Today you will learn:
• How to determine your retirement
income gap
• How to fill in your gap with CalSTRS
Pension2
• What investment choices are
available
• How to determine an investing
strategy
• How to enroll in Pension2
What is your retirement
income gap?
CalSTRS/CalPERS defined benefit
pension—your “first pension”—typically
replaces about 55% of your salary.
Experts say you’ll need 80% ̵ 90% to live
comfortably.
You’ll need to fill in any gap between
your current income and retirement
benefit with additional savings.
How do you fill in the gap?
Enroll in—or increase your
contributions to—a supplemental
savings plan, such as the CalSTRS
Pension2 plan.
What isPension2?
An employer-sponsored program
offered by CalSTRS that lets you
enhance your income in retirement
through pre-tax or post-tax payroll
deductions.
Open to both certificated and classified
employees.
What plans does Pension2 offer?
CalSTRS Pension2 includes all
Supplemental Saving Plans offered
by CalSTRS
Plans currently offered:
403(b)
457
Roth 403(b)
How do the plans differ?
Tax-Deferred
Contributions
Earnings
Penalty-Free
Distributions*
After age 59 ½
403(b)
Yes
Tax-deferred
457
Yes
Tax-deferred
At any age
After age 59 ½
Roth 403(b)
No
Tax-free
*Upon
separation from
employment
How do tax-deferred plans work?
Pre-tax deduction reduces taxable
income so you may be able to invest
more
Contribution
Reduces take-home
pay by
$25
$18.75
$50
$37.50
$75
$56.25
$100
$75
*Assumes 25% federal marginal income tax rate.
Small investments add up
$700,000
$600,000
$500,000
15 Years of
Conribution
30 Years of
Contributions
$400,000
$300,000
$200,000
$100,000
$0
$100/month $200/month $500/month
*For illustration only. Assumes annual yield of 7 percent, not including
fees, taxes or expenses. Your results may differ.
Annual Contribution Limits
2015 Contribution Limits
Plans
Maximum
Contribution
Age 50+ Catch-up
Contribution
403(b)
Roth 403(b)
$18,000
$6,000
457
$18,000
$6,000
Total
$36,000
$12,000
The advantage of enrolling in a 403(b) and a 457 plan is the
contribution limits are combined. If enrolled in both, you can
contribute up to $36,000 in 2015. If over age 50 and in both
plans, you can defer up to $48,000 in 2015.
Which plan is right for you?
• Do you think
you’ll be in a
lower tax bracket
when you retire?
• Do you plan to
be in a higher
tax bracket
when you retire?
• Do you plan on
withdrawing any
of your savings
before you retire?
• Do you plan on
keeping the
money invested
until age 59 ½?
• Do you like the
idea of not being
taxed when you
withdraw your
retirement
savings?
• Do you plan on
contributing more
money than the
maximum per
year?
Select 403(b) Select Roth
403(b)
Select 457
What investment options are available?
Pension2 offers two investment
strategies.
Which is right for you?
Election A
CalSTRS Easy
Choice Portfolios
Investment
strategies are based
on your projected
retirement date and
your risk tolerance
Election B
Build Your Own
Portfolio
Choose from 22
professionally
selected core funds
Build Your Own Portfolio
Foreign Stock
• Artisan International
• Dodge & Cox International
• DFA International Small
Company
• Vanguard Developed
Markets Index
• Vanguard Emerging
Markets Index
Specialty
• Vanguard REIT Index
• PIMCO All Asset
U.S. Large Cap Stock
• American Growth Fund of
America
• Dodge & Cox Stock
• Vanguard Institutional Index
• Vanguard Total Stock
Market Index
• TIAA Social Choice Equity
Stability of Principal
• Voya Fixed Plus III
• Federated U.S. Treasury
Cash
Bond
• Vanguard Total Bond
Market
• Vanguard Short-Term
Bond Index
Inflation Protection
• Vanguard InflationProtected Securities
Global Stock
• GMO Global Equity Asset
Allocation
• ESG Managers Growth
U.S. Small/Mid Cap Stock
• Vanguard Mid Cap Index
• Vanguard Small Cap
Index
Easy Choice Portfolio
Retired
2020
2030
Conservative
+
Moderate =
Aggressive
2040
2050
Moderate
2020
What are the fees for each option?
Core Funds
25 basis points + fund’s expense ratio
Average fund expense ratio: .31%
A basis point is .01% of your account balance
Charged annually
EXAMPLE: If you have $10,000 in your account, your
annual fee would be:
.25% + .31% = .56% = $56 annual fee
What are the fees for each option?
Easy Choice Portfolios
Conservative Retired (least expensive)
Total Weighted Annual Fee: .30%
Aggressive 2050+ (most expensive)
Total Weighted Annual Fee: .48%
Compare CalSTRS Pension2 fees to other
plans at 403bCompare.com. Many have:
• Higher expense ratios (many >1%)
• Annual fees
• Load fees
Self-Directed Brokerage Account
•
•
•
•
Self-managed account
Roll over money from Pension2
Initial minimum investment: $5,000
Fees: $50 annually, plus brokerage
fees
tdameritraderetirement.com
How do you determine your
strategy?
How involved do you want to be in
building and maintaining your portfolio?
• Do you prefer to keep
• Are you tracking
things simple?
economic trends?
• Comfortable knowing
• Keeping a watchful
investment managers are
eye on your portfolio?
assisting you?
• Enjoy making asset
adjustments and
trades on your own?
Select Election A
Select Election B
How do you enroll?
1. Go to www.Pension2.com
2. Click “Enroll Now”
3. Obtain 403(b)/457 Salary
Reduction Agreement from Payroll
Office/Online
4. Choose contribution amount
5. Select CalSTRS Pension2 as
vendor
6. Start saving!
Call us at (888) 394-2060 for walkthrough
Pension2 Facts to Remember
Ways to save other than payroll deductions:
• Roll over other supplemental savings plans
into Pension2
• Compare plans at 403bCompare.com
• Roll over your Cash Balance benefit
• Purchase additional service credit by rolling
over your Pension2 money
Pension2 Facts to Remember
Your CalSTRS Defined Benefit Supplement
account:
• Lump-sum payment
• Annuitize over period of years
• Roll over to CalSTRS Pension2
Distributions not required until age 70½
Thank you.