($8333) 100% $5645 $5645 $ % ($8333)

16 A different example.. Layne is a 28 year old teacher (DOB 2/1/1990) who started in the SUHSD at 27 years old on 8/1/2017. He is in the 2% at 62 STRS system. He is in this 2 nd year of service and wants to retire at the end of the school year after he turns 60 years old. Layne is married, spouse s DOB 1/5/92. The date he wants to retire is about 31 years from now, or 7/1/2050. At that point, he will have 33 years of service (no other service credit) He uses an average of 2 sick days per year, so he has 264 unused days It s 31 years in the future, but let s still say he makes $100,000 per year Let s see how his defined benefit looks.

17 Let s plug in the numbers

18 Retiring at age 60 after working 33 years and earning $100,000 fills the bucket differently for new members Option Benefit Beneficiary Survivor Member Survivor % of Work $$$ 0% $ $ % ($8333) 50% $4915 $2457 $ % ($8333) 75% $4756 $3567 $ % ($8333) 100% $4575 $4575 $ % ($8333)

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20 STRS Defined Benefit Supplement Account Establish your account at to see your current balance. 8% (9% for new members) of the money you earn for any extra duty you do, such as: Coaching, Summer School, Saturday School, Tutoring, Department Chair, Major/Minor Stipends, etc is deposited into your Defined Benefit Supplement (DBS) account with STRS. The District contributes an additional 8.25%. This money is held as a separate investment. Upon retirement, you can take it one of three ways: 1) Lump sum 2) Annuity Payments 3) Rollover into another account

21 403b/457/IRA/Roth IRA accounts These are different types of investment or saving accounts recognized by the IRS with different tax advantages and features. Let s start with 403b and 457 accounts

22 Pre Tax Saving and/or Investing 403b/457 Money is taken from your paycheck pretax, which lowers your adjusted gross income. This money is not subject to federal or state income tax witholding. The money you deposit can grow tax deferred, you only pay income tax when you withdraw it. Individual Retirement Account (IRA) You deposit money and then deduct that amount when completing your yearly taxes, either lowering your tax bill or increasing your return. The money you deposit can grow tax deferred, you only pay income tax when you withdraw it.

23 Post Tax Saving and/or Investing Roth IRA You deposit this money as you would in any savings account (meaning you pay income taxes on it) but the money can grow tax free and you do not pay income tax on the principal or the growth when you withdraw it.

24 Two big benefits pre-tax contributions and compounding interest Contributing directly from your paycheck, pretax, lessens the pain of saving The net changes to your take home pay will depend on two things: Filing Status Monthly Income Federal and State income tax withholding will likely range from 15% to 25% depending on your situation So pulling out $91 per month for 11 months ($1000 per year) may only lower your take home pay by $68 to $77 per month, not the full $91

25 What can $91 per month do for me? 8 th Wonder of the World Compounding Interest! Investment calculator

26 But where should I put my $$$? DISCLAIMER We are not financial advisors or professional retirement counselors Information we will share today should be checked and confirmed with other professional sources. Any decisions you make regarding retirement planning should be based on your own research and comfort level. Your best move might be to just leave know before it gets confusing.

27 Do your research, but lots of options CalSTRS Pension 2 CTA Retirement Savings Plan Valic Vanguard Etc, Etc Where you put your hard earned money is up to you, but don t forget about the fees!

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29 403b Compare To see all the different options available to SUHSD staff currently and compare their annual costs, go to:

30 Other ways to fill the 80% bucket Part time work (180 day moratorium on STRS work) Passive income (Rental property) Trust Fund Play the Lotto!

31 Final thoughts STRS Beneficiary Option You can choose a beneficiary option as soon as you are eligible for STRS retirement (age 55 with at least 5 years of service). Should you die before retirement, your beneficiary will receive monthly payments. If no beneficiary option has been selected, your surviving beneficiary will receive the cash value of your account. Life Insurance Should be part of your planning if you have dependents.

32 It s never too early or too late to start! Questions?