Secure Your Future

You need to plan before you retire

Apr 2, 2009 11:13 AM

Spring is here, it is beginning to warm up and many people are planning their vacations. Some people are concluding their vacation plans and others are preparing to retire and therefore planning for the rest of their lives.  A person should plan for retirement at least as long (much longer) than he/she plans for a vacation or other short-term event.

Have you taken advantage of all of the UFT’s pension-related services?

1. Have you had a preliminary or final pension consultation?  (If you are planning to retire this summer, you should call the UFT at 1-212-598-6866 and make the earliest final pension consultation available at the most convenient borough office.)
2. Have you decided whether to take terminal leave or termination pay?
3. Have you attended the UFT Pension Clinic?

By taking advantage of these three services and discussing the matter with your family and personal advisers, you could be entering into the well-earned most pleasant period of your life.  In an informal poll of the almost 200,000 UFT members we have discovered that the 50,000 retirees in that group are our happiest, most content members.

But there are things you must decide or know before you retire:

1. How much will your pension be?
2. Should you take a maximum retirement allowance or an option (reduced pension to provide for heirs or beneficiaries).
3. Should you remove a lump sum from your retirement accounts by taking a nonrepayable loan or removing excess funds?  (What are the effects on the size of your pension and on taxation?)
4. Whether to leave your Tax-Deferred Annuity (TDA) with TRS or remove it from TRS?
5. What are your health insurance and Welfare Fund benefits?
6. What are your rights under Social Security?  (You must contact the Social Security Administration for information on this.)

In those troubled financial times, it is a comfort to know that you will have a defined-benefit pension plan making guaranteed benefits for the rest of your life; a lifetime income from Social Security; health insurance; and a supplemental lump sum of money for those who participated in the TDA.  Some people have begun to call New York City retired UFT members and other retired public employees a mini stimulus plan.

Investment changes

April is the month to make changes in the Annuity Savings Fund (ASF) and Increased-Take-Home Pay (ITHP) for Tier I/II retired members and for the almost 4,000 retirees who have annuitized their TDA.

May is the month to make changes for in-service Tier I/II members in their Qualified Pension Plan (QPP) investments and TDA investments and for retirees who have deferred their TDA.

Changes may be requested over a three-, six-, nine- or 12-month period.

Changes requested will take place beginning July 1.

Members have the right to invest in six different investment funds.  The goals of the funds are described below:

The Fixed Return Fund offers a guaranteed rate of return set by the New York State Legislature.  The current rate is 8.25 percent and that is guaranteed through June 30, 2009.  At that time, the rate will be reviewed by the Legislature.

The Diversified Equity Fund will continue to be a broadly diversified stock program mostly invested in domestic stocks, with a 15 percent allocation to international stocks in developed countries.  There is also an investment in a defensive strategy to control volatility.  The object is to achieve a rate of return comparable to the broad stock market.

The Stable-Value Fund invests in low volatile fixed-income securities such as Guaranteed Investment Contracts (GICs), short-term bonds, and cash.  The goal of this fund is preservation of capital while returning current interest rates.

The International Equity Fund invests in non-U.S. companies listed on a variety of stock exchanges in developed countries of the world.  The objectives are to provide long-term capital growth and to achieve a rate of return comparable to that of the non-U.S. developed stock market over a full market cycle.  This fund does not invest in the stocks of companies in emerging markets.  The fund will be invested in the same manner as the International component of the Diversified Equity Fund (Variable A).

The fund was added for those members who may want to invest in international markets to a greater degree than the international investments in the Diversified Equity Fund.

The Inflation Protection Fund invests in funds that may include (but are not limited to) commodities, real-estate securities and inflation-linked bonds.  The objective is to provide a positive real rate of return that exceeds inflation over a full market cycle.

This fund was added as a protection against inflation in our retirement savings.  Inflation over the years has stealthily lowered the standard of living of retirees even though it has been relatively low in recent years.  This investment is designed to combat inflation over time.

The Socially Responsive Equity Fund invests in U.S. stocks.  The fund attempts to avoid companies receiving a significant portion of revenue from alcohol, tobacco, nuclear power or firearms or that have poor labor relations or harm the environment.  Objectives are to achieve positive long-term capital growth and to earn a rate of return comparable to that of the broader stock market while reflecting social priorities.

This fund was added to give members a chance to “do good” for the world while doing well financially for themselves.
While the objectives of these funds are meritorious, there is no guarantee that they will be met.

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“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.