Secure Your Future

At last, 55/25 is a reality — and it’s permanent

Mar 13, 2008 12:52 PM

Now that 55/25 has been signed into law the UFT will make every effort to ensure that members get the information they need to participate in this huge pension improvement. There is a Q&A insert in this issue of the New York Teacher and the Q&A will also be distributed as a special issue of PensioNews. There will be meetings in each borough, see the box on page 2, informational letters will be mailed to members and phone reminders will bring information to all UFTers. The union will work with the Teachers’ Retirement System and the Board of Education Retirement System (BERS) to see that these agencies also contact members and provide information.

The earliest retirement date under the new law will be June 30. If you are sure you want to retire at the end of this school year, call 1-212-598-6866 to make a final pension consultation. Call now if you plan to retire this July or August (after your summer program is completed).

Remember, this is a new permanent benefit for those members who opt into the program — not a one-shot incentive. There is no reason to rush into retirement if you are not ready. Retirement is a long-term event that requires thought and planning and should be done with deliberation.

In order to make an informed decision as to whether to retire now, as we have mentioned before, you have many things to think about:

• How much income will you need each year over your lifetime? Many experts believe that in order to live at least as well in retirement as you did before you retired you should replace at least 100 percent of your pre-retirement income plus have built-in inflation protection.
• Where will this income come from? Most of us are among the small minority of Americans who still enjoy all three legs of the retirement income stool — our defined benefit pension (the qualified pension plan — QPP), Social Security and income from our supplemental tax-deferred annuity program. Some never elected a TDA but they will have their pension and Social Security.
• How long must income last? The fastest growing age group in America is 80 and above. As educated, intelligent people, we should live longer than average. As of Dec. 31, 2007, TRS statistics show that 10,570 octogenarians, 2,556 nonagenarians, and 137 centenarians are collecting their pensions. All these categories have larger numbers than the last time we reported on this. Retirement may last four decades or more.
• Have you thought about what you are going to do with your TDA? For many members, the TDA is the largest single fiscal asset they posses (outside of, possibly, their residence, which, since we need a place to live, most financial experts tell us should not be considered a financial asset). If you are an astute investor, or you have a highly trusted financial advisor (not a new friend you make at this time of your life), you may wish to remove the TDA from the TRS and invest it on your own. If you are like the vast majority of retirees and are not a financial expert, or you do not have a trusted financial advisor, you may wish to leave the investment with the TRS in a deferred-account status. You may leave the money for continued investment for the rest of your life. If at some time in the future you want to remove the funds you may do so at any time. The deferred account is invested under the same rules as your in-service account. (Sorry, you cannot continue to contribute new money into the account.) The fund is protected for your beneficiaries. The IRS’ required minimum distributions rules apply after age 701/2.

Another choice, which has been made by nearly 4,000 TDA participants, is to convert the TDA account into a lifetime stream of payments, which can never run out as long as you live, by converting the account into an annuity. TRS’ TDA annuity rates are among the most favorable in the investment world.

We will highlight other areas of importance in retirement planning in future issues. And don’t forget to attend pension clinics for more information.

New investments

After years of study and preparation, the TRS will soon offer three new investment programs for Tier I/II members and all TDA participants. It will also offer greater investment flexibility for TRS members. These improvements will be permanent and will be available as of July 1.

The TRS will provide information on the new programs in the near future. Watch for announcements.

“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS. BRONX: 1-718-379-6200; BROOKLYN: 1-718-852-4900; MANHATTAN: 1-212-598-6800; QUEENS: 1-718-275-4400; STATEN ISLAND: 1-718-605-1400; Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.