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Retiring the Wisconsin Way · Money In Motion with Klaas Financial

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  Speaker 1: oh eight four four two five six three seven. Don't
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  Speaker 1: again their number six oh eight four four two five
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  Speaker 1: six three seven. Having a number for your retirement related question.
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  Speaker 1: Love to get you on the air six eight three
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  Speaker 1: two one thirteen ten. That's six eight three two one
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  Speaker 1: thirteen ten as mentions joined this morning by CJ Claws
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  Speaker 1: and Eric Schwartz. CJ. How you doing this week?
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  Speaker 2: I'm doing great, Sean, how are you?
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  Speaker 1: I'm doing fantastic. Great to talk with you. Eric, welcome back.
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  Speaker 1: How are you doing this morning?
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  Speaker 3: Thank you very much. I'm doing I'm doing great. I'm
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  Speaker 3: feeling refreshed after a week off.
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  Speaker 1: I hope you did something fun and it's always great
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  Speaker 1: to have have you guys along. And we've got a
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  Speaker 1: great conversation, a really uh really important one here in
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  Speaker 1: Wisconsin about call the Retiring the Wisconsin Way and WRS participants.
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  Speaker 1: We're going to get some information about pension benefits, retirement timing,
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  Speaker 1: in come planning, and so on. So you're definitely going
• 1:43
  Speaker 1: to want to pay close attention to this week's show,
• 1:45
  Speaker 1: not only for the great content, but an opportunity a
• 1:47
  Speaker 1: little bit later on the program for you to win
• 1:49
  Speaker 1: a twenty five dollars gift card from Amazon. Our friends
• 1:52
  Speaker 1: from Class Financial have provided that. Tell you a little
• 1:54
  Speaker 1: bit later on and the show how you can win
• 1:56
  Speaker 1: that with the Class Quiz Question League. Just a little
• 1:58
  Speaker 1: tip as mentioned playing close attention, not only do you
• 2:01
  Speaker 1: get some great information, but you also get a little
• 2:04
  Speaker 1: leg up on the competition because it's about every show,
• 2:06
  Speaker 1: the question and answer to the class Quiz question week
• 2:09
  Speaker 1: comes up on the program. But before we start this
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  Speaker 1: week's topic, let's actually look back at last week's show,
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  Speaker 1: Eric and get the question and answer to the class
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  Speaker 1: quiz question the week.
• 2:19
  Speaker 3: Absolutely so, last week we talked about making smart decisions
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  Speaker 3: not only for your tax return, but for your overall
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  Speaker 3: financial picture. And the question for last week was true
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  Speaker 3: or false a Roth conversion is beneficial for everyone. The
• 2:35
  Speaker 3: answer to that was false. While a Roth conversion is
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  Speaker 3: a great tool for a lot of financial situations, it
• 2:43
  Speaker 3: is not always a great idea for everyone, and it's
• 2:45
  Speaker 3: something that needs to be evaluated before we take action.
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  Speaker 1: And you want to get some of those details and
• 2:50
  Speaker 1: why that's false. Also, listen back to that podcast Clossfinancial
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  Speaker 1: dot Com was a really, really good one. And as
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  Speaker 1: we're talking this week about retiring, the Wisconsin Way and
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  Speaker 1: of course talking about retirement benefits is something that's unique
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  Speaker 1: to many Wisconsin workers and often misunderstood even by people
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  Speaker 1: participating in it. And as we talk about retiring the
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  Speaker 1: Wisconsin way, CJ, what are we talking about there? Who
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  Speaker 1: is the show for?
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  Speaker 2: Yeah, good question. So this show is primarily for participants
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  Speaker 2: in the Wisconsin Retirement System commonly known as WRS. And
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  Speaker 2: I do realize that, you know, this show gets to
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  Speaker 2: our listeners down in the Illinois market as well. So
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  Speaker 2: for some of you you might be going, ah, this
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  Speaker 2: doesn't apply to me. But I would actually say, you know,
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  Speaker 2: pay attention number one so that you can appreciate the
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  Speaker 2: Wisconsin retirement system and the strength of it. But number two.
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  Speaker 2: Elements of this are true for Illinois kind of state
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  Speaker 2: employees as well in terms of where their income will
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  Speaker 2: be derived from. But but yeah, you know, when we
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  Speaker 2: talk about WRS, as it's commonly referred to Wisconsin Retirement System,
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  Speaker 2: this program can include many state employees, university employees, t
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  Speaker 2: sure school district employees, municipal employees, county employees, and other
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  Speaker 2: public sector workers throughout Wisconsin. It's equally important to mention
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  Speaker 2: who this show is not for. So if you work
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  Speaker 2: in the private sector and participates for one K plan,
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  Speaker 2: this doesn't apply directly to you. Likewise, federal employees generally
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  Speaker 2: participate in a different retirement system even if you live
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  Speaker 2: in the state of Wisconsin. So again, who the show
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  Speaker 2: does not directly apply to would be private employees or
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  Speaker 2: federal employees, even if you live in the state of Wisconsin.
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  Speaker 2: So today we're focusing specifically on Wisconsin public employees who
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  Speaker 2: have earned benefits through the WRS system. I am super
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  Speaker 2: excited for the show because, as we will hear more
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  Speaker 2: from Eric. Eric has a lot of historical insight into
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  Speaker 2: this program, and both of us have insight into how
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  Speaker 2: this positively impacts the lives of Wisconsinites.
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  Speaker 1: Going to be a fascinating topic, that is for sure.
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  Speaker 1: As we talk with you, J Closs and Eric Swartz,
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  Speaker 1: our retirement planning professionals from Class Financial online, Class Financial
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  Speaker 1: dot com. That's Closs k l a A S Financial
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  Speaker 1: dot com and they're telephone number six, so eight four
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  Speaker 1: four two five six three seven. So Eric, when people
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  Speaker 1: think about retirement, obviously we immediately think about our four
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  Speaker 1: oh one case, But if you are a WRS participant,
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  Speaker 1: retirement looks quite a bit different. Can you kind of
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  Speaker 1: talk about some of the primary retirement buckets for Wisconsin
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  Speaker 1: public employees and what's available to them.
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  Speaker 3: There, absolutely, and Frey jump into that. I just want
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  Speaker 3: to underline what CJ was saying there. We're really excited
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  Speaker 3: about this show because this is an incredible benefit that
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  Speaker 3: are our folks here in Wisconsin have. And you know,
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  Speaker 3: I think people don't get into the weeds on this
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  Speaker 3: like like we do. But you know, with with a
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  Speaker 3: public pension like the Wisconsin Retirement system, that is a
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  Speaker 3: I mean, this is a big behemoth system and in
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  Speaker 3: a lot of states they don't operate their pensions very
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  Speaker 3: responsibly at all times. Wisconsin is different. We are one
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  Speaker 3: of the best funded public pensions in the country, generally
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  Speaker 3: in the top five if not if not higher. So
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  Speaker 3: what that means is we actually have assets set aside
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  Speaker 3: to pay the benefits that we have promised to employees.
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  Speaker 3: So while that sounds like you know, I would hope,
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  Speaker 3: I would hope that you'd have that, a lot of
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  Speaker 3: states do not. And unfortunately, I do have to call
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  Speaker 3: out our neighbors to the south in Illinois because they
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  Speaker 3: are they're not as well funded as we are up
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  Speaker 3: here in Wisconsin. But we'll get we'll get into more
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  Speaker 3: of this, and you know, going back to your question
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  Speaker 3: there the primary retirement buckets for most Wisconsin public employees.
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  Speaker 3: One of the advantages that public employees in Wisconsin have
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  Speaker 3: is that they're often building retirement security through three separate
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  Speaker 3: retirement programs all at the same time. Okay, So the
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  Speaker 3: first is what we what we're going to talk about today,
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  Speaker 3: the Wisconsin Retirement System pension or the BRS. So for
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  Speaker 3: most eligible employees, their participation in this program is mandatory. Okay.
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  Speaker 3: That's another reason pensions are so effective is they are
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  Speaker 3: not optional. People have to put money into them, and
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  Speaker 3: the employer also puts money into them. So employees contribute
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  Speaker 3: a percentage of their salary and employers make contributions as well.
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  Speaker 3: So this year, general employees contribute seven point two percent
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  Speaker 3: of their pay to the WRS, and employers are going
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  Speaker 3: to match that at seven point two percent. So on
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  Speaker 3: behalf of every employee in the pension system, we have
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  Speaker 3: fourteen point four percent of their salary going in. So
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  Speaker 3: it's the first bucket. The second bucket is social security. Okay. So,
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  Speaker 3: just like just like workers in the private sector, Wisconsin
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  Speaker 3: Retirement System participants generally pay Social Security taxes during their
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  Speaker 3: working years, and just like everybody else, their employers contribute
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  Speaker 3: as well. So in twenty twenty six, most employees will
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  Speaker 3: contribute a mandatory six point two percent of their gross wages,
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  Speaker 3: and employers will will also contribute six point two percent.
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  Speaker 3: So we have done a lot of shows on social security.
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  Speaker 3: Feel free to seek those out if you want to
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  Speaker 3: get deeper into the social security side of things. But
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  Speaker 3: another interesting thing to point out here is in other states,
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  Speaker 3: some other states, employees that participate in a public pension,
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  Speaker 3: they don't always pay into Social Security, right, so they'll
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  Speaker 3: be essentially exempt from Social Security and they just pay,
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  Speaker 3: you know, additional funds into Social Security. This is true
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  Speaker 3: for some of our public employees down in Illinois, right
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  Speaker 3: they do not pay into the Social Security system while
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  Speaker 3: they are a state employee and receive a larger pension
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  Speaker 3: benefit instead of that social Security benefit. So that first,
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  Speaker 3: again the three buckets here. The first one Wisconsin Retirement system,
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  Speaker 3: second is Social Security. Our third bucket is voluntary savings programs.
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  Speaker 3: So in many cases this is the Wisconsin Deferred Compensation
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  Speaker 3: Program or the WDC. So this is a voluntary program
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  Speaker 3: and it allows employees to make either pre tax or
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  Speaker 3: roth contributions. There is not an employer match here, but
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  Speaker 3: it is just an additional way to save funds for retirement.
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  Speaker 1: Interesting and CJ if I'm hearing Eric right, Unlike a
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  Speaker 1: lot of us, you know, we're trying to build a
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  Speaker 1: retirement around just those two less Social Security and four
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  Speaker 1: oh one K is a lot of state workers public
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  Speaker 1: employees are actually building three different retirement income streams.
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  Speaker 2: Yeah, that's exactly right. Although as Eric said, that third one,
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  Speaker 2: the WDC, the Deferred Compensation program, is optional, so you
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  Speaker 2: know some state employees will or won't have that, and
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  Speaker 2: justifiably so. I mean under certain circumstances, if you're married
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  Speaker 2: to a spouse who is saving into a four to
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  Speaker 2: one K plan and you need the extra cash flow,
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  Speaker 2: well we're not against somebody not having that third leg
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  Speaker 2: to the stool. But I think to Eric's point, if
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  Speaker 2: you actually think about this, you go, wait a minute,
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  Speaker 2: So let me get this straight. Fourteen point four percent
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  Speaker 2: going like between employee and employer going into a pension.
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  Speaker 2: What is that twelve point four percent going into Social
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  Speaker 2: Security required? That's a lot of stinking money. And yeah,
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  Speaker 2: and it shows up, by the way, when you get
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  Speaker 2: to retirement. It's between the pension and social security income benefits.
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  Speaker 2: It can be huge. It can replace almost all of
• 10:37
  Speaker 2: your working income. More on that later. So anyways, you
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  Speaker 2: can think of retirement for many WRS participants as that
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  Speaker 2: three legged stool. The first leg is that pension, which
• 10:48
  Speaker 2: could provide lifetime monthly income benefit. That second leg, as
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  Speaker 2: we talked about, is social security, which may provide another
• 10:54
  Speaker 2: source of guaranteed lifetime income. And that third leg is
• 10:58
  Speaker 2: the optional deferred compensation account, which that one think of
• 11:01
  Speaker 2: it as more is like provides flexibility and additional retirement assets.
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  Speaker 2: The first two that we talked about, soci security and
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  Speaker 2: pension are commonly referred to as like required, and the
• 11:13
  Speaker 2: second one is referred to as optional. In fact, one
• 11:17
  Speaker 2: of the biggest mistakes we see is that employees focus
• 11:20
  Speaker 2: extensively on their deferred compensation account balance while overlooking the
• 11:25
  Speaker 2: value of their pension and social security. And part of
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  Speaker 2: the reason they do that is because that WDC account
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  Speaker 2: or think spouses four or one K account has investments
• 11:36
  Speaker 2: that you have to choose and it has a balance
• 11:38
  Speaker 2: you get to track going up and down, or you
• 11:40
  Speaker 2: get all excited or sad when the market goes up
• 11:42
  Speaker 2: and down and it takes all your attention, and yet
• 11:45
  Speaker 2: what's fascinating is if you look at the amount of
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  Speaker 2: income that that four oh, win K or WDC is
• 11:50
  Speaker 2: going to provide, it's often less than social security or
• 11:53
  Speaker 2: your pension will provide. So we would say pay attention
• 11:57
  Speaker 2: to social security in your pension. And when you add
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  Speaker 2: all all of these three together, many Wisconsin public employees
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  Speaker 2: have built a remarkably strong retirement foundation. The key is
• 12:08
  Speaker 2: understanding how those three pieces fit together and making smart
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  Speaker 2: decisions about when and how to begin receiving each benefit
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  Speaker 2: once you retire.
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  Speaker 1: CJ. It feels like, as I'm listening to this as
• 12:19
  Speaker 1: a private sector worker, I'm hoping I'm not alone in this,
• 12:22
  Speaker 1: but kind of experience a little pension envy right now.
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  Speaker 2: There certainly can be. The Wisconsin retirement system is one
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  Speaker 2: of the strongest public pension systems in the country, as
• 12:33
  Speaker 2: Eric was talking about, but it is important to remember
• 12:35
  Speaker 2: that those benefits didn't appear by accident, right Employees and
• 12:40
  Speaker 2: employers have been contributing out of participant's entire career, and
• 12:44
  Speaker 2: that's why we think understanding and maximizing those benefits is
• 12:47
  Speaker 2: so important.
• 12:48
  Speaker 1: Vital information this morning, especially as if you are a
• 12:51
  Speaker 1: state worker WRS. Definitely stuff you want to pay attention to.
• 12:54
  Speaker 1: If you missed part of the program, you want to
• 12:56
  Speaker 1: share the show listen back, you can always do that.
• 12:59
  Speaker 1: Just head on over to class financial dot com. That's
• 13:01
  Speaker 1: Class Hey l aas Financial dot com. You can subscribe
• 13:05
  Speaker 1: and listen back to the podcast right online again it's
• 13:07
  Speaker 1: colass financial dot com. Great day to make that appointment
• 13:09
  Speaker 1: at cost Financial tel form number six oh eight four
• 13:12
  Speaker 1: four two five six three seven. No charge for that
• 13:15
  Speaker 1: initial gets to know you appointment at Costs Financial. It
• 13:17
  Speaker 1: will be complimentary to you again their number six oh
• 13:19
  Speaker 1: eight four four two five six three seven and Eric,
• 13:22
  Speaker 1: before we move on listening to all this, some folks
• 13:25
  Speaker 1: maybe thinking a pension, a Social Security and a deferred
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  Speaker 1: compensation sound great, but those contributions have to come from somewhere.
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  Speaker 1: Does it create a squeeze on your take home pay
• 13:35
  Speaker 1: during during your working years.
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  Speaker 3: Yeah, that's a great point, Sean, and I think this
• 13:40
  Speaker 3: piggybacks well on CJ's last point. There. You know these
• 13:44
  Speaker 3: benefits are not coming from from nowhere. The dollars have
• 13:46
  Speaker 3: to be going in throughout throughout an employee's career. So
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  Speaker 3: the short answer to your question is yes, many Wisconsin
• 13:52
  Speaker 3: public employees are making significant investments in their future during
• 13:57
  Speaker 3: their working years. So between their WRS countrytion, their Social
• 14:01
  Speaker 3: Security taxes, and then any voluntary deferred compensation contributions, they
• 14:07
  Speaker 3: may see a meaningful portion of their of their earnings
• 14:10
  Speaker 3: directed toward retirement before the paycheck ever reaches their bank account.
• 14:16
  Speaker 3: So participants typically, like I said earlier, contribute about seven
• 14:20
  Speaker 3: point two percent of their pay toward the pension. That
• 14:22
  Speaker 3: amount can vary from year to years, so you know,
• 14:25
  Speaker 3: that's that's what it is for twenty twenty six, and
• 14:30
  Speaker 3: then beyond that social Security taxes are also withheld. That's
• 14:34
  Speaker 3: six point two percent. So the challenge is, I can
• 14:37
  Speaker 3: feel really burdensome, you know when when you're in your
• 14:39
  Speaker 3: working years, and the benefit is that the contributions are building,
• 14:45
  Speaker 3: you know, and creating these multiple future income streams, but
• 14:48
  Speaker 3: it still can feel like you're in a pinch during
• 14:51
  Speaker 3: your working years. A lot of retirees would would gladly
• 14:54
  Speaker 3: trade a little bit more spending power today though, for
• 14:57
  Speaker 3: the confidence that comes from having a pension check, a
• 15:00
  Speaker 3: Social Security check, and a personal retirement savings in the future.
• 15:05
  Speaker 3: So sometimes the best way to evaluate those contributions is
• 15:08
  Speaker 3: in by asking you know, what is this costing me today?
• 15:11
  Speaker 3: How much less am I getting? But instead saying what
• 15:14
  Speaker 3: future income is this actually helping me create? And I
• 15:17
  Speaker 3: think that perspective can be can be helpful.
• 15:20
  Speaker 1: Really important to keep your eye on the prize. This morning,
• 15:22
  Speaker 1: as we talk with Eric Schwartz and CJ. Closs, our
• 15:24
  Speaker 1: retirement planning professionals from Class Financial Online Coss Financial dot com.
• 15:29
  Speaker 1: That's Coss k l a a AS Financial dot com.
• 15:32
  Speaker 1: Make an appointment right online, Schedule dot com. Complementary conversation
• 15:36
  Speaker 1: right at class Financial dot com or call the office
• 15:38
  Speaker 1: six oh eight four four two five, six three seven.
• 15:41
  Speaker 1: We'll continue our conversation with CJ and Eric. We'll kind
• 15:44
  Speaker 1: of look at some of the mechanics of how exactly
• 15:46
  Speaker 1: those pensions work. We'll get the details from CJ and Eric.
• 15:49
  Speaker 1: We will do that next as Money in Motion with
• 15:52
  Speaker 1: Coss Financial continues right here on thirteen ten. WIBA talking
• 15:57
  Speaker 1: this week with CJ. Closs and Eric Schwartz about retire
• 16:00
  Speaker 1: ring the Wisconsin Way really important if you are a
• 16:03
  Speaker 1: WRS participants, some great information for you. It's also just
• 16:06
  Speaker 1: really interesting how to hear how this struff stuff is structured.
• 16:10
  Speaker 1: Don't forget. If you miss any part of the program,
• 16:12
  Speaker 1: you can always listen back at cossfinancial dot com. It's
• 16:15
  Speaker 1: also great data make an appointments. Don't forget, it's not
• 16:17
  Speaker 1: going to cost anything that on the initial get to
• 16:19
  Speaker 1: know you conversation at COSS Financially, it will be complimentary
• 16:22
  Speaker 1: to you their number six oh eight four four two
• 16:25
  Speaker 1: five six three seven. That's six oh eight four four
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  Speaker 1: two five six three seven and CJ. Let's kind of
• 16:31
  Speaker 1: get into the get into some of the nitty gritty here.
• 16:33
  Speaker 1: How exactly does the WRS pension work?
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  Speaker 2: Good question, Sean, So. One of the biggest misconceptions we
• 16:41
  Speaker 2: hear is that the WRS pension works like so, like
• 16:44
  Speaker 2: a retirement account with a balance that participants simply withdraw from.
• 16:48
  Speaker 2: And that's not really how it works. Throughout your working years,
• 16:51
  Speaker 2: both you and your employer make contributions into the retirement system.
• 16:55
  Speaker 2: As Eric referenced earlier, those assets are professionally managed by SWIBS,
• 17:02
  Speaker 2: a state investment State of Wisconsin Investment Board. I think
• 17:06
  Speaker 2: is what it stands for. Air can correct me on
• 17:07
  Speaker 2: that later if I'm wrong.
• 17:08
  Speaker 1: Is that right?
• 17:09
  Speaker 2: Eric Okay, So they're professionally managed by SWIB and eventually
• 17:13
  Speaker 2: the system uses a formula to determine your retirement benefit.
• 17:17
  Speaker 2: In retirement, you generally receive a monthly pension payment for
• 17:21
  Speaker 2: the rest of your life. This is more similar to
• 17:24
  Speaker 2: Social Security than it is to a four or one
• 17:26
  Speaker 2: K plan. Many participants also don't realize that ETF calculates
• 17:31
  Speaker 2: both a formula benefit and something called a money purchase benefit.
• 17:35
  Speaker 2: In whichever calculation produces the higher benefit, that's the one
• 17:39
  Speaker 2: that's typically used. In other words, WRS participants often benefit
• 17:44
  Speaker 2: from a built in comparison designed to help maximize their
• 17:48
  Speaker 2: retirement benefit. So think of this in terms of like,
• 17:51
  Speaker 2: one calculation is looking at traditional pension calculations that have
• 17:55
  Speaker 2: to do with contributions and core interest payments. The other
• 18:00
  Speaker 2: one is like, well, what if it's just if it
• 18:02
  Speaker 2: was like a four to one K plan and was
• 18:03
  Speaker 2: invested and took on some market risk. What does that
• 18:05
  Speaker 2: look like? And more on this in a little bit.
• 18:07
  Speaker 2: We're going to talk about options between a fixed option
• 18:10
  Speaker 2: and a variable option. But they're basically doing a great
• 18:14
  Speaker 2: job investing the money and they're giving you the best
• 18:17
  Speaker 2: of both worlds. One of the reasons the State of
• 18:19
  Speaker 2: Wisconsin pension is so brilliant. So that's one of the
• 18:22
  Speaker 2: reasons why we understand your retirement as you're going to
• 18:25
  Speaker 2: want to understand your retirement estimate estimates before separating from
• 18:29
  Speaker 2: service so that you know what to expect. So while
• 18:33
  Speaker 2: we would say we truly we know the inner workings
• 18:36
  Speaker 2: of this pension system, we think it's spectacular. If you
• 18:40
  Speaker 2: haven't got onto that yet, let me just state it.
• 18:42
  Speaker 2: We think it's spectacular. But when you run into spectacular
• 18:47
  Speaker 2: solutions like this, it can be complicated. Like what if
• 18:52
  Speaker 2: anybody knows what I'm talking about. This is your employee
• 18:54
  Speaker 2: trust fund statement that you get, you know once a
• 18:56
  Speaker 2: year that comes in and you go, oh my gosh.
• 18:59
  Speaker 2: All the number is, the different formulas, the different projections,
• 19:02
  Speaker 2: and if you know what you're doing, it's great. If
• 19:05
  Speaker 2: you don't know what you're doing, it can be really scary.
• 19:08
  Speaker 2: So more on that as we as we move throughout
• 19:10
  Speaker 2: the show.
• 19:10
  Speaker 1: Great stuff this morning, as we talk with CJ. Closs
• 19:12
  Speaker 1: and Eric Schwartz from Class Financial Online Costs Financial dot Com.
• 19:16
  Speaker 1: That's Coss k l a as Financial dot Com and Eric,
• 19:20
  Speaker 1: I'm just assuming that it's when it comes to retirement.
• 19:23
  Speaker 1: It's not just a matter of reaching age sixty five
• 19:26
  Speaker 1: and kind of calling it good.
• 19:27
  Speaker 3: Is it?
• 19:29
  Speaker 2: No?
• 19:30
  Speaker 3: Absolutely not. And like like CJ said, the the fact
• 19:34
  Speaker 3: that the program functions as well as it does is
• 19:36
  Speaker 3: generally a result of a very fairly well thought out
• 19:41
  Speaker 3: formula and process, which can be pretty confusing. And the
• 19:45
  Speaker 3: agent that you retire can have a significant impact on
• 19:48
  Speaker 3: your lifetime benefit. But so can you know your years
• 19:52
  Speaker 3: of service and your your salary and things like that.
• 19:55
  Speaker 3: So one of the most important planning opportunities is really
• 19:58
  Speaker 3: understanding how close you may be to like a favorable
• 20:01
  Speaker 3: retirement milestone. We've worked with individuals who were ready to retire,
• 20:06
  Speaker 3: but they discovered that working, you know, maybe an additional
• 20:09
  Speaker 3: year maybe two, actually meaningfully increase their pension benefit. There's
• 20:13
  Speaker 3: a lot of rules of thumb out there. You'll hear
• 20:17
  Speaker 3: some people say, oh, if you're fifty seven, you have
• 20:19
  Speaker 3: thirty years of service, you get your your full benefit, right,
• 20:23
  Speaker 3: And so there's there's a lot a lot more into
• 20:27
  Speaker 3: this than just well, I'm ready to retire, I'm going
• 20:30
  Speaker 3: to be I'm going to be done.
• 20:31
  Speaker 1: Now what about Eric, as we talk about you know
• 20:34
  Speaker 1: different employee classifications as well. Many folks may not realize
• 20:39
  Speaker 1: that there's distinctions there, right or am I seeing that?
• 20:42
  Speaker 3: No, you're you nailed it. It's this is a really
• 20:45
  Speaker 3: important part of it. Not all Wisconsin Retirement System participants
• 20:50
  Speaker 3: are actually treated the same, okay, So we have different
• 20:53
  Speaker 3: classifications of employees. The largest category is our general employees,
• 20:58
  Speaker 3: which includes a ton of different public workers throughout Wisconsin.
• 21:04
  Speaker 3: We also then have our teachers and educational support personnel,
• 21:08
  Speaker 3: and then executive and elected officials that's another category, and
• 21:12
  Speaker 3: the last is protective occupation participants, So this includes like
• 21:16
  Speaker 3: law enforcement officers and firefighters. Each category has can have
• 21:23
  Speaker 3: different retirement ages. There's different benefit factors, benefit multipliers, and
• 21:29
  Speaker 3: other retirement planning considerations. A general employees retirement eligibility may
• 21:34
  Speaker 3: be different from a protective occupation employee such as a
• 21:37
  Speaker 3: law enforcement officer. So that's one of the first questions
• 21:41
  Speaker 3: we ask any WRS participant is what category are you in?
• 21:45
  Speaker 3: Before we can discuss retirement timing, we need to actually
• 21:48
  Speaker 3: understand the rules that apply to them specifically.
• 21:51
  Speaker 1: And CJ as as we kind of go through this
• 21:55
  Speaker 1: stuff too, I think another kind of topic and area
• 21:57
  Speaker 1: that gets a lot of questions, is fund in variable fund?
• 22:01
  Speaker 1: What are we talking about there?
• 22:04
  Speaker 2: That's right, Yeah, I hinted at this earlier. So the
• 22:06
  Speaker 2: majority of WRS assets are invested in the core fund,
• 22:11
  Speaker 2: participants could elect to participate partially in the variable fund.
• 22:15
  Speaker 2: The variable fund generally carries greater volatility because it's invested
• 22:19
  Speaker 2: more heavily in stocks. That means it has the potential
• 22:22
  Speaker 2: for higher long term returns, but it can also experience
• 22:25
  Speaker 2: larger fluctuations, which is, you know, one oh one of
• 22:29
  Speaker 2: investing in stocks. Think of the variable fund as a
• 22:33
  Speaker 2: sidecar to the core fund. A participant can elect to
• 22:36
  Speaker 2: invest up to half of their employee account in the
• 22:39
  Speaker 2: variable fund, while the other half remains in the core fund.
• 22:44
  Speaker 2: The core fund is the foundation, and the variable fund
• 22:46
  Speaker 2: provides an opportunity for potentially higher long term growth, but
• 22:51
  Speaker 2: with greater volatility. One important thing listeners should understand is
• 22:56
  Speaker 2: that participation in the variable fund can result in larger
• 22:59
  Speaker 2: annual day adjustments to retirement benefits after you retire, both
• 23:04
  Speaker 2: positive and negative.
• 23:06
  Speaker 3: So for some.
• 23:06
  Speaker 2: Participants that's attractive. For other stability may be more important.
• 23:10
  Speaker 2: The right answer depends on the individual's goals. And obviously
• 23:13
  Speaker 2: their risk tolerance. And finally, here's what we'd say. There's
• 23:16
  Speaker 2: kind of two parts to this choosing the variable versus
• 23:20
  Speaker 2: the core and Eric can correct me on this if
• 23:21
  Speaker 2: I'm wrong, but we'll often see people while they're working
• 23:25
  Speaker 2: and contributing, maybe use that sidecar of the variable fund
• 23:29
  Speaker 2: to get the potential for higher long term returns while
• 23:32
  Speaker 2: they're working and accumulating, and then as they get too retirements,
• 23:37
  Speaker 2: some of them will choose a I don't want to
• 23:39
  Speaker 2: have that variability in the potential variability in my income
• 23:44
  Speaker 2: stream in retirements, so now I'll swap back to the
• 23:47
  Speaker 2: core fund to have more stable, consistent income when I'm
• 23:52
  Speaker 2: actually generating it in retirement. So there is an option
• 23:55
  Speaker 2: to kind of switch back to the core fund when
• 23:58
  Speaker 2: you get to retirement, although to be quite frank that's
• 24:01
  Speaker 2: not a requirement, right, So there are pros and cons
• 24:04
  Speaker 2: to all of these decisions, all the more reason why
• 24:07
  Speaker 2: we suggest that you sit down with a good financial
• 24:09
  Speaker 2: advisor to make sure you understand the implications of these decisions,
• 24:13
  Speaker 2: because some of them have an irrevocable nature to them
• 24:16
  Speaker 2: once you make them.
• 24:17
  Speaker 1: Important decisions to be weighed, that is for sure. And Eric. So,
• 24:21
  Speaker 1: when someone approach approaches retirement, what are some of the
• 24:24
  Speaker 1: biggest mistakes you're seeing.
• 24:27
  Speaker 3: Yeah, I think the biggest mistake is just treating the
• 24:29
  Speaker 3: pension decision. That's a paperwork exercise instead of like a
• 24:33
  Speaker 3: life altering retirement plan decision. You have a lot of
• 24:37
  Speaker 3: choices when it comes to choosing your retirement benefits from
• 24:40
  Speaker 3: the WRS. Obviously, you get to decide when to retire,
• 24:44
  Speaker 3: but you get to decide which annuity option you want
• 24:48
  Speaker 3: to elect, So you know, do you want to have
• 24:50
  Speaker 3: coverage for a minimum number of years. The pension pays
• 24:54
  Speaker 3: as long as the participant lives, but you can also
• 24:57
  Speaker 3: put some additional minimum on there. You can say I
• 25:01
  Speaker 3: want to have you know, in case I die early,
• 25:03
  Speaker 3: I want to get at least five or fifteen years
• 25:05
  Speaker 3: of payments even if I pass away before then. Or
• 25:08
  Speaker 3: you can have you can choose to have your benefit
• 25:11
  Speaker 3: continue to your spouse if you pass away, and you know,
• 25:15
  Speaker 3: obviously all the different options, the more guarantees you put
• 25:18
  Speaker 3: on there, you're going to get a smaller amount each
• 25:20
  Speaker 3: month because you're getting some additional insurance. But that's a
• 25:23
  Speaker 3: big decision. You also have the decision of whether or
• 25:27
  Speaker 3: not you continue to participate in the variable trust fund.
• 25:31
  Speaker 3: For my clients, I prefer that they cancel their variable
• 25:35
  Speaker 3: participation at retirement, But like CJ said, that's not a
• 25:39
  Speaker 3: requirement and it has to fit into your overall retirement strategy.
• 25:43
  Speaker 3: So for my clients, we cancel that variable participation and
• 25:46
  Speaker 3: we take additional risk with their investments elsewhere right we can,
• 25:50
  Speaker 3: we can find ways to get growth without the pension
• 25:58
  Speaker 3: fluctuating as much. You have to consider how the pension
• 26:01
  Speaker 3: coordinates with your social security. If you retire before sixty two,
• 26:05
  Speaker 3: you have the option to choose an accelerated benefit, which
• 26:08
  Speaker 3: means that from your retirement date until sixty two, you
• 26:11
  Speaker 3: get an additional amount from your pension, basically behaving as
• 26:16
  Speaker 3: a Social Security substitute. And then at sixty two your
• 26:20
  Speaker 3: benefit drops down and the expectation is that you would
• 26:23
  Speaker 3: turn on your Social Security to right size your payment.
• 26:28
  Speaker 3: You also have the option to choose how much you
• 26:30
  Speaker 3: want to actually distribute from your deferred compensation accounts. Okay,
• 26:34
  Speaker 3: so there is a lot. There are a lot of
• 26:37
  Speaker 3: decisions to make, and generally employers are pretty good about
• 26:40
  Speaker 3: offering educational seminars, but really the pension is the foundation
• 26:46
  Speaker 3: of the retirement income plan, and working with an advisor
• 26:49
  Speaker 3: to help you figure out how it figures into the
• 26:51
  Speaker 3: overall strategy is a really, really good idea.
• 26:54
  Speaker 1: That's a great day to make that apployment and make
• 26:56
  Speaker 1: that call the Class Financial. Don't forget that first, get
• 26:58
  Speaker 1: to know your conversation. It's not going to cost you.
• 27:00
  Speaker 1: A thing I got to do is pick a phone
• 27:02
  Speaker 1: game a call tel for number six oh eight four
• 27:04
  Speaker 1: four two five six three seven. That's six oh eight
• 27:07
  Speaker 1: four four two five six three seven. You can also
• 27:09
  Speaker 1: schedule that appointment right online at cossfinancial dot com. That's
• 27:13
  Speaker 1: Coss k l aasfinancial dot com. You heard Eric there
• 27:17
  Speaker 1: mentioning how pension coordinates with Social Security. We'll get some
• 27:20
  Speaker 1: more details on that next as Money in Motion with
• 27:23
  Speaker 1: Coss Financial continues right here on thirteen ten. Wuiba just
• 27:29
  Speaker 1: moments away from the Closs Quiz question of the week
• 27:31
  Speaker 1: your chance to win a twenty five dollars gift card
• 27:34
  Speaker 1: to Amazon. We'll get to that in just a moment.
• 27:35
  Speaker 1: Talking about a really important conversation, especially if you are
• 27:38
  Speaker 1: a state worker in the WRS, participant in that pension
• 27:43
  Speaker 1: system and CJ. How should listeners think about kind of
• 27:46
  Speaker 1: coordinating that WRS pension with Social Security as well as
• 27:50
  Speaker 1: their personal savings.
• 27:52
  Speaker 2: Yeah, the goal is to build a coordinated income strategy
• 27:56
  Speaker 2: in retirement. So for many retirees, pension income covers a
• 27:59
  Speaker 2: substantial portion of their essential expenses. Social Security may provide
• 28:04
  Speaker 2: another meaningful source of guaranteed income. And then finally, that
• 28:07
  Speaker 2: deferred compensation account, the WDC account and other investments that
• 28:11
  Speaker 2: you might have can provide flexibility for travel, large purchases,
• 28:15
  Speaker 2: charitable giving, healthcare expenses, and anything that might be unexpected.
• 28:20
  Speaker 2: So when all three of these pieces work together properly,
• 28:24
  Speaker 2: retirement tends to be much more predictable.
• 28:27
  Speaker 1: And Eric will let you kind of wrap this up.
• 28:30
  Speaker 1: Any final thoughts or suggestions to folks listening this morning.
• 28:34
  Speaker 3: Yeah, I think, like I said, we were really excited
• 28:36
  Speaker 3: about this show. And like CJ said, I've spent a
• 28:39
  Speaker 3: lot of my career working with public employees in Wisconsin
• 28:43
  Speaker 3: here and I love talking about the pension system. I
• 28:47
  Speaker 3: could talk about it all day. I think it's an
• 28:48
  Speaker 3: incredible benefit that our citizens have here in Wisconsin. And
• 28:54
  Speaker 3: like I said earlier, you know, the Wisconsin retirement system
• 28:57
  Speaker 3: it's widely regarded as one of the strongest public pension
• 29:00
  Speaker 3: and systems in the country. Okay, but what that can
• 29:05
  Speaker 3: do sometimes is create a situation where people think, well,
• 29:08
  Speaker 3: as long as I have a pension, I don't need
• 29:09
  Speaker 3: to do any other planning, I don't need to do
• 29:10
  Speaker 3: other savings. But you still, you still have a responsibility
• 29:15
  Speaker 3: to make sure that you're setting assets aside, that you're
• 29:19
  Speaker 3: you're aware of when you might be able to retire,
• 29:22
  Speaker 3: what age you You have to think about your pension options,
• 29:27
  Speaker 3: your survivor decisions. You still have to figure out when
• 29:29
  Speaker 3: to take Social Security, and you do need dollars outside
• 29:33
  Speaker 3: of your pension and social Security. Okay, So if we're
• 29:37
  Speaker 3: thinking about it this way, I'd suggest kind of three
• 29:40
  Speaker 3: three steps for every WRS participant listening. Okay. One, review
• 29:45
  Speaker 3: your ETF retirement estimates regularly. See you mentioned earlier. You
• 29:49
  Speaker 3: get a statement once a year from the Wisconsin Retirement System.
• 29:55
  Speaker 3: It is confusing because there's a lot of information out
• 29:57
  Speaker 3: there and it can be hard to understand what it
• 30:01
  Speaker 3: actually means. If you don't understand it, seek out an
• 30:04
  Speaker 3: advisor or get in touch with the Wisconsin Retirement System
• 30:09
  Speaker 3: to make sure that you understand fully the benefits available
• 30:13
  Speaker 3: to you. Number two, understand which WRS employee category you
• 30:18
  Speaker 3: belong to. Like we mentioned earlier, there are multiple different
• 30:22
  Speaker 3: categories with different retirement ages, different formulas to figure out
• 30:26
  Speaker 3: your benefit, so make sure you are aware of that.
• 30:30
  Speaker 3: Number three, develop an income plan that coordinates your pension,
• 30:33
  Speaker 3: your Social Security benefits, and your personal savings. Seek out
• 30:38
  Speaker 3: an advisor to help with this because this is what
• 30:40
  Speaker 3: we specialize in. Even though so, I think my final
• 30:44
  Speaker 3: piece of advice is even though you have a pension,
• 30:46
  Speaker 3: it does still it does not mean that you do
• 30:48
  Speaker 3: not need to plan outside of that. A little planning
• 30:51
  Speaker 3: today can really make a big difference throughout retirement.
• 30:54
  Speaker 1: Well put this morning as we talk with Eric Schwartz
• 30:56
  Speaker 1: and CJ. Closs, they are our retirement planning professionals from
• 30:59
  Speaker 1: Class Financial. Great day to make that appointment. You can
• 31:01
  Speaker 1: schedule it right online Coss Financial dot com. That's Coss
• 31:04
  Speaker 1: k l aas Financial dot com. That initial appointment, that
• 31:08
  Speaker 1: complementary conversation not going to cost you a thing. You
• 31:10
  Speaker 1: can schedule it online Class Financial dot com or give
• 31:13
  Speaker 1: them a call six oh eight four four two five
• 31:15
  Speaker 1: six three seven. You don't want to hold on to
• 31:17
  Speaker 1: that telephone number now because it's time for the class
• 31:19
  Speaker 1: quiz question of the week. It works like this. In
• 31:20
  Speaker 1: just a moment, I'll ask you the class quiz question
• 31:22
  Speaker 1: of the week. You will then have thirty minutes from
• 31:24
  Speaker 1: the today's program to call the Class Financial office right
• 31:26
  Speaker 1: here in Madison at six oh eight four four two
• 31:29
  Speaker 1: five six three seven. If you are the first caller
• 31:31
  Speaker 1: with the correct answer, you will win this week's prize,
• 31:33
  Speaker 1: which is a twenty five dollars gift card to Amazon.
• 31:37
  Speaker 1: This week's class quiz question of the week. Is this
• 31:39
  Speaker 1: true or false? All Wisconsin Retirement System WRS participants have
• 31:44
  Speaker 1: the same minimum retirement age. Is that true or is
• 31:48
  Speaker 1: that false? Telephon number six oh eight four four two
• 31:51
  Speaker 1: five six three seven. Don't forget that's also Coss Financials
• 31:54
  Speaker 1: Office right here in Madison, that number six oh eight
• 31:57
  Speaker 1: four four two five six three seven. See Eric. It's
• 32:00
  Speaker 1: great chatting with both of you, guys. Enjoy this great
• 32:02
  Speaker 1: day and we'll do it all again real soon. Thanks Sean,
• 32:06
  Speaker 1: Take care, guys. News comes your way next here on
• 32:08
  Speaker 1: thirteen ten, Wuiba, This is Money in Motion with Coss
• 32:13
  Speaker 1: Financial Asset Advisors. LLC a registered investment advisor registered with
• 32:18
  Speaker 1: the SEC. The contents of this show are for informational
• 32:21
  Speaker 1: purposes only and should not be considered individual investment advice.
• 32:25
  Speaker 1: Class Financial does not offer tax or legal advice. Any
• 32:28
  Speaker 1: opinion offered during the course of this show is the
• 32:31
  Speaker 1: opinion of that particular investment advisor representative, and not necessarily
• 32:36
  Speaker 1: the opinion of Cost Financial