Thinking About Retiring? 2014
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
Introduction to Retirement Issues General Retirement Planning for the Adventist Employee
A Whole New Chapter Sun. America Retirement Re-Set Study, 2012
Re-defining Retirement Sun. America Retirement Re-Set Study
Retiree Employment Patterns • Administrators more likely to work postretirement • Source: Retirement Plan Mini-Survey
Why People Retire Early? Sun. America Retirement Re-Set Study
Typical Retirement Asset Curve • Growth of Tax Deferred Assets age 20 to 90.
Typical Retirement Income Curve • Retirement – SS – Interest Income & Pension Plan – Principal Drawdown • Assumptions – 80% of Pre-Ret Pay – 6% Investment Return – Inflation 2. 5%
How Much Income Do I Need? • • • Where are you going to live? How Long do you plan to Live? Are you planning on working? Retirement Activities? Early Retirement?
The Guru’s Say. . . • You should have 70%-80% of your employment income in Retirement • Inherent weakness in these models – Our Split Plan – Overwhelming Targets – Social Security non participation by some – Retirement move – Housing in retirement – Our Retirement Healthcare Plan
Living Expenses Comparison (The 70% Rule)
Bequest Model • Maintains your Retirement Asset Value For Your Kids • Withdraws Only 4% per Year from Investment Asset • Allows for Growth of Asset to Offset Inflation Erosion
Annuity Model • Maintains Standard of Living • Fixed Monthly Income from your Retirement Investments • Over Time Inflation Will Erode Un-indexed Annuity Income • Asset may be Depleted upon Death
Lowered Expectations • Reduced Standard of Living • Target an Asset Required to Yield 80% of Estimated Retirement Living Allowance • Result of: – Low Years of Service – No Homeowners Equity
Estimate Retirement Income Requirements • • • 70% of Wages? 102% = $44, 000 70% = $30, 800 SS ~ $16, 300 DB Pension ~ $9, 000 Annual Income Gap ~ $5, 500
Plug the Income Gap • Rule of 15 @ Age 65: • Multiply Annual Income Gap by ~15 for Fixed Annuity • $5, 500 x 15 = $82, 500
25 DB Years Active Low ERI Model Ret. Active High ERI Model Ret. Wage Other SS Pension Spouse Allow. $ 49, 920 $ 4, 800 $ 16, 800 $ 8, 100 $ 1, 800 $ 76, 176 $ 4, 800 $ 16, 800 $ 8, 100 $ 1, 800 Total $ 54, 720 $ 26, 700 $ 80, 976 $ 26, 700 Mortgage Car Pmt $ 16, 104 $ 3, 000 $ 25, 767 $ 3, 000 $ 3, 000 Taxes Ret Svings Prop Tax & Ins HC/Life/etc $ 10, 000 $ 1, 498 $ 1, 800 $ 2, 400 $ 1, 200 $ - $ 1, 800 $ 1, 200 $ 15, 000 $ 2, 285 $ 5, 800 $ 2, 400 $ 1, 200 $ - $ 5, 800 $ 1, 200 Total $ 34, 802 $ 7, 200 $ 54, 252 $ 11, 200 Discretionary Replacement % Shortfall Requiring DC ~ $ 19, 918 $ 19, 500 100% 98% $ 418 $ 10, 460 $ 26, 724 100% $ 15, 500 58% $ 11, 224 $ 280, 600
15 DB Years Wage Other SS Pension Spouse Allow. Total Mortgage Low ERI Model Active Ret. $ 49, 920 $ 4, 800 $ 16, 800 High ERI Model Active Ret. $ 76, 176 $ 4, 800 $ 16, 800 $ 54, 720 $ 16, 104 $ 4, 877 $ 831 $ 22, 508 $ 80, 976 $ 25, 767 $ 4, 877 $ 831 $ 22, 508 Car Pmt $ 3, 000 $ 3, 000 Taxes Ret Svings $ 10, 000 $ 1, 498 $ 1, 200 $ - $ 15, 000 $ 2, 285 $ 1, 200 $ - Prop Tax & Ins $ 1, 800 $ 5, 800 $ 5, 800 HC/Life/etc $ 2, 400 $ 1, 200 $ 2, 400 $ 1, 200 Total $ 34, 802 $ 7, 200 $ 54, 252 $ 11, 200 Discretionary Replacement % $ 19, 918 $ 15, 308 $ 26, 724 $ 11, 308 100% 77% 100% 43% Shortfall Requiring DC ~ $ 4, 610 $ 115, 260 $ 15, 416 $ 385, 400
Filling the Income Gap • Work Longer – Increase DC Plan – Increase SS Benefits • Reduce Replacement Ratio – Say From 70% to 50% – By moving to Low-Cost Retirement Area • Increase Retirement Savings
Annuity – How It Works • $100, 000 Lump Sum • Invested at 5%% • Withdrawals of $350 or $450 per month • Withdrawal COLA 2. 5%/year
Retirement Challenges Today • • • Home Values Falling Interest Rates at ~0% Failing Pension Plans Healthcare Assistance Uncertainty Employment Uncertainty • If you are contributing less than 3% you are walking away from money the church wants to give to you. • Is 3% enough for you?
Today’s Retirement Picture “If we take a late retirement and an early death, we’ll just squeak by. ”
Struggling Retirees/Survivors • Ministers Opting out of Social Security – Disability – WEP – Medical • Divorce • Death of Employee prior to Retirement – Life Insurance • Early Retirement – SS – Medicare – Pension • Short Career/Homeowner’s Equity
Advice from a Bored Retiree! Have something in mind to do after you retire. After 90 days of doing all the little things needed doing around the house, I needed something to do. I could wished the church had some idea of things we could of chosen from to continue to spread the message. . The conference where retired could use some retired Pastors but no calls I think that is a waste of 40 years experience. I offered my time to the church first, no takers so I went to work for the government and never felt so appreciated. Such is life. All the best.
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
Adventist Retirement Plan Saving for Retirement
The ARP Contribution Model Contributions • ER Basic Contribution – 5% – Regardless of EE contributions • EE Voluntary – Recommended Minimum 3% – Usually Tax Deferred – Should consider higher • ER Match – 100% up to 3% Contributions
Dollar Cost Averaging C Investment Bargains C Invest $200 per month in Mutual Fund ‘A’ C @ $25 = 8 shares per month C @ $15 = 13. 33 shares per month C More Shares = More Future Growth
Diversification • The Enron Scenario • ARP Requires Diversification • Mutual funds invest in many companies. – SDA Large Cap 467 companies – Dreyfus Appreciation – 52 companies – Dreyfus Emerging Leaders – 67 companies
The Risk Investment Cone Aggressive Growth Columbia Small Cap SDA Small Cap Munder Midcap Invesco Mid-Cap Core Growth of Principal T Rowe Price International Risk Return Continuum Amer Funds Europac Dodge & Cox International SDA Large Cap Dreyfus Appreciation Vanguard REIT Index Dodge & Cox Stock Growth & Income American Century Equity Inc Vanguard Growth & Income PIMCO All Asset All Authority Income Vanguard Treasury Vanguard Corporate PIMCO Real Return SDA Bond Galliard Stable Value
What Helps Investments Grow? Source: Financial Analysts Journal, May/June, 1991: By Gary Brinson, Brian Singer and Gilbert Beebower.
INVESTING FOR GOOD • All “SDA” funds are “Socially Screened” – Avoid Companies with significant exposure to: – – – Pornography Tobacco Alcoholic Beverages Gambling Meat Packing Caffeine Beverages • Default Model: Socially Screened Age Appropriate
Target Maturity Funds • Default Employees, ~ 60% • Target Maturity Funds – SDA Retirement 2010 Conservative – SDA Retirement 2015 Moderately Conservative – SDA Retirement 2040 Aggressive • Incremental Re-balancing from aggressive to conservative • Socially Screened • Age Appropriate Default
How Much should I contribute?
Retirement Asset as Multiple of Wages
Approximate Contribution Averages • 3% Avg Cont. Rate • However – 25% are contributing 0% – 30% are undercontributing – Leaving Money on the Table
Investment Summary • The Guru’s Say: • As you approach retirement, you should be moving into less aggressive positions • Market swings can take years to ride out • Discuss Your Asset Allocation Model with a Guru today!
Investment Tools • Experts Schwab brokerage window • Learning – set up your own model within vetted funds • Don’t know, don’t care – Financial 360 – Guided Portfolio Services – Target Dated Models
So What Happens at Retirement? • Structured Withdrawal – – Easy & Flexible Minister Friendly Low Fees No Guarantee • Purchase Annuity – – – Trouble Free Guaranteed by Insurance Company Minister Un. Friendly Moderate to High Fees Loss of Control of Asset – Not Flexible • Rollover to an Alternate Plan – Minister Un. Friendly – Fees, flexibility, control depend on Plan • Cashout – Taxable Immediately
VALIC Can Help • VALIC Advice Line – 888 -568 -2542 > 0, “Advice Line” • VALIC Web Site – www. VALIC. com/adventist • VALIC Representative
Decisions P. 15 • Investing my Retirement Assets – Investment Advisor – Target Dated Funds – Guided Portfolio Services – Do it yourself • How much to Contribute? – Minimum, 3%, Maximum IRS Limits – Contact Employer to change rate www. Presentation. Pro. com
Decisions p. 15 • Distribution – Structured withdrawal – monthly, quarterly – Annuitization – Rollover to alternate plan (IRA etc) – Leave it to grow – Cash-out www. Presentation. Pro. com
Questions?
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
The Healthcare Plan SHARP Healthcare in Retirement
Supplemental Healthcare, Adventist Retirement Plan SHARP is an Employer sponsored plan that helps Retirees defray the health care costs related to medical, prescription drugs, dental, vision, and hearing aid expenses.
Isn’t Medicare Enough? • Retirees Incur Expenditures Not Covered by Medicare such as: • Outpatient Prescription Drugs • Dental, Vision, Hearing • Medicare Outpatient 2014 – Co-Pay 20% – Deductible $147. 00 • Medicare Inpatient 2014 – $1, 184/admission deductible – $296/day co-pay, days 61 -90 – $592/day co-pay, days 91+
To Be Eligible for SHARP You must be: • Beneficiary of Plan(s) or • Spouse of Beneficiary under Joint and Survivor (J&S) and • With 15+ Years of Church Service Credit
Medicare ‘Premiums’ Reimbursement • Reimbursement for Standard Medicare Part B Premiums – 2014 = $104. 90/mo • Qualified retirees receive prorated reimbursement (50%-90%) • If J&S, same for spouse • Added to monthly benefits
SHARP is like a Menu Your flight’s been cancelled. You’ve been given a meal voucher at the airport for a fixed dollar amount. There are FOUR menu options. You can order ALL, SOME, or NONE of them. If you order them all, you will exceed the value of your meal voucher and will have to pay some from your own pocket. If you don’t spend the whole voucher, the restaurant is going to keep the voucher: No change given.
SHARP MENU Options 2014 PMPM Base Option OR (not both) MCx (Medicare Extension) $35 $145 DVH (Dental, Vision, Hearing) $60 Rx (Prescription Drugs) $115
The SHARP Menu Options • Base Coverage $35 pmpm – Dental, one annual checkup at 100% – Foreign Travel Emergency Medical • $1, 000 deductible/$50, 000 maximum • 80%/20% – Catastrophic Medicare After $2100 annual deductible • OR, • MCx (Medicare Extension) $145 pmpm – Same as Base, except: – Covers Hospital & Dr. Visit Deductibles – Covers Dr. Visit Co-Pays
Hold The Phone! • Do the Math! – $145 -$35 = $110 ‘luxury premium’, x 12 mo’s = $1, 320, – or 62% of deductible being saved • Is This a Good Deal? • Very Popular with Retirees
The SHARP Menu Options • DVH (Dental, Vision, Hearing) $60 pmpm – Dental 20% Coinsurance, up to$2, 200/Yr – Vision 20% Coinsurance, up to $400/Yr – Hearing 20% Coinsurance up to $2, 200/Yr with 1 year ‘look-back’
The SHARP Menu Options • Rx (Prescription Drugs Extension) $115 pmpm – No Deductible, No Annual Cap – Retail Co-pay = $12/$24/$40 – Home Delivery Co-pay = $29/$54/$90 – Cost Constraint & Safety Rules • Effective 2014, this is a Medicare D plan. Joining this plan may make it impossible to join a Medicare Advantage Plan, according to Medicare. If you wish to join a Medicare D Plan, do not sign up for Rx.
Working with the Annual Caps • • Straddle Plan Year – Jan to December Look-back Provision, Audiology Only Pitfalls – Single Code Procedure Appeals – Administrative – SHARP Committee – Board Appeals Committee
Earned Credit (The amount the Plan pays) • Monthly Credit for – Retiree – J&S Spouse – Dependent Child up to age 26 • Eligibility – SHARP Eligible – 15 qualifying years, and – Retiree is age 65, or – Retiree has 40 years of service – If Retiree is Eligible for Earned Credit, then J&S spouse also, even if younger
The Earned Credit Years of Church Service Credit under both DB & DC Plans: Retiree Category 2013 Earned Credit PMPM 15 to 19 Years E $125 20 to 24 Years D $145 25 to 29 Years C $170 30 to 34 Years B $190 35 plus Years A $210
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN Enrollment Form Required Church Service Only Retiree DOB SS# 000 -00 -0000 J&S Spouse 000 -00 -0000 Earned Credit Eligible? Y or N y Retiree Spouse Base Option (Y/N) Monthly Cost $35 Dental/Vision/Hearing (Y/N) $60 Prescription Drugs (Y/N) $115 Medicare Extension (Y/N) $145 Total Cost Standard Earned Credit: Personal Cost per Month Pre-Medicare Option (Y/N) DOB SS# $399 $138 Dependents - Name Below Total Pre-Medicare Costs Pre-Medicare Earned Credit Non-Medicare Earned Credit - First Child Non-Medicare Earned Credit - Second + Children Personal Pre & Non Medicare Cost Retiree Cost Spouse Cost
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN Enrollment Form Retiree J&S Spouse Church Service Only DOB Joe Bozinski 3/2/1948 Tina Bozinski 3/17/1948 Earned Credit Eligible? Y or N SS# 000 -00 -0000 y Retiree Spouse Y Y Base Option (Y/N) Monthly Cost $35 Retiree Cost Spouse Cost Prescription Drugs (Y/N) $60 Y $115 $210 $170 $40 Y $35 Y Y $35 $60 $210 Dental/Vision/Hearing (Y/N) $170 $40 $40 Medicare Extension (Y/N) $145 Total Cost Standard Earned Credit: 26 Years Personal Cost per Month Pre-Medicare Option (Y/N) DOB SS# $399 $138 Dependents - Name Below Total Pre-Medicare Costs Pre-Medicare Earned Credit Non-Medicare Earned Credit - First Child Non-Medicare Earned Credit - Second + Children Personal Pre & Non Medicare Cost Total Personal Monthly Cost
Pre-Medicare Healthcare • If Employee Retires prior to Medicare Eligibility (age 65), – Not eligible for healthcare assistance unless • 40+ years of service credit, or • Eligible to retire prior to 2003 – However you CAN purchase bridge coverage until Medicare age eligible for you and spouse – See Retirement Plan for details – Examples Follow.
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN Enrollment Form Retiree J&S Spouse Church Service Only DOB John Bozinski 3/2/1945 Heather Bozinski 6/30/1948 Earned Credit Eligible? Y or N SS# 000 -00 -0000 y Retiree Base Option (Y/N) Spouse Y Y Y Dental/Vision/Hearing (Y/N) Monthly Cost $35 Retiree Cost Spouse Cost $35 Medicare Extension (Y/N) $60 $115 $175 $210 $0 Y Y $60 $115 $210 Prescription Drugs (Y/N) $60 $175 $0 $145 Total Cost 36 years Standard Earned Credit: Personal Cost per Month Pre-Medicare Option (Y/N) DOB $399 3/17/1995 Y SS# 000 -00 -0000 $138 Dependents - Name Below Jennifer Bozinski $138 $399 $138 Total Pre-Medicare Costs Pre-Medicare Earned Credit $138 $399 Non-Medicare Earned Credit - First Child $138 Non-Medicare Earned Credit - Second + Children Personal Pre & Non Medicare Cost Total Personal Monthly Cost $0 $0 $0
SUPPLEMENTAL HEALTHCARE, ADVENTIST RETIREMENT PLAN Enrollment Form Retiree J&S Spouse Church Service Only DOB John Bozinski Heather Bozinski (when she turns 65) 3/2/1945 6/30/1948 Earned Credit Eligible? Y or N SS# 000 -00 -0000 y Retiree Base Option (Y/N) Spouse Y Y Y Dental/Vision/Hearing (Y/N) Monthly Cost $35 Retiree Cost Spouse Cost $35 Medicare Extension (Y/N) $60 $115 $210 Prescription Drugs (Y/N) $60 $145 $320 $210 $0 Y Y Y $210 $145 Total Cost 36 years Standard Earned Credit: Personal Cost per Month Pre-Medicare Option (Y/N) DOB 3/17/1995 $399 SS# 000 -00 -0000 Dependents - Name Below Jennifer Bozinski $138 Total Pre-Medicare Costs Pre-Medicare Earned Credit $138 Non-Medicare Earned Credit - First Child $138 Non-Medicare Earned Credit - Second + Children Personal Pre & Non Medicare Cost Total Personal Monthly Cost $0 $0 $110
Changing Your Options? • Significant Limits to Change: – Initial Open Enrollment – 3 -Year Anniversary Open Enrollment • From Retirement effective date, not SHARP enrollment. – Other Discretionary Changes • Age 65 • Loss of Coverage – Rx Exception – Medicare D Plan has annual Open Enrollment
Affordable Care Act • Option for a non-J&S Spouse to join. – No earned credit for such a spouse • Child up to age 26 with earned credit www. Presentation. Pro. com
Decisions p. 22 Option Base or MCx DVH Retiree J&S Spouse Child Rx* Pre. Medicare Non. Medicare *Rx precludes joining a Medicare Advantage plan. www. Presentation. Pro. com
Questions on SHARP
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
The Frozen DB Plan Estimating Your Monthly Benefits
DB Monthly Benefits • Monthly Pension Plan • Benefits Depend on: – Vesting – Total service credit – Level of earnings – Eligibility for spousal benefits – “Old” Plan or “New” Plan
Years of Service Credit • Pre-2000 Years Only • Employment by a ‘Participating Employer’ • Exceptions: – Approved graduate study for MDiv/Ph. D – Qualifying Military Service – Chaplain of Prison etc. • Not Counted: – Years with less than 1000 hours in year – Volunteer Work – Paid directly by church or church school – Years Lost to Breaks in Service unless Recovered (25 years full service)
The Single Life Benefit • Basic Formula for all Retirees: • Service credit x Benefit Rate Factor x Pension Factor • Single Life rate provides benefits for participant ONLY
Joe Bozinski’s Single Life Benefit • Pay rate = Pastor • 25 years service credit • 2014 Church Pension Factor, $2, 339 • 25 years x 1. 3% x $2, 339 = $760. 18/mo
Karen Bozinski’s Single Life Benefit • Pay rate = Administrative Assistant • 25 years service credit • 2014 Church Pension Factor, $2, 339 • 25 years x 1. 06% x $2, 339 = $619. 84/mo
The Joint & Survivor Benefit • Reduced Monthly Benefit: • Eligible Spouse Receives: – Healthcare Assistance – Death benefit – Survivor benefits • Single Life rate is usually less 10% per month • Participant may opt for higher Single Life Rate, no spouse benefits • Election is irreversible
Example: Joe Bozinski • Single Life = $760. 18/mo. • Within 5 years in age • Joint & Survivor = 90% x $760. 18 = $684. 16 • If spouse dies, no reversion to Single Life Benefit.
The Spouse Allowance • Additional “welfare” benefit granted to participant if Spouse has no retirement plan provided by any employer. • Recognition of career-uprooting moves. • Reduced by employer-provided retirement benefits.
Spouse Allowance Eligibility • • • 20+ years of service credit Married at least 1 yr prior to effective date SA is reduced by the amount of any ER benefit Social Security does not count against SA Discontinued at death of spouse or divorce Does not restart at Re-Marriage
Example: Joe Bozinski • Bozinski is SA eligible (20 yrs etc) • Formula: Years SC x . 0125 x Single Life benefit • 25 x. 0125 x $760. 18 = $237. 56 • SA is reduced by any retirement benefits of spouse.
Spouse Allowance Reduction
Don’t Confuse SA with J&S • Joint & Survivor • Available to all married (1 yr) retirees • ‘Paid for’ by monthly benefit reduction • Provides healthcare and survivor benefits to spouse • Spouse Allowance • Requires 20 yrs credit & 1 yr of marriage prior to ret. • Provides additional ‘welfare’ benefit • Reduced by amount of spouse’s employerprovided benefit • Belongs to Retired Employee, Not Spouse.
Normal Retirement Age • NRA for Plan and SS goes from 65 to 67 from 2003 to 2025. • “Early Retirement” will result in Benefit Reduction of 1/2% per month prior to NRA or 40 years. • Tina & Joe – Same Pay – Same Years of Service – She’s 2 years younger
Parsonage Allowance Exclusion Qualifying Housing Exp. • No annual report required • 1099 -R is marked “Taxable Amount Not Determined” • Retiree determines how much of the benefit is taxable by documenting allowable housing expenses.
Post-Retirement Church Employment • Maximum of 75% of Full Time • Exception: Those age 70 ½ by Dec 31, 1997 may work FT for Church • Suspend benefits, including healthcare • Dollars amount not determining factor • Can work for a non-denominational employer without penalty.
Retirement Denominational Employment Pitfalls • ‘Top-up’ stipend • Full-time expectation for Part-time pay • Part-time denominational employment should be negotiated without reference to your income. • AD&D Insurance
The Death Benefit • A death benefit is provided if you have: – At least 10 ysc in Church Plan – Spouse also eligible if you elected Joint & Survivor benefit
Calculating the Death Benefit • 40 ysc=100% of current Pension Factor ($2, 339 in 2014) • Less than 40 ysc, Pro-rate • Example: 25 years service credit • $2, 339 x 25/40 = $1, 462
Independent Transfers • In order to qualify: – ITR effective date prior to 2000 – Retirement after 1999 – Vested in NAD = 10+ years • Includes both DB & DC Years, not pre-NAD years – Working for NAD employer on 12/31/1999 • Benefit – Pre-NAD Years added to NAD years at NAD Rates – Adjusted by any benefit from pre-NAD plan
Interdivision Employee • IDE to US Prior to 2000 – At least 10 years in NAD, or – Until Retirement, and – Retires with US Residency • Retirement Benefits at higher of – NAD rate or – Home Division rate – No residency requirement • IDE to US after 1999 – Home Div or NAD DC plan
Mixed Service – Church & Hsp • • • May have separate benefit effective dates Lump sum option for Hospital service Cash benefit in lieu of healthcare No death benefit on Hospital service Post-1991 CH service counts toward vesting in Hsp Plan • Post-1991 Hsp service cannot count toward vesting in CH Plan
The Survivor Benefit What Happens to my Benefits if I Die?
Joe Bozinski, Retiree, Dies • Tina Bozinski shared 30 of 30 ysc, and receives no personal pension: • Survivor Benefits to Tina Bozinski: – ½ the participant’s J&S rate – Continuation of healthcare assistance @ same rate – 30/30 ths of Spouse Allowance • Benefits continue even if Surviving Spouse remarries
Joe Bozinski, Pre-Retiree Dies • Tina Bozinski shared 25 of 25 ysc, and receives no personal pension: • Survivor Benefits to Tina Bozinski: – ½ the participant’s J&S rate – Continuation of healthcare assistance @ same rate – 25/25 ths of Spouse Allowance • Pro-rated if less – Tina’s choice when to receive benefits. Early Retirement Penalty. • Benefits continue even if Surviving Spouse remarries
Joe’s Wife Dies, Joe Survives • Full monthly J&S benefit continues • Continuation of healthcare assistance @ same rate • Spouse Allowance ceases • If Retiree re-marries, the New spouse is NOT eligible for – Survivor Benefits – Death Benefit – Healthcare Assistance
Joe Dies with Single Life Benefit • Single Life Benefits Cease • Sp Allow continues if – At least 10 years ‘shared service’ – Pro-rated based on ‘shared service’ • No Survivor Benefits • No Survivor Healthcare • Death Benefit to Spouse or Estate
The Retirement Allowance
The Retirement Allowance • One-Time Lump Sum Benefit • Available At Retirement • Based on Years of Service and Last Wages • Do Not Confuse with Monthly Retirement Benefits
Calculating The Retirement Allowance • Eligibility: – At least half-time employment for past two years – Go Directly from Employment to Retirement – Limited Exceptions within 36 months • Calculation: 12. 5% x monthly pay x years SC • Split Benefit – For service prior to 2000 – Retirement Benefit – For service after 1999 – Employee Benefit directly from Employer
Example: Joe Bozinski • 22 Years Pre-2000 – Can be rolled over into tax deferred IRA – Not Subject to FICA • 13 Years Post-1999 – Cannot be rolled over into IRA – Subject to FICA – May be Tax Deferred • Last Monthly Wages $5, 200 • 35 x. 125 x $5200 = $22, 750
“Special Pay” Resolution • All employer RA (post 1999 portion) is sent directly to ARP Account – No exceptions • Fewer IRS contribution limits • No payroll taxes (FICA/SECA) • Still accessible to Retiree • Adopted Special Pay in Columbia & Southern Unions: – Carolina, Gulf States – GC, NAD, New Jersey, Ohio, Pennsylvania, Potomac, WAU – Check with your employer if not on this list.
Decisions p. 34 • Select an Effective Benefits Date • Select Annuity Type – Single Life, or – Joint & Survivor • Select option for Lump Sum Retirement Allowance – Cash it out, or – Rollover to IRA or DC Plan account
Questions?
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
Bridges Between Plans
Transitional Enhancement • Pastor John Bozinski – 20 DB Pre-2000 Years of US Service Credit – 15 DC Post-1999 Years of US Service • Retires at age 66 • Let’s say that in 13 DC years his ‘default’ moderate plan would have grown to an employer provided account of $76, 500.
Pastor Bozinski’s TE Freeze Scenario No-Freeze Scenario Single Life Benefit $602 DC Estimated Annuity $425 Total Combined Single Life benefit Transitional Enhancement $1, 027 Total Estimated Single Life benefit $1, 053 $26 $1, 053
Vesting Reciprocity • • Benefits vesting reciprocity Healthcare Eligibility Spouse Allowance Eligibility Early Retirement Eligibility
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
You May Need These. . .
Documents to Consider • Estate Planning Documents – Will – Trust – Living Will/Advance Directive • “Your voice if you are alive, but not able to speak or act for yourself” – Financial Power of Attorney See your Conference or Union Trust Services Department.
Do I Need Insurance? P. 37 • Why? – Mortgage or Special Needs Dependent • Long Term Care – ARM has arranged this with LTC Financial Partners. – 866 862 1457 or visit www. benefits. LTC. com • Life Insurance – Life Conversion for employer’s Basic Life only – Retiree Supplemental Life Insurance • Requires prior to retirement coverage – http: //www. adventistrisk. org/Employee. Benefits /Life. Disability. Forms. aspx
Decisions p. 39 • • • Update Will Do I need a Trust? Update Advance Directive Do I need a Power of Attorney? What Insurance Products do I Need? – Life Insurance? – Long Term Care?
Adventist Retirement Workshop • • Introduction to Retirement Issues p. 2 The Financial Plan p. 4 Adventist Retirement Plan p. 10 The Healthcare Plan p. 16 The Legacy Pension Plan p. 23 Bridges Between Plans p. 35 You May Need These p. 37 Other Stuff p. 40
Other Stuff
When To Retire? • As Soon As Possible? • At Constituency? When Forced by Health Concerns? As Part of a Plan? • Critical Items to Remember: – – NRA = Normal Retirement Age No Tuition Assistance in Retirement 40 Years Service For Pre-Medicare Eligibility Age 59 ½ Earliest Benefits Eligibility under Pension Plan • Early Retirement Penalty • No Pre-Medicare Healthcare
The Old Testament Model • Numbers 8: 24 “This is what applies to the Levites: from twenty-five years old and upward they shall enter to perform service in the work of the tent of the meeting. But at the age of fifty years they shall retire. . . They may, however, assist their brothers in the tent. ”
Scott Adam’s Retirement Philosophy
Starting the Process: DB Plan • Current Employer Human Resources Office • Give at Least Four Months for Paperwork
Starting the Process: DC Plan At Retirement or anytime at or after 59 ½ – Employer Sends Term. Code to VALIC – You Contact VALIC for Termination Documents – Inservice Distribution at 59 ½ • Decisions You Will Make: – Cash-out Creates ‘Tax Incident’ – Rollover Protect Tax Deferred Nature – Leave It Continue to Manage – Annuitize Guaranteed Flow till Death
The Last Three Years • Your Last 3 Years Paychecks, • Discretionary Income & • Preparation for Retirement
Go Into Retirement Prepared • You probably will have more discretionary income at R – 3 years than ever again • Consider Where You Want To Be Re: – Consumer Debt – Retirement Automobile – Major Household Equipment – Housing
Consumer Debt • Goal: Don’t Go Into Retirement With Consumer Debt • You Can’t Consistently Earn Credit Card Finance Charge Rates (16% to 22%) D
The Retirement Vehicle • Goals: Low Mileage Paid For Retirement Vehicle • Vehicle Unreliability is a Major Stressor • Car. Max and similar entities have large inventories of low-mileage cars for ~$14, 000.
Major Household Equipment • Goal: New Major Appliances • Examples are mostly from Sears’ Kenmore products – Mid-Range Products • You can spend more or less!
Major Household Equipment Appliance Washer Dryer Refrigerator Freezer Stove/Range Dishwasher Microwave TV/Audio Computer Totals Est. Mid-Range Yours? $500 to $650 $400 to $500 to $1300 $300 to $600 $500 to $1300 $300 to $650 $500 to $1000 $600 to $1200 $3900 to $7800
3 -Year Savings Plan Estimated Pre-Retirement Expenditures Consumer Debt Yours Example $ $6, 000 Automobile $ $14, 000 Household Equipment $ $6, 000 Total $ $26, 000 Divided by 36 Pay Periods $ Divided by 78 Pay Periods $722 $333
The Dream Home • Many Retirees Move Out of their Dream Home within a Few Years of Retirement – Health Care Proximity – Roots – Proximity to Children • Many Retirement Dream Homes are not Market Dream Homes – Retiree takes a bath on sale • In addition to location criteria in popular books (America’s 100 Best Places), consider roots, family, lifestyle.
Advice from Retirees! • Don't buy too much land around your home. In a few years it gets too much to take care of and then the need for another move. • If you are moving, rent at first, and if you are moving to be with your kids, don't plan on them staying there forever! • You will need to have your house paid for, car paid for and look for low cost of living areas where you want to retire. • Try very hard to pay off your home mortgage before you retire. Life is comfortable in retirement when you do not have a mortgage to deal with.
Where Adventist Retirees Live
Home Ownership Survey • Most Responding Retirees Own Outright! • ‘Avoid Debt like Smallpox’ • Tax Implications • Retiree Advice “Have your home paid for!”
Retirement Move • Eligibility: If denomination has moved you during career • If 30+ years of service credit, a full move of reasonable(? ) household goods & travel expense within NAD • Employer has significant discretion • Taxable to retiree
A Transition Point • Social Security – Medicare – Monthly Benefits • Frozen Defined Benefit Plan – Monthly Pension – Healthcare & Welfare Supplement • Defined Contribution Plan – Retirement Savings Plan • Countdown Thoughts
Questions?
Closing Thoughts p. 46 “The history of John affords a striking illustration of the way in which God can use aged workers. When John was exiled to the Isle of Patmos, there were many who thought him to be past service, an old and broken reed, ready to fall at any time. But the Lord saw fit to use him still. Though banished from the scenes of his former labor, he did not cease to bear witness to the truth. . And it was after John had grown old in the service of his Lord that he received more communications from heaven than he had received during all the former years of his life. The most tender regard should be cherished for those whose life interest has been bound up with the work of God. . They have borne test and trial, and though they have lost some of their vigor, the Lord does not lay them aside. He gives them special grace and wisdom. ”{AA 571 -572}
Closing Thoughts It is my joy to send along greetings to you from my fellow officers of the North American Division. If you are reading this, it means that you are on the brink of another of life's transition points - retirement. You are at a point of looking back over your years of service to the Lord and to the Seventh-day Adventist Church. I hope that you can clearly see the impact that has been made through your service in the lives of people all over this division and around the world. Thank you for your commitment, dedication and sacrifice. Only in eternity will you know the full extent of your impact in service. May you be blessed as you look forward to a new phase in your life as a disciple of Jesus Christ. Your Brother in Christ Dan Jackson President, North American Division
Closing Thoughts
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