Saving For Retirement
As you may know, TRS is a Defined Benefit (DB) pension plan to which both you and your employer contribute a percentage of your compensation. Your employee contributions are kept in your TRS member account, which earns interest each month and never loses value.
Once you become eligible and apply for TRS retirement, your monthly benefit will be based on your years of service and your average final compensation (AFC) – not on your TRS account balance. Best of all, your TRS retirement benefit will continue for your lifetime.
But will it be enough?
The "Three-Legged Retirement Stool"
Financial planners have long used a three-legged stool metaphor to describe the ideal retirement scenario:
The majority of TRS members receive Social Security benefits at some point after they retire. However, you might retire with TRS several years before you begin receiving Social Security benefits. Also, be aware that your TRS and Social Security benefits combined still might not replace all of your pre-retirement income. When you factor in unknowns like health care and housing costs, you begin to see why the third leg of the stool is so important.
What are your options for additional retirement savings?
You might have access to either a 457 deferred compensation plan or a 403(b) Defined Contribution (DC) plan through your employer. In these plans, you decide how much to have withheld from your pay and how to invest those savings, usually selecting among several options with various levels of risk. While these accounts can lose value and benefits are not guaranteed, they offer a convenient and flexible way to supplement your retirement savings.
Ask your employer if a 457 or 403(b) retirement savings plan is available at work. If not, consider opening an Individual Retirement Account (IRA) at a qualified financial institution. Even putting aside a small amount from each paycheck can add up by the time you reach retirement age!
To learn more, check out the links below.
- 457 Plan vs. 403(b): What's the difference?
- AARP Retirement Planning Resources – includes tools and retirement calculators
- AARP Montana website
- Consumer Reports Guide to Retirement Planning
- National Institute on Retirement Security (NIRS) – News and research on retirement topics
- Social Security Retirement Benefits website
Note: This information is provided for general education purposes only. We encourage TRS members to consult a qualified advisor before making financial decisions of any kind.
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