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Age: 62 and 60
Occupation: Professor and State Director
Primary Goal: Retire comfortably, reduce taxes and become reemployed for five years as professor emeritus and a part-time advisor with the State of Ohio. They want to travel more to see their kids and grandkids and give money to charity upon death.
Mark has 34 years in STRS Ohio and Elizabeth has 32 years of service credit with OPERS. They both can retire with an unreduced benefit from STRS and OPERS. They each saved a small amount in Ohio Deferred Comp but spent much of their earnings raising their children.
Mark and Elizabeth weren’t sure where to start when it came to choosing the correct payment plan and how to reduce taxes, and eventually give to charity. They sought the advice of a Certified Financial Planner who understood both systems and had two decades of experience advising STRS and OPERS members.
Results
Todd helped Mark and Elizabeth decide on their optimal retirement dates, which payment plan to leave each other while maximizing their income while alive and in the event, one predeceases the other.
Mark was advised to retire on June 1st from the university. This allowed him to return to work part-time in August for the fall semester after sitting out two-calendar months as required.
Elizabeth retired in September to accrue a three pay month and increase her actuarial age to receive a higher benefit.
While they never considered taking a PLOP, Todd advised them to take a PLOP to reduce their income today while receiving pensions and two part-time incomes to reduce their taxable income.
Todd rolled over both PLOP’s into an IRA to avoid tax and penalty plus he consolidated the small Ohio Deferred Comp plans to make this easier as they aged in retirement.
They figured since they were married, they should leave 100% to each other. However, they were advised to leave a reduced Joint & Survivor Annuity (JSA) so that they had more money today and the surviving spouse didn’t end up with more income than they had when they were both alive.
Todd advised Mark and Elizabeth to establish Roth IRAs so that they would have tax free accounts to pass to the children along with the house.
The Traditional IRAs could be used as income until death at which time could be passed to charity and avoid tax.
The kids would inherit the house without tax, the checking, and savings plus to Roth IRA’s, all of which has no tax.
Age: 60 and 62
Occupation: Teacher and Engineer
Primary Goal: Both Retire this Year, Optimize STRS Ohio Retirement Date and Payment Plan, consolidate 403(b)s and 457 plans and figure out what to do with spouse’s Social Security and 401(k).
Molly has 34 years of service credit with STRS Ohio. She can retire this year with an unreduced pension but is concerned if they can afford to retire since Archie will receive a reduced pension from Social Security.
Archie has worked long days as an engineer and wants to retire to enjoy his kids and first grandchild. He feels life is too short and wants to retire soon.
Molly and Archie weren’t sure where to start since the Ohio pension system is so difficult to understand. For Molly her decision to retire and the choices she makes are irrevocable, so they felt they need to work with someone who understood the STRS Ohio pension.
Results
Archie and Molly met with Todd who worked for STRS Ohio for seven years and has been a Certified Financial Planner for nearly twenty years.
Todd built a retirement strategy that:
Maximized Molly’s STRS Retirement Income
Chose an STRS payment plan that covered her spouse for only the percentage he would need if Molly pre-deceased him. This resulted in them having the most money while alive but also protecting one another in the event of premature death.
Consolidated the 403(b)s and 457 plan into one after Molly received her sick payout that Todd had her defer into Ohio Deferred Comp (457).
Todd advised Archie to take Social Security at age 67 since he would receive approximately 50% more by waiting five years. Todd had Archie bridge the five years by using his 401k which they rolled into an IRA and set up the monthly deposit. This income would then be reduced or stop once Social Security started and restarted at age 73 when Required Minimum Distributions start for Archie.
Todd educated Molly and Archie on the Government Pension Offset which they were surprised to learn that Molly would NOT receive any of Archie’s Social Security due to the GPO and her STRS benefit exceeding the limit.
Todd also advised Molly not to take a PLOP so that she would not reduce her income and they wouldn’t need to take as much to bridge their income from their IRA until Archie’s Social Security started at 67.
Age: 56 and 54
Occupation: Business Owner and ODOT employee
Primary Goal: Reduce debt, pay for college for their two kids, retire comfortably and travel.
Kelsi has 26 years of OPERS credit working for the Ohio Department of Transportation. Joey operates a successful concrete company and their twins are 12 years old.
Joey and Kelsie seek the advice of a Certified Financial Planner to develop a strategic plan to help them pursue their primary goals. After investigating various firms, they decided to work with someone who had knowledge of their pension, who was also married and had kids.
They were overwhelmed with what was their best option when it came to paying off debt, saving for college and retirement, and still be able to take a vacation each summer without going into debt.
Results
Todd and Ryan developed a debt avalanche strategy to help Joey and Kelsie reduce their debt quickly while paying as little interest as possible. All debt would be paid off by the time Joey retired.
They set up an employer retirement plan for Joey so that he could make retirement contributions and deduct them as an expense on his company tax return.
The kids were added to the payroll to increase deductions for the company and saving for the kids.
Kelsie set up two 529 plans and began saving for college for both kids through her employer payroll deductions. This would offer the twins some money for college while covering the difference with cash flow and student loans.
Kelsie would retire in six years when she reached 32 years of age with in OPERS. She would then go back as a nurse for four years to help offset college costs while also receiving a full OPERS pension.
During this time Joey and Kelsie would also be focused on paying off debt by setting up bi-weekly weekly mortgage payments and establishing an emergency fund to avoid using credit cards.
Joey will work until age 67, at which time he will sell the business or offer the kids an option to take over. Kelsi will be aged 65 and both kids will be done with college, the house paid off and both retired with the lifestyle they envisioned.
Kelsie won’t receive Joey’s Social Security due to the Government Pension Offset.
Health Care for Kelsie will be with Medicare and OPERS as a supplement and Joey would have Medicare and would need to purchase a Medigap policy.
Age: 48 and 49
Occupation: Nurse and Police Officer
Primary Goal: Retire to a southern state, help the kids through college and buy a fishing boat.
Sarah would not have as many years as a nurse in the OPERS system since she went back to school after the kids were born. Her OPERS pension wouldn’t be a full 32 years.
They needed to figure out how to pay off debt and help the kids through college.
Their kids are 12 and 16 years old. Both are athletes and want to play their sport in college.
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Results
Ryan advised James to retire at age 52 with OP&F. He also recommended James apply for the DROP program and hope to complete 8 years.
Sarah would be age 60 and have 23 years of service credit. She waits till age 67 to take an unreduced OPERS benefit. She is advised to choose a Single Life Annuity based on her income and how much James would need if she predeceased him.
Sarah’s SLA would maximize their income while both were alive.
James would retire after 8 years in DROP. He chooses a plan of payment to cover Sarah in the event he predeceases her so that she can maintain her lifestyle.
He decided the rollover the DROP and is small Ohio Deferred Comp account. He invests the account, taking a balanced approach in low-cost ETF’s, Stock and Mutual Funds.
Ryan recommends not trying to pay off the house since they will be selling and moving down south.
The focus becomes the college savings and paying Sarah’s student loans. In addition, they have two car payments and a small credit card balance.
Ryan develops a strategy to pay off the debt before maturity and with less interest.
They set up a Roth IRA for Sarah so that they have a tax-free account since OP&F, OPERS and the Traditional IRA are all taxed as ordinary income.
They use a portion of the DROP / Traditional IRA account to supplement their income until Sarah’s OPERS begins at 67.
Instead of paying cash for the boat, Ryan suggests making payments to avoid taking a lump sum and increasing their tax bill with the money no longer being invested for growth.
