As an employee of the Penn State Faculty, you know that the university and students appreciate their staff. It’s no surprise that the university employee benefits package offers a variety of valuable financial, healthcare, and insurance benefits.
As one of the largest universities in the country, the benefits package is competitive and valuable for employees. At Strong Tower Associates, we specialize in helping Penn State employees make the most of their benefits package and plan for a secure financial future.
But if you’re like many faculty and staff at Penn State, you may feel behind in your retirement savings. Here is a simple guide to action steps that will help you make the most of your Penn State benefits package and catch up for retirement in a hurry.
Evaluate Where You Are Now
You may hear how much other people have saved for retirement and feel discouraged. You may also talk to some people and it makes you feel better about how you are doing for retirement saving.
The best place to start with your retirement plan is to evaluate where you are at right now and where you’d like to be to feel secure about your plan. Start by compiling together all of your retirement statements, whether they are through Penn State, your previous employer-sponsored plans, such as 401ks or 403bs (including your spouse’s, if applicable), and other investment accounts.
Then, you need to figure out how much you are saving each year in these different accounts. Look up your estimated social security benefits online at ssa.gov to get an idea of how much you plan to receive. You can also get an idea of what you can expect from the State Employee Retirement System (SERS).
Create a General Plan For How Much You Need to Retire
Everyone has heard different numbers of how much you need to have for a secure retirement. The reality is that the number you need is exactly that; it’s the number YOU need, not what everyone else needs. Depending on the lifestyle you want to have in retirement, the amount of your savings, your expenses, and your income producing assets all play important parts in determining what you will need for retirement.
The best thing to do is compile all the information from your statements together to see the big picture and come up with a budget for retirement. Working with an expert who helps people prepare for retirement, you can develop a plan that gives you clarity and answers your questions.
Do You Need to Save More?
When you are creating a retirement plan, you may discover that you need to save more money each month to move towards your goals. If you realize you need to save more, you will also need to decide where the best place is to save your money. With so many retirement savings vehicles available, you will need to determine the best option for your situation.
Investigate Your Penn State Retirement Benefits
A good place to start is to understand more about your retirement benefits from Penn State. Employees have two benefits which include the Penn State Alternate Plan through TIAA, and the State Employees Retirement System (SERS).
With the Alternate Plan, you contribute 5% of your income and Penn State contributes 9.29%. The money is invested through TIAA and the performance of the account is determined by the investments you pick. You have the option of choosing LifeCycle Target Date funds or individual mutual funds. You should choose your investments to align with your risk tolerance and the amount of time the money will be invested before you retire. A financial advisor can help you decide on the best portfolio for your situation.
The SERS program requires you to contribute 6.25% of your gross salary. When you retire, your income is based on your length of service and your average salary for the three highest years of service. The formula is 2% of your participating years of service multiplied by the average of the highest three years of earnings. If you were hired prior to January 1st, 2010, or participated in SERS before 2010, your formula is different.
Decide What’s Best For You
Now that you know the basic details of your retirement options through Penn State, it makes sense to see what other options there are, too. On top of the Alternate Plan and SERS, you may contribute to traditional IRAs, Roth IRAs, and regular investment accounts.
If you look at the retirement you desire and add up your expected income from SERS, the Alternate Plan, and Social Security, and find that it’s not enough, you will need to consider saving more and using more aggressive strategies. Working with a financial professional who understands investing and retirement planning can be key to figuring out which accounts are best for you to add money into if needed.
Take Action
Now that you have a much better idea of what you need to do, it’s time to take action. Perhaps the most important part of retirement planning is to hold yourself accountable to follow through. You only get to retire once and odds are you don’t want to work the rest of your life.
Taking action could be saving more each month in a tax-qualified retirement plan, paying down debt, or not taking on unnecessary debt as you approach retirement. It could also mean downsizing your home or planning for healthcare costs. While all of this can be overwhelming to think about, working with an experienced professional may help you feel more confident in your plan.
At Strong Tower Associates, we’re happy to help you create a plan for a secure retirement and to maximize your Penn State benefits package. To learn more and to schedule a free Q&A phone call, contact us here.
About Ash
Ash Toumayants is a financial advisor and the founder of Strong Tower Associates. For over a decade, he has helped hard-working people across Central Pennsylvania prepare for retirement. Fueled by a passion for helping people see through the veil of confusion that shrouds the financial world, his goal is to educate his clients so they can make more sound choices regarding their financial future. A Penn State graduate, he currently lives in State College with his lovely wife, Noelle, and their adorable children. Learn more by connecting with Ash on LinkedIn or emailing [email protected].