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TRANSCRIPT
YOUR JOURNEY TO RETIREMENT
What is RetireReadyTN? RetireReadyTN is the State's retirement program, combining the strengths of a defined benefit plan provided by the Tennessee Consolidated Retirement System (TCRS), 401(k) and 457(b) plans through services provided by Empower Retirement, and retirement readiness education. We strive to empower public employees to take actionable steps toward preparing for the future.
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Plan for Your Retirement DestinationImagine your retirement income being a three-legged stool, coming from three different sources:
1. TCRS (Defined Benefit)
2. Employer Plan (401(k), 457 and/or 403(b)
3. Social Security
Tennessee Consolidated Retirement System (TCRS)
• TCRS is a defined benefit plan providing a lifetime retirement benefit, survivor and disability benefits for members and beneficiaries
• After meeting vesting requirements, a member becomes eligible to receive a monthly retirement benefit upon reaching the age and/or service requirement
• Benefits are calculated with a set formula
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TCRS by the Numbers
• Provides retirement, survivor and disability benefits to more than 215,500 active members and more than 144,600 retired members
• $52.1 billion held in trust
• One of the top three best funded state pension plans1
• More than 92% of the $2.6 billion in annual benefits paid by TCRS remain in Tennessee
• For every $100 paid out to retirees, $67 comes from investment earnings
1 The Pew Charitable Trust, The State Pension Funding Gap, 2017. 5
Legacy Plan Overview
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Employees Hired Before July 1, 2014 – Legacy Plan
• Members may be contributory or non-contributory to TCRS
• Generally 5-year vesting under TCRS, with some exceptions
• Service Retirement at age 60 and vested, or with 30 years of service
• Early retirement may be available with a reduced benefit
• General State and Higher Education employees participate in the 401(k) plan on a voluntary basis and qualify for a dollar-for-dollar match up to $50 each month
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What Determines Your TCRS Retirement Benefit?
• Average Final Compensation (AFC)
o The average of your highest 60 consecutive months of salary
• Years of Service
o Your total number of years and months of creditable service
• Age at Retirement
o Determines early retirement reduction factors and benefits paid under the joint and survivor plan options
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TCRS Legacy Plan Formula
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Accrual Factor1
x
Average FinalCompensation
x
Years of Service
=AnnualBenefit
1.5%Average of Member’s
Highest 60 Consecutive Months of Salary
Service established while in a position covered by
the Legacy Plan
1General State, Higher Education Employees, and K-12 Public School Teachers receive a 5% Benefits Improvement Percentage (BIP), which raises the Accrual Factor from 1.5% to 1.575%. The BIP does not apply to members of the General Assembly, State Judges, and any superseded plans.
• Retirement benefit payments are made monthly via direct deposit
• A member may choose a Single Life Annuity or Joint and Survivor Plan
Legacy Plan TCRS Benefit Calculation Example
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Average Final Compensation (AFC) = $30,000
1General State, Higher Education Employees, and K-12 Public School Teachers receive a 5% Benefits Improvement Percentage (BIP), which raises the Accrual Factor from 1.5% to 1.575%. The BIP does not apply to members of the General Assembly, State Judges, and any superseded plans.
Years of Service Accrual Factor1 Annual Benefit Monthly Benefit
5 1.5% $ 2,250 $ 187.50
10 1.5% 4,500 375.00
15 1.5% 6,750 562.50
20 1.5% 9,000 750.00
25 1.5% 11,250 937.50
30 1.5% 13,500 1,125.00
Hybrid Plan Overview
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Employees Hired on or After July 1, 2014 – Hybrid Plan
1Members have 30 calendar days to opt out of the 2% member contribution before a contribution is made to the member’s account; otherwise, contributions to the
401(k) of 2% will be deducted each pay period for the member. The member may modify, or opt out of, future contributions to the 401(k) plan at any time.
2State, Higher Education employees, and K-12 Public Teachers have immediate vesting in the 401(k). Local Government employees should call their plan specialist.
Employer contributions Member contributions Total contributions
TCRS 4% 5% 9%
401(k) 5% 2% 1
7%
TOTAL 9% 7% 16%
• Members are contributory to TCRS
• 5 year vesting in TCRS, immediate vesting in 401(k)2
• TCRS Service Retirement at age 65 or by meeting the rule of 90 (service credit plus age = 90)
• General State and Higher Education employees qualify for a dollar-for-dollar match up to $50 each month to the 401(k) plan
TCRS Hybrid Plan Formula
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Accrual Factor
x
Average FinalCompensation
x
Years of Service
=AnnualBenefit
1.0%Average of Member’s
Highest 60 Consecutive Months of Salary
Service established while in a position covered by
the Hybrid Plan
• Benefit payments are made monthly via direct deposit
• A member may choose a Single Life Annuity or Joint and Survivor Plans
Hybrid Plan TCRS Benefit Calculation Example
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Years of Service Accrual Factor Annual Benefit Monthly Benefit
5 1.0 % $ 1,500.00 $ 125.00
10 1.0% 3,000.00 250.00
15 1.0% 4,500.00 375.00
20 1.0% 6,000.00 500.00
25 1.0% 7,500.00 625.00
30 1.0% 9,000.00 750.00
Average Final Compensation (AFC) = $30,000
Deferred Compensation Plan Options
• Three deferred compensation plan options:
1) 401(k) – make pre-tax contributions to reduce your current taxes
2) Roth 401(k) – make after tax contributions to reduce your taxes in retirement
3) 457(b) – make pre-tax contributions to reduce your current taxes
The 401(k)/457(b) offer the same investment options, each plan has its own IRS contribution limit
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401(k) Plan Details• What is a 401(k) plan?
– Section 401(k) of the Internal Revenue Code.– Offered by your employer to help you save and invest additional money.– You can voluntarily set aside some of your income in before-tax or after-tax (Roth)
options.– In 2020, you can contribute 100% of your compensation or $19,500 (whichever is
less).– Traditional 401(k) contributions/earnings can grow tax deferred until withdrawn,
usually during retirement.– Roth 401(k) contributions are taxed initially, but earnings and distributions are not.
• Age 50+ Catch-Up– Age 50 or older, you may contribute an additional $6,500 in 2020.
• Contributing to multiple plans– If contributing to another plan, such as a 403(b) plan, the combined total cannot
exceed the maximum limit of $19,500 in 2020, or $26,000 if age 50 or older. For more information about contributing to multiple plans, please visit www.irs.gov.
401(k) Roth Option• What is a Roth?• Flexibility
– Designate all or a portion of your elective contributions
• After-tax Roth account– “Locks in” today’s tax rates on all contributions– Suitable for higher tax bracket at retirement
• Before-tax traditional account– Contributions and any earnings on contributions are
tax-deferred until you take a distribution– Suitable for lower tax bracket at retirement
• Employer-matching contributions are treated as before-tax contributions– They may be subject to income taxes upon
distribution
457 Plan Details• What is a 457(b) plan?
– Section 457(b) of the Internal Revenue Code.– Offered by your employer to help you save and invest additional money.– You can voluntarily set aside some of your income before you pay current taxes.– In 2020, you can contribute 100% of your compensation or $19,500 (whichever
is less).– Contributions to the plan through voluntary salary deferral and any earnings can
grow tax deferred until withdrawn, usually during retirement.
• Age 50+ Catch-Up– If you are age 50 or older during the calendar year, you may make additional
contributions to your plan account. You may contribute an additional $6,500 in 2020.
• Special Catch-Up– If you are within three calendar years of retiring, you may contribute up to
$38,000 to your plan account. You cannot use both the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.
Getting Started• Who is eligible to enroll?
– State of Tennessee, Tennessee Board of Regents, or University of Tennessee Employees
• All current state employees who are eligible to enroll in TCRS or the Optional Retirement Program (ORP) are also immediately eligible to participate in the 401(k) and 457(b) plans.
– K-12 Certified Teachers and Support Staff
• All current Local Education employees who are eligible to enroll or currently contributing to TCRS are also immediately eligible to participate in the 401(k).
– Local Government Employees
• Check with your HR/benefits specialist to determine the availability of plan options and your eligibility to participate.
Employer Match• Employer may match your 401(k) contributions up to an annually
appropriated limit.
– For State employees only: employer match is $50 per month, for the plan year ending on June 30, 2019. Availability of the match is subject to funds appropriated each year. You must contribute at least $50 per month in order to receive the full $50 match.1
– For employees of Higher Education institutions, K-12 schools and all other employers: Contact your Human Resources office or your campus resource office for current information on employer contributions.
1 In general, employees who are actively contributing to the 401(k) plan and who are eligible to participate in the TCRS or ORP will be eligible to receive matching contributions.
• Update your TCRS Beneficiary by logging into Self-Service for more information, review the TCRS Selecting a Beneficiary Guide
• Update your 401(k) & 457(b) beneficiary(s) by accessing the retirement dashboard via RetireReadyTN.gov
• You may select multiple beneficiaries
• You must elect beneficiaries for your TCRS, 401(k), and 457(b) plans separately, even if designating the same beneficiary for all plans
• Remember, your beneficiary(s) will not automatically be changed in the event of a birth, marriage, divorce, and death, or other change in circumstance
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Selecting Your Beneficiary(s)
• Consider putting your money into a number of different types of investment options.1
• Invest for the long term.
• Be aware of being too cautious.
• Review your investments when you change your long-term goals.
Understand How Risk Affects Your Journey
Risk: the possibility of gain or loss on your investment
Return: the actual gain or loss on your investment
1 Diversification does not ensure a profit and does not protect against loss in declining markets.
• Invest for your risk tolerance and savings goals.
• Know your time frame.
• The investment strategies on the following slide are intended only to illustrate possible investment portfolio allocations that represent an investment strategy based on risk and return.
• This is not intended as financial planning or investment advice.
Diversify With Asset Allocation1
1 Asset allocation and diversification do not ensure a profit and do not protect against loss in declining markets.
Establish Asset Allocation
The models shown above illustrate hypothetical investment allocations by risk profile. Each of the five models represents the equity allocation midpoint of each of the five Morningstar U.S. Fund Allocation peer groups. These models were back tested using historical monthly returns since 1977 (when data was first available for each index) from the S&P 500® and the Bloomberg Barclays US Aggregate Bond Index to represent each model’s equity and fixed income allocations, respectively. By comparing the performance of each of these models, you can observe that the historical return, and risk, both increase as equity allocations increase from conservative to aggressive models. In line with that expectation, the range of outcomes in any rolling one-year period becomes wider as the equity allocation increases. In applying a particular asset allocation model to your individual situation, you should consider other assets, income, and investments in addition to the account you are considering for investment, to the extent the model does not consider these additional assets. Asset allocation does not ensure a profit and does not protect against loss in declining markets.
• You can roll over into this Program approved balances from a former employer’s 401(a), 401(k), 403(b) or governmental 457(b) plan or from an IRA.1
• If you leave your employer, you can roll over your account to your new employer’s 401(a), 401(k), 403(b) or governmental 457(b) plan (if allowed) or to an IRA.1
• Discuss any rollover with your personal financial or tax advisor before making this decision.
Rollovers
1 If you roll over any governmental 457 dollars to another type of plan or account, the withdrawals made prior to you reaching age 59½ may be subject to a 10% federal early withdrawal penalty upon distribution from the non-457 account.
Retirement Education Services1
• RetireReadyTN has retirement education services available to help you at each phase of your retirement planning journey —enrollment, accumulation and distribution. These services include:– Asset roll-in service: Helps you consolidate any
eligible savings from previous employer-sponsored plans into your current Program, giving you easy account management.
– Catch-up contribution and employer match awareness: Helps you save more toward your goal of reaching your desired retirement income level.
– Account distribution education: Helps you decide whether to keep your retirement plan savings in the Program or to initiate a rollover upon a distributable event.
1 GWFS Equities, Inc. registered representatives may also be investment adviser representatives of GWFS affiliate, Advised Assets Group, LLC. Representatives do not offer or provide investment, fiduciary, financial, legal or tax advice or act in a fiduciary capacity for any client unless explicitly described in writing.
1 A bond fund’s yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa.2 Asset allocation and balanced investment options and models are subject to the risks of the underlying investments, which can be a mix of stocks/stock funds and bonds/bond funds. For more information, see the prospectus and/or disclosure documents.3 Equity securities of small and mid-size companies may be more volatile than securities of larger, more established companies.4 Foreign investments involve special risks, including currency fluctuations, taxation differences and political developments.7 Offered through a group fixed and variable deferred annuity issued by ING. A ticker symbol is not available for this investment option.
Investment Options
Short-Term/Fixed
Bonds1 Balanced2 Large Cap Equity
Mid Cap3 Small Cap3 International4
Tennessee
Stable Value
Fund
Vanguard Total
Bond Market Index
Inst (VBTIX)
Western Asset Core
Plus Bond IS
(WAPSX)
Fidelity Puritan
(FPURX)
Tennessee
Treasury Managed
Fund
Allianz NFJ Large
Cap Value Instl7
Fidelity Contrafund
(FCNTX)
Fidelity OTC
Portfolio (FOCPX)
Vanguard
Institutional Index
Fund (VINIX)
Janus Enterprise
Fund (JDMNX)
Columbia Mid Cap
Value Z7
Brown Capital
Small Company Inv
(BCSIX)
Invesco Van
Kampen Small Cap
Value Fund Y7
DFA International Value Fund I (DFIVX)
Fidelity International Discovery (FIGRX)
RELATIVE RISK INCREASE
Investment Options, continuedThe following chart is intended to illustrate investment options available to you under the State of Tennessee 401(k) and 457 Deferred Compensation Program.
1 Generally, the asset allocation of each target date fund will gradually become more conservative as the fund nears the target retirement date. The date in a target date fund’s name is the approximate date when investors plan to start withdrawing their money (generally assumed to be at age 65). The principal value of the fund(s) is not guaranteed at any time, including at the time of the target date and/or withdrawal. For more information, please refer to the fund prospectus and/or disclosure document.
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LifecycleFunds1 Risk managed according to retirement date
VanguardInstitutional Target Date Funds:
Retirement Income (VITRX)
2015 (VITVX)
2020 (VITWX)
2025 (VRIVX)
2030 (VTTWX)
2035 (VRIVX)
2040 (VIRSX)
2045 (VITFX)
2050 (VITLX)
2055 (VIVLX)
2060 (VILVX)
ProspectusCarefully consider the investment objectives, risks, fees and expenses of the annuity and/or the investment options. Contact us for a prospectus, a summary prospectus and disclosure document, as available, containing this information. Read them carefully before investing.
Securities offered or distributed through GWFS Equities, Inc., Member FINRA/SIPC and a subsidiary of Great-West Life & Annuity Insurance Company.
Great-West Financial®, Empower Retirement and Great-West InvestmentsTM are the marketing names of Great-West Life & Annuity Insurance Company, Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: New York, NY, and their subsidiaries and affiliates, including registered investment advisers Advised Assets Group, LLC and Great-West Capital Management, LLC.
The information provided today is for general education purposes. GWFS Equities, Inc. registered representatives may also be investment adviser representatives of GWFS affiliate, Advised Assets Group, LLC. Representatives do not offer or provide investment, fiduciary, financial, legal or tax advice or act in a fiduciary capacity for any client unless explicitly described in writing. Although data is gathered from reliable sources, the completeness or accuracy of the data shown cannot be guaranteed.
Brokerage services provided by TD Ameritrade Inc., Member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. All rights reserved. Used with permission. Additional information can be obtained by calling TD Ameritrade at 866-766-4015. TD Ameritrade and GWFS Equities, Inc. are separate and unaffiliated.
Core investment options offered through group fixed and variable deferred annuities and mutual funds. GWFS Equities, Inc., or one or more of its affiliates, may receive a fee from the investment option provider for providing certain recordkeeping, distribution and administrative services. ©2018 Great-West Life & Annuity Insurance Company. All rights reserved. AM375104-0218
Empower Retirement Advisory Services, provided by Advised Assets Group, LLC, a registered investment adviser
What is Advisory Services?• Benefits participants throughout their lives by providing assistance with:
– Accumulation of savings– Retirement (spend down)
• Tools and advisory services help you: – Understand how much money you’ll need during retirement – Design a retirement plan strategy to meet that goal– Provide investment advice strategies during retirement
• Different levels of help are available to you based on your investment goals, time horizon, investor profile and tolerance for risk
• Advisory Services lets you choose the level of help that you want in making retirement planning choices
Advisory Services Fees
Online Investment Guidance
Online Investment Advice
Managed Account service Annual Fee
CostNo additional cost
to youNo additional cost
to you
Up to 100k = 0.45%
Next 150k = 0.35%
Next 150k = 0.25%
Over 400k = 0.15%
Keep Track of Your Journey
Services Available
Call Center(800) 922-7772
Websitewww.RetireReadyTN.gov
Order or personalize your PIN2 X X
Check account balance, allocationsand transactions1
X X
Check investment performance X X
Reallocate funds1 X X
Use financial calculators and tools X
Email a customer service representative X
Talk with a customer service representative8 a.m. to 7 p.m. Central time
X
1 Transfer requests received on business days prior to close of the New York Stock Exchange (4 p.m. Eastern time or earlier on some holidays or other special circumstances) will be initiated at the close of business the same day the request was received. The actual effective date of your transaction may vary depending on the investment option selected. 2 The account owner is responsible for keeping their PIN/passcode confidential. Please contact Client Services immediately if you suspect any unauthorized use. Representatives of Empower Retirement do not offer or provide investment, fiduciary, financial, legal or tax advice or act in a fiduciary capacity for any client unless explicitly described in writing. Please consult with your investment advisor, attorney and/or tax advisor as needed.
Manage your account, monitor your progress
To access your Program’s website, go to www.RetireReadyTN.gov
FOR ILLUSTRATIVE PURPOSES ONLY. The account owner is responsible for keeping the assigned PIN confidential. Please contact Client Services immediately if you suspect any unauthorized use.
Retirement Readiness Education
Retirement Readiness Review
Take advantage of retirement readiness education at all
stages of your career.
With your local RetireReadyTN Plan Advisor, you can
review:
These services are offered at no additional cost to you.
• Your retirement plans, including TCRS, and 401(k)/457(b) accounts
• Your TCRS Member annual statement. Access at MYTCRS.com yearly
• How much of your working income you'll need to replace
• Your personal retirement goals and planned retirement age
• Whether your savings and investment choices are in line with your goals
• Financial planning and budgeting
Take Action to be Retire Ready!
• Log into your accounts at RetireReadyTN.gov
• Review your beneficiaries for TCRS, 401(k) and 457(b) accounts, and make updates if needed
• Review your TCRS Member Annual Statement
• If you are in the Legacy Plan and don’t already have a 401(k) or 457(b) account, consider enrolling
• Evaluate your 401(k) and/or 457(b) contributions. Are you saving enough to support your desired lifestyle in retirement?
• Schedule a meeting with a RetireReadyTN Plan Advisor
Nearing Retirement
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Retirement Counseling
Members within 5 years of retirement can schedule a retirement counseling session to:
• Determine the total income you will need in retirement
• Review benefit estimate and annuity options from TCRS and Social Security
• Review 401(k)/457(b) balances, investments, and retirement income options
• Discuss how to execute your retirement plan
Social Security Benefits
• SSA.gov – Official Social Security website
• Social Security is estimated to replace 35%-40% of your income
• Set up your my Social Security account on the website
– Enter security questions to protect your account
– View your estimated monthly retirement benefit
– Update your personal information
• Review your estimated benefit for early, normal or late retirement ages
Within 3 Years of Retirement
• Schedule a counseling meeting with a RetireReadyTN Plan Advisor and request a benefit estimate by calling 800-922-7772. During a counseling session you will:
– Review your TCRS benefit estimate, benefit payment options, and employment history
– Review your 401(k)/457(b) account balances, investment choices, and retirement income options
– Discuss Social Security options
– Discuss how to execute your retirement plan
– Create a monthly retirement budget
– Consider your eligibility for 401(k)/457(b) Catch-Up Contributions
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When You’re Ready to Retire
For your TCRS Benefit
Once you have met the TCRS retirement eligibility requirements, apply for retirement benefits. Before getting started, you should:
• Review the Retirement Checklist available at RetireReadyTN.gov
• Schedule a one-on-one retirement counseling appointment to discuss your next steps
• File your application online by logging into Self-Service at MyTCRS.com
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TCRS Retirement Plan Option Selection
• Single Life Annuity Plans
1. Member Only Option - Maximum monthly benefits payable to member for life. Benefits cease at death.
2. Social Security Leveling - An increased benefit payable to member until age 62, then a reduced benefit payable after that date. The reduction would be equal to the full amount the member is eligible to receive from Social Security at age 62.
• Four Joint and Survivor Plans
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TCRS Retirement Plan Options – Joint and Survivor Plans
• Option 1 (100% Joint and Survivor)
– Permanently reduces the member’s maximum retirement benefit based on the dates of birth of the member and his or her beneficiary(s). In the event the member passes away, the member’s beneficiary(s) will receive the same benefit amount as the member for the remainder of the beneficiary’s lifetime.
• Option 2 (50% Joint and Survivor)
– Permanently reduces the member’s maximum retirement benefit based on the dates of birth of the member and his or her beneficiary(s). In the event the member passes away, the beneficiary(s) will receive 50% of the member’s benefit for the remainder of the beneficiary’s lifetime.
With option 1 and 2, if a member has designated more than one beneficiary, the benefit amount will be divided equally between the beneficiaries. If any or all beneficiaries pass away before the member, the member’s benefit amount will remain the same.
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TCRS Retirement Plan Options – Joint and Survivor Plans
• Option 3 (Modification of Option 1)
– Permanently reduces the member’s maximum retirement benefit based on the dates of birth of the member and his or her beneficiary(s). In the event the member passes away, the beneficiary(s) will receive the same benefit amount as the member for the remainder of the beneficiary’s lifetime.
• Option 4 (Modification of Option 2)
– Permanently reduces the member’s maximum retirement benefit based on the dates of birth of the member and his or her beneficiary(s). In the event the member passes away, the beneficiary(s) will receive 50% of the member’s benefit for the remainder of the beneficiary’s lifetime.
With Option 3 and 4, if a member has designated more than one beneficiary, the benefit will be divided equally between the beneficiaries. In the event the beneficiary passes away before the member, the member’s benefit will increase to the member’s maximum benefit under the Member Only Option. If multiple beneficiaries have been designated, a portion of the member’s benefit that was designated for a beneficiary that dies before the member will revert to the amount the member would have received under the Member Only Option.
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Selecting a TCRS Beneficiary at Retirement
• Monthly benefits cannot be paid to estates or institutions
• The member may designate multiple beneficiaries
• If you selected a Joint and Survivor Plan, you may only make changes within 60 days after the effective date of retirement or date of retirement notice letter and must pay the difference received in benefits and the optional plan
• Situations such as birth of a child, marriage, divorce, remarriage, or death do not automatically change a designated beneficiary. Your beneficiary designation on file with TCRS will supersede any other document, including a will, for receipt of any benefits due from TCRS upon your death.
• For more information, review the Selecting a Beneficiary Guide available at RetireReadyTN.gov
Cost of Living Adjustment (COLA)
• Must be retired 12 months by the upcoming July 1 in order to receive COLA
• Based on the percentage increase in the Consumer Price Index (CPI) for the previous year
• Payable up to three percent (3%) and compounded annually
• Local Government employees should coordinate with their benefits specialist to see if COLA is available
Working After Retirement
Retired members receiving a monthly TCRS benefit may temporarily return to work with a TCRS-covered employer under the following provisions:
• Limited to 120 days of employment within a 12 month period
• Salary limit per year
• 60-day waiting period from the member’s date of retirement unless waived by employer
Before accepting a position with a TCRS-covered employer, contact RetireReadyTN to see how your benefits may be impacted.
All Plans are Needed to be Retirement Ready!
Questions?
Thank you!
