Financial Considerations for Retirement

JOURNAL: ISSUE 1 - 2015

According to data compiled by the Social Security Administration, the average life expectancy is 84 for men and 86 for women. The increase in longevity raises a pressing question: Just how much income will a retiree need?

In order to calculate expenses during retirement, it’s key to consider housing and healthcare costs, debt, and responsibilities to dependents. Lifestyle considerations are also critical in determining income needs in retirement: will you re-locate; travel; take on new hobbies, or go back to school? Reasonable expectations about your retirement begin with a review of available sources of income after leaving regular employment.   

Retirement income can consist of pension benefits, Social Security benefits, and long-term retirement savings. These sources are typically referred to as the “three legged stool” approach to funding retirement. Regrettably, one of these legs is becoming less common for U.S. workers. Defined benefit pension plans are not offered in most workplaces today. Recent research from the Bureau of Labor Statistics reveal that defined benefit pensions now cover only 18 percent of private-sector workers.  Fortunately, for International Pension Fund (IPF) participants, defined benefit pensions remain a component of a well-deserved retirement.

Pension Benefits

Along with BAC Local pension plans, IPF offers a “third leg” of security for members. IPF pension benefits are a stable source of income that reduces the guess-work of financial planning by providing a lifetime of income with optional security levels for survivors in the form of regular monthly payments.

Social Security

Unless you are disabled, the earliest that you can begin receiving Social Security retirement benefits is age 62. If you decide to start collecting benefits before your full retirement age (which ranges from 65 to 67, depending on the year you were born), your monthly retirement benefit will be permanently reduced. Conversely, you can get a higher payout by delaying retirement past full retirement age. For further information, visit www.ssa.gov or call the Social Security Administration at 1-800-772-1213.

Retirement Savings

As an IPF participant you may be eligible for participation in the BACSAVE Retirement Savings Plan. Designed as a tax-advantaged supplemental savings vehicle for IPF participants, BACSAVE consists of both a Retirement Savings Plan (RSP) and a 401(k) plan. The RSP’s investment guidelines provide for broad diversification of investments, generating reasonable rates of return while reducing the risk of loss. The RSP’s average annual yield since it was established in 1990 is 5.4%.

Required Minimum Distributions (RMDs)

For those with traditional IRAs, the law requires you to start taking distributions – called “Required Minimum Distributions” or RMDs – by April 1st of the year following the year you turn age 70½. If you withdraw less than your RMD, you will have to pay a penalty tax equal to 50% of the amount you fail to withdraw. RMDs also apply to Local annuity plans along with the IPF Retirement Savings Plan.  

Other Sources of Savings

Employer 401(k) plans or other forms of savings may have been accrued after a lifetime of work by you or your spouse. Savings accounts, IRAs, stocks, and bonds, should all be accounted for within a retirement portfolio. Special consideration regarding both rates of withdrawal and tax-triggering events should be made when accessing funds. Drawing on these funds systematically with regard to interest accruals and market conditions will maximize the value of your assets.

Tax Considerations

You may elect to have federal and, in some cases, state taxes, taken out of your pension check.

You may also pay taxes by filing quarterly estimates to the IRS. After your first year on pension, confer with your tax advisor to be sure the proper amount is being deducted from your pension. 

Work After Retirement

The obvious advantage of working during retirement is relying less on your retirement savings. Under IPF Rules and Regulations, pensioners are free to work without limit outside the Masonry Industry.  After age 62, an IPF pensioner may return to covered employment and continue to receive retirement benefits until their earnings exceed the Social Security earnings limitations for pensioners age 62 and older ($15,720 for 2015). There is no limit for IPF pensioners age 64 and older.

Updated Ready or Not

To help BAC members consider the above issues and transition into a rewarding retirement, a newly updated edition of Ready or Not, a comprehensive retirement handbook, is now being printed. Tips on budgeting, aging and health, Social Security and Medicare, and other valuable retirement resources are all included. Produced by IPF in conjunction with MEI Publishing, Ready or Not will be mailed to active participants age 59½ and older and also forwarded to Locals for distribution at Retiree Club meetings.