The information here was gathered, edited and written by Prof. Todd Hunt, with the assistance of Valerie Hunter, Benefits Manager in the Department of University Human Resources. All references to specific times and events involving benefits provided by the university, the state and outside providers have been reviewed and verified by Human Resources.
When does retirement planning begin?
For most faculty, the first step toward retirement planning came when you enrolled in the Alternate Benefits Program (ABP) pension plan. At that time, the forms asked: "Expected retirement date?" A faculty member can elect any date, not just the 65th birthday or the last day of the school year in the selected age year.
In fact, some faculty indicate one date for their principal retirement account, and other dates for supplementary accounts. The dates selected are not binding; they can be changed by contacting the investment carrier. The date is used by the investment carrier to calculate expected distributions, thus giving the faculty member an idea of how much will be available monthly after retirement. The annual account review provided to the faculty member shows different distributions depending on which distribution method is selected.
Of course, investment carriers constantly are offering new products, and decisions made by the faculty member -- along with shifts in the markets where retirement funds are invested -- all affect the amount available for distribution at the time of retirement. Thus, faculty members should review, at least on an annual basis, the printout of their retirement account and consider whether expectations are being met for adequate money at the expected time of retirement.
Meet periodically with your representative
At least once every few years, take advantage of the counseling sessions offered by your provider. The representative will have your account on-line and can call up all the information pertinent to the questions you have. You also will want to ask the representative for guidance about investment options, long-term care insurance and other products or services. The sessions are free and help you review what your objectives are and what your expectations should be.
Starting the 5-year pre-retirement clock
Many factors will affect the decision on a specific retirement date. Some are purely financial; others have to do with professional objectives and job satisfaction. It is important not to think of retirement as The End but rather as a transition to a life that increasingly puts the focus on choices based on your own objectives rather than the objectives of the institution for which you work.
Financial considerations include putting children through college, paying off mortgages and other debts, saving enough for travel and recreation after retirement, ensuring that pension benefits will be adequate. Track expenses regularly, and eventually you will come to the "five-year" point where you can see the possibility of retiring in about that time. You may decide to start the 5-year pre-retirement clock when you feel you can see the light at the end of the financial tunnel. Or, you may decide professional objectives or personal considerations affect your decision even more than financial considerations.
Professional objectives include the desire to continue teaching and/or research indefinitely (perhaps beyond retirement, perhaps in a reduced capacity). Consulting and training may continue after retirement. Will you want to continue maintaining memberships in academic organizations after retirement, or will you be relieved not to feel you must attend conferences, publish still more articles, and maintain a network of colleagues? The paramount consideration for starting the 5-year pre-retirement clock may be a feeling of impending burnout or, conversely, a euphoric feeling that you’ve accomplished your objectives and it’s time to move on.
Personal considerations include health, family needs and demands, relationships with department members, changing personal interests, a desire to "reinvent" yourself, or recognition that hobbies and pastimes provide more rewards than work.
Others can help you with most of the details of planning for retirement. But starting the 5-year pre-retirement clock is best when you figure it out for yourself by weighing and balancing the three areas discussed above.
To announce...or not?!? University Regulations require a faculty member to notify the unit head in writing of the planned resignation date. The resignation date is the last day you will be paid by the university, usually the last day of the month: 6/30/00, for example. The day following, for pension purposes, is your retirement date -- the date when you are eligible to begin drawing on your pension: 7/1/00, for example.
So, you must announce your resignation, and that should be at the beginning of your last year. You may wish to wait as long as possible because you don’t want colleagues to think of you as a lame duck. On the other hand, you may wish to announce the date much more than a year in advance if you are concerned that your unit must conduct a search for a replacement, and if you and your department head agree that you should be involved in that search and in the socialization or training of your replacement. Your relationship with your unit determines whether you announce early or as late as possible.
What to do in years 5, 4, 3 and 2... The final year before retirement is the big one, of course. So why gear up for pre-retirement in five years and counting?
First, you have to track those finances more closely than ever to assure that the chosen date will work. Owing to "the miracle of compounding" (and, in recent times, the rise of the stock market where pension funds invest), you may see larger than ever gains in retirement assets in each of the five years before retirement.
Second, your pre-retirement mindset will lead you to seek out more information about retirement. You may subscribe to a retirement newsletter, buy one or more books on retirement, attend seminars on estate planning, and begin to check out retirement communities during your travels. You may decide to join the American Association of Retired Persons (AARP) in order to receive their publications...and discounts.
Third, you need the time to convince yourself that you are making the right decision about when to retire. Retiring is one of the Big Moments in your life, and it deserves the same thought and decision-making care as marriage and choice of a career.
A word about retirement incentive plans. Longtimers at Rutgers remember the "buy-outs" that enabled colleagues to retire early and receive various benefits, including one year’s salary spread over two years. Those programs were funded by the state of New Jersey, which has not recently provided, nor is it likely to offer, programs to stimulate retirement. It also is unlikely that the university will fund such incentive programs. Faculty wishing to explore a continuing relationship with their department or college after retirement are encouraged to speak with their chair or dean.
15 months before retirement...
Human Resources conducts a workshop that provides an overview of "The Alternate Benefits Program (ABP) Retirement Process." It is an invaluable help in readying for the final year of employment at Rutgers. For July 1 retirees, the workshop is held in April -- look for an announcement and sign-up form in March.
From 25 to 50 people attend the spring workshop in New Brunswick. The benefits specialist conducting the workshop will provide handouts, with a summary of ABP benefits. If you are covered by the Public Employees’ Retirement System (PERS), you will attend a different PERS specific workshop.
The information is presented clearly, the benefits specialist answers any and all questions, and you can stay afterwards if you have a particular concern or problem.
Topics covered at the workshop include:
- Continuation of employer-provided life insurance.
- Employer-provided long-term disability.
- Loans available to members vested by their retirement carriers.
- Rules for cash distribution of retirement funds.
- Health benefits at retirement.
- A checklist of necessary steps toward retirement.
3 months before retirement...
If you are planning to start drawing Social Security benefits upon retirement, the local SS office needs at least three months to process your application. You will need to provide three documents: your original birth certificate, last year’s W-2 tax form, and your current paycheck record.
If you (and/or your spouse) are at least age 65, you must enroll in Medicare A & B. Enrollment is required to enroll in retiree health benefits. This, too, is accomplished through your local Social Security office.
If you have not yet notified your department or unit of your plans to retire, it should be done now.
If you will be leaving your office and you cannot take books and journals with you because of space limitations, this is the time to pass them on to a library, to colleagues, to graduate students -- those who can make the best use of them.
1 month before retirement...
Most carriers need at least a month to process your request for payment of retirement funds, so the forms should be submitted to your provider by now. Otherwise, plan your finances so that you can draw on savings during the first month of retirement. Your first retirement check will arrive around the end of the month in which you retire.
Make arrangements with your department or unit secretary to hold your mail for pickup or to forward it to your home. Send notices to academic and professional groups, publishers, trade publications and others from whom you no longer wish to receive mailings.
Assure that your e-mail privileges continue after retirement by obtaining the guest account form from Human Resources. Currently, you qualify for this privilege if you have 10 years of service at Rutgers.
Within 1 month following retirement...
You have only one month following retirement to convert your group life insurance policy to an individual policy. Your ABP group policy provided your beneficiaries with three and one-half times your salary if you had died while serving as a faculty member (1.5 - 3 times your salary for PERS members). You may continue all or some of this insurance without medical examination if you arrange with the provider to pay the premiums. For ABP members, your free group policy is reduced to one-half of your last year's salary at retirement (3/16 of the your last year's salary for PERS members).
NOTE: ABP members must be 60 years of age and have ten years of pension credit to receive the post-retirement group insurance. PERS members also must have at least 10 years of pension credit to receive the post-retirement group life insurance benefit. At age 70, if you are still an employee of Rutgers, the group life insurance benefit for ABP members is reduced from three and one-half times salary to one-half of your last years's salary.
ADDITIONAL NOTE: If you find after going through the retirement process you have no documentation of the death benefit -- a piece of paper to give your lawyer or executor -- it is easy to acquire that proof. Fill out a Designation of Beneficiary form (EB-0214-0997) designating your beneficiary and contingent beneficiaries. Mail it to the Division of Pensions and Benefits in Trenton, and it will be returned with an endorsement -- proof that you have a state death benefit. The form can be obtained from Rutgers Human Resources (phone 732-932-3020 Ext.4077) It also can be requested at the state website, which is linked to the RFA website.
Within 1 month following the death of the faculty member...
Your spouse’s coverage under a retired faculty member’s health plan will end at the end of the month in which you die. However, your spouse will be sent a letter and application offering continuation of coverage (s)he had prior to your death (though s/he will have to pay for it even if the prior health coverage was free). Your spouse will be re-enrolled for coverage under his/her own name and Social Security number, without a break in coverage, upon receipt of the completed and signed application. This information is taken from the state’s fact sheet, which can be found along with other information on the website at: www.state.nj.us/treasury/pensions/fact11.htm Or, if you have questions, call 609-292-7524 for assistance.