Apr 26, 2007 11:29 AM
Having a retiree health plan provided by our employer is more valuable than many realize. The Fidelity Mutual Fund Company recently conducted a study which says that a 65-year-old without employer-sponsored health benefits will need to have about $215,000 in savings to pay Medicare premiums, co-payments and prescription drug costs, among other health related expenses over her lifetime.
Having a defined-benefit pension as we do is great. It is a marvelous feeling, our retired members tell us, to know that each month, for the rest of their lives, they will receive a pension check and a Social Security check. However, for those who elected to contribute to a tax-deferred anuity, having a lump sum of money available for luxuries and other pleasurable things as well as for unforeseen emergencies is an additional comfort. Contributing regularly to the TDA is like adding the cherry to the sundae.
If you are not contributing to the TDA program yet, you should start now. By systematically allocating a set percent of your income — as little as 1 percent of pay up to a maximum of $15,500 per year for those under age 50 ($20,500 per year for those 50 or older) — you can start building a brighter, more secure future.
Investing a fixed-dollar amount or a fixed-percentage of income each payday is an approach called Dollar Cost Averaging. If you are investing in the Variable Annuity A program, this allows you to purchase more units when the unit value is low and fewer units when the unit value is high.
By automatically investing in a TDA, you ensure that you do not fall into the trap of delaying investing until “the time is right.” Instead, it enables you to invest consistently while providing the opportunity to build a significant lump sum to supplement your Social Security and pension.
Information about the TDA program is available from the Teachers’ Retirement System by phone or online. Have even more money to save? You may wish to contact the New York City Deferred Compensation Program; call 1-212-306-7760 for information about another savings plan available to TRS members from the City of New York.
The TRS publication “Investment Portfolios” has recently been updated. This publication lists the name and value of each of TRS’ investments in the three TRS investment funds — the Pension Fund, the Variable A Fund and the Variable B Fund — as of June 30, 2006 (the close of the last fiscal year). “Investment Portfolios” may be obtained by accessing the TRS Web site or by calling the TRS Service Line: 1-888-869-2877
At the end of the 2005-06 school year, there were about 70,000 retirees at an average age of 60. Over the past 10 years, members retired with about 27 years of service on average.
About 59.1 percent of Tier I/II members take the maximum retirement allowance (collect the highest retirement allowance without providing for heirs or beneficiaries). About 41 percent elect a reduced retirement allowance to provide for a beneficiary. About 72.2 percent of Tier III/IV members elect maximum and the rest elect to provide for beneficiaries.
That’s one of the most important decisions to be made at retirement — the irrevocable choice as to whether to take the maximum retirement allowance or to elect an option to provide for heirs or beneficiaries. Various factors can influence your decision, including longevity of both you and your beneficiaries, financial considerations for you and your beneficiaries, and so on. This choice is a key topic covered at Final Pension Consultations. Since no one can predict the future by one second, no one can know for sure at retirement what the perfect decision is. But your decision should be made based on facts and should give you peace of mind. That is why it is so important that you schedule a Final Pension Consultation in the year before you retire to learn about the various options available to you and to find out just what each will mean in terms of how much your actual pension will wind up being.
Tiers I/II in-service members — QPP Investment Election Change Form (code MA7)
Tiers I/II retirees — Retiree’s QPP Investment Election Change Form (code RP8)
TDA annuitants (retirees collecting TDA Check) — TDA Annuitants’ Investment Election Change Form (code RP9).
“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.