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Professional Plan Administration

Envisioning Your Future with MOSERS

[Posted on 04/16/2012 at 8:30 AM]

Professional Plan Administration means that, for many state workers, having a reliable MOSERS retirement benefit could make the difference between a confident retirement and merely living from month to month.

This is part 3 of a 4-part series illustrating how MOSERS envisions your retirement...with us!

In Your Words


Comments from attendees of MOSERS' PreRetirement and Money Matters seminars:

  • Before the meeting the idea of the retirement process was very scary and unsure. But with her confident and calming presentation we now look forward to starting the process.
  • Just what I needed. Professional and very informative. Good job!
  • Loved common sense, and personal experience associated with financial materials and tools.
  • Extremely knowledgeable and presented the information very well. Kept things very interesting (not boring at all).
  • Extremely helpful, really helped me to make choices.
  • Excellent, thanks for being so patient to all of us coming into this time of life.
  • Extremely knowledgeable, and does a great job of communicating with the group. She is to be commended! Made it easier to understand.
  • Presenter was thorough and clear, good presentation and he used excellent examples to aid in the explanation of options. Great customer service.

Glasses close up 

We’re Ready When You Are

Helping to ensure you will be adequately prepared for retirement is a priority at MOSERS. According to MOSERS’ actual experience, our members generally retire around age 60. The Summary of Actuarial Assumptions in the current Comprehensive Annual Financial Report shows that at age 60, our male members can, on average, expect to live to age 83.1, and our female members can, on average, expect to live to age 85.1. This means there will be a significant period following retirement when money will be needed for healthcare, housing, and basic day-to-day expenses.

What is an “adequate” retirement income? Retirement studies use the term replacement ratio or replacement rate to describe the amount of pre-retirement income that is available once employees retire. According to a research brief on retirement readiness from the National Institute on Retirement Security (NIRS),

“An “adequate” replacement rate is typically defined as one that allows a retired household to enjoy roughly the same standard of living as it did before retirement. This standard of adequacy might be deemed to fall anywhere from 65% to 85% of pre-retirement income.”

A study from the Financial Security Project at Boston College called “Exploration of Retirement Planning Attitudes and Behavior” that included interviews with both retirees and pre-retirees demonstrates that views on retirement planning range from unrealistic goals to denial to emotional paralysis. Many did not take into account unexpected expenses that could affect retirement planning, like taking care of a parent, divorce, debt, or loss of a job. The reality of expenses in retirement (or lack of any savings at all) versus the lifestyle expectations doesn’t match.

NIRS’ own surveys, as reported in Pensions and Retirement Security 2011: A Roadmap for Policy Makers, show that Americans are afraid they will either have to depend on family or public assistance for day-to-day expenses if their retirement income falls short. There is considerable anxiety about the quality of life during retirement if there is no clear financial cushion.

That's why we recommend that our members rely on more than one source of income to increase the likelihood of a secure retirement. Traditionally, the three major sources include social security retirement, pension income, and personal savings. Reemployment after retirement could also be considered the fourth piece.

Executive Director of NIRS, Diane Oakley, explains how these pieces work together:

Click for Video Transcript

Professional Plan Administration - Pieces

We've traditionally talked about retirement security as a three-legged stool... and I guess, to a certain extent, you see a lot of young kids who probably don't even know what a three-legged stool looks like... The idea of the family farm and the person milking it with a three-legged stool is just not there as much anymore, but... So sometimes, you know, but the idea of having three components of income, I think, in retirement is really important. You know, the reality of it is that the three-legged stool, you know Social Security's a little wobbly, public pensions are in good shape, private pensions are wobbly because employers in the private sector are moving away from those plans, and the third leg, personal retirement savings, is really coming up short, so that stool's getting pretty wobbly.

Sometimes at NIRS, we've often talked, too, about the three-lane highway. Most people have seen a three-lane highway, drive on them all the time. You know you've got that first lane that you come in, that gives you, like, the opportunity to set your base, and get yourself grounded. Social security is a basic for so many people. Now in some states that's not the case and they have the state retirement system for public employees. The next layer on top of that is your employer-provided pension, that gives you the opportunity to go a little faster, charge up, get to where you want to go, get there a little better, a little sooner. And then personal savings, being those people who want to travel in the fast lane, have life at high speed, and full enjoyment, move along without any hitches. Of course, you might get a traffic ticket, but we haven't figured out how that one plays into the analogy so...

I think there's a couple of different ways but clearly one of the important things is to have a diverse source of income, and social security, and employer-provided pension, and employer-provided retirement savings plan, as well as your own savings outside of that are all important.

Special Thanks to Diane Oakley, Executive Director, NIRS


Defined benefit plans, such as MOSERS, provide a dependable monthly stream of income that will not run out during retirement. This means that it is easier to create and maintain a monthly budget and plan for expenses. Retirees have a better chance of being self-sufficient in retirement if they don’t have to rely on social security retirement alone. Putting together MOSERS retirement, State of Missouri Deferred Compensation Plan savings, and social security retirement income means that households are less likely to fall short with their income replacement goals.

We also realize the average state worker doesn’t have the time or expertise to research investment fund options, so the assets are professionally managed by our investments staff with a wealth of experience and knowledge. There are no difficult choices to make with the MOSERS defined benefit plan. You can’t borrow from your MOSERS retirement since there aren’t individual accounts, so the trend of “leakage” (taking unscheduled amounts out and not replacing it) is not an issue for the system.

The Ripple Effect: Missouri Reaps the Benefits

Around 89% of MOSERS retirees and survivors live in Missouri. You can view a map here that shows the distribution of our retirees throughout the state. The annual retirement benefits paid to these individuals provide a steady, continuous and significant stimulus to Missouri’s state and local economies. Their retirement income also stays here and supports local businesses. According to the National Institute of Retirement Security’s “Pensionomics” Missouri Fact Sheet,

Each $1 in state and local pension benefits paid to Missouri residents ultimately supported $1.49 in total output in the state. This "multiplier" incorporates the direct, indirect, and induced impacts of retiree spending, as it ripples through the state economy.”

Not only does their retirement income have a direct impact on their area, but also an indirect effect when local businesses they support purchase more goods and create more jobs. The total annual economic impact of state and local public pension plans nationwide adds up to $1 trillion.

Pooling

In her testimony before The U.S. Senate Committee on Health, Education, Labor and Pensions, Diane Oakley explained how participants in a defined benefit plan benefit from “pooling” because “pensions better manage longevity risk, or the chance of running out of money in retirement. Half of the retirees who plan on drawing down their savings in their 401(k) account over their life expectancy will run out of money.”

She explains this concept through the analogy of a buying club:

Click for Video Transcript

Professional Plan Administration - Analogy

Many of us are familiar with buying clubs, like Cosco’s or BJs, and when you think about how those work, you pull together a large number of people so you get an economy of scale, and then that enables the organization to go out and get buyers who can scan the markets for the best values, and then bring them back so they can deliver you a quality product at a low price, and in many ways that’s exactly what happens in a pension plan.

You get economies of scale because you’ve brought together thousands of employees across the state in a public plan. You also get professional managers managing the money, returning more money in terms of investment, making that plan more affordable, so you can have an adequate and affordable pension at the same time.

And so those type of things, I think, work really well, in terms of helping employees get a benefit that enables them to retire without having to worry, that can also there be counted on to deliver those benefit checks month after month. So then in times when the economy, as we’ve recently seen with the stock market fall back a little, significantly in the last couple of years, those retirees don’t have to worry about their monthly income and they can continue to be in their economy, spending money which again gets back to what a Cosco does.

When more people buy at a company like Cosco, that generates more dollars to more companies, delivering product to be bought, and that’s how we grow our economy. And it works to help retirees, that’s how their dollars go back into their communities when they’re retired as they spend their retirement income checks consistently, on buying food, on fixing up their house, on buying new products, that’s how we all grow.

Special Thanks to Diane Oakley, Executive Director, NIRS


A defined benefit pension adds value to both Missouri, and to the lives of MOSERS retirees.
We’re planning for your retirement...even if you aren’t yet.

 





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MOSERS
Missouri State Employees' Retirement System
Address: 907 Wildwood Dr., Jefferson City, MO 65102
https://www.mosers.org/images/mosers-logo-bg-375-280.jpg Phone: 800.827.1063 URL: Email: mosers@mosers.org Founded On: September 1, 1957