Apr 12, 2007 5:04 PM
Tier I/II members, both in-service and retirees, as well as retirees who have annuitized their tax-deferred annuity (that is, collect a second check from the Teachers’ Retirement System each month) can make investment election changes in their Annuity Savings Fund (ASF), Increased Take-Home Pay (ITHP) and annuitized TDA accounts during the month of April. Changes will begin in July and will take a year to complete. The next opportunity to make changes for this group will be April next year.
The fact that we have the right to make a change does not mean we are required to make a change. To paraphrase Shakespeare: To change or not to change, that is the question.
Here are some factors you should consider:
Financial experts tell us there is no way to time the direction of the financial markets. Any changes you choose to make should be for sound financial reasons based, perhaps, on your answers to the questions posed above and not because of the recent roiling of the investment markets.
The chart below shows the returns for in-service members’ ASF, ITHP and TDA accounts as well as for TDA deferred accounts for retirees.
The returns for retirees collecting a Qualified Pension Plan check are based on the same returns as modified by actuarial factors applied when a lump-sum account is converted to a lifetime stream of payments.
TDA participants can make investment changes quarterly. The month of May is when in-service and deferred TDA account holders can request changes.
After the baby boomer generation (born 1946-1964) came Generation X (born 1965-1983). They are now 24 to 42 years old. They should start thinking about savings in general and retirement savings in particular. While they will not be able to collect Social Security until age 67, they will become eligible to begin collecting their TRS pension at age 55. That’s only 13 years from now for the leading edge.
A recent survey shows that among households in which the person making financial decisions is a Gen-Xer, 20 percent haven’t started saving. And as a group, most have saved less than $11,250. About 40 percent of them expect to receive a pension, compared with 60 percent of boomers. Except for those in either group who work in public employment or a heavily unionized trade, this expectation may be wishful thinking.
At TRS, we have about 43,000 Gen-X members, all of whom, if they stay the course, will have a pension and well over 55 percent have TDA accounts. They will also get retiree health coverage as well as Social Security.
The Centers for Disease Control and Prevention has put out a report on “The State of Aging and Health in America 2007.” The report predicts that by 2030, the number of Americans aged 65 and over will more than double to 71 million, roughly 20 percent of the U.S. population. The cost of providing health care for the 65-plussers is three to five times greater than the cost for younger people. An enhanced effort to promote good health is essential.
The report states that three behaviors — smoking, poor diet and lack of physical activity — were the root cause of almost 35 percent of U.S. deaths in 2000. These behaviors are risk factors that often underlie the development of the nation’s leading chronic disease killers: heart disease, cancer, stroke and diabetes.
We retire with a pension that lasts a lifetime. By adopting healthier behaviors, and obtaining regular health screenings, we can reduce the risk for many chronic diseases and better enjoy this lifetime income we have earned.
May 1: That’s when TRS must receive a “QPP Investment Election Change Form” from Tier I/II members in order to effect QPP investment election changes on July 1.
“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.