Texas Retirement System Overview Save for a better Texas Retirement System Overview tomorrow LR#13160

Retirement Realities

Dream…

Plan… Build towards your goals Plan to live longer than you think Estimate your total retirement income Lifetime Income Savings Earnings Other Assets Plan to live longer than you think There are more than 53,000 Centenarians In the United States Source: Centurians: National Awarness Project. www.adlercentenarians.org/

Your Retirement System Tier 1 & 2 Regular Retirement at Age 65 with 5 years of service Age plus years of service equals 80 Tier 3 Regular Retirement at Age 65 with 5 years of service At least age 60 and age plus years of service equal 80 Tier 4 Regular Retirement at Age 65 with 5 years of service Age plus years of service equal 80 and at least age 55 and have at least 20 years of service Tier 5 & 6 Regular Retirement at Age 65 with 5 years of service At least age 62 and age plus years of service equal 80 Source: TRS Handbook, 2013

Calculating Your Pension Benefit Service Factor X Years of Service Final Average Monthly Salary = Monthly Retirement Benefit All Tiers – 2.3%% Year of service are for each school year you work at least 90 days Tier 1, 4 & 6 – Average of highest three annual salaries Tier 2, 3 & 5 – Average of highest five annual salaries Source: TRS Handbook 2013

How to Calculate Your Monthly Benefit Sample Calculation Tier 2 member, retiring at age 62 with 30 years of service Service Factor 2.3% Years of Service X 30 Final Average Monthly Salary X $4,708 Monthly Retirement Benefit $3,248 (Explain Example) Your results will be different. You can get the information you need for your calculation on the retirement website. I will be happy to help you calculate your monthly payout according to the options you select to match your situation. Source: TRS Handbook 2013

Retirement Income Gap $108,366* Income needed in 20 years $60,000 35% Net Loss of Spendable income This is the scary slide that answers the question of how much more the cost of your retirement will go up, as your paycheck goes down in retirement! You just saw the variables in how your retirement benefit is calculated, but there will be a gap between the money you are bringing home today from your paycheck and the money you will bring home from your retirement benefit check. That gap may be bigger than you think. (Explain Example) $38,976 Retirement Income Begin Working Retire at 62 *Assumes a 3% inflation factor Source: TRS Retirement Handbook

Payout Options Options based on which tier you are a member of All classes offer Life only Life with survivorship options See TRS site for full details Source: ERS Retirement Handbook

Act… Can you live on a fraction of your salary? Bridge the retirement gap Buy years of service Explore savings options through employer- sponsored plan Create an income stream for life

Act… All figures assume a 4% annual rate of return compounded monthly and do not include any matching contributions made by an employer which are available in some qualified retirement plans.

Act… Pre-tax Savings Gives Lacey More Lacey want to save $200 a month towards her retirement. She needs help to understand the power of a pre-tax savings plan. Post Tax Pre-Tax Gross Income per Paycheck $4,500 Pre-tax contribution $0 $266.66 Standard tax deductions $686.33 $619.67 Post Tax retirement contribution $200 Take home pay $3,613.67 This hypothetical example is for illustrative purposes only. Taxes are deferred until monies are withdrawn from the plan. This example is based on a teacher in the state of your State claiming single and zero allowances not considering state taxes. Source: TRAK Software

How Much Can Be Contributed in 2015? $6,000 age 50+ catch-up $18,000 Base 15 year catch-up may apply if plan document permits (restrictions apply) 13

403(b) Distributions Elective deferrals cannot be withdrawn until: Age 59 ½ Separation from service Death Qualified Domestic Relations Order Total disability Distributions prior to age 59 ½ may be subject to 10% IRS early distribution penalty.

403(b) Loans Subject to plan approval Allow for access without a qualifying event Low cost with no credit approval Must be paid back in five years or less Up to 25 years for primary home purchase Maximum loan amount subject to IRS guidelines 15

$50,000 403(b) Loans – How Much Can Be Borrowed Rule 1: Must be aggregated with all plans of the employer Rule 2: Cannot exceed the lesser of: $50,000 Less any highest out- standing balance in last 12 months 50% of present value of participant’s non- forfeitable benefit under the plan* less any outstanding loan balance *This amount will not be violated if the loan does not exceed the lesser of (1) $10,000 or (2) 100% of his or her vested account balance. Note: IRS limits are for total maximum loans under the plan, carriers may limit the amount that may be borrowed from their individual policies 16

403(b) Hardship Distribution Medical Expenses Funeral Expenses Tuition Expenses (next 12 months) Purchase Primary Residence Prevention of Eviction Foreclosure on Mortgage Casualty loss to employees primary residence not covered by insurance The only needs that qualify for a hardship are: Medical expenses of the participant, participant’s spouse, or dependent, Purchase of the participant’s principal residence, Tuition and related expenses for the next 12 months at a postsecondary institution for the participant, participant’s spouse, or dependant, or Funeral expenses, or Prevention of eviction from the participant’s principal residence or foreclosure on the mortgage of the participant’s principal residence Only employee contributions may be withdrawn Maximum distribution limited to amount needed due to hardship Only employee contributions may be withdrawn Maximum distribution limited to amount needed due to hardship and not available from other sources Contributions must stop for 6 months after hardship distribution

Enjoy… Follow your dreams Now is the time to put your retirement income strategy in place Experience the financial security for a retirement lifestyle you have always dreamed of

Disclosure This presentation represents our understanding of the tax code and state retirement plan You should always consult your tax professional or state retirement system about your individual situation Information believed to be accurate as of April 2015

(Please conclude by delivering this very important message) As you can see, we have quite a story but the great thing is it’s a simple one…. The National Life Group is a national company comprised of passionate people who care about the needs of their customers.  While we represent different products, different issuing companies, and operate across all the geographies and cultures of the U.S., we are at the core a single company that has delivered on its promises for 166 years.