Retirement – Subject Matter Minute Blog

Subject Matter Minute, Episode #56 – Pre-Retirement Checklist

The below post is taken from the Video Blog, the Subject Matter Minute. If it’s a little hard to read, it’s because it’s taken from the spoken word. You can view the episode on YouTube if you would like. Find it here: Episode #56 – Pre-Retirement Checklist

If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive. (I would prefer you view it on YouTube, so I know how many people have watched)

You can also listen to an audio version.

Hello and welcome to the Subject Matter Minute! I appreciate you!

My last episode was on the upcoming raises. Well, you should all now know how much you got. I’m really hoping all of you fabulous, hard-working state employees were pleasantly surprised with what you got. I had low expectations, so that helped. (giggle) But I was pleasantly surprised. Now let’s cross our fingers that there is more money in the next couple of years to add to that and get us closer to the mid-point of our pay grades. Remember that even though it hurts, high gas prices can be good for state employees!

Alright, before I get started, I want to give a shout-out to a couple of state employees that I met at the Laramie Brewfest during Jubilee Days. Hello to Lisa of DFS and Tasha of Game and Fish. You guys are a hoot! My wife and I had a great time drinking with ya and cracking ourselves up! Am I right??

Ok, let’s get down to business. We’ve all heard the expression, “the great resignation,” right? You might even be sick of it right now, but…. Apparently, a ton of people are getting out of the game. And while right now, due to the state of the stock market, might not be the best time, if you are ready and thinking about it, WRS has a pre-retirement checklist to help you get there. …and I’m very envious of you.

Before I hit that checklist, I want to hit a couple of items that are the same, both for folks that are retiring and folks that are just moving on to another employer. Of course, we hope that never happens, but we realize it’s going to happen from time to time. First of all, whether you are retiring or just moving on, know that HR will be in touch. Not only because I’m sure there are probably a few things you need to return, but because they also want to hear from you. In fact, most will conduct what’s referred to as an exit interview – this is your chance to be honest with HR about why you are leaving. Regardless, along with an exit interview, there are a couple of items in the Personnel Rules and the Compensation Policy that pertain to retiring.

Chapter 11 of the personnel rules, which covers separation, goes over notification procedure, rescinding notification, and failure to notify. So first of all, when you decide that you are leaving the state and/or retiring, you need to provide written notification to your supervisor specifying the date and time of your resignation. Of course, you want to do it as far ahead as possible, and the rules mention that if you notify with less than 2 weeks, without good reason, you will not separate in good standing. This only matters if you want to go back to work at the state. Still, it’s kinda rude to give less than two weeks’ notice. Also, if you change your mind before the resignation date that you set, you can change it with the approval of the agency head. So if you are getting cold feet, or the stock market is doing even worse, you can push it back. 🙂

The Compensation policy goes over how you will be paid for the leave you have accumulated when you retire. First of all, you will be paid for all of your annual leave… at your hourly rate. For sick leave, you will be paid for 50% of what you have, but only up to 480 hours. So if you have an ungodly amount of sick leave, you are still only going to get a max of 480 hours.

Longevity pay is an interesting one. First of all, you will get longevity pay for the month that you quit/retire no matter how many days you work that month. So, you work 2 days, you get your longevity pay for that month. Second, you also may get what’s referred to as a Longevity Payout. This combines your annual and sick leave paid out and applies the number of hours as if they were hours worked. So… if your annual and sick leave balances add up to an equivalent of a month’s time, or several months, you will get longevity pay for each of those months.

Also, you will get paid for any comp time you have remaining.

An exempt employee will get paid for any unused Paid Time Off.

And finally, if you have any other type of leave accrued, use it before you leave or retire. You will lose those hours. So, leave like wellness, personal, or admin leave.

And one little fun tidbit here… if you get paid out for your annual and sick leave and then decide you can’t stand retirement and get rehired within 31 days of your retirement, you will have to pay all that money back. So…… don’t do that.

Ok… so that covers the personnel rules and compensation part of retiring. Now let’s hit this checklist that WRS puts out. It’s approximately 8 things to do before you reach your retirement date.

At 6 to 8 months from retiring, you need to request an estimate of your pension benefits. You can do that on the website or you can give them a call. Now, if you are planning to retire on the “earliest date for unreduced retirement benefits” then WRS says you need to contact a Benefits Specialist for final verification of the Rule of 85 date within 3 months prior to terminating your job. … just to make sure you got it right. You can find your earliest date for unreduced retirement benefits at the bottom of page 1 of your statement.

Next… if you are planning to keep the state insurance, health and dental, through EGI, then you need to contact EGI 3 months out from retiring.

You should also consider social security and medicare. If you are eligible for social security benefits and want to start receiving them when you retire, apply approximately 3 months before. Go to www.ssa.gov or contact your local Social Security office to do this. If you are Medicare age eligible and wish to apply for Medicare, those benefits can also be applied for at: www.ssa.gov. (Click on Menu at the top and click Medicare under the Benefits section).

There is another option for your annual and sick leave benefits. You can defer them into your 457 deferred compensation plan. If you decide to do this, after careful consideration, a completed final Deferral Authorization of Accrued Leave Payouts Form must be submitted to WRS the month before your last working day. The form is on the WRS website.

Speaking of the 457 Deferred Comp plan… you should think about this account as well. Everyone should at least have a little bit in there as they match $20 a month… right? Ok, well, first of all, you don’t have to do anything with it right away. But if you do want to start withdrawing funds, go ahead and contact WRS about it. And just so you know, you will be required to start taking distributions from your 457 account in the calendar year that you turn 72.

And finally… 2-3 weeks before retiring, you can submit your pension application. Please make sure that your termination date is submitted and set before you do this. You may submit your pension application by logging into your pension account or by printing off the pension application from the website.

If you are getting close to retirement, first of all, I envy you sooooo much. But secondly, there are a ton of things to consider! Hopefully, this gives you an idea of the state-related things that you need to think about. But, no matter what, I would get on the phone with WRS to make sure you are checking all the boxes.

Alright… thanks for watching! Keep enjoying this fabulous summer and I’ll see you next time!

Subject Matter Minute, Episode #22 – Health Savings Accounts

If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive. (I would prefer you view in YouTube, so I know how many people have watched)

You can also listen to an audio version.

Hello and welcome to another episode of the Subject Matter Minute, I’m Matt Nagy, thank you for joining me. Before I get started on today’s episode, I want to first thank the subject matter expert from last episode, which was Wyoming retirement system… specifically Polly Scott. She always makes sure that I’m not making stuff up and that I’m getting things right. Thanks!

Also, a couple episodes ago I briefly mentioned something about my daughter that I wanted to talk about get off my chest. I don’t know if you guys remember but back in the day, I mentioned that my parents had given us a Subaru Outback for our daughters to use. An older model, but a fabulous car that they had bought new. So my older daughter got to drive it. Well, within three weeks she totaled it. Don’t worry she, was fine… it was a low-speed thing. Then after that I had a 93 Camry that I bought from my parents a while back. I put enough money into it to make it tip-top. So I let her drive that and about five months ago she totaled that car. Again, she’s fine. This one was in Ridley’s parking lot, right into a pole… dead center in the front. I mean crushed it. I’m glad she was fine, but heartbreaking two wonderful cars down the tubes. She had to buy her next car herself, obviously, and now my younger daughter turns 16 so she is driving as well. We set her up with a really cheap 97 Sentra, and and we also tried to change her behavior with some promises of helping her with a car after high school if she doesn’t total this one. I don’t know if it’ll help, but so far so good with that one. Thanks for letting me tell my story and get that off my chest. I know that speaking to people when I tell this story that others deal with this, so a lot of you out there feel my pain.

Today I’m gonna talk about something related to our healthcare plan. It’s a change you can make if you can afford it, and if it works for you. Today I’m going to talk about health savings accounts.

Health savings accounts, also known as HSAs.. Before I go into that I want to thank this month’s subject matter expert on this topic which is Ralph Hayes of employees group insurance. Of course it’s employees group insurance, right? Ralph helped me out, and he actually has been doing this personally for a while and he’s a believer in it, so he was the perfect person to help me out with this information. Thanks Ralph.

An HSA is like a personal savings account but it is used for health expenses, medical expenses. Set up in 2003 by the government to allow those folks who had high deductible health plans a way to pay for current expenses and future expenses, in a pretty tax favored way.

So in order to take advantage of an HSA you have to, again, have a high deductible health plan, and like the name says, a high deductible health plan has a high deductible. Currently the state has one plan or two plans, that you can use. For an individual, it’s the $1500 high deductible health plan, and for an employee with a dependent or basically families, it’s a $3000 deductible. Now keep in mind that while we the deductible is high with these, it means that your monthly premium is lower. Take me, for instance. Right now, I have a family plan at the $500 deductible point. This means that my premium is about $260 a month. If I go to the $3000 HDHP plan, my monthly premium goes down to about $63, so about a two hundred dollar difference there.

So if you go with this qualified plan that the state offers, you can open an HSA.

Something to know is that the state does not contribute to this plan and the reason I say this, the reason I tell you this, is because after all my reading I found that actually a lot of employers do contribute to HSA. Kind of as a benefit. But not at the state, you have to fund this yourself.

In 2019 you can contribute up to $3500 as an individual into your HSA, or $7000 as a family. At age 55, they give you a little extra room, if you can afford it, you can put another $1000 per year into your account.

First I want to talk about the advantages to an HSA. The big one that caught my eye and got me excited is you get a triple tax advantage. 1. Contributions are tax deductible, which means that you can either pull the money pre-tax out of your check, or any money that goes into the account after tax is deducted from your gross income on your tax return. 2. Earnings are tax-free. A lot of these counts you can earn money, like an IRA basically, and these earnings are tax-free. 3. Withdrawals are tax-free if they are used for
qualified medical expenses. So you’re talking a bunch of tax-free money right there.

Another advantage is funds rollover forever. Once you put them in, they’re yours. This is not like a flexible spending account, where you use it or lose it… this is your money to keep.

As I mentioned briefly the money in this account is invested in the good programs and can grow. There’s a lot of HSA providers out there, but you want to get one that, if you have excess in there, it can be invested like an IRA, and it can grow.

Another advantage is that it’s portable. The money is yours, again, even if you change plans, change jobs, or you retire.

Another advantage is the HSA can be used for retirement after age 65. You can still use it for health expenses, but you can also use it for anything else without penalty. I’m going to go into this penalty thing in just a minute, because now I want to talk about the disadvantages of an HSA.

The number one disadvantage, obviously, is the high deductible. It can be really difficult to come up with that kind of money for the deductible, especially in the first year or two of doing an HSA. That’s understandable.

Number two… unexpected health care costs. Kind of the same deal… if you aren’t putting enough money into your HSA, or it’s early on in your process, the first couple years, you might find it hard to pay for unexpected health care costs.

Now taxes and penalties… I mentioned this earlier. While you’re allowed to withdraw the funds from these accounts for anything that you would like to, if you pay for non qualified items you will have to pay income tax and a 20 percent penalty. I mentioned after 65 you don’t have to pay the penalty. You’ll still have to pay income tax on it, like an IRA, but no 20% penalty.

One last disadvantage is the pressure to leave the money alone. You may be reluctant to seek out medical care because you don’t want to spend that money that’s over there making money, and of course we want everyone to get medical care when they need to.

So really both healthy young people on a budget who want to reduce their monthly payment and families who can afford the high deductible and possibly max out the account, these are the kind of folks who might find these accounts especially beneficial.

Let’s let’s consider my situation for a second. This is me considering this whole thing. If I were to put the two hundred dollars a month that I saved by going to the $3000 deductible plan, I’ll be putting aside $2,400 a year. Not quite the deductible, but honestly we haven’t spent that much as a family for several years several years. Mostly because we’re done with braces and that sort of thing, but we’ve also been pretty healthy. So even at that contribution level of $2,400 a year I could probably expect some money to roll over, and then the account would grow.

Something to keep in mind if you’re thinking about expenses at this point… preventive care is still covered with a high deductible health plan at the same rate as it is now with your lower deductible.

If we were to put a little bit more into the HSA we could get it up to the $3000 deductible pretty easily… with $50 more a month… so a total of $250. That would get us to the deductible. Now, if we wanted to take it even further, I’m sure a lot of you, like me, use the flexible spending account, and typically we put in over a hundred dollars a month. If instead, we put that to the HSA, let’s just say a hundred, that would put us at $4,200 a year in our HSA. So even if you hit your deductible and paid your $3000, you’d have a little bit to roll over. Now, there is coinsurance and all that to take into account too, but $4,200 a year, if you don’t spend it all, you might be able to roll some over.

If you’re spending all the money in your HSA every year, then you are losing out on the growth benefit. However, at least you aren’t worried about the use-it-or-lose-it aspect of the flexible spending account, right? You’re getting the same tax benefit, but you don’t have the stress of trying to spend the money or having to do it by a certain date or buying things you don’t need (like these classes I got, and I got another pair of sunglasses this year because we didn’t have medical expenses… so I bought some computer glasses and then some sunglasses for in the car). You get that tax benefits but you don’t have to worry about that if you go with an HSA.

After after having said all that, trust me, I don’t know the best route for anybody, including myself. I’m just trying to wrap my head around this concept and see if maybe it would work for us. I do know that health expenses in retirement are one of the top expenses, and it’s serious expense. In fact, the last number on the average that we’ll spend on health care in retirement is $280,000! I’m not saying that the HSA will get us there, but it could certainly help and pay a chunk of that, and certainly in a incredibly tax advantaged way.

Again I want to thank Ralph for getting me this information. I find it very interesting. I hope you do too. I’m not telling anyone what to do financially. If it works for your family great, if not stay with that sweet low deductible plan that you have and be happy about it.

Thanks for joining me on the Subject Matter Minute, and I’ll see you next time!

Subject Matter Minute, Episode #21 – Public Employee Pension Plan, Part 2

You can also listen to an audio version.

Hello and welcome to another episode of the Subject Matter Minute, I’m Matt Nagy. This is part 2 of a two-parter on our pension. If you missed it, the last episode was Episode #20, and it covers a ton of information about the pension… the first half of this two-part series. This one’s gonna be a little bit long, just like last time… I apologize up front, and I’ll save that little tidbit about my daughter for next time. 🙂

We’re gonna jump right in. As I said, please go back and watch the first episode, Episode #20, on your pension. In that, we covered a bunch of details… we covered what a pension is, how much comes out of your check, when you become vested, how you accumulate service credits, when you can retire, how much you can expect to get, and what you can do if you leave employment before you retire.

In part 2 we’re going to cover what happens to your pension if you die before retirement, beneficiaries, applying for retirement, retirement payments, returning to work after retirement, and a few other small items of interest.

Who knew there was so much involved in a pension! Maybe some of you guys who are getting close or are dealing with it knew, but the rest of us probably didn’t… I know I certainly didn’t.

First of all, number one thing when you first get your job with the state… make sure you go in log into your account and designate a beneficiary. This person will get your benefits if you die.

So if you die before retirement, whether or not you’re vested makes a difference in what your beneficiary will get, or the choices that they would have. If you’re not vested at the time of your death – you know less than 48 months of service – then your beneficiary will get a lump sum of twice the amount in your account. Now keep in mind we’re talking about the public employee pension plan. This is a bit different in the other ones like the public safety plans, but all of this is simply for the majority of us in the public employee pension plan.

If you are vested at the time of your death your beneficiary can either take a lump sum or take a lifetime monthly benefit. Basically what you would have gotten… sorry. A beneficiary must be at retirement age to receive the lifetime benefit.

I’m going to apologize up front… I will be referencing my notes because this is a lot of information, and while I know it, it’s a little bit hard to just throw out there… so forgive me for that.

As I was saying, if you were vested at the time of your death, your beneficiary can either elect a lump sum or a lifetime monthly benefit. Any beneficiary must be at retirement age to receive the lifetime benefit. A spousal beneficiary can wait before they start taking the benefits, but only till the member, you, would have been 70 and a half years old.

A non spousal beneficiary who is not of retirement age at the time of your death would only be eligible for the lump sum. There’s a lot of specific timing requirements for non spouse beneficiaries, so if that’s what’s going on and you need to know about that, please contact WRS.

There are other scenarios, such as people with more than one beneficiary, or if an entity is your beneficiary (like a trust). If if you need to know more about that go ahead and contact WRS on that as well.

One little interesting tidbit… you can change your beneficiary anytime pre-retirement, but your spouse has a say… basically your spouse’s consent is required. I thought that was pretty interesting.

So that’s if you die before you reach retirement age. We’re gonna talk about what happens when you die after you reach your retirement age in just a minute, but first let’s talk about applying for retirement. First of all you’ve got to choose a retirement date, obviously. If you want to retire as soon as you’re eligible, keep your birth date in mind because you need to be 60 under tier 1, or 65 under tier 2, or meet the rule of 85. I went over that in the first half of your pension, so check out that video… Episode #20. You apply for your benefits online and you need to log into your account on or shortly before your last working day.

This is a really good time to contact Wyoming Retirement System and talk to them about it because it’s a process and there’s some things you need to fully understand. These options I’m going to talk about in a minute… the choices you make cannot be undone. You need to pick between eight benefit payout options. Each one has a slightly different payout amount related to who gets what and how much. They’re all a little different. I’m gonna briefly cover each. If you need to know more information than I’m giving you, WRS has a fabulous video. There’s a link down below… watch it, you’ll get more information on each one.

Option 1 – single lifetime benefit with beneficiary

This is a lifetime benefit for you alone. When you die, your beneficiary gets a lump sum of any remaining balance in your account. There’s something to keep in mind here… typically, retirees burn through the money in their account within three to five years, so really that doesn’t leave much for a beneficiary.

Option 2 – 100% joint and survivor benefit

This is the most straightforward one for members with spouses, probably the one that’s used the most. It’s a lifetime benefit for you, and then a hundred percent lifetime benefit for your spouse should you die.

Option 2 P – 100% joint and survivor benefit with a pop up provision

It’s the same as option two, you have a lifetime benefit and then your beneficiary gets a hundred percent, but this one has a pop up in that if your beneficiary dies before you, then you pop up to option 1. The reason that’s important is that option 1 typically pays out more per month.

Option 3 – 50% joint and survivor benefit

You can probably start to figure these out, right? It’s a lifetime benefit for you and a 50% lifetime benefit for your beneficiary upon your death.

Option 3p – 50% joint survivor benefit with a pop up provision

Exactly the same as the option 3, but should your beneficiary die before you, you pop up to option 1.

Option 4 – 10-year certain benefit

A lifetime benefit for you, but if you die before 10 years of benefits, your beneficiary will only get the benefit to the end of that 10 years. You’re limiting your beneficiary to a 10-year period.

Option 4b – 20-year certain benefit

Same deal, but your beneficiary has up to 20 years, if you should die, to get the benefits.

I know I’m going fast but this is gonna be a long episode!

Option 5 – Single lifetime benefit without beneficiary

It’s exactly that… it’s a lifetime benefit you, and there’s no beneficiary involved. So if you’re single, there’s no one to leave money to, this is the one to take… you’ll get the highest payout per month.

We’re gonna complicate this further… you can also add what’s called a self-funded COLA. COLA stands for cost of living adjustment. This allows you to have your pension payments go up every year by a certain percentage. (cost-of-living) You can choose between one, two, and three percent. Initially, you have a lower payout per month, but then after a two-year waiting period, your pension goes up every year by the percentage you choose. So, I see this as something for people who think that they’re gonna be retired for a while, who expect to live a long time, perhaps have good longevity genes in their family. I think it’s a good option…

A few little tidbits… you’ll get your retirement payments the month following your termination. (Actually it can be up to 2 months) You can have your money direct deposited into your bank. And something to remember is that your monthly benefit is reported the IRS as income, so you’re gonna need to pay taxes if they’re due.

The next section in the handbook goes over the rehired retiree rule. Very hard to say. There are a lot of details to it, but one major point is that if you are truly retired, and then you come back to a job that’s in the same pension plan, you’re gonna have to choose whether or not to keep getting your pension while you’re a state employee, or stopping the pension and adding to your credits. If you keep getting your pension you won’t get any more credits. If you stop getting your pension then you’ll just add on years of service to what you had previously.

Feel free to contact WRS on this and/or read through the handbook for more information. I have a little funny down below… there’s a link to a video. We did aN HR conference this year, and Doug McGee from WYDOT did a little bit on the rehired retiree. Watch it if you want to get a good laugh about the rehired retiree.

Next, the hand book covers disability. If you become incapacitated to the point where you can’t perform your duties, you may be eligible for a disability retirement. To be eligible, you must have three things apply. You must be disabled and apply for disability while you’re a contributing member of the WRS. AND after you’ve had ten or more years of service. AND before age sixty in Tier 1 or before age sixty-five in Tier 2. If you have all of those things then you are eligible for a disability retirement. (actually you are eligible to APPLY for disability. WRS still has to make sure you are eligible)

There’s some differences, so you’re gonna need to contact WRS, obviously.

I feel like I’m talking really fast and maybe even breathing hard from it. I’m gonna quit there, okay? There are a few other topics of interest in the handbook that you can check out. They talk about military deployment, divorce, life insurance, dispute resolution, and more, but I think we’ve covered all the important aspects, you know the meat of the WRS system.

Hopefully these two videos give you what you need… I still suggest you talk to WRS if you’re getting close, but you know, this is a nice review at any point to refresh. All right I’m gonna let you go, I’m gonna see you next time on the Subject Matter Minute!

Subject Matter Minute, Episode #20 – Public Employee Pension Plan, Part 1

You can also listen to an audio version.

Hello and welcome to the Subject Matter Minute, I’m Matt Nagy, thanks for joining me.

Today I am gonna cut right to the chase, because we have a lot of information to cover. I’m not gonna talk about my mullet or my teenagers, I’m just gonna get right to it. Today I want to talk about your retirement, or the public employee pension plan.

The public employee pension plan… I hope I didn’t pop that too much in your ears… or otherwise known as your retirement with the state. First of all, it’s the largest pension plan administered by Wyoming Retirement System. They also administer seven others for other types of employees. You can see them here on this list.

Today we’re going to talk about the one that covers most of us. In case you didn’t know, the pension plan is the mandatory retirement that you get with the state. There’s a ton of great information on the Wyoming Retirement System website. I have some links down below, be sure to click through them. You’ll get some more information in addition to what we talk about today.

The beautiful thing about our pension plan is that you can’t outlive your benefits. We’re putting in a portion of our income monthly, but even when that runs out you will still get a monthly payment for the rest of your life. There’s another name for it… it’s called a defined benefit plan, and that’s because it’s based on a formula and not the contributions. The formula is based on your age, service credits, or years of service, and highest average salary.

A lot of people tend to focus on the amount in the account, and that’s kind of natural because, with the 457k or just a investment account, an IRA, that’s the money that you’re gonna be using for retirement, but in the case of a pension, the only reason you would need to focus on that is if you leave the state and cash out your account or if you die before retirement.

Should you die before retirement, your beneficiary is entitled to either your pension as you would have gotten it, or a lump sum, so it’s very important that you keep your beneficiary information up to date.

There are over 450 employers in the state who use this same plan, so if you were to leave the state and work for another one of those employers, your pension travels with you… you can just continue on.

Things are a bit different for UW and Community College employees. When they first become employees they need to choose between two retirement entities… the Wyoming Retirement System or TIAA. Once they make that choice, they have to stick with it forever, or at least until they terminate employment.

Otherwise, getting this ball rolling is easy. Your employer signs you up and sets up the monthly contributions.

The contributions you do as an employee contribute to the pension as does the state. Basically the state and the employee pay a percentage of the employee’s income. Right now, this year, the total employee percentage is 8.5 percent and the total employer is 8.62. However, I’m not sure why they even list it like this because in our case the employer actually pays 5.75 percent of our percentage. So really you’re paying 2.93 percent of your salary towards the pension.

You can see they’ve got it scheduled to go up, but even by 2021 it’s only going to be 3.68 percent that we are contributing. The state is covering the rest… so not bad, not bad at all.

You qualify for a lifetime benefit once you’re vested and reach retirement age. You need 48 service credits to be vested. Usually this means 48 months. It’s different depending on how many hours a month you work. Most state employees are full-time and are gonna get a month of service for every month they work. If you’re a part-time or seasonal it’s different. If you work 86 or more hours in a month you receive one month of service credit. If you work 40 to 85 hours you get a half service credit, and if you work 1 to 39 hours in a month you get a quarter service credit. So that’s how you figure that out. Once you get 48 service credits, you are vested, which means that even if you quit state employment, you can eventually get your pension benefits when you retire… when you reach that age.

When can you retire and start collecting? Currently there’s two different scenarios… it depends on when you are hired. Currently we have two tiers… they call them tiers… if you were hired before September 1st 2012 you are in tier one. If you were hired on or after September 1st 2012 you’re in tier two. Tier one folks get to retire at age sixty and tier two folks have to wait until they’re 65, or both of them, in either tier, can retire if you reach the rule of 85.

So I got hosed… I feel like I got hosed… I literally became an employee two months after the change to tier 2. Tier 1 folks get to retire at age 60 and they have a higher multiplier percentage… you’ll see what I mean in a minute, than tier two. Us poor folks in tier 2 have to wait until 65, and it’s less a percentage of our max income. Anyways, I missed it by 2 months… yeah.

You’ve probably heard of the rule of eighty five. Under the rule of eighty-five, you qualify for retirement benefits if your years of service and your age equal eighty-five or more. Stop doing math… do that after the show, okay? Keep watching. 🙂

So how much money can you expect to receive when you retire? Well, simply put, the equation is this. You have a multiplier (like I mentioned it’s different for tier 1 and tier 2) times the years of service, times your average monthly salary.

(multiplier) X (years of service) X (highest average salary)

So let’s do a quickie here, just do some quick math. Let’s say your top salary is $4,000 a month, you’ve worked for the state for 20 years, and your tier two. I’m gonna do tier two because it’s a little more simple. So that’s

$4000 X 20 X 0.02 = $1600

Tier two multiplier is 2%. So that means that if that’s my highest average salary when I retire, I’m gonna be making $1600 a month. Not too shabby.

Or you can go to the WRS site and they have a calculator on there. Here you can play around with the numbers. You can change your age at retirement, your years of service, your highest average salary, and kind of play around with the numbers to see what would work best for you.

You can also log in and do an estimate within that area, but the problem with that is that it says that your highest average salary is your current salary. At at the current rate of raises at the state, that might be the case, especially if you’re getting close, but hopefully at least us that can’t retire for a while… hopefully our highest average salary will be more than that?

So the best scenario is to use that calculator that we just showed you.

What are your options when you leave employment with the state? So you can keep your pension… you can leave it with the state, or you can take a lump sum… you can cash out. If you leave it with the state, you will have the same same scenario when you retire… you will get a lifetime benefit… if you’re vested. There’s a lot of things to consider when you’re doing this. WRS has a whole bunch of information on this. Here is a brochure that talks about the questions you should ask yourself. Check that out if you’re getting close, and you’re trying to decide what to do.

If you want to leave your job and take a refund you would get your contributions plus interest… not the state’s contributions.

You also have some time to think about it. You do not have to make this decision right away, so take your time, read up on the choices, and make a good decision.

Like I mentioned, there are a ton of employers out there who also use this pension plan, so if you move to one of them, or leave the state and come back to the state, and did not cash out your pension, then it will continue on where you left off.

I think that’s enough for today! That’s a lot of information. Like I mentioned, we’re gonna have a round two with more information so be sure to tune in next month.

Today I covered what a pension is, how much comes out of your check, when you become vested, how you accumulate service credits, when you can when you can retire, how much you can expect to get via the formula, and what you can do if you leave employment.

Stay tuned next month for information on what happens if you die before you retire, beneficiaries, applying for retirement, retirement payments, and more. That’ll do it for the Subject Matter Minute this month, thanks for joining me and I’ll see you next time.

Subject Matter Minute, Episode #14 – Health Insurance for State Retirees

You can also listen to an audio version.

Welcome to another episode of the Subject Matter Minute, I’m Matt Nagy, thanks for joining me. So last month we talked about a subject that’s fairly near and dear to my heart… dental insurance. I hope that was helpful to you guys.

Before I start this month’s topic I wanted to mention that one of the things that I really like to do, one of the things I do every summer, and sometimes kind of in the colder months, is river raft. In one of my earliest jobs at the University I just happened to work with a bunch of guys… it’s just guys I think… that we’re into river rafting, so they got me into it. I own a cataraft, which is not really a raft, it’s the type with two tubes and the frame in between, which personally I think handles better in big rapids, but that’s an aside. Last week I just got back from doing a river that doesn’t really have a lot of rapids, or at least it didn’t this year… it’s the San Juan down in Utah. I’ve done a couple trips that we call the daddy-daughter trip on that River. Basically, it ends up being like five dads and and I guess five daughters and one son this time. One son snuck in, but that’s okay. It was gorgeous… so I’m having a hard time getting back to work. It was a sunny trip, it was kind of chilly, but that just made the time around the campfire, or the fire pan for those in the know, so much more enjoyable. We had a great time. I know there’s more of you River rafters out there, or river runners, and it’s always good to know more, so feel free to post something down there or throw me an email. You never know what can come of it!

This month’s topic is health insurance for retirees.

Before we do get started on this topic, I’d like to throw out another thank you to Karen Williams. She was my subject matter expert last time on the dental health benefits, so thanks Karen.

This month’s subject matter expert is Pamela Unruh, also of egi. She’s been very patient with me because I was peppering her with emails constantly, trying to get this figured out in my own head. Thanks Pam, I appreciate your patience, and I think I got it all figured out.

I had mentioned that retirees health insurance is the topic, but really an eligible retiree can also continue life, health, dental, vision, and long term care, as long as they’ve had that coverage for at least one year prior to retiring.

The bottom line, something I want to be hitting on a lot here, is that you can keep these things when you retire, but the state contribution goes away. There is a subsidy, but we’re gonna go into that later.

So what makes you eligible? Eligible retirees can be under the age of 50 with at least 20 years service or you can be over the age of 50 with at least four years service.

One other little tidbit that you need to remember is that a retiree needs to apply for coverage within 31 days of the day that their coverage ends… so don’t forget.

Let’s talk a little bit about Medicare because that definitely comes into play as you’re reaching the age 65 or thereabouts. Once you become eligible you must enroll in Medicare Parts A and B. That’s because Medicare is the primary payer… they pay first.

The premiums for these coverages are taken out of your pension, unless there’s not enough money in your pension, then come directly out of your checking account.

I mentioned that the state no longer pays a big chunk towards your insurance, but you can get a subsidy. The subsidy is based on the number of years of service with covered entities…the state, the Community Colleges, UW, and then some school districts. Currently the number is $11.50 per year for those who are not Medicare eligible, and it’s $5.75 a year for those who are. Those both max out at thirty years, which means that if you’re not Medicare eligible you can get a subsidy of $345 a month, if you’ve done thirty years of service. If you are Medicare eligible and you’ve had 30 years of service, that gives you a $172.50 a month discount.

I’ve talked about saving for retirement or retirement in general in a couple episodes, and this topic really ties in. Something a lot of people forget about is the shift of the burden of health care costs from the state to you, and that’s a big shift.

I’m gonna go over a scenario here, and since typically when you retire it’s the retiree plus a spouse, my scenario is gonna be retiree plus spouse at a nine hundred dollar deductible. Currently, if you’re an active employee the total cost is $1822. The state pays $1,660 dollars towards that, so that leaves you with a monthly payment of a $161.79.

Let’s talk about a retiree plus a spouse that is not medicare eligible. Their full price is the same $1822, but the state only pays the subsidy. They do not kick in the big chunk. Let’s assume a max number of service years for the employee… thirty years times the $11.50, which means that they can take off the top the $345. That puts their total monthly payment at$1477.04. So your healthcare costs just went from $161 a month to $1477. That’s a difference of nearly $1315. You finally paid off that house, but you’ve got a whole new payment to deal with. I’m not trying to upset anyone, and I don’t want to be flip about this, I just hope that this information can help people who still have time to save more and take these things into consideration.

Let’s talk a little bit more about Medicare. You can simply drop your state health insurance when you become Medicare eligible. I don’t know what kind of coverages there are, or how good they are, but if you don’t feel like it’s enough for you then you are gonna pay more. Even when you’re both Medicare eligible.

The next scenario is a Medicare eligible retiree and a spouse who is not eligible. They pay $1365.71. Let’s assume the max number of years of service. Now remember that the employee is eligible… that means that they can get the $172.50 from the monthly total. That puts the monthly total at $1193.21, so in that scenario you will still be paying over a thousand dollars more than you were as an employee.

That scenario was a Medicare eligible retiree with a non eligible spouse. The final scenario, obviously, is you’re both eligible for Medicare. Prices do drop at that point, but you’re still gonna be paying nearly six hundred dollars more a month than you were as an active employee.

All that being said, there are some higher deductible plans that can bring down your costs, and there’s also some Medicare supplement type plans. I’ve posted a link below to the charts, and you can see those on there. Basically, what the Medicare supplement plans do is they help with the out-of-pocket costs of Medicare, and they’re much cheaper, but you’re not getting all the benefits of the health insurance.

So the bottom line in all this that you can keep your coverages when you retire, however your costs will go up. Just keep this in mind as you save for retirement and perhaps as you consider what age to retire at.

Hopefully I haven’t made everyone depressed or scared, and hopefully you either knew this and you’re prepared, or you have time to save more money or shift your expectations about when you’re going to retire.

I think that’s it for today. Thank you very much for joining me and I’ll see you next month on the subject matter minute.

Subject Matter Minute, Episode # 11 – 457 Deferred Compensation Plan

If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive.

You can also listen to an audio version.

Hey hey hey! Welcome to another episode of the Subject Matter Minute, I’m Matt Nagy, thanks for joining me.

I haven’t asked for a while, or maybe not as much as I used to, but I’d really like it if you folks would subscribe to my youtube channel. At the bottom of every video there’s a big red button that says “subscribe.” So go ahead and click that now. All of you guys have a YouTube channel now associated with your Gmail, so it’ll subscribe you, and if you go into YouTube you might see the stuff that I post along the side. It also gives me some numbers just in case somebody wants a report generated and wants to actually know how many people are actually watching me. So I’d really appreciate it.

Last month there was no subject matter expert, because I was the subject. If you didn’t watch, it was a blooper reel. It seemed to go over pretty well considering it had the most views of any of my videos! Thanks for laughing with me, or perhaps at me. It was a lot of fun to put together and I’m glad you guys liked it.

This month the subject matter expert is, once again, Polly Scott of the Wyoming Retirement System. She got me the information, she’s very helpful… thank you very much Polly.

The subject of this month’s Subject Matter Minute is the Wyoming 457 deferred compensation plan.

First of all, what is it. It’s a retirement plan. We have our pension, which is probably top two of the best benefits that we have as state employees, and that’s most likely the thing that’s going to get you the most towards retirement. And then we have social security, which hopefully we’ll have at that point. But generally speaking, you’re going to need some extra money put aside of your own money to have a comfortable, sustainable, retirement. That’s what this is… the 457 deferred comp plan is a retirement vehicle for you to put your own money aside.

Why would you want to do it? First of all, if you’re not doing it you’re losing $20 a month! All state employees of the executive, legislative, and judicial branches, for sure, will get a match of $20 a month if you put in $20 a month. So if you simply do the minimum of $20 a month the state matches it. If you’re not doing it, you’re losing $20 a month, so please do it for that reason at least.

There’s lots of other good reasons.

It’s easy. The money comes automatically out of your account and like other similar things you can get it taken out pre-tax or post tax. If you get it taken out pre-tax, it reduces your taxable income. If you get it taken out post tax, you can take the money out in retirement tax-free.

Another good reason to use it is the money is immediately yours… you’re immediately vested. So right away after you put money in. If you leave your job you can keep that money in that account.

Also, you decide how the money is invested. Well, if you want to. There’s actually three different ways to do this and I’ll go into those later.

Some of the details: You can contribute a minimum of 20 and a maximum of $18,000 a month. There are situations when those getting close to retirement can contribute more than the maximum of $18,000 a month. If you’re in that situation please contact WRS.

You can also add money to this account by rolling over accounts… so other IRAs or 457 s from another job can be rolled into this account.

When you leave employment you can either keep the account; keep logging in and managing the account, or you can roll it into an IRA or a or another jobs 457 plan.

Keep in mind that this is not a savings account, this is a retirement account, which means that you can’t just withdraw money. There are certain scenarios where you can. First of all, obviously you can withdraw money when you retire. That’s the natural scenario. Second of all, you can when you leave employment with the state. Now keep in mind if you do that you’re gonna be hit with some fees and some taxes. Another scenario where you can withdraw the money is if you have an unforeseen financial emergency. The IRS says that this is a severe financial hardship resulting from illness, disability, or accidental property loss. So in this scenario we’re not talking about paying off your home loans your car loans or things like that, it’s more like if your home is about to be foreclosed on or if you have a bunch of uncovered medical expenses. If you think that you’re in that scenario talk to Wyoming Retirement System and they’ll help you out. There’s one more… it won’t benefit you much, but if you were to die, your beneficiary can withdraw the money.

Now let’s talk about your involvement in these funds. There’s three different ways you can be involved. First one is not involved at all. This is a pre-mixed target-date fund. Basically, you pick a fund that ends right about when your retirement is going to happen, and then the pros take over and they mix a nice diversified portfolio that as it gets closer to your retirement, becomes more and more conservative. That’s number one… hands off.

Level two is a mix-your-own fund. You have access to several funds that the Wyoming retirement system has put together and you decide which ones you use. You can have them all in the international fund, or you could have them all and the bond fund, or you can mix and match. So you have some involvement there.

Level three is a self-directed brokerage account. This is for the pros, and it’s done through TD Ameritrade. If you’re interested in doing that, go ahead and talk to Wyoming Retirement System, and they’ll get you set up. There are fees associated with these things… there always are. These are very low. The Wyoming retirement system board is tasked with finding low-fee, high quality investments, and that’s what they do.

I think that’s all I’m going to cover this time. I could go on and on about investing I suppose, not that I’m a pro, but I’m looking through the Wyoming Retirement System information and there’s just so much stuff! But we’re gonna keep it to that. Just know that you should definitely be investing at least twenty dollars a month in the 457. If you are a state employee that will be matched by the state, please put the $20 in and make an extra twenty.

Don’t forget to look down on the show notes where you’ll find links to all sorts of important stuff including an enrollment form. If you just want to jump in and do that target date fund, go down, find the link, and enroll. All right, thanks for watching! Remember again to subscribe to my channel and I’ll see you next time on the Subject Matter Minute!

Subject Matter Minute, Episode #9 – Retirement Goal Calculator

If YouTube is blocked for you or your agency, you can scroll to the bottom of this post to view it from Google Drive.

You can also listen to an audio version: Episode #9: Retirement Goal Calculator.

Welcome to another episode of the subject matter minute. I’m Matt Nagy, thanks for joining me.

Sometimes here I say “hello fellow state of Wyoming employees,” but I
got to admit, I’m feeling a little bit lonely right now. Last episode, I asked
you guys to post your favorite hair band, or a hair band concert from the 80s down below, and I got exactly zero responses. So it could be a couple things here…either I am the only gen Xer out of the 900 or so of you that watched the video, or perhaps you’re embarrassed to admit that you liked hair bands back then? I know there’s a lot of people that make fun of that era but you know music is what it is… If it makes you feel good you like it, and it made me feel good. I loved it!

So you can go back to that episode and comment if you want to or,
you know, no pressure… you don’t have to do that at all, but I’m hoping I’m not the only gen Xer out there!

Before I go on I want to thank last month’s subject matter expert, which again was EGI. Thanks guys for getting me the information.

Today’s subject is actually a tool. I’m going to show you the retirement goal calculator!

The retirement goal calculator. This is a sweet tool put out by the Wyoming retirement system just a month or two ago that can help you decide if you have enough money saved for retirement. Obviously, this month’s subject matter expert is the Wyoming Retirement System. Specifically Polly Scott. She was the one who pointed me in the right direction for this and thought that this would be a great thing to show you guys first. And, she answered some of my questions, so thanks Polly for helping me out!

I’m gonna take you there, show you how to do it, and run you through a couple scenarios. The nice thing about this thing is that it’s simple and that you don’t have to go find your taxes and financial information and input all this stuff. It does some figuring for you and it keeps it simple.

Here’s the retirement goal calculator. You find it by going to this URL: http://retirement.state.wy.us/en/DC/Goal-Calculator Once you get there scroll on down. It’s really quite straightforward. I’m gonna throw in some numbers just to show you how it works.

First Step in Retirement Goal Calculator — Please click image for larger version

Let’s just say my current annual income before taxes is $45,000. That’s your annual income. I’m pretty sure that I’m gonna need 90% of that in retirement. How many years until you retire? Basically it’s about 15 years in reality so let’s put that in. How many years do you estimate that you’ll be retired? Well, considering that I have a 99 year old grandpa who is still building houses at this point I’m gonna say at least thirty. Thirty is the max in this calculator. Once you fill those in you can see your retirement goal is $40,500, which is ninety percent of $45,000.

Please click image to see larger version

Let’s go to the next step. This is social security. This is kind of an estimate, but as you can see here, it gives you some numbers. Mine’s between twenty and fifty thousand, so let’s just say that maybe you know my income will go up a little bit and by then I’ll have fifty thousand a year… let’s say twenty five percent. Now you can see once you do that it fills in a little bit of this graph over here. So right now you’re getting $11,250 a year. You haven’t quite made it there.

Now let’s go to the next step. At retirement, how many years will you have been employed? Basically, I will have been employed 33 years if I stick it out with the state. This is the one thing you do need to know… which tier you are in. I’m a Tier two employee because I came in late.

Please click on image to see a larger version

Oh my! Based on my inputs, I should exceed my desired income! You can see it right here… my retirement goal was $40,500, and my estimated retirement income will be $40,950. That’s basically because of the years of service.

Please click on the image to see a larger version

Now I’m gonna adjust my goal. This time let’s do a scenario where I am not saving enough money and will need to save more. Let’s do $45,000 here. Let’s say that I want a hundred percent of my income. I’m going to still say fifteen years till I retire and I’m still going to want that to last thirty years.

Let’s go to the next step. Let’s do the same thing here… 25 percent.

Next step. Let’s just say that I’ll only have been employed for twelve years, and that I’m still a tier two employee.

Next step. Now there’s another step that wasn’t there when I was saving enough money. Now they want to know how much you’ve saved in retirement on the side. I’m gonna say $10,000 in an IRA or something like that. You know the rate of return is usually like 7% to 8%, let’s just say 6% to be safe.

Next step. Okay, I have not saved enough money by any means! You can see that I’m about halfway there. When I retire I’m only gonna be making $22,000 every year and it gives you a number that you’ll need to save every month until retirement. Hopefully yours isn’t nearly as shocking as that number!

So run some scenarios, change up how many years you work for the state or how much retirement you have saved on the side, or whatever… just run some numbers and see where you’re at. Hopefully this will help you out.

I hope you found the retirement goal calculator useful. Hopefully when you put your numbers in there you were really close to having what you need or maybe even over, and if not, you know you can talk to the retirement folks about the deferred compensation, or find some other way to invest the money.

Thanks again to Polly Scott of the Wyoming retirement system! I want to thank her for getting me the information, and for putting together the
calculator, and I’m sure we’ll be talking to her a lot more down the road about more stuff! That’s it for this subject matter minute, have a great day and we’ll see you next time!