Michigan Public School
Employees Retirement
System (retirement)
What’s
YOUR
Tomorrow?
Are you saving enough for ALL your tomorrows?
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Life Insurance Company of the Southwest™
Form No. 11055(0712)
You Can Work At Controlling Your Future
Retirement Questions to Ask Now!
• Are you planning to live to 100?
• What percentage of your Final Salary will you be living on?
• Will you outlive your retirement money?
• Are you saving enough for all your tomorrows?
Longevity: Your Biggest Risk
How many retirement years will you enjoy?*
Example of a female who
reaches a certain age…
Then the average age she is
expected to live
Age
Life Expectancy
(average)
60
65
70
75
80
85
90
88
88.5
89.5
90.5
91.75
93.5
96
* Based on information obtained from AnnuityAdvisors.com
Become Familiar with Your retirement Benefit
How to determine your retirement Pension
• Minimum age and service requirements
• Annual benefit based on final average compensation multiplied
by a pension factor times years of service
•
FAC
x
Final Average
Compensation
1.5%
Pension Factor
x
YOS
Years of Service
• Survivorship options
• Service credits affects pension eligibility
Source: retirement Handbook
Adding to Your Service Credit
Source: retirement Handbook
Retirement Income Gap
Can you live on a fraction of your final salary?
$63,213*
Income needed in 20 years
$35,000
54.9% Net Loss of
Spendable income
$15,765
Teacher Retirement
Income
Begin
Working
*Assumes a 3% inflation factor
Source: retirement Handbook
Retire
at 60
Now Is the Time to Plan & Save
Will you outlive your retirement money?
• Know your retirement expenses
– Don’t forget taxes and medical costs
• Identify your sources of income
– You may not receive Social Security
• Bridge the retirement gap
– Buy years of service
– Explore saving options through your 403(b) and/or 457 plan
– Create an income stream for life
Power of a Pre-Tax Savings Plan
Pre-tax Savings Gives Lacy More
Lacy wants to save $100 a month towards her retirement
She needs help to understand the power of a pre-tax savings plan.
Gross Income per Paycheck
Pre-tax contributions
Standard tax deductions
Post-tax retirement contributions
Take-home pay
Post-tax
Pre-tax
$4,500
$4,500
$0
$133.33
$686.33
$653
$100
$0
$3,713.67
$3,713.67
This hypothetical example is for illustrative purposes only. Taxes are deferred until monies are withdrawn from the plan. This example is based on
a teacher in the state of Michigan claiming single and zero allowances. Source: TRAK Software
How Much Can Be Contributed?
•
The Internal Revenue Code determines an individual's maximum amount that he
or she can defer to the plan free of tax for the year. This may be limited by your
employer’s plan provisions.
•
If you contribute the maximum basic salary deferral limit, and your plan allows,
you can qualify for both the catch-up provisions below. You have the potential to
contribute up to $27,000 to your 403(b) plan during 2015.
•
Basic salary deferral limit: $18,000 in 2015.
•
403(b) 15 years of service cap extension: You may be
eligible to defer up to an additional $3,000.
•
Age 50+ Catch-up: If 50 or older, you may be eligible
to defer up to an additional $6,000 in 2015.
•
Total 2015 contribution limit on combined
employee/employer contributions: 100% of your
includible compensation or $53,000, whichever is less.
How Loans Work
Loans may be available if the plan permits.
All loans from any retirement plan of the employer must be aggregated for
purposes of determining the maximum amount of the loan. Loans can not
exceed the lesser of:
– $50,000 (reduced by the highest outstanding loan balance for the
last 365 days); or
– 50 percent of the present value of the participant’s nonforfeitable benefit under the plan. This amount will not be
violated if the loan does not exceed the lesser of
(1) $10,000 or
(2) 100% of his or her vested account balance.
Distributions
Generally, because 403(b) plans enjoy tax deferral, elective
deferrals in the plan cannot be withdrawn until:
– Age 59½
– Death of the participant
– Total disability of the participant
– On separation from service of the participant
– As the result of a QDRO (Qualified Domestic Relations
Order), or
– As a qualified reservist distribution
Hardship Distributions
Hardships…Only employee salary deferrals can be withdrawn, not interest
or employer contributions. The IRS lists the following as qualifying
hardships:
– Medical expenses of the participant, participant’s spouse, or
dependent
– Purchase of the participant’s principal residence
– Tuition and related expenses for the next 12 months at a
postsecondary institution for the participant, participant’s
spouse, or dependant
– Prevention of eviction from the participant’s
principal residence or foreclosure on the mortgage
of the participant’s principal residence
What Are Your Next Steps?
How I Will Work with You
• Schedule a work-through to calculate your retirement
benefit
• Determine your “retirement gap” and find ways to bridge
that gap
• Explain your 403(b) plan and your savings options
• Address any other questions you may have
Disclosure
• This presentation represents our understanding of the tax code
and state retirement plan.
• You should always consult your tax professional or state
retirement system for your individual situation
• Information believed to be accurate as of July 2013.
For more information
Email:
Life Insurance Company of the Southwest™