Vesting is Important
For a new LAGERS member, vesting is the single most important thing to understand about your new benefit. To become vested simply means you become eligible for this benefit. In LAGERS, vesting happens once you have earned 60 months (5 years) of service in LAGERS. If you leave your employer before you have five years of service, you will not be eligible for any monthly benefit at retirement. However, vesting doesn’t have to be with just one employer. You could work 2 years for one employer and 3 years for a second LAGERS employer, and because you have a total of 60 months between the two, you are vested!
Vesting is a really important benchmark because once you reach your vesting date, it does not matter whether you work with your employer until you retire, or if you change jobs down the road, you are guaranteed a monthly benefit at retirement. Your LAGERS monthly retirement benefit will be based upon how long you work, so the longer you work, the better your benefit will be, but regardless of how long you stay with your LAGERS employer, once you are vested, you will be eligible for a monthly benefit when you reach your retirement age (which is age 60 for general employees and 55 for police officers and firefighters).
Benefits are Forever
If you have worked for an employer in the past with retirement benefits, chances are those benefits were substantially different than LAGERS. Retirement plans come in all shapes and sizes, and LAGERS is what you call a defined benefit or pension. Pensions work differently that your 401(k) or your 457(b) or your IRA. In these types of plans, your benefit is based on how much you pay into the plan, plus or minus any investment gains or losses. You may also have been individually deciding how to invest your money, or paying someone a fee to do that for you.
In LAGERS, your benefit is not tied to an account balance, but rather to how long you work. The longer you work for a LAGERS employer, the better your retirement benefit will be. When you are ready to retire, LAGERS will use a formula to calculate your benefit. The formula looks at how long you worked, how much you earned in salary, and what benefit program your employer elected. Based on the formula, LAGERS will determine a monthly amount that will be payable at retirement every month for the rest of your life. Your monthly benefit will never stop (even if you live 50 plus years into retirement), and your benefit will never go down (even if the markets aren’t performing well). Retirement benefits in LAGERS are lifelong and guaranteed!
As a new employee, it may be difficult to quantify the value of a benefit like this, especially since you can’t look at an account balance, but just remember that employees who devote their careers to a LAGERS employer are also earning service that will make your future pension benefit better and better with every passing year.
Member Contributions Pay Off Big
It’s not uncommon for a new member to not be in love with the idea of a mandatory 4% employee contribution. At LAGERS we certainly recognize that every paycheck, down to the last dollar is important to our local government workers, but we also recognize that creating retirement security for our members should be a priority. If your employer has elected to require employees to contribute 4% toward funding your benefit, keep in mind that what you receive back in terms of a monthly lifetime benefit will far outweigh how much you yourself paid in. In fact, over 90% of your benefit will be funded through investment return of the system and your employer’s contributions to LAGERS.
Should you, however, ever decided to leave your employer before retirement, your money is always guaranteed to be returned back to you either through are refund or through a monthly retirement benefit, so rest assured that your member contributions are as secure as they can be in LAGERS.
Disability and Survivor Benefits are Included!
One last thing to always remember about your LAGERS benefit is that you also receive Disability and Survivor benefits as part of the deal. This means that should you pass away or become permanently disabled from your job, there may be additional lifetime benefits payable to either you or a beneficiary. If today is your first day on the job, you are already eligible for disability or survivor benefits should your job cause your death or disability and these benefits are calculated using service as if you would have worked until age 60! Once you’re vested, you also become eligible for disability and survivor benefits for deaths and disabilities that happen off the clock.
These extra benefits can really add up if you ever needed them, and the best part is, they don’t cost you anything extra!
Working in public service is a noble calling, and LAGERS is honored to be able to help our local government workers prepare for a bright retirement future. As with any benefit, taking time to understand that your compensation goes well beyond your take –home pay is key to understanding the true lifetime financial value that you receive as a LAGERS member!