Rounding Out Your Retirement Plans

You know how important it is to have a plan for your retirement years, and we don't just mean what kind of fish you're going to catch or what project you're going to take on. Everyone, regardless of age, should know how much money will be needed in retirement, and have a plan for reaching that goal. Here are a few items you may not have considered.

Increasing your FAC.

You know that your pension is a factor of your service credit totals and your final average compensation, or FAC. Your FAC is the average of your highest three consecutive years of compensation. 

Increasing your service credit will increase your pension amount. However, you may also be interested in how to boost the FAC factor in your pension calculation. The best way, of course, is to accept that pay raise or promotion you deserve. Another is to work overtime or premium time. Saving up your annual leave may be another way.

If your FAC period is your final three years of employment (immediately preceding your retirement), some compensation payouts are included in your FAC. Taking your annual leave as a payout, rather than using it before you retire, might boost your final salary and thereby your pension amount. The most common types of leave payouts that can count in your FAC include up to 240 hours of annual leave paid at retirement, compensatory (comp) time paid at retirement, and longevity earned during the FAC period. 

For more details on what counts and does not count in your FAC, see Estimating Your FAC.

Catch up on your deferred compensation.

Don't overlook your Deferred Compensation 401(k) and 457 plans as a way to boost your income in retirement. Remind yourself of the tax advantages when you contribute to your account through biweekly payroll deductions. And refresh your knowledge of all the higher limits and additional incentives the law permits for savers age 50 and older. 

If you'd like more information or wish to increase your deferred compensation contributions, contact ING soon. Most transactions can be handled via ING's fully interactive website at https://stateofmi.csplans.com, or you can call (800) 748-6128 during normal office hours. You might also want to review ING's Guide to Termination or Retirement Distributions so you know the different ways you can have your account paid out to you when the time comes.

The 3-legged stool.

A sound retirement is like a 3-legged stool. You can't depend on just your pension, any more than you can rely solely on savings and investments or just your social security in retirement. To be balanced, you need all three.

A typical person retiring at age 55 today should plan to live at least 30 more years. To retain the same purchasing power through 30 or more years of retirement, your income in retirement must increase each year to keep pace with inflation. While your pension and social security do have built-in annual increases, you'll be depending on savings to supplement any gaps. 

That's one of the reasons we suggest you review your plan once a year to see if you're on target. Add up your retirement savings and deferred compensation funds, obtain a recent social security statement that estimates your benefit at retirement, and update your pension calculation. If you need to adjust your goals, or your plan, do it sooner rather than later.