University Times

Planning for retirement is like building a three-legged stool, a TIAA-CREF staffer said: It’s not a comfortable seat if even one of the legs turns out to be wobbly.

Christopher Yoest outlined the three main supports of a sturdy retirement plan at last month’s Staff Association Council/Benefits financial planning seminar “How Am I Doing? Understanding and Achieving Your Long-Term Financial Goals.”

The first leg of a well-built stool, Yoest said, is knowing your retirement goals. “All of us are going to have unique visions of how you live in retirement,” he said. “‘Am I on track? How am I doing?’ What it really comes down to is understanding your goal.” For instance: Will you remain in your Pittsburgh-area home or move someplace more, or less, expensive in retirement? Will you have the same lifestyle, and the same expenses, before and after leaving Pitt?

The second leg: Know your options for retirement saving. What sorts of plans are available, and what’s best for you? Should you modify your retirement savings plan as you approach retirement, or perhaps simply choose a plan that shifts to safer investments automatically as you age?

Third: Know your resources. As Yoest pointed out, in the Pitt Benefits office “you have a whole team over there that wants to see you not only healthy today but financially healthy as you head toward retirement.

“Retirement today is extremely different than what it was for our parents,” he added. “We are living longer than generations that preceded us. Individuals are paying a lot better attention to their own health … and we need to plan accordingly so we don’t outlive our income in retirement.”

Retirement may last 30 years or more nowadays, he added. Despite its importance, however, “retirement gets put on the back burner. We have a lot of day-to-day noise that can get in the way of how we plan today for tomorrow.”

Most retirees still will need 70-90 percent of their working income to maintain the same lifestyle in retirement, he said. Those who want to relocate may need a higher percentage of their former salaries. This retirement income usually comes from four main sources: Social Security, your Pitt retirement plan(s), post-retirement employment and personal savings.

“Social Security was never designed to be a primary source of income for retirement,” Yoest pointed out. “It was meant to be a supplement.” As anyone who follows the news understands, he added, the future of this decades-old national safety net also is in flux.

After retiring from Pitt, he said, “we want to have the choice to take on employment.” This new phase of employment may mean taking a part-time job in a field that interests you, such as working in a nursery to satisfy your gardening passion. Or you may become a consultant in your previous career field. Regardless, Yoest said, employment at this point in life ought to be a choice, not a necessity: “We don’t want you to have to work in your golden years under the Golden Arches unless you want to.”

Retirees need to be conscious that the degree to which each income source provides support shifts throughout retirement. In the earliest retirement years, your Pitt retirement plan should help the most, followed by employment, savings and, finally, Social Security, he said. In the later retirement years, when perhaps your health prevents employment or life slows down a bit, personal savings are the top retirement aid, followed by retirement plans and finally Social Security.

“It’s never too late to start saving more, no matter where we are in our career path,” Yoest said. He suggested employees take advantage of Pitt’s supplemental retirement plans, which let you save for retirement above and beyond the standard plan. A supplemental plan would be particularly helpful for those who wish to save more toward retirement. Such plans are open to all full- and part-time faculty and staff.

For those who are age 52-64 and are fully vested, the accelerated option may be most helpful, he said. This option provides a higher match of 14.5 percent from Pitt on the employee’s 8 percent contribution, albeit for a limited amount of time (ending after 10 years or at age 65, whichever comes first).

“There are simple things you can do to find ways to contribute more to your retirement,” Yoest said. He held up his own weekday iced tea-buying habit as an example. Spending $3.16 for the large, brewed iced tea at a popular coffee shop, Yoest said, may seem a trivial expense. But $3.16 a day is $15.80 a week, a minimum of $63.20 per month and at least $758 a year. Contributing that same amount to a supplemental or other retirement plan, Yoest pointed out, would give a tremendous boost to your retirement savings, and could be less expensive even than an iced-tea habit. For instance: $50 contributed before taxes to Pitt’s supplemental plan would result in only $37 taken out of your net pay, if your salary places you in a 25-percent tax bracket. Over 10 years, the extra $6,000 in contributions will add up to $8,000 in extra retirement savings, given the additions of Pitt’s match and interest.

If failing to plan for retirement makes for a shaky seat, not diversifying your retirement investments can make for a potentially dangerous elevator ride, Yoest said: “Would you be more safe if you knew that the elevator was supported by one cable or by four or five cables?” He recommended securing your investment elevator by investing across five types of assets: stocks, real estate, bonds, money-market funds and guaranteed-interest financial products.

“No matter what type of investor you are,” he said, “you want to be diversified amongst the asset classes.”

Investments done through multi-year or multi-decade retirement funds also benefit from dollar-cost averaging: buying into the highs and the lows of the market across time. Yoest said that, in the end, this provides better dividends than trying to make one large purchase at what is assumed to be the most opportune time in any market. And TIAA-CREF’s Lifecycle Funds automatically adjust asset allocations as you approach retirement, becoming more conservative as you get closer to stepping down from your Pitt post.

Both TIAA-CREF and Vanguard offer free individual retirement planning sessions for Pitt faculty and staff. To make an appointment with a TIAA-CREF representative, call 412/803-3653. To talk to a Vanguard representative on campus, call 800/523-1188.

—Marty Levine