Whether it’s your first day on the job, or you’re a seasoned local government pro, you may feel a little overwhelmed when it comes to understanding your LAGERS benefit. While there a many facets to how your benefit works, here are five simple themes every LAGERS member should know.
1. Your Hard Work Pays Off
LAGERS benefit calculation is pretty simple: work longer, earn more income in retirement. That’s easy enough, but because you accrue service, and not an account balance, it can sometimes be difficult to visualize the true value of your LAGERS benefit. LAGERS offers many different tools to help you estimate your future benefit, but know that each month you work, your future financial security grows - and that future monthly income will add up over a lifetime!
2. Your Benefit is Fully Funded at Retirement
We get questions all the time about the solvency of the LAGERS system. They’re fair questions; it seems hardly a day goes by we don’t read about a pension system in trouble, or Social Security become insolvent. Here’s what you need to know about LAGERS. LAGERS is a pre-funded system, meaning that each month, your employer “pre-pays” for your future benefit so that on the day you retire, 100% of the money you will draw in the future is already paid for and set aside.
Not only are our retiree benefits fully funded funded, but the LAGERS system as a whole is 96% pre-fund, meaning that our members, employers, and taxpayers alike have the peace of mind in knowing that the LAGERS system is on sound financial footing!
3. You Don’t Have to Be the Investment Expert
Because your benefit is based on how long you work, not what you’re invested in, you don’t have to stay up at night worrying if you selected the right investments or wondering how the markets will perform tomorrow! It also means that at retirement, your monthly income is not affected by swings in the market.
With that said, investment returns of the system are still very important since around 60% of your benefit is paid for by investment returns of the system. Instead of asking each member to become an investment expert, LAGERS relies on our team of investment professionals to make sure that the system is prudently invested allowing our members and retirees to focus on all the other important things in their lives!
4. Your Benefit is More Flexible than You May Think
One of the most common misconceptions about pensions is that the benefit is not flexible or portable. Not only will you have many options to choose for how you want your LAGERS benefit paid out at retirement, but if you leave your current job prior to retirement eligibility, you also have options! These options will depend on your unique situation, but they can range from a lump sum payout, to a continuation of service accruals at a new LAGERS employer, to deferring your benefit for future monthly income!
On top of that, our members also have options for returning to work after retirement so that our retirees have options to continue working while drawing a benefit! Retirement is not a one-size-fits-all affair, and your LAGERS benefit is designed to be as unique as you are!
5. Your LAGERS Benefit Offers More than Just Retirement
Not only are you accruing a future income with your LAGERS benefit, but every LAGERS member is also automatically covered by disability and survivor benefits. These extra benefits may be payable in the event of a member’s death or permanent disability prior to retirement. While we hope no one ever has to use these, Disability and Survivor benefits provide a tremendous financial benefit that you should factor into your overall financial plan! If you ever consider a change in future employment, make sure you pay attention to these important benefits, so you don't have any gaps in your financial plan for you and your loved ones.