Member Education Seminar Indiana State Teachers’ Retirement Fund Please silence your cell phones.

Overview Membership & Service Credit Retirement Overview Investments TRF Web Site 2

Membership Eligibility Licensed Teachers & Administrators Regular employment in Indiana public school system Licensed Substitute Teachers Requires minimum Associate’s degree Requires completion of 1 year of service 3

What Counts as Service? 120 or more days = 1.0 year 60 to 119 days = 0.5 year 10 years of qualified service = vested (eligible to receive pension benefit) 4

What Counts as Service? Regular Indiana teaching service Substitute teaching in Indiana Public Employees’ Retirement Fund (PERF) service School board approved leaves of absence from an Indiana school 5

Board Approved Leaves of Absence These may include: Advanced Study Work Experience Teacher Exchange Pregnancy/Adoption Sickness or Classroom Disability 6

What Counts as Service? Private school service in Indiana Out-of-state service credit Military service credit Additional purchased years of service credit 7

Purchase of Additional Years of Service Credit Example of cost to purchase one additional year of service credit Age Annual Salary Yrs Service Estimated Cost 35 $ 40, $ , , , , , ,646 If service credit is purchased and never used, the member is refunded the purchase amount plus interest. 8

How Do I Qualify for Retirement: Service Eligibility Two Requirements: Service Eligible and Age Eligible Service Eligible: Vesting TRF members with 10 years of qualifying service 9

How Do I Qualify for Retirement: Age Eligibility Age 65 with at least 10 years of service Age 60 with at least 15 years of service Ages 55-59: age and service years total at least 85 (Rule of 85) 10

Can I Retire Any Earlier? Early (reduced) retirement available between ages 50 to 59 Must have at least 15 years of service Pension percentage based on age Member receives reduced pension benefit for life 11

Classroom Disability Benefit Eligibility At least five years of service Active employment in a TRF-covered position Conditions Medically confirmed Six-month continual absence from classroom No teaching service earned Reviewed annually Benefit $125/month + $5 for every year of service over five years 12

Death Before Retirement Survivor Pension Benefit Eligibility At least 15 years of service in a covered position Marital status Dependent children Annuity Savings Account (ASA) Keep designated beneficiaries current 13

Your Teachers’ Retirement Fund (TRF) retirement benefit consists of two separate components: Monthly Pension Benefit + Annuity Savings Account Your TRF Retirement Benefit 14

TRF Retirement Benefit Pension Benefit Administered by State of Indiana through Teachers’ Retirement Fund Lifetime monthly benefit Annuity Savings Account (ASA) Composed of mandatory & voluntary contributions + investment gains/losses Can be lifetime monthly benefit 15

TRF Retirement Benefit 16 Part One: Monthly Pension Benefit

Monthly Pension Benefit Benefit Formula: Average salary x 1.1% x years of service (A-1 Option) Example: Age years of service Salary average (5 highest years): $60,000 Annual pension income based on formula: $60,000 x 1.1% x 30 = $19,800 ($1,650/month) 17

TRF Retirement Benefit 18 Part Two: Annuity Savings Account

Annuity Savings Account What is it? Individual investment savings account Mandatory contributions 3% of Annual Salary Voluntary contributions Pre-tax or post-tax 1% increments Up to additional 10% of salary Investment gains & losses 19

Annuity Savings Account Vesting & Withdrawal Immediately vested Consequences of withdrawal Pension forfeiture Penalties Vested Members, inactive for 90 days after June 30, 2009, can withdraw their ASA balance without forfeiting their pension Rollover protection 20

Annuity Savings Account Voluntary Pre-Tax Contributions Contributions Reduce taxable income Taxed at distribution Election window Two-year time frame between fifth and seventh years Irrevocable decision Remains in effect for length of employment 21

Annuity Savings Account Voluntary Post-Tax Contributions Contributions All taxes paid prior to contributions Revocable decisions Participation Contribution percentages Employer approval 22

Annuity Savings Account Investment Allocations Allocation changes Made quarterly Made in 10% increments to total 100% Defaults to Guaranteed Fund Beneficiary designation Beneficiaries should be named and kept current Divorce/Marriage 23

Annuity Savings Account ASA Allocation Risk tolerance Comfort level with ASA value fluctuations Age Younger members may take on more market risk since losses can be made up over time Portfolio diversification Contributions allocated among different types of investments may reduce overall risk 24

Annuity Savings Account Investor Profiles Conservative Prefer the slow and steady pace of stable investment options and are not comfortable at all with risk Are within a few years of retirement or already retired 25

Annuity Savings Account Investor Profiles Moderate Willing to accept some risk for potentially greater returns, but are uncomfortable with large ups and downs in the short-term Comfortable with risk but have less than 10 years until retirement 26

Annuity Savings Account Investor Profiles Aggressive Willing to take a higher level of risk for greater growth potential Have more than 10 years until retirement Not tempted to change allocations when experiencing a drop of 10% or more 27

Annuity Savings Account Investment Election Options Guaranteed Fund Investment Risk Profile: STABLE Bond Fund Investment Risk Profile: CONSERVATIVE Standard & Poor (S&P) 500 Index Fund Investment Risk Profile: MODERATE International Fund Investment Risk Profile: AGGRESSIVE Small Cap Equity Fund Investment Risk Profile: AGGRESSIVE 28

Retirement Planning Please remember, TRF employees are not financial planners. Be aware of personal needs Lifestyle change, health care costs, inflation, travel Research options available to you Consider all sources of retirement income Social Security, TRF benefit, personal savings, spouse’s retirement 29

Retirement Planning: Why Worry About It Now? The power of compound interest Age 22$50/month10 yearsat age 60…$86,000 Age 32$50/month28 yearsuntil age 60…$63,000 Age 42$50/month18 yearsuntil age 60…$24,000 But what if… Age 22$100/month10 yearsat age 60…$255,000 Age 32$100/month28 yearsuntil age 60…$194,000 Age 42$100/month18 yearsuntil age 60…$79,000 Please note: estimates based on numbers as of January,

Retirement Planning: What Should I Do Now? Set realistic goals Develop a budget and stick to it Save early and often The power of compound interest Determine best investment strategy Which investor profile suits you? 31

Retirement Planning: What Should I Do Now? Check investments periodically TRF Interactive Quarterly statements Outside investments Maintain good records Keep all financial documents and brochures 32

Rollover Savings Account (RSA) What is it? May create a separate account before retirement Rollover tax-deferred funds from IRA or other qualified retirement plans Why set it up? And when? TRF could offer a higher rate of return and/or better payment options than your current qualified retirement plan 33

TRF Web Site 34

TRF Web Site TRF Interactive Update contact information Manage ASA investment allocations Calculate potential retirement benefit Change beneficiaries View quarterly statements 35

Teachers’ Retirement Fund We are here to serve you! Any questions? Please complete our survey. Your comments help us serve you more effectively. 36