If you are a California resident with a career in public service, you should are most likely familiar with the California Public Employee’s Retirement System or CalPERS. CalPERS has provided retirement benefits for public service employees for more than 80 years. The CalPERS pension fund currently serves more than 1.7 million members. However, the residents of one Sierra County town may have a significant concern about their retirement. Unexpected pension issues are one reason why retirement planning is so important.
Loyalton public employee’s may lose their pension
Patsy Jardin, a 71-year-old public employee in the small Sierra County town of Loyalton, has worked for more than 30 years towards her pension. About three years ago, Loyalton broke from the California Public Employees’ Retirement System, the nation’s largest public pension fund. What she didn’t know was, that decision would ultimately affect her retirement. She, along with four other colleagues, received notice recently that their employer, Loyalton, failed to pay into CalPERS after its split from the system. As a result, its employees would suffer a reduction in their pensions.
Loyalton could not afford to pay into the public pension fund
Loyalton retirees may become the first in California to suffer a significant reduction in their retirement benefits because their town was unable to pay into the public pension fund. Loyalton is not alone, however. There are two other agencies that are substantially behind in making payments into CalPERS. However, Loyalton owes CalPERS the largest termination fee of $1.6 million. That equates to approximately $2,100 for each of the town’s 750 or more residents, which far exceeds the town’s resources. The numbers are staggering, considering the fact that there are only 5 retirees and the obligation is more than a million dollars.
Some of the benefits provided by CalPERS
There are a wide range of retirement benefits and other services provided by CalPERS to public employees. California Employers’ Benefit Trust (CERBT) – CERBT is a Section 115 Trust fund devoted to prefunding other postemployment benefits for all California public agencies. Upon the death of an active member or retiree, Death Benefits are provide to their beneficiaries or survivors. CalPERS also has Deferred Compensation (401k, 457, etc.) plans, including Supplemental Income 457 and Supplemental Contributions.
CalPERS provides Disability & Industrial Disability retirement benefits based on whether the disability is job-related. Benefits are determined by the member’s employer, occupation, and certain provisions in the contract between CalPERS and the employer. Finally, CalPERS provides Retirement benefits to state, school, and contracting local public agency employees. Those benefits are calculated using a specific formula based on the member’s years of service credit, age at retirement, and final compensation at the time of retirement.
Understanding the need for retirement planning
Retirement is meant to be a relaxing time in our lives, but the thought of retirement may be stressful for some. An issue that concerns many clients is whether they will have adequate income or savings to have a comfortable retirement. Common questions include when to start saving and which savings and investment strategies are best to use.
Set aside sufficient savings
It is simply a matter of mathematics. The sooner you start saving the more you will have accumulated by the time you decide to retire. If you want to have enough financial assets available when you retire, you need to start making regular deposits to your savings account as soon as possible. The sooner you begin, the more compound interest you can ultimately earn.
Update your retirement planning periodically
It is necessary to review your estate plan and your retirement plan from time to time. It needs to be reviewed in order to make any changes as they become necessary over time. It is very likely that adjustments to your plan will be needed. For instance, it may be necessary to deal with changes in the market that could have an unfavorable consequence on your investments. You may also need to adjust your plan when your income or expenses change.
Similarly, any significant changes in your family situation typically warrant adjustments, as well. For example, the birth of a child or grandchild, a marriage, divorce, or the death of a spouse or beneficiary generally require revisions to your retirement plan because they could alter how much you can save for retirement.
Consider the potential need for long-term care as part of your retirement planning
So many people ignore the fact that sickness is not the only reason you may need long-term care. For instance, if you suffered a terrible injury following an automobile accident, there is certainly a possibility that you will need long-term care in order to fully recover from that injury. In many cases, loved ones are admitted to nursing homes because of the need for daily assistance with activities such as dressing and grooming, simply as a result of aging. In other words, you cannot simply rely on your relative good health at the present. Your circumstances could change and you should be prepared.
If you have questions regarding planning matters, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.
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