Jeff Pabst, CRC
This Back by Popular Demand post was first published way back in 2014. It has been updated to reflect any new updates, but the information still rings true. There are options for increasing your benefit in LAGERS, but they may not be what you think. Read on to learn more.
It seems like every time I attend a pre-retirement seminar, someone asks me “how can I increase my benefit?” There are a few ways to increase your retirement income that you may not have thought of.
Work longer and make more. This may not have been your first thought for increasing your benefit. However, the LAGERS benefit formula is designed to reward long term employees. The longer you work and the more you make, the greater your monthly benefit will be. So, if you’re willing to ‘keep on workin,’ just remember that your benefit will keep on growin’.
Can I contribute (more) to LAGERS? Some of LAGERS employers require their employees to contribute to the system. At first glance, you may think that contributing to the system is going to increase your benefit and you may want to increase the amount you’re already contributing to LAGERS (if you are contributing). However, being required to contribute to the LAGERS system will not increase your benefit. Instead, your contributions are assisting your employer in paying for the cost of your LAGERS benefits. So, can you contribute to the system? If your employer chooses this option, yes, but it won’t increase your monthly benefit amount. If you are looking for an additional place to contribute or save for retirement, look into whether or not your employer has a defined contribution provider. If so, this can be a great way to save for retirement. If they don’t, look in to opening an IRA at your local investment or banking organization.
Purchase previous service. Do you have any previous military service or public employment within the State of Missouri? If so, you may be eligible to purchase additional credited service. If you decide to purchase service, this will increase your total service under LAGERS and thereby increase your future monthly benefit. Be prepared though, purchasing service can be quite expensive, however, you are getting a guaranteed lifetime benefit in exchange.
Annuitize your current assets. If you have assets in a defined contribution account (457, 401, IRA, etc) and are looking for more guaranteed income, you may want use those assets to purchase an annuity when you retire. An annuity will pay you a stream of payments during your retirement years. While annuities can be a useful retirement planning tool, be sure to do your research about the product(s) that you may be exploring and the advisor who you may be purchasing it through. Don’t sell yourself short! Trust your gut! If you don’t feel comfortable purchasing a particular insurance or investment product, you probably shouldn’t purchase it.
Continue working after retirement. I know this may sound a little backwards, but quite a few retirees seek part-time or ‘lower responsibility’ employment after they have retired from their career at their current employer. As a LAGERS member you have several options that allow you to continue to receive your monthly benefit while still working.
These are just a few suggestions of how to generate more retirement income. Each person’s retirement income situation is different. So, do your research and plan according to your needs.
