PREPARING FOR RETIREMENT, The EARLIER The BETTER

1. PREPARING FOR RETIREMENT, The EARLIER The BETTER Presenter: Marie Ardito, Retired Teacher Information Coordinator Massachusetts Retirees United May 12, 2015

2. DisclaimerWhile the information presented is believed to be accurate and reliable as of seminar date, it is recommended that each individual confirm it's applicability to his/her own retirement variables and with a retirement consultant from his/her respective retirement board. Also all legal matters should be discussed with an attorney and financial matters with a financial planner. The information presented is general in nature. The presenter assumes no obligations for failure to verify information at the time participant is retiring. Ms. Ardito is associated with Lincoln Investment as a speaker, not as a financial representative.

3. Workshop Summary • Pension Criteria and Options • Protecting Assets • Working in Retirement • Health Insurance and Medicare • Social Security/GPO/WEP • Tax Structure

4. Declaration Of Homestead • On primary residence • Registry of Deeds • Automatic $125,000---- house in trust • Protects up to $500,000 if under 62 years old • Protects up to $500,000 per person on deed over age 62. While the information presented is believed to be accurate and reliable, itis recommended that each individual confirm it's applicability to his/herown retirement variables. The presenter assumes no obligations or liabilityarising out of its use by others.

5. Working in Retirement • Doing the work you have always wanted to do, not what you have to do. • See ideas and questions to ask yourself on WORK and Volunteering www.marieardito.com

6. Work Your Pension Allows • All private sector jobs • Teaching in private, non-public schools • Teaching out of state

7. Does Not Allow • Work in public sector job • Can only work 960 hour or make the difference between what your pension is and what your salary WOULD HAVE BEEN had you remained teaching plus $15,000. Applies to a calendar year. • Critical Shortage

8. State Tax Structure In MA no State Income Tax Know what other states do Some states tax Social Security Benefits for seniors for property tax www.retirementliving.com

9. Forms for MTRB • Notarized Birth Certificate • Marriage Certificate if taking Option C • Copy of discharge if veteran • Photocopies from contract of salary schedule for 3 years which make up FAS, pages of longevity, and stipend

10. Forms MTRB Provide • Option Selection Form • Group Health Insurance XXX • Federal Tax Withholding • Direct Deposit • MA Teachers Retirement System One Charles Park Cambridge, MA 02142

11. Creditable Service • All Creditable Service must be purchased prior to effective date of retirement. • Part of a year counts. • All forms may be downloaded from the MTRS website www.mass.gov/mtrs or can be obtained by calling them at 1-617-679-6877.

12. Forms of Creditable Service • Regular Service • Out of State Public School Teaching Service up to 10 years • Substitute, temporary, part time teaching or tutoring • Maternity prior to January, 1975

13. More Creditable Service • Any unpaid leave of absence-1 month • Non-Public School Service --prior to 1973 up to 10 years • Work done in any state, county, municipal, as long as not while you are teaching

14. And more Creditable Service • Military Service • Peace Corps • Vocational Teacher’s Bill • Pay with Rollover Option

15. Age Factor • PART OF A YEAR DOES NOT COUNT HERE. Age as of last birthday. If you retire on your birthday, you are able to use that age factor. • USE 1 BEFORE A DECIMAL POINT IF IN 50’S --2 IN FRONT OF DECIMAL POINT IF IN 60’s. Whatever the number is after the decimal point is the second number of your age. For those hired prior to April 2, 2012

16. 1.0 = 50 1.1 = 51 1.2 = 52 1.3 = 53 1.4 = 54 1.5 = 55 1.6 = 56 1.7 = 57 1.8 = 58 1.9 = 59 2.0 = 60 2.1 = 61 2.2 = 62 2.3 = 63 2.4 = 64 2.5 = 65 Age Factors 65 is the largest age factor a person may use

17. Final Average Salary(FAS) • Regular salary + longevity + any money you get for a contractual stipend position equals your salary. • Sick leave buy back and “deals” cannot be included. • Your FAS is made up of the average of your 3 highest consecutive years salaries.

18. Retirement Plus • You add 2% for each year above 25 years but cannot count until 30 Y/S • 30 Y= 12% 31 Y= 14% 32 Y= 16% • 33 Y= 18% 34 Y= 20% 35 Y= 22% • Two percent applied only to the whole number of your creditable service, not part of the year.

19. Formula for Option A • Person 56 years old • 34.3 years of service • Final Average Salary (FAS) = $56,787 • Age Factor X Yrs of Service = % of Salary 1.6 X 34.3 = 54.88% (add 20% R+ factor = 74.88%) • FAS X % of Salary = Annual Pension $56,787 X 74.88% = $42,522 For illustrative purposes only

20. Options • There are 3 options: A, B, C • Must submit Option Selection Form with your Application to Retire Form • Irrevocable decision once effective date of retirement occurs

21. Understanding the Three Pension Options: A, B, C • Option A- • Highest payout available • For your lifetime only • Payout ends when you die • No beneficiary benefits

22. Option B • 1-2% less than option A income for member • Anyone can be your beneficiary • When you die, balance of your fund goes to beneficiary • Account depletes itself in 10-11 years

23. Option C • Lowest possible payout • Provides survivor benefit equal to 2/3 of Option C • Beneficiary must be parent, spouse, sibling, children or ex-spouse who has not remarried • Pop-up provision available

24. Case Study • Your age: 60 • Your Age Factor: 2.0 • Final Average Salary: $42,000 • Years of Service: 35 • Retirement Plus Percentage: 22% • Beneficiary’s age: 52 • Option A Option B Option C $33,600 $33,264 $29,780 Dies with you Any remaining $19,853 to beneficiary to survivor ($3,820 difference) For illustrative purposes only

25. Which Option Should You Choose: • Factors to consider: • Your Age • Your beneficiary’s age • Health of you and your Beneficiary • Is ability to change your beneficiary important? • Cost differential between Options A and C

26. Pension Max • Must be insurable • Different types of insurance: • Term • Universal Life • Variable Life • Whole Life

27. Do you have other assets? • Do you have other assets, such as: • 403(b)s, also referred to as TSAs, Tax-Sheltered Accounts or Tax-Sheltered Annuities? • rental income, IRAs, etc.? • Are you eligible for Social Security?

28. COLACost of Living Adjustment • Issued annually if voted on by Legislature • If retire on June 30, 2014, eligible July of 2015

29. COLA Based On: • 1971-------$6,000 • 1981-------$7,000 • 1985-------$8,000 • 1986-------$9,000 • 1997-------$12,000 • 2012-------$13,000 • MRU working to increase this base to $16,000

30. $50,000 Pension

31. Purchasing Power • Purchasing Power is the value of your pension in each year of your retirement! • The great need to supplement your pension! • Pension 5-7 years out!

32. Ways to Supplement Your Pension in Retirement • Employed: Company Retirement Plan • Self-Employed: SEP, ROTH, Traditional IRA, Single 401(k) • Fully Retired: Keep on Saving • Mutual Funds, Non-Qualified Annuities, Stocks, Bonds, CDs, etc.

33. Health Insurance Questions • Who oversees the health insurance for retirees in your community? • What percentage does each pay? • Do you have to be carrying the health insurance at the time you retire to be eligible to carry it into retirement?

34. More Questions on Health Insurance • What are the Plans offered to Retirees? • Which plan should you have if moving out of state or living out of state for X number of months? • If you don’t take the health insurance when you retire can you pick it up later?

35. Still More Questions • Will Spouse be covered after you die, or if on their plan will you if they die? Will payment plan change? • What if you still have minor children? • When does your health insurance cease as an active teacher? • When does your health insurance begin as a retiree?

36. Word of Advice • Plan to attend Health Fairs well in advance of your anticipated retirement date. Ask questions yourself; don’t rely on someone else’s answers. • WATCH WHAT IS GOING ON

37. MEDICARE • Medicare A (hospitalization) free to all workers and spouses who draw Social Security Pensions • All hired after March, 1986 pay 1.45% Medicare tax and will get Medicare A coverage if have 10 years of Medicare covered employment

38. Medicare Continued • Ask how your system handles Medicare. • Do they require you to pay all of B? • Do they require you to come off the school plan and be covered solely by Medicare? • Get this answer yourself--Don’t rely on what someone else says!!

39. Social Security • Need 40 units for eligibility • Receive Earning and Benefits Statement2 months before your birthday • No matter what Social Security may tell you prior to your actually filing you will be penalized by the WEP/GPO unless:

40. GPOGovernment Pension Offset • Will get no Social Security or have it reduced by 2/3 either as a spousal or survivor benefit if not eligible to retire by December 1, 1982, July 1, 1983 • You will be eligible for Medicare

41. WEPWindfall Elimination Provision • Will receive greatly reduced percentage of what you are entitled to in Social Security unless: • Eligible to retire prior to January of 1986 • Have 30 years of substantial earnings But you are eligible for Medicare • MUST HELP TO FIGHT For THE REPEAL OF THE WEP/GPO

42. Getting Involved / Being Informed You must be informed NOW on retirement issues. It is Never too early! Let your voice be heard for it is your future that is at stake! Ignorance is never bliss!

43. Questions?

44. A Few Money Suggestions • Five years prior to retiring, list household expenses to take care of prior to retiring. Try to do one a year (roof repair, house repainted, rug replacement, etc.) • Set to have mortgage paid off. • Car relatively new going into retirement. • Don’t give up second car.

45. More Money Suggestions • For a couple of years prior to retiring keep notebook of monthly expenses. Estimate which will increase/decrease when retired to get clear idea of what your monthly expenses will be. • Credit Cards

46. Legal Checklist • Do you (and your spouse/partner) have: • Will? • Living Will? • Durable Power of Attorney? • Healthcare Proxy? • Declaration of Homestead?

47. More Legal Suggestions • Do you have all of your documents in order? • Where can they be found? • Do you know who your beneficiaries are? • Do they need updating?