For early to mid-career employees

The thought of retirement may not be on your radar, but have you ever thought about where your income will come from in retirement? Sure, it may not seem important now, but the amount you start saving and when you start saving will have a huge impact on your income replacement in retirement.

What’s income replacement you ask? Income replacement is a term for how different sources of income in retirement will add up to replace some or all of your pre-retirement paycheck. In a recent survey of Missouri state employees, 37.7% of workers under the age of 35 were unsure of where their retirement income will come from. A state of Missouri employee’s “retirement paycheck” is typically made up of three sources: your defined benefit pension plan, social security, and personal retirement savings, such as MO Deferred Comp.

The defined benefit pension plan, provided by either MOSERS or MPERS, is a benefit you receive as long as certain working requirements are met. This benefit is created using a formula; Final Average Monthly Pay (FAP), times a multiplier, which is established by legislation, times your years of credited service, both earned by working and any service you are qualified to purchase. This calculation produces your monthly pension benefit amount.
The next source of replacement income is your social security benefit. You can collect early social security benefits at the age of 62 but by starting early, you are taking a permanent reduction in the amount of your benefit. Your full social security benefit would occur between age 65 and 67, depending on your year of birth. To find out when you will be eligible for full benefits and what your benefit payment would look like, visit ssa.gov.

You may be thinking this won’t be enough to replace your income in retirement, and that’s probably a true statement for many employees. This is where your personal savings for retirement comes into play. Keep in mind, you have limited control over your defined benefit pension and social security, so saving smart with deferred comp can help give you that extra savings boost and higher income replacement.

Estimating what your retirement needs may be in the future will help determine how much you’ll need to save. Use the Grow your Retirement Savings Calculator to see how your contributions will add up over your career. To increase your contribution, logon to modeferredcomp.org and click the 457 plan “Contributions” link on the home page. By increasing your contribution, you’re preparing for the future! You can also give us a call at 1-800-392-0925. Plan for the retirement you want and start saving more NOW!…(read more)

LEARN MORE ABOUT: Retirement Planning

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Income Replacement: What is it?

In today’s uncertain world, it is important to have a safety net in place to protect against the unforeseen events that can disrupt our lives. One of the key components of this safety net is income replacement. But what exactly is income replacement?

Income replacement is a form of financial protection that provides you with a source of income in the event that you are unable to work due to illness, injury, or involuntary unemployment. It is designed to help you maintain your standard of living and meet your financial obligations when your primary source of income is no longer available.

There are various types of income replacement plans, including short-term disability insurance, long-term disability insurance, and unemployment insurance. Each of these plans has its own set of qualifications, benefits, and coverage periods.

Short-term disability insurance typically provides a portion of your income for a limited period of time, usually up to six months, following an illness, injury, or pregnancy. Long-term disability insurance, on the other hand, can provide income replacement for an extended period, often until retirement age, if you are unable to work due to a serious and long-term disability.

Unemployment insurance, as the name suggests, provides income replacement when you are laid off from your job through no fault of your own. This can help you cover your expenses and bills while you search for a new job.

Income replacement can come from various sources, including private insurance policies, employer-sponsored benefits, and government programs. It is important to understand the terms and conditions of your income replacement plan, as well as any limitations and exclusions, to ensure that you are adequately protected.

Having income replacement can provide you with peace of mind and financial stability during difficult times. It can help you avoid financial hardship and maintain your independence while you are unable to work.

In conclusion, income replacement is a valuable tool for protecting your financial well-being in the face of unexpected challenges. By securing income replacement through the right insurance policies and government programs, you can ensure that you and your loved ones are safeguarded against the loss of income due to illness, injury, or unemployment. It is an essential component of any comprehensive financial plan and should not be overlooked.