July 02, 2017
Proposed Changes in Michigan Teacher Retirement You Need to Know
MLive reported last week on some of the changes that current teachers would face if the pending retirement overhaul is approved. Some Democrats in the Senate and House spoke out against changing teachers’ pensions, but the bill’s sponsor, Sen. Phil Pavlov, R-St. Clair, claims that the changes will make the retirement system stronger.
What Current Teachers Need to Know
According to the article, the proposed bill would affect current teachers in at least three ways.
- No More Service Credits
Under the current system, teachers under the legacy plan have the ability to purchase service credits. Service credits add to the number of years worked allowing a teacher to retire earlier. The credits also impact pension amounts. Proponents of the change claim it is necessary for the fiscal stability of the plan.
Those against the change argued that eliminating the credits would penalize teachers who want to take time from work to raise a family or for any reason a teacher would want to add years to his or her service record. If passed, service credits will be eliminated September 30, 2017.
- Increase in Employer Contributions to 401(k) Plans
Under the current plan, teachers who choose the 401(k) plan as their retirement account can earn up to 9 percent of their pay. The teacher must contribute 6 percent of his or her pay to receive the 3 percent employer match.
However, under the new law, teachers who choose the 401(k) plan can have up to 10 percent of their pay added to their retirement accounts. The state will automatically contribute 4 percent under the new plan. If the teacher contributes 3 percent to the plan, the state matches the contribution for a total of 10 percent.
- No More Decreases in Pension Contribution Levels
Under current law, the state can actually decrease its contribution to the pension plan if the plan performs well. In other words, if the investments are performing well, the teacher may receive less in pension contributions from the state. The new bill maintains the level of the pension contribution even when the pension plan is doing well and earning money.
Do Teachers Have Other Retirement Options?
Yes, teachers and employees in other professions have many more retirement options than just those offered by their employer. Private retirement accounts can help individuals ensure that they have sufficient funds to pay for their retirement. The last thing that you want to do is run out of retirement funds.
For individuals who “outlive” their retirement, the consequences can be heartbreaking. To continue paying for the care and standard of living they enjoyed during retirement, they may be forced to sell assets that they intended to leave for their family.
Sadly, individuals who do not have assets to liquidate must rely on family to provide financial assistance. If there is no one to help, they must try to survive on what little income they have left each month, which is difficult when costs of medication, medical care, and personal care are increasing each year.
Do Something Today to Protect Your Future
You can avoid the problem of running out of retirement money by planning for your future today. Estate planning is much more than simply deciding who should get your assets when you die. A comprehensive estate plan includes elements that protect you in the event you become incapacitated. Retirement planning is another crucial element of an estate plan that many people do not think about when contemplating drafting a will.
Participating in your employer’s retirement plan is a great first step. However, you need to consider other options as part of your retirement planning to protect your future. You need to take steps today to ensure that your retirement plan will provide the necessary income you need to live comfortably throughout your entire retirement.
The Michigan Estate Planning Attorneys of The Elder Care Firm of Christopher J. Berry, CELA Can Help
We want to help you develop a comprehensive estate plan that includes retirement planning. Our attorneys can help you develop a plan that covers all potential scenarios to protect you and your family. With a variety of estate planning and retirement planning resources available, we can help you find a plan that is perfect for you.
Call 888-390-4360 to schedule an appointment. You may also contact our office for more information or to schedule an appointment with a Michigan estate planning lawyer by using the contact form on our website.
Source: “3 ways teacher retirement changes would affect current teachers” by Emily Lawler, MLive, June 28, 2017