In this episode Don Anders gets into whether you should pick the FRS Investment Plan or the FRS Pension plan. You make this decision when you first start working, but you can also change it using your one-time second election.

For more information, to register for one of our upcoming webinars, or to schedule an appointment, visit us at http://www.frsdrop.com


Transcription:
Don Anders: Hello, this is Don Anders, and welcome to the Florida Retirement System Podcast. The purpose of this is just to educate people on retirement, and it's myself, Don Anders. I've been working with FRS retirees for over a decade now. My firm and myself, we've helped over 2,000 people retire, just like you, from the Florida Retirement System.

Don Anders: The reason I started this podcast was because we hear all the time of, "Hey, we really wish we had this education earlier on, before we chose our options, not right when we go to retire," because that's when my firm works with people. So, we decided to do this podcast to educate.

Don Anders: With me we have Alex Dingman. Alex is a longtime friend of mine. He works doing radio, doing podcasts. I brought him on to help me produce this and get it out to you, but more importantly, Alex knows nothing about the Florida Retirement System. So I wanted to bring him on and almost make it like he's a new employee, or someone that is getting ready to retire, and my goal is going to be to educate him on your options, on the FRS options. Because if I can educate him, who's starting from pretty much nothing from an educational standpoint with the FRS, then hopefully I'll be able to educate you on it as well. So, Alex-

Alex Dingman: It's good to be. I hope I can guide you, kind of ask the questions, given the perspective that I'm going to have here, of not knowing much, and then, like you said, you can be the one to educate me, Don.

Don Anders: Hopefully we can. Well, we'll see what we can accomplish. By the way, this is a serial podcast. What that means is we're not going to do a bunch of ongoing ... There's going to be about 15 episodes, and then if there's any updates or changes down the road, we'll go ahead and issue bonus episodes. So, don't think this is going to be a two- or three-year commitment to listen to. 15 episodes, not too long, so you could even knock these out in an afternoon, okay?

Alex Dingman: Outstanding.

Don Anders: Okay. What I wanted to start off with is the difference between the pension plan and the investment plan, Alex. What the pension plan and investment plan is, are the two options. Let's say you're about to start working. Okay? What do you want to be? You want to be a teacher, firefighter, police officer?

Alex Dingman: Firefighter. That sounds pretty cool. Always been a dream of mine to be that cool, so let's do it for this [crosstalk]

Don Anders: Were you playing with the fire trucks as a kid?

Alex Dingman: Yeah. Oh, you know it. Yeah.

Don Anders: Okay.

Alex Dingman: Love it.

Don Anders: All right. So you finally get your dream to become a firefighter. You get on board, and they're going to give you a packet. In that packet, it asks, "Do you want to go with the pension plan or the investment plan?"

Alex Dingman: And I have no idea. I mean, I can think in my head, I've heard these terms before, investing, obviously, putting my money somewhere, a pension, I think that means money you get after you retire. But I'm not really sure what the difference is, Don.

Don Anders: Yeah. And that's pretty accurate, but they both apply to the pension. The FRS is a little unique. Not all pension plans allow people to do this, but the FRS allows you to either have a cash value, a lump sum, or they allow you to have a monthly traditional pension there. There's a few factors that you want to factor in. First off, how long do you plan on being a firefighter

In addition to the Florida Pension options, you'll also have the option to contribute to an optional employer plan. We discuss the difference between 403(b), 457, and Roth. We also discuss some tricks you can use to help you save more and to pick the right investments for you.

For more information, to register for one of our upcoming webinars, or to schedule an appointment, visit us at http://www.frsdrop.com

Show transcription:

Don Anders: Hello, this is Don Anders, and welcome to the Florida Retirement System Podcast. This is episode number two of 15. Here with us as the last episode we have Alex Dingman. How you're doing Alex?

Alex Dingman: I am doing pretty well. You know, the firefighter gig just getting it underway, and I'm feeling pretty good about it.

Don Anders: As you know, if you listened to episode one, Alex is our fictional new firefighter.

Alex Dingman: Yes, and if you looked at me, you would tell that I'm not actually a firefighter.

Don Anders: You won't be able to get the gas mask on with that beard.

Alex Dingman: No, no, I don't think I'd work out.

Don Anders: All right. So what we're going to get into now is you just got hired. We chose the investment plan or the pension plan last time, went over the options. Now let's talk about your optional retirement plan. If you're ... so firefighters, police officers, most state employees will have a 457. Teachers also usually have a 457, but they also usually have a 403(b) as well. A 403(b) is kind of the default for any kind of school board person. 457 is the default for anyone else in the state.

Don Anders: So you're going to have a 457 available to you. There might be one option, there might be two, three, four different options that you can go with depending on your agency, who you're working with. So the big question that I'm guessing you have is, who should you contribute to?

Alex Dingman: Yeah. I mean, I've heard of 401ks before now, but these are specific to public employees then?

Don Anders: Yeah. And if you have ... so a 457, another name it's basically I like to call that a public employee's 401k. A 403(b) I like to call it a teacher or a school board or a nonprofit's 401k. 

There's a little differences, but when you're just getting started, the big thing that you want to look for, first off, if there's just one option, then you contribute to that option. Usually just retiring with pension, social security is not going to be enough, so you want to make sure you contribute with something. And if you can, I really want you to make sure that you contribute a percentage of your salary, not an actual dollar amount because if you contribute a percentage, let's say it's 6%, every time you get a raise, the amount that's going in is going to go up as well.

Don Anders: If you can do that, please do it. If you can't, sometimes they just allow you to just contribute $50 or $100. This is actually how I got started, was signing people up for these types of plans. If you can just contribute $100, next time you get a raise, let's say it's $200 per paycheck, can take half of that, so take $100, send that to your retirement and then give yourself the other $100 raise because you want an extra cup of coffee a day

Alex Dingman: Well, and this goes back to the old saying of paying yourself first, right?

Don Anders: Yeah.

Alex Dingman: And that's the big reason why you do this, because you're the first one that gets money from your paycheck that you earned.

Don Anders: Yeah. When you first start, you're not paid a lot as a state employee. That's not... You did not become a firefighter to get rich.

Alex Dingman: No.

Don Anders: If you did, that was a bad scheme. The reason that is it's passion or you did it because of job security or something like that. So you need to make sure you pay yourself so you can retire,

Don talks about whether you should use all of your PTO, cash it out, or roll it into your deferred comp 457, TSA 403(b), BENCOR account, or other plan that is available to you at retirement.

For more information, to register for one of our upcoming webinars, or to schedule an appointment, visit us at http://www.frsdrop.com

In this episode, Don discusses one of the best features of the Florida Retirement System, the Deferred Retirement Option Program. 

FRS DROP is a great feature for Florida public employees where they let you pay your pension into a separate account while they continue to work!

Don and Alex are discussing the 4 Pension Options you can choose from when you retire from the Florida Retirement System. FRS Pension Option 1 is a lifetime payment option for your life only. 

Don Anders and Alex Dingman continue with your Pension Options in the Florida Retirement System, focusing today on Option 2.

Don and Alex are discussing the 4 Pension Options you can choose from when you retire from the Florida Retirement System. FRS Pension Option 3 is a lifetime payment option for both the retiree and their spouse. This option is for spousal benefit only, and the reduction is based on the spouse’s life expectancy.

Don and Alex are discussing the 4 Pension Options you can choose from when you retire from the Florida Retirement System. Option 4 is a lifetime option for both participant and spouse, but if either the participant OR their spouse dies the pension is reduced by 1/3 for the rest of the surviving spouse’s life. Like option 3, this option payout is based on the participant’s spouse’s life expectancy.