Your first year in retirement is a little like starting a new job, only without all the work. But still, it involves establishing a routine, figuring out when your money will come in, building new relationships, and feeling excited about the future. Starting a new job means dealing with a lot of unknowns, and beginning a new chapter in life as big as retirement is no different. Here is what you can expect from LAGERS during your first year.
Your benefit is paid at the beginning of each month.
You will receive your retirement benefit from LAGERS on the first of each month. A benefit received on February 1st is your payment for the month of February. Your payment will arrive on the first banking day of each month if you have chosen to have your benefit automatically deposited into your bank account. If you have chosen to receive a paper check, LAGERS mails those out on the last mailing day of the previous month.
No matter if you choose direct deposit or a paper check, we cannot pay you sooner than the first of the month. For example, the first banking day in 2016 is January 4th, so that is when your benefit will be added to your bank account.
Also, you will not receive a monthly payment stub from LAGERS if you have signed up for direct deposit. We will mail you a stub, however, any time the net amount of your benefit changes because of cost of living adjustments, tax withholding changes, or for any other reason.
Your Partial Lump Sum (PLUS) is paid no sooner than 90 days after the date of your first LAGERS payment.
Many retirees select the Partial Lump Sum (PLUS) option in order to get some money up-front in exchange for a reduced monthly amount. The soonest LAGERS will pay out the PLUS is three months after the date you first received a payment from us. For example, if your first benefit payment is February 1st, the soonest LAGERS would pay the PLUS could be May 1st. You may choose to extend the PLUS payment out as far as five months. Extending the payment allows some people to push the PLUS into the next tax year.
If you choose the PLUS and decide not to directly roll it into another retirement account, LAGERS withholds 20% of the taxable portion of the PLUS and forwards it onto the IRS. LAGERS is required to withhold this amount in all circumstances. However, if your tax liability ends up being less than what was withheld, you can apply for a refund at the end of the year. The entire amount of your PLUS will be sent to one of your eligible retirement accounts if you choose a direct rollover.
So why do we wait three months to pay you the PLUS? This is to ensure we have all information from your employer about your final wages and service so we can double check that your benefit amount is correct. This is also why you may see your monthly amount change slightly three months after you retire.
You are eligible for your first cost of living adjustment on October 1st of your second calendar year of retirement.
LAGERS Board of Trustees may grant an annual adjustment of retiree benefits in order to keep pace with inflation. If approved, these cost of living adjustments, or COLAs, are paid to retirees on October 1st each year. In order to be eligible for your first COLA, you must be retired for 12 full months including an October 1st. For example, any person that retires in 2016 won’t also receive a COLA in 2016. You would, however, receive a COLA in 2017 if your retirement is effective January 2016 – October 2016. If your retirement will be effective in November or December 2016, you will be eligible for your first COLA on October 1, 2018. But, you would also receive a little more than everyone else so that we can ensure your benefit is worth the same as it was when you retired. The point of COLAs is not to increase your benefit, but rather to make sure you can buy the same goods and services today as you could in the past.
The first year of retirement can be a wonderful adjustment into the next stage of your life. Knowing what to expect will help this be a smooth transition so that you can focus on all of the great aspects of retirement!