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Member Education Seminar

Member Education Seminar. Indiana State Teachers’ Retirement Fund Please silence your cell phones. Overview. Membership & Service Credit Retirement Overview Investments TRF Web Site. Membership Eligibility. Licensed Teachers & Administrators

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Member Education Seminar

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  1. Member Education Seminar Indiana State Teachers’ Retirement Fund Please silence your cell phones.

  2. Overview • Membership & Service Credit • Retirement Overview • Investments • TRF Web Site

  3. MembershipEligibility • Licensed Teachers & Administrators • Regular employment in Indiana public school system • Licensed Substitute Teachers • Requires minimum Associate’s degree • Requires completion of 1 year of service

  4. What Counts as Service? • 120 or more days = 1.0 year • 60 to 119 days = 0.5 year • 10 years of qualified service = vested (eligible to receive pension benefit)

  5. What Counts as Service? • Regular Indiana teaching service • Substitute teaching in Indiana • Public Employees’ Retirement Fund (PERF) service • School board approved leaves of absence from an Indiana school

  6. Board Approved Leaves of Absence • These may include: • Advanced Study • Work Experience • Teacher Exchange • Pregnancy/Adoption • Sickness or Classroom Disability

  7. What Counts as Service? • Private school service in Indiana • Out-of-state service credit • Military service credit • Additional purchased years of service credit

  8. Purchase of Additional Years of Service Credit Example of cost to purchase one additional year of service credit AgeAnnual SalaryYrs ServiceEstimated Cost 35 $ 40,000 10 $ 526 40 45,000 15 1,394 45 50,000 20 2,234 50 55,000 25 12,646 If service credit is purchased and never used, the member is refunded the purchase amount plus interest.

  9. How Do I Qualify for Retirement: Service Eligibility • Two Requirements: Service Eligible and Age Eligible • Service Eligible: Vesting • TRF members with 10 years of qualifying service

  10. How Do I Qualify for Retirement: Age Eligibility • Age 65 with at least 10 years of service • Age 60 with at least 15 years of service • Ages 55-59: age and service years total at least 85 (Rule of 85)

  11. Can I Retire Any Earlier? • Early (reduced) retirement available between ages 50 to 59 • Must have at least 15 years of service • Pension percentage based on age • Member receives reduced pension benefit for life

  12. Classroom Disability Benefit • Eligibility • At least five years of service • Active employment in a TRF-covered position • Conditions • Medically confirmed • Six-month continual absence from classroom • No teaching service earned • Reviewed annually • Benefit • $125/month + $5 for every year of service over five years

  13. Death Before Retirement • Survivor Pension Benefit Eligibility • At least 15 years of service in a covered position • Marital status • Dependent children • Annuity Savings Account (ASA) • Keep designated beneficiaries current

  14. Your Teachers’ Retirement Fund (TRF) retirement benefit consists of two separate components:Monthly Pension Benefit+ Annuity Savings Account Your TRF Retirement Benefit

  15. TRF Retirement Benefit • Pension Benefit • Administered by State of Indiana through Teachers’ Retirement Fund • Lifetime monthly benefit • Annuity Savings Account (ASA) • Composed of mandatory & voluntary contributions + investment gains/losses • Can be lifetime monthly benefit

  16. TRF Retirement Benefit Part One: Monthly Pension Benefit

  17. Monthly Pension Benefit • Benefit Formula: • Average salary x 1.1% x years of service (A-1 Option) • Example: • Age 55 • 30 years of service • Salary average (5 highest years): $60,000 • Annual pension income based on formula: $60,000 x 1.1% x 30 = $19,800 ($1,650/month)

  18. TRF Retirement Benefit Part Two: Annuity Savings Account

  19. Annuity Savings AccountWhat is it? • Individual investment savings account • Mandatory contributions • 3% of Annual Salary • Voluntary contributions • Pre-tax or post-tax • 1% increments • Up to additional 10% of salary • Investment gains & losses

  20. Annuity Savings AccountVesting & Withdrawal • Immediately vested • Consequences of withdrawal • Pension forfeiture • Penalties • Vested Members, inactive for 90 days after June 30, 2009, can withdraw their ASA balance without forfeiting their pension • Rollover protection

  21. Annuity Savings AccountVoluntary Pre-Tax Contributions • Contributions • Reduce taxable income • Taxed at distribution • Election window • Two-year time frame between fifth and seventh years • Irrevocable decision • Remains in effect for length of employment

  22. Annuity Savings AccountVoluntary Post-Tax Contributions • Contributions • All taxes paid prior to contributions • Revocable decisions • Participation • Contribution percentages • Employer approval

  23. Annuity Savings AccountInvestment Allocations • Allocation changes • Made quarterly • Made in 10% increments to total 100% • Defaults to Guaranteed Fund • Beneficiary designation • Beneficiaries should be named and kept current • Divorce/Marriage

  24. Annuity Savings Account ASA Allocation • Risk tolerance • Comfort level with ASA value fluctuations • Age • Younger members may take on more market risk since losses can be made up over time • Portfolio diversification • Contributions allocated among different types of investments may reduce overall risk

  25. Annuity Savings AccountInvestor Profiles Conservative • Prefer the slow and steady pace of stable investment options and are not comfortable at all with risk • Are within a few years of retirement or already retired

  26. Annuity Savings AccountInvestor Profiles Moderate • Willing to accept some risk for potentially greater returns, but are uncomfortable with large ups and downs in the short-term • Comfortable with risk but have less than 10 years until retirement

  27. Annuity Savings AccountInvestor Profiles Aggressive • Willing to take a higher level of risk for greater growth potential • Have more than 10 years until retirement • Not tempted to change allocations when experiencing a drop of 10% or more

  28. Annuity Savings AccountInvestment Election Options • Guaranteed Fund • Investment Risk Profile: STABLE • Bond Fund • Investment Risk Profile: CONSERVATIVE • Standard & Poor (S&P) 500 Index Fund • Investment Risk Profile: MODERATE • International Fund • Investment Risk Profile: AGGRESSIVE • Small Cap Equity Fund • Investment Risk Profile: AGGRESSIVE

  29. Retirement PlanningPlease remember, TRF employees are not financial planners. • Be aware of personal needs • Lifestyle change, health care costs, inflation, travel • Research options available to you • Consider all sources of retirement income • Social Security, TRF benefit, personal savings, spouse’s retirement

  30. Retirement Planning: Why Worry About It Now? The power of compound interest • Age 22 $50/month 10 years at age 60… $86,000 • Age 32 $50/month 28 years until age 60… $63,000 • Age 42 $50/month 18 years until age 60… $24,000 But what if… • Age 22 $100/month 10 years at age 60… $255,000 • Age 32 $100/month 28 years until age 60… $194,000 • Age 42 $100/month 18 years until age 60… $79,000 Please note: estimates based on numbers as of January, 2009

  31. Retirement Planning: What Should I Do Now? • Set realistic goals • Develop a budget and stick to it • Save early and often • The power of compound interest • Determine best investment strategy • Which investor profile suits you?

  32. Retirement Planning: What Should I Do Now? • Check investments periodically • TRF Interactive • Quarterly statements • Outside investments • Maintain good records • Keep all financial documents and brochures

  33. Rollover Savings Account (RSA) • What is it? • May create a separate account before retirement • Rollover tax-deferred funds from IRA or other qualified retirement plans • Why set it up? And when? • TRF could offer a higher rate of return and/or better payment options than your current qualified retirement plan

  34. TRF Web Sitewww.in.gov/trf

  35. TRF Web SiteTRF Interactive • Update contact information • Manage ASA investment allocations • Calculate potential retirement benefit • Change beneficiaries • View quarterly statements

  36. Teachers’ Retirement Fund We are here to serve you! Any questions? Please complete our survey. Your comments help us serve you more effectively.

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