A record year in the investment market calls for a pause to celebrate and manage expectations
What. A. Year. 2020 was one for the books and, in many ways, one we’d like to forget. We mourn the loss of lives and hope for a brighter future ahead. As the COVID-19 pandemic continues to evolve, you may have noticed your investment performance exceeding expectations across your higher-risk investment allocations, including those you have with INPRS.
Why might that be? Funds inherently with higher risk, such as the Large Cap Equity Index, Small/Mid Cap Equity, International Equity, and Target Date Funds with 25 or more years until their maturity date and have more stock in them. The greater exposure to equity risk causes them to be more volatile. Greater stock exposure can mean that returns are plenty when the going is good and when markets are down, so might be investment balances.
The pandemic caused uncertainty in specific sectors, but roaring demand in others and general speculation created a unique environment.
While many individuals are still experiencing hardship and job loss, the stock market has recovered well.
While it’s exciting to see your investment returns showing 18%, 20%, and even 22% for the year, it’s important to remember that investments go up and down over time, ebbing and flowing with the realities of our world.
A great way to safeguard your INPRS investments is to understand where you have your hard-earned dollars invested. Also, understand how those investments perform based on your retirement goals.
Since 2010, new members to INPRS have had their DC investments defaulted to their age-appropriate Target Date Fund. Target date funds initially contain a more aggressive investment mix, which likely will experience more notable highs and lows following market activity. As a Target Date Fund gets older, it is adjusted to be more conservative. Thus, it leaves the invested member with an investment mix more focused on preserving their investments and limiting drawdowns in preparation for using the balance for expenses in retirement.
Members invested in stand-alone funds like the Small/Mid Cap Equity Fund or International Equity Fund have a static investment mix. These Funds will continue to reflect their segment of the stock market over time. And will continue to see their investments move in alignment with the risk profile, no matter how close one is to their retirement age.
You cannot control or consistently predict how investments will perform in the future. Past performance is not a reliable indicator of future performance. What you can do is review your current investment elections. Consider your retirement and other financial goals and whether your current investment selections are suitable to help you reach those goals.
If a refresher is needed, check out our Investing 101 materials on our website. Review our investment fund fact sheets or register for our Asset Allocation and Investment Basics Education webinar. If you need help, give us a call at (844) GO-INPRS or (844-464-6777).
Don't leave money on the table when you leave your state job
Your ability to pay for health-related costs may depend on it
A little-known health benefit exists for most state employees when they retire, but many folks leave their jobs, and this benefit, on the table. You can avoid this fate by taking a few easy steps to ensure you receive the benefits you've earned.
If you’re currently working full-time in one of the following positions, you’re eligible for the Retirement Medical Benefits Account (RMBA). If you are:
- A state elected officer;
- An appointed officer who is appointed to fill State elected office vacancies;
- Certain police officers of the executive branch (eligible for medical benefits);
- An employee of the executive, legislative or judicial branch of state government; or
- A member of the Indiana General Assembly, you are eligible for the RMBA.
The RMBA is a health reimbursement program for medical, vision, dental, and long-term care insurance available to qualifying state employees who retire out of their eligible position. If you choose to quit your job and then later retire, you forfeit your eligibility in this program. Here’s what you need to know:
- If you're a qualifying employee, understand what the RMBA is and how you can receive benefits upon retirement.
- Understand that quitting your covered position will result in your forfeiture of membership in RMBA unless you are already age and service eligible for a normal retirement when you quit. If you are close to retirement eligibility, consider if retiring out of your covered position could be in your best interest.
- Plan details and frequently asked questions are available here.
Take some time today and learn about the RMBA. If you need support, please contact INPRS at 844-GO-INPRS.
A new option is now available for your annuity choice
Members retiring July 1 or later have additional annuity choices from MetLife. When retiring, you can now opt for a life annuity with or without a cash refund feature. This applies to single life annuities, or the joint and survivor annuity.
A cash refund feature is when a member receives an annuity for life. At the member’s death, the beneficiary gets the total used in calculating the annuity,
minus the total annuity payments made to the member.
You may be eligible to change your MetLife selection if:
- Submitted your retirement application more than 30 days before your actual retirement,
- Selected an annuity, or
- Are currently going through the retirement process.
Your initial benefit payment may be lower with the cash refund feature than it would be if you do not select this feature. You can compare and contrast the payment options with and without the cash refund feature. Need help determining which payment option and feature best meets your retirement income needs? Visit the MetLife Retirement Income Center quoting tool or the Retirement Application Center (RAC) at www.myINPRSretirement.org.
If you have any questions, our Member Advocate Team is here to help! Visit INPRS’s comprehensive FAQ page or give us a call at (844)-GO-INPRS (844-464-6777), or feel free to email us at email@example.com.
Understanding the fees you pay
While no one likes to pay fees, it’s important to understand what fees you are paying and why. When you review your statement, take note of the administrative and investment fees INPRS is required to add. We’re committed to only assessing the fees that are necessary for taking care of your account.
Belo,w we sum up what you need to know about the two types of fees INPRS members pay: administrative fees and investment fees (also referred to as expense ratios):
- PERF, TRF, and LE DC plan members pay administrative fees to cover the costs associated with managing their defined contribution (DC) accounts.
- Administrative fees are $3.75 deducted directly from members’ DC account each month, for an annual charge of $45. This deduction is noted on your quarterly member statement. PERF and TRF Hybrid members will find the fee noted on their annual member statement.
- INPRS’s member fee policy outlines the method used to determine administrative fees. You can find the fee policy online at https://bit.ly/DCAdministrativeFeePolicy.
EXPENSE RATIOS / INVESTMENT FEES
- INPRS Defined Contribution (DC) Plan investment options each carry an “expense ratio.” An expense ratio measures how much you’ll pay over the course of a year to own an investment option. An expense ratio is expressed as a percentage for each investment option.
- When you view your DC account, your online statement will show how much money you gained or lost, known as net of fees. All expenses are deducted from your investment option(s) before showing how much you gained or lost.
- You will find that the expense ratios associated with INPRS are typically lower than retail investment offerings. For example, an INPRS member working for ten years starting at age 30 could have over $10,000 more in their DC account upon retirement than a retail investor with higher fees on the same investment amount and length of time. *
- Click here for further details on Expense Ratios and to view the Fee table.
You can use the below equation to figure how many dollars you’re paying annually in fees:
Amount Invested (dollars) x Expense Ratio (%) = Fee
For example: if you have $10,000 in a fund with an expense ratio of 0.12%, you’ll pay $12 per year in fees.
View your investment options and their associated expense ratios by logging into your secure online account at www.myINPRSretirement.org.
* The above example assumes a $1,000 annual investment for 10 years at year-end, starting at age 30 and investing until age 65. Both scenarios assume an 8.00% gross return with an INPRS return of 7.90% net-of-fees and a competition return of 7.53% net-of-fees. The rate of return is an assumption and is not a guarantee of performance.
Getting the most out of your advance child tax-credit payments
Beginning in July 2021, the Internal Revenue Service (IRS) began issuing advanced payments for taxpayers who qualify for 2021 child tax credit. These advanced payments provide taxpayers with a monthly payment for half of their total child tax credit amount. The second half of the credit may occur when the taxpayer files their 2021 taxes.
If the IRS has taxpayers’ direct deposit information on file, payments are by direct deposit. Taxpayers without direct deposit information in the IRS’s database will receive their payments by check. The 2021 child tax credit is only approved for this year and is different than the child tax credit that you may have been eligible to receive in prior years.
While these payments generally are intended to help qualifying taxpayers cover expenses for their children, you may be wondering what their best use may be. All situations are different but keep one thing in mind — any financial improvement you make indirectly benefits your child. Do not feel obligated to use the money for diapers unless that is the area of your greatest need. Here are some ways to use your advance child tax credit payments to better yourself and your family.
Cover child-related expenses - Daycare, diapers, clothes, and other essentials are a straightforward expense to tackle with your monthly check.
Pay down credit card balances - Your monthly obligations, especially high interest-earning credit card balances.
Put the money in savings - If you have less than three months of essential expenses saved, you may want to give it a boost with your child tax credit.
Deposit the money in your child’s 529 account - Set the money aside for your child’s qualifying education expenses. You could be eligible for a 20% tax credit on your Indiana return. Remember, money in a 529 account can only be used for qualifying education expenses (without penalty), so only consider this if you do not need to access the money.
No matter what you choose to do with your advance child tax credit, remember that it is not permanent. Resist adding it to your budget as expected income and instead treat it as an opportunity to improve you and your kids' financial situation. For more information on the advance child tax credit, read here.
Source: Internal Revenue Service
Build a healthier budget using the 50/30/20 Rule
With the holidays around the corner, the end of the year is quickly approaching. That means between now and the new year, you have the urge to spend more on seasonal items and activities. From buying candy for costumed visitors to traveling for family dinners and present giving, for many people, all of this spending can add up very quickly and cause financial stress.
If seasonal overspending is an issue, start creating a budget early to help reduce stress about finances after the holidays. Stick to a realistic budget and be mindful of your spending. You will not only help your finances bounce back but keep yourself moving toward your savings and retirement goals.
Our record-keeping partners at Voya can help you build a healthier budget to assist with life and next year’s events. Learn how by applying the 50/30/20 rule. This simple budgeting approach may help you simplify your financial life while meeting all of your goals. To learn more check out this article from Voya, here.
Source: Voya Financial
Get your three weekly credit reports for FREE
Equifax, Experian, and Transunion – the three major credit bureaus – will continue to offer free weekly credit reports to all Americans through April 20, 2022.
The year extension continues the weekly reports offer that first became available at the beginning of the global pandemic. You can get your free credit reports by visiting AnnualCreditReport.com.
- Go to AnnualCreditReport.com.
- Click on “Request your free credit reports.”
- Fill out the form to request up to three free copies of your credit report.
- Select the reports you want (Equifax, Experian, and/or Transunion).
- Confirm your identity and submit your request.
- Review your report(s) and verify accuracy.
Your credit report serves as a good snapshot of how your overall financial health looks. Regular review of all three credit agency reports is a great way to check your financial profile, current and historical credit accounts, and personal information. And when you need to use credit, it is good to know where you stand before making a big purchase, securing a loan, or other financial transactions.
Source: Federal Trade Commission
10 things to know when you leave your PERF or TRF-covered employment
If you recently terminated or are considering leaving your PERF or TRF-covered employment, there are several things you need to know. The choices you make can have a significant impact on your retirement and financial future.
For PERF and TRF Hybrid members, two parts make up the plan: the defined benefit (DB) or pension and the defined contribution account (DC account). To be eligible for a pension when you retire, you must meet specific age requirements and be vested. However, all the DC funds are yours, even if you aren’t vested in your pension. There are requirements for withdrawing this money, but leaving your PERF/TRF-covered job does not reduce or eliminate this benefit. PERF and TRF My Choice plan members have a DC account only and have specific vesting requirements for the employer contributions made to their account. My Choice members vest in 20% increments over five years. For example, if you leave your My Choice plan after three years, you’ll be 60% vested in the employer contribution portion of your account.
Here's what you need to know if you are thinking of leaving employment or retiring:
- You can leave the money invested in your DC even if you are not working in a PERF/TRF-covered position. If you turn 70½ on or after 1/1/20, you are not obligated to take a distribution until you reach 72 years of age.
- You cannot contribute additional money to your account if you are not in a covered position.
- You will be able to change your investment option choices whenever you like.
- You will continue to receive quarterly and/or annual statements with details of your DC investments.
- You can request a distribution or rollover of your account at any time. However, you may be subject to penalties for early distribution.
- It is your responsibility to keep your personal information up to date. Log in to your account to update your communication preferences and beneficiary information as life changes.
- Suppose you are under the age of 59½ when you leave employment and take a distribution. In that case, you may be required to pay an additional 10% tax unless you qualify for certain exemptions. The Internal Revenue Service (IRS) sets rules for taking an early distribution.
- If you are vested and leave your covered position, you may withdraw funds from your DC account after 30 days.
- Once you are vested and meet eligibility requirements, you can apply for retirement. You’ll receive a retirement benefit check every month after you retire for the rest of your life. If you are not vested, you do not qualify.
- If you do not take a cash distribution and choose to remove your DC account from INPRS, you can roll the money into a qualified retirement account outside of INPRS. Types of accounts that qualify include:
- IRAs (Individual Retirement Accounts)
- Employer plans (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan);
- Other qualified retirement plans (taxes and penalties do not reduce funds).
To request a distribution of your DC account, log into your secure online account to initiate your request at www.myINPRSretirement.org. If you have questions, call and speak with our Member Advocate Team at (844) GO-INPRS or 844-464-6777. Speak with a tax or financial advisor before making a distribution choice if you need help determining what’s best for you.
If you’re ready to retire, remember to fill out the online retirement application at least 90 days before your target retirement date. You’re not eligible to receive any PERF/TRF benefit (retirement or distribution) until after your last wage-earning day with your PERF/TRF employer. In-service withdrawals and distributions are available for qualifying members. Distributions may require some information from your employer. Find additional information here on this website, or speak with a Member Advocate Team representative at (844) GO-INPRS or 844-464-6777.