Straight Talk has Moved!

MOSERS’ Straight Talk has been merged with our Rumor Central Blog. While we will no longer continue to update this blog, we will continue to leave it up so that your bookmarked links will still remain active.

If you subscribe to this Straight Talk Blog via RSS, please update your feed with these links: MOSERS’ Rumor Central (full blog) and MOSERS’ Rumor Central (Straight Talk only). If you subscribe via email, please log in to the MOSERS Secure Site and update your email preferences.

Putting the pieces together part 2: Your monthly income

Getting ready for retirement often means collecting pieces of information from multiple agencies so that you can begin to envision your life post-retirement.  This is part 2 of a 3-part series:

Part 1: Gathering estimates for your health care premium

Part 2: Where will your monthly income come from?

Part 3: What can you do right now?

How much will retirement cost me?

You’ve begun finding out in Part 1 how much your retirement will cost. Most financial planners agree that the average individual will need between 70% and 90% of his or her pre-retirement income to live comfortably. You will have to anticipate your own income needs, which will include inflation. For the last 25 years, inflation has averaged 2.76% (Source).

Not only will inflation affect your future household income, but it will also affect your purchasing power. Let’s assume that you have $10,000 today and there will be an average of 4% inflation in the coming years. That money will be worth $6,756 in 10 years, $4,564 in 20 years, and $3,083 in 30 years if it is not earning any interest.

Also consider your anticipated retirement age and the longevity of your life. Thanks to modern medicine and other breakthroughs, life expectancy has risen through the years. According to data compiled by the Social Security Administration, a man turning 65 today can live (on average) until age 84. Women can expect to live until 86. Are you curious to know how long an individual of your generation might live? Here’s a convenientlife-expectancy calculator to plan for the average numbers of years a person can expect.

What are your sources of income?

Most people realize that no one source will provide all their income in retirement. Diversifying your income is one way you can plan to meet the needs of a longer, more active retirement.

Your sources of income may include:

• Social Security
• MOSERS
• Personal savings and/or investments
• Re-employment

MOSERS provides all members an annual, personalized benefit statement that will project a pension benefit based on your salary, service history, and a retirement multiplier. If you have not yet received it, you may find it on our Secure Site under Estimates.

The Social Security Administration provides both a Quick Retirement Calculator, a Retirement Estimator, as well as your official social security statement online. In order to access your online statement, you will have to create an account with a valid email address, social security number, and US mailing address.

Your personal savings and investments may come from a number of sources. If you were hired after June 1, 2012, you were automatically enrolled into Missouri’s Deferred Compensation plan (check your balance here) You may also have savings and investments from other plans, such as previous employers or your own IRA.

Re-employment is another option. Many view their retirement as a chance to pursue another career dream. Your MOSERS benefit will not be affected by full-time employment unless you begin working at a MOSERS benefit-eligible position with the state of Missouri.

Putting it together:

Let’s use some real numbers for a bit and look at an average retiree if he or she were retiring this month under the MSEP 2000:

1. $2,500 monthly Final Average Pay
2. Will retire at age 62
3. 23 years of credited service at retirement.
4. 1.7 (0.017) multiplier for MSEP 2000*

 

Using the estimate that an individual will need roughly 80% of his or her income during retirement, we can determine that the member will need $24,000 a year or $2,000 per month. Using the MOSERS Retirement Benefit Estimate Formula, we’ve found out that his or her retirement benefit will be $977.50 a month.

                As you can see, our example member will need an additional $1022.50 a month to meet his post-retirement income goal. Social security can help fill that gap, but that amount varies depending on when the member chooses to start receiving that benefit. You may start drawing social security at age 62, but at a reduced rate. For convenience, we’ve included an early retirement social security estimate below:

 

                You will have to determine your own individual sources of income, but we recognize that it might be difficult to navigate each website. We recommend that state employees use MO Deferred Comp’s RetiremenTrack tool, which is specifically designed for state of Missouri employees. Simply enter your income, pension, and savings information and the calculator will reveal if you’re on track for your retirement goals. 

*If you would like to complete your own formula, please use the following multipliers:

MSEP = 1.6% (0.016)       MSEP 2011 = 1.7% (0.017)

Friday Top Five: February 14, 2014

From PandoDaily: The Wolf of Sesame Street: Revealing the secret corruption inside PBS’s news division

On December 18th, the Public Broadcasting Service’s flagship station WNET issued a press release announcing the launch of a new two-year news series entitled “The Pension Peril.” The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on  major PBS programs including the PBS News Hour.

However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that “The Pension Peril” is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering.

 From Reuters: Pension Politics

David Sirota has a very important scoop today: the PBS series “Pension Peril” has secretly* been funded by John Arnold, a billionaire powerbroker with an aggressively anti-pensions political agenda. This looks very bad for PBS — but it’s also bad for Arnold, who generally gets glowing press, and who would seem to have no good reason to have insisted on secrecy when writing the $3.5 million check that made the series possible.

The PBS series in question seems to fall uncritically into line with the beliefs of Arnold and other Very Serious People — that pension liabilities are a huge problem, and that the only way to fix them is to reduce the amount that pensioners get paid. But of course it’s not nearly as simple as that.

From Bloomberg Businessweek: Why Aren’t There More Female Hedge Fund Managers?

Why aren’t there more women running hedge funds? The money’s good, and the lifestyle would seem to lend itself better to balancing family demands than more traditional Wall Street jobs, with less face time and greater emphasis on money-making rather than bonding on the golf-course. What’s more, research has proven that women, on average, make more prudent investors—a recent report by Rothstein Kass found that women-owned hedge funds performed better than both the S&P 500-stock index and the Global Hedge Fund Index over the last six-and-a-half years, as female investors proved more cautious and less prone to overconfidence than men.

From Cypen & Cypen: Taxation of Social Security Benefits

Your Social Security benefits may be taxable; about one-third of people who get Social Security have to pay income taxes on their benefits:

• If you file a federal tax return as an “individual,” and your combined income is between $25,000 and $34,000, you may have to pay taxes on up to 50% of your Social Security benefits. If your combined income is more than $34,000, up to 85% of your Social Security benefits is subject to income tax.
• If you file a joint return, you may have to pay taxes on 50% of your benefits if you and your spouse have a combined income that is between $32,000 and $44,000. If your combined income is more than $44,000, up to 85% of your Social Security benefits is subject to income tax.
• If you are married and file a separate return, you probably will pay taxes on your benefits.

At the end of each year, Social Security will mail you a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received. You can use this statement when you complete your federal income tax return to find out if you have to pay taxes on your benefits. Although you are not required to have federal taxes withheld, you may find it easier than paying quarterly estimated tax payments. Note: on the 1040 tax return, your “combined income” is the sum of your adjusted gross income plus non-taxable interest plus one-half of your social security benefits. For more information, call Internal Revenue Service’s toll-free number, 800.829.3676, to ask for Publication 554, Tax Guide for Seniors.

From Advisor.CA: How to Plan for Solo Retirement

In Canada 43% of seniors 65 or older are single, says Statistics Canada, and those who didn’t plan to be alone in retirement could be facing financial hardship, says BMO.

Divorce later in life is one factor contributing to more people finding themselves alone during retirement. About 4,000 Canadians 65 years old and over get divorced every year, shows data from Statistics Canada. Other factors leading to a single retirement include an increasing number of Canadians who never get married and higher life-expectancy rates among women.

Friday Top Five – February 7, 2014

The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From PensionDialog: Are We Ready to Retire?

Retirement savings—and the lack thereof—for private sector employees were in the news last week as President Obama launched myRA and Senator Tom Harkins (D-IA) put forth his bill, the Universal, Secure, and Adaptable (USA) Retirement Funds Act of 2014.

While typically this space is focused on public employee retirement plans, given the media attention, it’s important to be aware of the conversation and understand what’s being proposed.

From Connecticut News Junky: Connecticut Wants to Take Obama’s Retirement Idea Further

It received a brief mention in President Barack Obama’s State of the Union address earlier this week, but Connecticut union officials and the Working Families Party want to take the idea of creating retirement savings accounts for all Connecticut residents even further.

From My Retirement Paycheck: Special Situations to Consider before Starting Social Security

There are a few situations in which making the decision to start Social Security retirement benefits may need some extra thought. In addition, if you have already started receiving Social Security benefits, particularly before your Full Retirement Age, you should be aware of the several points.

From Next Avenue: A Helpful New Site for the Financially Insecure

President Obama tonight will likely make the case that the U.S. economy is in the best shape in years. Indeed, many forecasters predict that 2014 will be a “breakout year” for growth, according to The New York Times.

But not everyone is feeling it. Overall, workers’ pay has been stagnant or falling and roughly 1.7 million people 55 and older are unemployed. That’s why I’d like to recommend a new site I’ve tried out that’s geared to Americans over 55: EconomicCheckUp from the National Council on Aging (NCOA), the nation’s leading nonprofit service and advocacy group representing older adults and organizations that serve them. (Full disclosure: NCOA has also provided content for Next Avenue.)

From NixaXpress: Zweifel Announces Support of Pension Forfeiture Legislation

State Treasurer Clint Zweifel Feb. 6 announced his support for a bill that would prohibit public employees convicted of certain felonies directly in connection with their job from collecting a pension. Senate Bill 823, sponsored by Sen. Dixon, R-Springfield, and co-sponsored Sen. Sater, R-Cassville, is consistent with Treasurer Zweifel’s continued push to make government more accountable to Missouri citizens.

“As State Treasurer it is my duty to ensure that Missouri tax dollars are used responsibly and that public pensions are going only to citizens who have earned them,” Zweifel said in a press release. “This legislation protects the state and taxpayer dollars ensuring that anyone convicted of the felonies laid out in Senate Bill 823 will forfeit their public pension. I thank Sen. Dixon and Sen. Sater for working with me to sponsor this commonsense legislation and I look forward to working with members of the General Assembly to get this bill passed.”

Putting the Pieces Together Part 1: Your Health Care Premium

Getting ready for retirement often means collecting pieces of information from multiple agencies so that you can begin to envision your life post-retirement. Although MOSERS no longer provides health insurance for state employees (and hasn’t since 1994), we understand that navigating the system is sometimes frustrating. This is part 1 of a 3 part series:

Part 1: Gathering estimates for your health care premium

Part 2: Where will your monthly income come from?

Part 3: What can you do right now?

Your retirement health care insurance can come from multiple sources, such as Medicare, MCHCP, or another employer-provided health care plan.

Why does it matter?

It is a common misconception that Medicare will cover all of your costs. However, dentures, eye care, hearing aids, and diabetic supplies are not regularly covered by Medicare Part-A or Part-B. You can find out more about what Medicare will cover here.

Employer-provided health insurance can range from $500-800 in premiums per month, which can be deducted from your retirement benefit. It’s important to note how much of your benefit will be earmarked for health insurance costs.

You may believe you don’t need many health insurance services now, but you may want to consider your potential needs. You may cancel your employer-provided health insurance at any point, but you cannot add it after your retirement.

Where to find your estimates:

Medicare: eligibility, premium calculator, program costs

Medicaid: eligibility

Program of All-inclusive Care for the Elderly (PACE): eligibility

PACE is a Medicare and Medicaid program that helps people meet their health care needs in the community instead of going to a nursing home.

MCHCP: calculator

Department of Conservation Health Care: Employee Benefits. Premiums are available in the 2014 Benefits Offering Booklet.