Do you really want to work FOREVER?
Reasons why you should save for retirement
You don't want to work forever, and you will ultimately be responsible for paying for your retirement: If you want to stop working, think about how much income you will need to live. Social Security provides a basic "floor" of income that you will have to build on for a comfortable retirement. Pensions have provided about 1/3 of retirees with some added income each month. If your employer offers a savings plan at work, use it.
You want to have enough money saved for a comfortable retirement: You may assume that expenses will go down in retirement, but frequently that is not the case. Inflation means you will need more, not less. Higher property taxes could cause your housing costs to be more. Many other expenses may arise: increased medical costs and health insurance premium costs; financial help for children, grandchildren, or even elderly parents. The more free time you have could result in more money being spent on traveling and entertainment.
You don't know how long you will be able to work: The 2007 Retirement Confidence Survey found that 37 percent of current retirees retired earlier than planned due to an unexpected event such as health problems or changes in their company such as downsizing. The earlier you start preparing for unexpected events, the better.
You don't know how long you will live: People today are living longer. A man retiring at age 65 would have a 50 percent chance of still being alive at 81, a woman at age 85. There's a 25 percent chance of living to nearly 90 and a 10 percent chance of getting close to 100. You don't want to risk the chance of running out of savings.
You may want to meet with a financial advisor to discuss your retirement needs based on your goals.
For more information on retirement saving, go here.
*Source: Choose to Save®, a program of the Employee Benefits Research Institute
Does anyone "plan" to be disabled?
You're at a point where you can start saving more money for retirement. You have a sufficient amount of life insurance that will protect your family if you should die prematurely, but have you considered disability insurance?
If you become disabled, you may receive payments from Social Security or a company disability policy, but the income may not be enough to sustain your needs.
A permanent injury may keep you from working. If this happens, your earned income stops, but your expenses are ongoing. You may incur more expenses to help with the activities of your daily living.
There are many factors to consider as you prepare for retirement. You may want to meet with a financial advisor to discuss your options for disability insurance coverage.
Double digit returns rock stability
Investment performance for the Indiana Public Retirement System (INPRS) remains solid. While INPRS is a long-term investor, the system's one-year net investment return for the fiscal year ending June 30, 2011, was 19.37 percent.
Overall, INPRS remains one of the better funded systems nationally. The aggregate funded ratio of INPRS' pre-funded plans was more than 85 percent (excluding TRF's Pre-1996 account) at the end of the 2011 fiscal year. Nationally, state pension plans were funded at about 69 percent according to the 2011 Wilshire Report on State Retirement Systems.
In addition, TRF has a pay-as-you-go plan that has been in place since 1921. It is not pre-funded and its funding status is low by design. In 1995, the state established a separate fund to protect TRF retirees against any disruption in state payments and to smooth out payments from the state as the baby boomer generation retires. As of the end of fiscal year 2011, this fund's assets are approximately $2.3 billion.
More information on the financial condition of INPRS is available online here.
Focus on risk instead of money? How does that work?
The first asset allocation specific to the Indiana Public Retirement System (INPRS) was approved by the board of trustees in October.
The allocation is intended to:
- Continue to achieve the actuarial expected rate of return over the long term
- Provide better diversification of risks
- Reduce risk through less exposure to public equities (stocks)
"This represents the next step in integrating the investment activities of the new system," said INPRS Executive Director Steve Russo. "While the system's seven funds remain legally separate, we expect to find significant savings as we consolidate investment managers while implementing a new system-wide asset allocation."
The allocation includes a strategy called Risk Parity designed specifically to balance risk in the portfolio, with investments such as Treasuries, Inflation Linked Bonds, equities and commodities. Risk Parity is an approach to investment management that focuses on the allocation of risk instead of capital (money).
As a strategy, Risk Parity includes a cross-section of investments selected specifically to reduce risks through diversification within an investment portfolio, while also providing expected stable long-term returns.
Do I need to prepare before I see a counselor?
Q. I plan to meet with a retirement counselor to complete my application. Do I need to do anything beforehand?
A. Begin by familiarizing yourself with the available options for disbursement of your monthly pension benefit and Annuity Savings Account (ASA). Next, make sure to bring your bank account number and routing number for direct deposit; it is no longer necessary to bring a cancelled check. Finally, you can save time by printing your name, address, and phone number on the application before your appointment. This is especially relevant for members with PERF service, as the PERF Retirement Application requires member information at the top of each page.
Quick! What do you know about your retirement benefit?
TRF at a Glance is an overview of TRF's plan provisions.
Click here to download a PDF copy.
One person's pleasure may be another person's pain
What is your vision for retirement? Have you discussed your thoughts and ideas with your spouse? If not, you may want to candidly engage in conversation about how the two of you want to make the transition.
You may want to relax at home while your spouse may want to travel. As you talk about the future and the resources you will have available, consider factors such as rising inflation and longer life expectancies. Will your combined incomes be enough to sustain your life style and life span?
Besides Social Security and your TRF pension, have you explored other avenues of securing a steady cash flow during your retirement years?
There are many things to reflect on as you approach retirement. Be prepared by finding out more about your TRF pension benefit. Refer to the TRF Member Handbook online.
