Retirement

State Government Pensions

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state government pension retirees.

State government pension plans represent a touchstone of public finance, providing long-term financial stability for millions of public sector workers. This comprehensive, yet focused guide will take you through what these pension plans are, how they function, and the benefits workers receive in their retirement years. How Does a Local Government Pension Plan Work? At its core, a state government pension plan is a long-term savings and investment plan designed to provide income to public sector employees after they retire. These plans are typically defined benefit plans, meaning that the retirement income is predetermined based on several factors including salary, length of service, and a benefit multiplier, unlike defined contribution plans where the retirement benefits depend on investment returns. The most significant advantage of these state government pension plans is their predictability. Because they’re structured as defined benefit plans, they provide retirees with a steady, guaranteed stream of income for life, regardless of market fluctuations or economic conditions. This ensures that the retiree can maintain a desired standard of living post-retirement. How do these state government pension plans work? The process is fairly straightforward. Both the employee and employer contribute a certain percentage of the employee’s salary towards the pension …

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Colorado PERA Good or Bad The Truth

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PERA logo

As a former financial planner in Colorado, I get a lot of questions about Colorado’s PERA program and is PERA a good retirement plan. For those of you who are not from Colorado, PERA stands for Public Employment Retirement Association. It is a public pension plan for employees of the State of Colorado and public-school teachers, similar to CalPERS, the public pension plan for California. Most Colorado PERA jobs are with state and local governments, as well as many teachers in Colorado. Recently, PERA has taken some lumps in the media. For whatever reason, Republicans hate PERA, even though it is a version of exactly what they want to do by reforming Social Security to be based on investing in the markets. Sometimes, these criticisms are valid, and sometimes they are not. What is true is that PERA is not just another ordinary pension plan, and to really understand it requires delving into those details. PERA and Social Security The most important thing to understand about PERA is that it replaces Social Security. You know how people are always saying that Social Security would be better off if it invested worker’s contributions in the stock market? That is exactly what …

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How Much Social Security Will I Get?

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social security amount

How Much Will Your Social Security check be? Social Security is a program of the federal government that provides retirement income for Americans older than 62 years old. The program also offers benefits for those who are disabled. The amount of Social Security you get depends on several factors, but most importantly, your age when you choose to start taking Social Security, and your income while working. I want a better idea than that. I want to know how much Social Security will I get when I retire. Fortunately, there is an easy way to find out. Qualifying for Social Security As a government program, there are a million exceptions to every rule, but in general, in order to qualify for a Social Security benefit, you must have 40 work credits. You earn a credit for each quarter you have wages or self-employment income on which you pay Social Security taxes. So, if you have been working for a state government that opts out of Social Security like Colorado does with its PERA pension program, or California does with its CALPERS, then your income doesn’t earn you credits. You can earn up to four credits each year, and you need …

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Social Security Checks Increase 2023

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social security checks

Fortunately for retirees depending on Social Security, payments on Social Security checks 2023 will be quite a bit higher than the payments on 2022 Social Security checks. New Social Security Payment Amount 2023 The 2023 Social Security payment amount hasn’t been officially released yet, but some groups are expecting a 10 percent or more increase for Social Security retirees in 2023 thanks to high inflation in 2022. Although some financial groups are expecting an even higher increase. If inflation remains the same as in June, then the COLA for Social Security would be around 9 percent. Social Security COLA Increase COLA stands for cost of living. Social Security payments are adjusted each year to keep up with inflation. For the last few years, Social Security check amounts had been relatively flat thanks to low inflation until 2022. 2022 Social Security checks were increased by a COLA of 5.9 percent. However, inflation has been even higher during the first half of 2023. The Fed has been trying to combat inflation by aggressively raising interest rates. If the Fed’s gambit works, inflation could be lower by year end. Whether that would translate through to the 2023 Social Security check calculations remains to …

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What Is an IRA?

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ira retirement account beach

What Is an IRA? An IRA is an individual retirement arrangement, but what does IRA really mean? IRA Definition An IRA is a tax-advantaged account used for retirement savings. IRAs are defined and governed by the IRS through Publication 590-A Contributions to Individual Retirement Arrangements, and Publication 590-B Distributions from Individual Retirement Arrangements. Is An IRA a Good Way to Save for Retirement Saving money in an IRA is smart. To know, “Is an IRA right for me,” depends on your financial situation and your retirement goal. An IRA is a great way to reduce taxes and to grow your money without paying taxes for years. There are actually several different types of IRAs such as Roth IRAs, SEP-IRAs and SIMPLE IRAs. The standard, or plain IRA is often referred to as a traditional IRA. What Is a Traditional IRA? A traditional IRA allows taxpayers below a certain income threshold to deduct the value of contributions made to the IRA. The money also grows tax-free inside the IRA. Overall, the funds in a traditional IRA are considered tax-deferred because you will have to pay taxes on tax-deductible contributions and tax-free growth later when you withdraw the money. How Does an …

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Roth 401k and Roth 457 Plans

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457 retirement

By now, many people are familiar with the basic concepts of a 401k retirement savings plan. But did you know there are different kinds of 401k plans? Do you know what a 457 plan is, or what its variation, the Roth 457 plan is? If you already have a good understanding of regular 401k plans, or traditional 401k plans, then it’s pretty easy to see the difference. If not, don’t worry, we’ll walk you through it step by step. Standard Features 401k and 457 Plans The regular parts of a 401k plan are relatively well known. An employer must start and run the 401k plan. Contributions made to the 401k plan are traditionally made with pre-tax dollars. That means that you pay no taxes on the amounts you contribute to a 401k plan. Also, no capital gains taxes or taxes on dividends are due while the money grows inside of the 401k savings plan. In exchange, you cannot withdraw money from a 401k plan prior to age 59 1/2 except in very specific circumstances without penalty. In addition, you will have to pay taxes on the money as you withdraw it from the account. And, finally, once you turn 70 1/2 …

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Why Are Roth IRA Better for Young Adults

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why roth ira best for younger people

There are several different retirement account types, so why is Roth IRA better for young adults? What makes Roth IRA best for certain people? Can older people still benefit from Roth IRA? Why Are Roth IRA Good? A Roth IRA is one of several tax-advantaged retirement accounts. Like the traditional IRA, all money deposited in a Roth IRA grows tax-free. There are no capital gains taxes on a Roth IRA and no taxes on dividends or interest earned inside a Roth IRA. Why Is a Roth IRA Better Than a 401k for Younger People? What makes a Roth IRA so good is that unlike both traditional IRAs and employer sponsored retirement plans like 401(k)s is that withdrawals from Roth IRA are tax-free. With traditional IRAs or 401k plans, withdrawals are taxable even if you are over 59 1/2. However, you cannot deduct your contributions to a Roth IRA. Why Do a Roth IRA? So, what makes a Roth IRA better for younger people? As a younger person, the money you put into a Roth IRA will have much more time to grow. So, all things being equal, a younger person will end up with a higher amount of earnings in …

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How To Use Roth 457 Plans

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roth 457 retirement plan

When it comes to retirement planning, 457 plans are kind of the neglected younger sibling of the better known 401k plans. Both are employer sponsored retirement plans, meaning your employer has to set them up for you, unlike an IRA or Roth IRA which are individual retirement plans. However, a 457 plan is a special retirement savings plan in that it is only allowed for certain organizations, specifically governmental employers and non-profit employers. The non-profit 457 plans are known as non-governmental 457 plans and are less flexible. For governmental 457 plans, the main advantage is that unlike 401k plans, there is no 10 percent penalty for withdrawing money from a 457 plan prior to age 59 1/2 like there is for a 401k savings plan. However, withdrawals from a 457 plan are taxable, just like withdrawals from a 401k plan are taxable. Which brings us to the Roth 457 savings plan. Roth 457 Retirement Plan As you can probably guess from the name, a Roth 457 plan has similar tax-advantages to a Roth IRA, or Roth 401k, namely that withdrawals from the account are tax-free, rather than taxable. In exchange, you do not get the up-front tax savings from your …

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401k Contribution Limits 2022 and 2023

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401k

401k contribution limits prevent higher income taxpayers from stuffing too much money tax-free into their 401k plans. Each year, the IRS adjusts tax numbers due to either tax law changes, or statutorily mandated adjustments. However, in some cases, the tax amounts are tied to inflation so that they automatically adjust. In many cases, numbers are only modified for the current tax year when a certain limit or threshold is met. Limits for 401k contributions are indexed to inflation and adjusted every year in this manner, provided there is enough change caused by inflation to modify the numbers. 2022 401k Contribution Limits The current 401k contribution limits for 2022 were set by the IRS in late 2021. These limits are tied to an economic index that measures the overall cost of living. The index is designed to rise with inflation. By tying 401k contributions to the index, Congress doesn’t have to pass a law to change the 401k income limits or maximum annual 401k contribution amounts for 2022. The 2022 maximum 401k contributions limits are higher than they were in 2020 because there was enough inflation during the year to cause an increase. Check out this close look at the details of Acorns …

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Where Is My PERA 401k History?

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the history of pera 401k accounts is missing

Did you login to PERA 401k account and find all of your historical data missing? Do you wonder where your PERA 401k history is on the website? I had the same questions when I tried to log in and plan out buying some PERA retirement years with the 401k. Turns out, there is an easy answer to why all of your PERA 401k data is missing. PERA Changed Custodians If you have a balance in the PERA 401k, then you got the same mailers, emails, and notifications I did. You probably took a quick look at them and figured it wouldn’t matter and decided to ignore them, like I did. That is where the answer lies, however. The PERA Board of Trustees decided they could do better for PERA members. For an organization as large as PERA, doing better usually means lower expenses. 401k Blackout Period Once PERA figured out that they wanted to change 401k custodians, they needed to figure out how. For better or worse, the process of changing 401k administrators is highly regulated with a whole host of rules that must be followed. One of the rules that migrating 401k plans must follow is the imposition of …

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