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

Member Education SeminarIndiana State Teachers’ Retirement Fund

Please silence your cell phones.

Overview

• Membership & Service Credit

• Retirement Overview

• Investments

• TRF Web Site

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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

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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)

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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

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Board Approved Leaves of Absence

• These may include:

• Advanced Study

• Work Experience

• Teacher Exchange

• Pregnancy/Adoption

• Sickness or Classroom Disability

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What Counts as Service?

• Private school service in Indiana

• Out-of-state service credit

• Military service credit• Additional purchased years of service credit

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Purchase of Additional Years of Service Credit

Example of cost to purchase one additional year of service credit

Age Annual Salary Yrs Service Estimated 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.

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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

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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)

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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

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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

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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

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Your Teachers’ Retirement Fund (TRF) retirement benefit consists of two

separate components:

Monthly Pension Benefit+ Annuity Savings Account

Your TRF Retirement Benefit

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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

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TRF Retirement Benefit16

Part One: Monthly Pension Benefit

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)

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TRF Retirement Benefit18

Part Two: Annuity Savings Account

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

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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

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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

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Annuity Savings AccountVoluntary Post-Tax Contributions

• Contributions• All taxes paid prior to contributions

• Revocable decisions• Participation• Contribution percentages• Employer approval

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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

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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

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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

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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

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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

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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

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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

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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

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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?

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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

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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

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TRF Web Sitewww.in.gov/trf

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TRF Web SiteTRF Interactive

• Update contact information• Manage ASA investment allocations• Calculate potential retirement benefit• Change beneficiaries• View quarterly statements

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Teachers’ Retirement Fund

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