If you are a teacher (or employee) retiring from a State of Illinois school district, you’ll likely have some questions about Medicare and how your TRS retiree medical insurance (TRIP) coverage works. Your benefits are unique in that TRIP will transition over to your Medicare and TRIP after age 65.
Many educators think that the TRS AAI buyout will mean less money for them in the long-run. In some cases, this may be true. However, depending on your goals, taking the buyout may actually give you more savings over time.
One of the biggest benefits of electing to opt for the TRS AAI buyout is that you gain control over your pension now, rather than play the wait-and-see game as TRS tries to work through their funding problem.
The truth is, it’s possible to overspend when you receive a lump sum of cash. This could potentially hurt your future retirement savings plans, and jeopardize your future lifestyle. However, if your lump sum payout is part of a well-rounded financial plan, you’re more likely to find success in retirement.
You may be wondering: If I take the AAI Program buyout, how much will my lump-sum payment be? And how will my benefits be impacted?
COLA, or Cost-of-Living-Adjustment, is a legally required automatic increase to pensions. Illinois state law has required an automatic annual increase to pensions since 1969. Currently, COLA is a fixed 3% each year (compounded, meaning the prior year’s benefit gets increased by 3%). This increase happens every year, and is supposed to help your pension benefit keep up with inflation and a constantly-rising cost of living during retirement.
If you’re feeling confused about the AAI Program, you’re not alone. Many Illinois teachers who have been paying into TRS aren’t completely sure whether they should enroll. My hope is that this blog series will provide some clarity around the AAI Program, it’s pros and cons, and whether it’s right for you.
Unfortunately, retirees often face depression, anxiety, and declining physical health as a result of not having any structure in their daily life. Even more unfortunate is the fact that depression in the senior citizen population often goes untreated. People aren’t sure if and when to speak up, and often don’t see the negative impact on their physical health (and their finances).
Many people who are heading into retirement with a pension wonder which pension election option is best for them and their family. One attractive option is the lump sum payout. This option pays out a lump sum of an employee’s pension when they retire. If you’re leaning toward taking the lump sum pension payout, it’s important to have a plan for that money.
High expense ratios and turnover rates may seem small when you originally invest, but they can slowly erode your returns over time. This could result in a significantly smaller nest egg, and more financial stress as you head into retirement.
Asset location is focused on where (or in what accounts) your assets are located. Asset location, though not as frequently talked about in the world of personal finance and financial planning, is equally important to asset allocation.
Many pre-retirees are constantly searching for the “ideal” portfolio as they head into this new season of life. As you tweak your portfolio in the last few years of your career, it can be challenging to know exactly how to diversify your investments in a way that balances tax minimization and wealth growth.