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.

There aren't too many ways to increase your final average compensation, or FAC, short of a pay increase, promotion, or working overtime or premium time. Remember, however, that 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 average compensation and thereby your pension amount.  

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

Catch up on your deferred compensation.

The state of Michigan's 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. Refresh your knowledge of all the higher limits and additional incentives the law permits for savers over age 50. 

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 Payout Guide 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.