“The Fundamentals of Planning Your Retirement”...Pension Plan Comparisons Pension Investment...
Transcript of “The Fundamentals of Planning Your Retirement”...Pension Plan Comparisons Pension Investment...
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“The Fundamentals of
Planning Your Retirement”
Duval County Public Schools
Presented By:
Robert Ard, CCO
TSA Consulting Group, Inc.
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“The Fundamentals of
Planning Your Retirement”
What is retirement?
FRS Retirement Options
Employer Sponsored Voluntary Retirement Plans
Drop
Special Pay Plan
Money after Retirement
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Successful Retirement
Freedom
Financial Freedom
Freedom of Time
Freedom of Choice
Travel
Health Care Covered
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When to retire?
After 30 years of service
More years equals a higher factor
Is 62 years old enough?
Can you work longer?
What will your Social Security Benefit be?
Do you have enough saved?
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Retirement
At a GlanceYOUR RETIREMENT OPTIONS
AS AN EMPLOYEE OF
DUVAL COUNTY PUBLIC SCHOOLS
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Retirement Options
Florida Retirement System
All Full-time employees
Pension Plan
Investment Plan
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Florida Retirement System
Pension
Defined Benefit Plan
Years of Service
Age
Average Final Compensation
Investment Plan
Defined Contribution
Contributions amount
Investment Results
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FRS Pension
How much income can I expect?
AFC x YOS x Factor
Example: $50,000 x 30 x 1.6% = $24,000
What are my Benefit Payout Options
Life only
Life with 10 year certain
Joint with 100% to the Survivor
Joint with 2/3 to Survivor
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FRS Investment Plan
Defined Contribution Plan
Benefits based on
Employer contributions
Investment Returns
Your investment skills
Portability
If you move from an FRS employer to a different
employer, this money moves with you.
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FRS Pension & Investment
Plans Health Insurance Subsidy
Contribution made each month by
employer to provide a benefit for the
payment of health insurance premiums
during retirement
Benefit amount = $5.00 per month for each
year of creditable service
Example: 30 years x $5.00 = $150/mo.
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FRS Pension & Investment
Plans Changing your mind
Pension to Investment
Actuarial Value of Account
Smaller in early years
Investment to Pension
Buy in at Actuarial Value
Investment results important
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Pension Plan ComparisonsPension Investment
Plan Design Defined Benefit Defined Contribution
Vesting6 Years (If after 2011 – 8
years)1 Year
Transfer-abilityNo
Only FRS Employer
Yes
Any eligible plan
Retirement Age
62 or
30 Years of Service (Age 65 if employed after 7/1/11)
Governed by IRS Rules
Investment Management
FRS Self
DROP Eligibility Yes No
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Considerations
Career Choices
The longer you stay in the system, the more the
FRS Pension looks good.
The more mobile you are, investment control
(Investment Plan) may be more important
If you are undecided, you have the choice of
changing later.
Problem with this is if market forces change, change may no longer be an option.
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Retirement
Your Part!
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Personal Savings Options
Non-Employer sponsored savings
Tax Deductible (if you qualify)
IRA
Mutual Funds
Annuities
Stocks, Bonds, etc.
Non-Tax Deductible
Stocks, Bonds
Real Estate
Annuities
Commodities
Etc.
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Your Pre-Tax
Retirement Savings
Types of plans available through Duval County
Public Schools
403(b) Tax Sheltered Accounts
457(b) Deferred Compensation Program
401(a) Special Pay Plan
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After tax vs. Before tax
Before tax savings (Pre-tax)
Immediate Savings
In a 25% Federal Income Tax bracket you
can increase your savings by 33%.
Pre-Tax savings lower your taxable income
each year
After Tax Savings
Pay taxes before savings. Contribute less withsame take home pay
Pay taxes at your higher tax bracket
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24
68
1015
2025
30
$0.00
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
$140,000.00
Before Tax vs. After Tax Savings
After Tax
Savings
Before Tax
Savings
$100 per month @ 6% for 30 years = $76,223
(after tax)
OR
$133 per month @ 6% for 30 years = $134,268
(before tax)
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403(b) Retirement Savings
Available to Education andQualified Non-Profit OrganizationEmployees
Pre-tax savings and accumulation
Savings made through salary reduction
Deposits made to the authorized vendor ofyour choice
Tax Deferral
Account grows without current taxation
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457(b) Retirement Savings
Available to Governmental Employees
Governed by IRS and Plan Document
Pre-tax savings and accumulation
Savings made through salary reduction
Deposits made to the authorized vendor of your
choice
Tax Deferral
Account grows without current taxation
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Rules for using accounts
Withdrawals
Governed by Internal Revenue Code
Only pay taxes when withdrawn
Loans
Loans up to ½ of account to $50,000
Retirement Income
Take income as you need it afterretirement (Subject to Internal Revenue
Guidelines).
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Contribution Guidelines for
403(b) and 457(b)
Basic Limit
$18,000 in 2017
Aged Based Addition
$6,000 additional contribution if you areover 50 years old
Service Based Catch-up
Up to $3,000 additional contributions -403(b) only
Subject to Years of Service and PriorContribution Restrictions
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What is DROP?
FRS Pension benefit that was designed
to allow an employee to work past
normal retirement age and increase
their personal wealth through
accumulations in their DROP account.
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DROP
Only available to FRS Pension PlanParticipants
After Reaching Qualified Retirement
Employee retires from Pension Plan
Payments made to a trust earning 1.3%
Money available at full retirement
Portability
You may take distribution in cash, utilize arollover, or combination of two.
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DROP
When can you DROP?
30 years of Service or Age 62 and
vested
Age 57 if later
Over age 57 if instructional
What happens if I don’t DROP?
Normal Pension
Lose DROP options after one year if you
have reached age limit
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DROP
How long can I DROP?
Up to 5 years
What if I want to keep working after
five years
Must come back as a new employee
after being retired for at least one year
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What happens at DROP
termination?
DROP Accumulations for most
participants $100,000 to $200,000
DROP Options Take Cash – Pay taxes
Rollover – Defer taxes
Combination Cash & Rollover
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Your Bencor
Special Pay Plan
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Contributions Made to the
Bencor Special Pay Plan
Accumulated Sick
Leave
Accumulated Annual
Leave
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Why do you have the
Bencor Special Pay Plan?
Taxes
Taxes
Taxes
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Tax Savings & Deferrals
FICA – SS and MediCare
Taxes
Federal Income Taxes
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FICA & Medicare taxes
Without the BENCOR Plan you pay
up to 7.65% in Social Security and
Medicare payroll taxes
With the BENCOR Plan
Avoid all Payroll Taxes
Example: $20,000 x 7.65% = $1,530
savings
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Federal Income Taxes
Without the Bencor Plan you
could pay 25%, 31%, 36% or
higher in income taxes
With the Bencor Plan – Defer
all Income Taxes
Control Payment of Income
Taxes
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Special Pay Comparison
Without Bencor Plan
$ 10,000.00
2,500.00 Fed Tax
620.00 FICA
145.00 Medicare
6,735.00 Net Pay
With Bencor Plan
$ 10,000.00
$ 0 Fed Tax Deferred
$ 0 FICA Saved
$ 0 Medicare Saved
$ 10,000.00 Deposited
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Contribution Limits
Annual Maximum Limits
100% of Salary up to $54,000
Multiple Contributions
Made over Drop Years, or
Final years prior to retirement (subject to employer’s Board Policy)
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Contributions during DROPMultiple Annual Contributions
Increasing percentage of Sick and Bank Point leave at end of each year of DROP.
5 Year example: Year 1 20%
Year 2 25%
Year 3 33.3%
Year 4 50%
Year 5 100%
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Other Features
Liquidity & Flexibility
Safety
Tax-Deferred Earnings
Optional Investment Accounts
Loans
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Employee Instructions
Complete Enrollment
Forms
Address
Beneficiary
Investment Direction
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Employee Account
Information
BENCOR Administrative
Services Administers accounts for BENCOR
Offices in Westchester, OH
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Employee Account
Information
Using your account (Subject to IRS
Guidelines)
Withdrawals at employment separation
Use as income or take as you need
Loans
½ of account balance up to $50,000 (one time $100 fee)
Change Investments
Over the phone, online
Rollovers – In & Out
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Your Money
After Retirement
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DROP or Special Pay
Rollover
DROP
Accumulation
IRA
403(b) & 457(b)
401(a)
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DROP or Special Pay
Rollover
DROP
Accumulation
IRAExisting IRA
Rollover IRA
59 ½ Minimum Age
Subjects $ to IRA
restrictions
Fees and Charges
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DROP or Special Pay
Rollover
DROP
Accumulation 403(b) & 457(b)Existing account
only
Evaluate any fees &
surrender charges
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DROP Rollover
DROP
Accumulation 401(a)Existing Account
No surrender
charges
Make final decisions
at later date
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Questions & Answers