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Retirement Income 1 Overview & Benefit Options Presented by Jan Hawkins Senior Retirement Benefits Officer Spring 2015.

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Presentation on theme: "Retirement Income 1 Overview & Benefit Options Presented by Jan Hawkins Senior Retirement Benefits Officer Spring 2015."— Presentation transcript:

1 Retirement Income 1 Overview & Benefit Options Presented by Jan Hawkins Senior Retirement Benefits Officer Spring 2015

2 Retirement Income 2 What Is IPERS? The largest public retirement system in Iowa ● Members include employees of: ○ public schools, cities, counties, state government, state universities, State Board of Regents, & other Approximately 340,000 members 2,000 employers 108,000 retirees $1.8 billion in benefit payments paid annually 2

3 Retirement Income 3 What Is IPERS? 401(a) (defined benefit plan) under IRS codes: ● Lifetime benefits are paid based on a formula, not on the amount of contributions. ● Formula factors ○ Age ○ Years of service ○ Highest average salary 3

4 Retirement Income 4 DB vs. DC: What’s the Difference? Guaranteed Benefit YES. Monthly benefit is guaranteed for life. NO. Benefit fluctuates with market performance. Investment Risk Pooled investments. IPERS takes on all the risk. YOU take on all the risk. Withdrawals & Loans NOT AVAILABLETYPICALLY AVAILABLE Vesting 100% in your contributions. Portability YES Death Benefits YES Disability Benefits YES. IPERS provides disability benefits depending on certain qualifications. NO. Defined contribution plans do not usually provide disability benefits. Fees & Expenses INCLUDEDTYPICALLY HIGH 4 401(k), 403(b), etc. (Defined Contribution Plan) IPERS (Defined Benefit Plan)

5 Retirement Income 5 How Does It Work? Contributions from active members and employers are paid in. Lifetime retirement benefits, disability benefits, death benefits, and refunds are paid out. The IPERS Trust Fund The IPERS Trust Fund must be used for the exclusive benefit of members and their beneficiaries. 5

6 Retirement Income 6 What’s My Part? Contributions + interest ● Contributions based on gross wages ● Current Regular class contribution rate: ○ 5.95% from you, the member ○ 8.93% from your employer IPERS can adjust the total contribution rate by no more than 1.0 percentage point up or down, following an actuarial valuation. 6

7 Retirement Income 7 IPERS Annual Interest Rate 1.99% - 2015 1.65% - 2014 1.28% - 2013 1.34% - 2012 2.03% - 2011 2.64% - 2010 3.61% - 2009 5.33% - 2008 5.79% - 2007 7

8 Retirement Income 8 What Is “Vesting”? Vested status is obtained after: 28 quarters (7 years) of reported wages, or When wages are reported in the same calendar year age 65 or older is attained 8

9 Retirement Income 9 Vesting Entitles the member to: ○ Monthly retirement or disability benefit ○ A portion of employer’s investment if refund is taken and Is required for a service purchase 9

10 Retirement Income 10 Benefit Formula Monthly benefits are calculated using: ● Years of Service ● Age ● Highest Average Salary 10

11 Retirement Income 11 Benefit Formula – Years of Service 11 Each year worked earns 2% of the 60% payable for the first 30 years. 1% for a maximum total of 65% payable for each additional year after 30. Early retirement reduction if before normal retirement.

12 Retirement Income 12 Rule of 88 Rule of 62/20 Age 65 At least age 62 with 20 or more years of service Age + Years of service = 88 or greater Regardless of service Normal Retirement Age (No Age Reduction) 12

13 Retirement Income 13 Reduce 3% a year for portion of service through 06/30/12 From nearest normal retirement eligibility (rule of 88; rule of 62/20; age 65) Reduce 6% a year thereafter From age 65 As of July 1, 2012 Early Retirement Age Reduction 13

14 Retirement Income 14 Maximizing Years of Service Free credit ●Leaves of absence ○Granted prior to July 1998 ○Requires verification from employer ●Active military duty ○Entered military as an IPERS-covered employee and returned to IPERS employment within one year of discharge ○Submission of DD214 form required 14

15 Retirement Income 15 Beginning 01/01/16: Purchasing will take place only during the retirement process. Increased accuracy of cost Reduced risk of under- or overpaying Request an official cost quote when you apply for retirement benefits. Application for Service Purchase Service Purchases 15

16 Retirement Income 16 Service Purchase Options Refunded IPERS service IPERS employment not previously covered Other public system(s) (if not eligible to draw pension from the other system) Active duty military/leave of absence time not eligible for free credit Nonqualified service (air time) 5-year limit IPERS buy-up credit conversion Buy-back with cost credit 16

17 Retirement Income 17 How Much Will It Cost? Submit an Application for Service Purchase (available at www.ipers.org).www.ipers.org Your service purchase cost will be calculated. ●Official cost quotes generated only after your Application for Retirement Benefits is on file. ●You will receive the cost per quarter and the entire purchase cost. Cost quotes are valid for six months. Remember, completing the Application for Service Purchase does not obligate you to purchase service. 17

18 Retirement Income 18 Saving Up for a Purchase Request a basic cost estimate anytime before retirement. ●Application for Service Purchase Save money in a separate retirement account that can eventually be rolled over to IPERS for your service purchase. 18

19 Retirement Income 19 Retirement Estimates Request benefit estimates from IPERS before deciding on a retirement date. For detailed information on your account: ● Call toll-free 1-800-622-3849 or locally at 515-281-0020. Phones are answered by Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday, excluding holidays. Working a little longer could increase benefits significantly. May be eligible to retire earlier! 19

20 Retirement Income 20 Monthly Benefit Six monthly payment options ● Always lifetime to member ● Different death benefit provisions IMPORTANT! Option choice cannot be changed once benefits are paid. 20

21 Retirement Income 21 Option Summary OPTION 1 Guaranteed death benefit in $1,000 increments OPTION 2 Death benefit only if balance of investment remains OPTION 3 No death benefit OPTION 4 Dual life annuity OPTION 5 Guaranteed 10 year monthly benefit payments OPTION 6 Dual life annuity with pop-up feature for member Always lifetime to member! 21

22 Retirement Income 22 Pre-Retirement Death Benefits Designated sole beneficiary of vested member can elect lump sum payment or lifetime monthly benefit (provided monthly benefit is $50 or more). If member not vested at death, beneficiary only eligible for lump sum payment. If designated beneficiary is more than one individual or entity, death benefit can only be paid in lump sum payment. Federal law now allows multiple beneficiaries to rollover lump sum payments. If no beneficiary has been designated, lump sum payment made to the estate. 22

23 Retirement Income 23 Important Facts to Remember! Working any time in a month makes you ineligible for benefits that month. You can get a paycheck in the same month you start IPERS payments. 23

24 Retirement Income 24 Getting Monthly Benefits Started Must terminate employment unless age 70 Must be age 55 or older ● Unless vested and eligible for IPERS disability benefits, first month of entitlement is month following the month you terminate employment Must submit completed application Benefits paid the last business day of month 24

25 Retirement Income 25 Taxes Benefit payments are subject to federal and state income tax ● You can request that the tax can be withheld from monthly benefit payment 1099R mailed each January For detailed tax information, contact the IRS for publication 575 or consult a tax advisor 25

26 Retirement Income 26 Reemployment Must have a bona fide retirement. It’s your responsibility to contact IPERS if you are returning to an IPERS-covered position. ●It’s possible that returning to an IPERS-covered position will affect your benefit. Know the Social Security earning limits 26

27 Retirement Income 27 Bona Fide Retirement To qualify for a bona fide retirement, you must: End all service with covered employers, including non-covered service. File an IPERS benefit application. Stay out of all employment with a covered employer for one month. Stay out of all employment in an IPERS- covered position for an additional three months. 27

28 Retirement Income 28 Reemployment Guidelines Applies to IPERS-covered employment only $30,000 earnings limit under age 65 (benefits reduced 50 cents for each dollar earned over the limit) No earnings limit after age 65 Benefits recomputed upon termination 28

29 Retirement Income 29 Online Access 24/7 29

30 Retirement Income 30 When to Contact IPERS 3–5 years from possible retirement for estimates 5–6 months from retirement to obtain application packet At termination, if before age 55 for additional options If a disability occurs 30

31 Retirement Income 31 The purpose of this presentation is to give you a brief overview of IPERS and upcoming law changes. For detailed information on your account: Call toll free 1-800-622-3849 or locally at 515-281-0020 Phones are answered by Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday, excluding holidays. Website: www.ipers.orgwww.ipers.org E-mail requests: info@ipers.org Retirement calculators Handbook Newsletters Other important information Contact us: 31

32 Retirement Income 32 Thank You! Presented by Jan Hawkins Senior Retirement Benefits Officer

33 Neither Nationwide ® nor any of its representatives give legal or tax advice. Information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice. Nationwide Retirement Solutions, Inc. and Nationwide Life Insurance Company (collectively "Nationwide") have endorsement relationships with the National Association of Counties and the International Association of Firefighters-Financial Corporation. More information about the endorsement relationships may be found online at www.nrsforu.com. Nationwide Retirement Solutions, Inc. and its affiliates (Nationwide) offer a variety of investment options to public sector retirement plans through variable annuity contracts, trust or custodial accounts. Nationwide may receive payments from mutual funds or their affiliates in connection with those investment options. For more detail about the payments Nationwide receives, please visit www.nrsforu.com. Retirement Specialists are registered representatives of Nationwide Investment Services Corporation, member FINRA. In MI only: Nationwide Investment Svcs. Corporation. Nationwide, the Nationwide framemark, and On Your Side are service marks of Nationwide Mutual Insurance Company. ©2012 Nationwide Retirement Solutions Inc. All rights reserved. NRM-6817AO.4 (12/12)

34 Retirement Income Building your retirement income

35 Retirement Income 35 Three sources of retirement income

36 Retirement Income 36 Social Security is only the foundation Calculating your benefit : The amount of your social security benefit depends a lot on when you retire. Delaying your retirement by even a few years can result in a higher monthly benefit. For more information, visit www.socialsecurity.gov

37 Retirement Income 37 Your pension may not be enough How much is enough? Experts agree you’ll need at least 80% of your current income to maintain the same standard of living in retirement*. * Retirement Savings Rule of Thumb, www.debt.org/retirement/how-much-do-i-need-to-save/, accessed Dec. 3, 2012

38 Retirement Income 38 It’s up to you to bridge the income gap Personal savings options: ●Employer-sponsored plans (401k, 457b, 403b, etc.) ●Traditional or Roth IRAs ●Annuities ●Other investments (stocks, bonds, mutual funds etc.) Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Withdrawals may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½.

39 Retirement Income 39 Working longer isn’t always an option Source: 2012 RCS Fact Sheet #2, EBRI, March 2012 70% 60% 50% 40% 30% 20% 10%27% of retirees actually do 70% of retirees expect to keep working in retirement


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