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Answering these questions may provide some insight into how well prepared you
are to retire. It's also a good idea to use the
Countdown to Retirement checklist.
- Do you own your home free and clear? If not, will you have enough income
to pay for it?
- Have you planned for the future of your children or others financially
dependent on you?
- Have you estimated how much retirement income you will receive from all
sources? Is your estimate between 60-80 percent of your preretirement
income?
- Have you included a realistic inflation factor in estimating the income
you will need throughout retirement?
- Have you considered your future health care costs when projecting your
income needs in retirement?
- Have you saved for or planned for major expenses such as home repairs or
an automobile purchase you expect to make during retirement?
- Do you plan to maintain cash in reserve for a family emergency?
- Have you considered that at a time of increasing life expectancies,
greater demand is placed on your personal savings and investments since they
must last for a longer period of time?
- Do you already have a fulfilling leisure time activity or hobby you plan
to devote more time to in retirement?
The more "yes" answers you have, the more adequate your retirement
preparation and the more likely you'll be able to preserve your standard of
living.
Things to Consider
Some people are ready to go the minute they're eligible. Others like to weigh
every factor before deciding on a date. Below are some things you might want to
consider when choosing your retirement date.
Retirement effective date.
Your retirement effective date is the first day of the month following the
month in which you satisfied retirement eligibility requirements, and you
terminated employment with the Michigan State Police. In addition, you must
submit your completed retirement application to ORS at least 30 days, but no
more than 90 days, prior to your retirement effective date.
Medicare.
When your Medicare coverage begins, typically at age 65, we will reduce your
portion of the state health insurance premiums deducted from your pension. For
information on social security benefits, go to www.ssa.gov, call
toll-free (800) 772-1213, or visit your local SSA office.
Taxes on your pension.
Your pension is subject to state and federal income tax (except for any portion of the
pension representing service credit purchases made with post-tax dollars).
Taxes will be withheld from your pension according to the withholding
instructions you give us when you retire. If you live outside of Michigan, you should check the
state and local income tax regulations in your area.
Deferred compensation and other savings.
Before choosing a date, it would be wise to think about how, and when, you
plan to draw your savings, deferred compensation funds, and other retirement
accounts. Your 401(k)/457 plans administrator can give you payout options and
tax ramifications. You might also wish to consult a financial advisor who can
help you gauge how long your savings might last into your golden years, and
maybe even tell you how to minimize taxes and make your money go further.
Effects of divorce.
If you divorce while you are an active or deferred member, the court may order that a portion of your pension be paid to an alternate payee such as your former spouse or dependent child. The order (known as an eligible domestic relations order, or EDRO) must be on file with ORS
before your retirement effective date. ORS has developed an
online fillable EDRO form to allow members to create accurate and complete
EDROs that can be administered under the retirement statutes. It is the
preferred document to file with ORS. Background information and instructions are
provided separately in
Eligible Domestic Relations Orders: Background and Instructions (R0911X).
Note: The retirement statute prohibits continuing insurance
benefits for a former spouse after a divorce.
Are you buying service credit?
If you're thinking about or are in the process of purchasing service credit,
remember that the purchase must be paid in full while you are still an active,
working member of the retirement system. It's especially important if your
pension eligibility depends on the purchase you are making. Don't stop working
until you are positive that all service credit payments have been received by
ORS. Start working with us early so we can help you coordinate your payoffs.
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