Example of Tier 1 and Tier 5 Pension Shortfalls for Employees
Note: the above chart is for illustration purposes only, for married benefit assumes 100% to spouse (same age) and a pension factor of 85% for joint benefit. Assumes 30 years of work and savings of 6,000/year for the 30 years with an 7% growth rate and 4.5% distribution rate. Ages 60 and 62 represent average retirement ages. $75,000 FAC represents an average salary of municipal workers in New Jersey. Replacement Income equals FAC x Replacement Ratio. Tier 1 is enrollment date before July 1, 2007, Tier 5 is enrollment date after June 28, 2011. There are also Tiers 2, 3 and 4 representing enrollment years July 2007 – June 2011.
There are many resources available to help employees prepare for retirement. For example, the PERS (Public Employee Retirement Program) website offers several benefits for public service employees. However, navigating the system and the online resources can be overwhelming. That is why is it beneficial to work with a team who understands the often-nuanced retirement options and can help employees understand the specific options available to achieve their retirement goals.
Retirement planning integrates social security benefits.
The earliest an employee can begin receiving social security benefits is age 62, this age varies depending on your birth year and your full retirement age. However, the longer they wait, the percentage of monthly benefit increases. For example: an employee born in 1960 with a full retirement age of 67 will receive 70% retirement benefit at age 62. If they wait until age 65 to begin benefits, the benefit increases to 86.7%. It may be beneficial for some employees to wait until the later years to begin receiving these benefits especially if they consider their other options. For each year past full retirement age, the benefit will increase 8%.
We help municipal employees understand their retirement planning options.
Our advisors have extensive knowledge and experience in working with municipal employees. Our team of professionals help by bringing clarity to the retirement process and provides guidance when planning for and enjoying retirement. This includes everything from pension choices to navigating the health insurance program offered. They work one on one with employees to analyze their potential retirement scenarios, including early retirement and how their pension interacts with social security and the health plan. With the right risk, retirement and cash flow planning, municipal employees will have what they need to create a comprehensive plan, and gain control over their financial future.
We ensure your plan is tax optimized.
Working with certified public accountants enables us to widen the scope of our services beyond traditional financial planning and take a holistic approach to helping employees achieve their retirement goals. By leveraging tax and financial advisory experience, our advisors help ensure their plan is operating in a tax-optimized manner, and we are always looking for ways to reduce current and future tax burdens.
