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US Treasury: muniRetireV7N2

US Treasury: muniRetireV7N2

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Published by: Treasury on Jan 23, 2008
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In This Issue: 
Published by the Vermont Municipal Employees’ Retirement System, Ofce of the State Treasurer 
December 2007
 Volume 7, Issue 2
 Vermont Municipal Employees’ Retirement System
Good Planning Helps Focus Your Retirement PictureDesignating a Beneciary for Your Retirement AccountMake an Investment in Financial EducationCost of Living Adjustment Coming in Januar
 There’s Life After Work 
Will your finances be in place for your retirement years? 
 Above, visitors at Sandbar State Park enjoy a free concert. Vermont-ers, and most Americans, are living longer and have high hopes for how they will spend their retirement years. However, plans to enjoy 
“life after work” may become uncertain without a rm plan on how tomake your retirement investments last. The State Treasurer’s Ofce
recently sponsored several “Save for Retirement Week” activities tourge people to learn more about building retirement resources. Closeto 200 people visited retirement information booths at events held inMontpelier and Waterbury. Many of the free resources distributed by 
the Treasurer’s Ofce are available at www.MoneyEd.Vermont.gov.
Stop worrying and start guring.
51 percent of people who examined
their nancial futures ended up changingtheir retirement plans.
-- 2006 Employee Benet Research Institute Survey
Plan Now, Play Later 
(continued pg. 5)
Preparing for retirement
isn’t one-size-ts-allplanning. Financial experts estimate the averageAmerican will need at least 70 percent of today’sincome in retirement to maintain their current stand
ard of living. That raises a lot of personal questionsregarding exactly what the perfect retirement picturewill look like. And the answers are as diverse as thepeople asking the questions.One way to answer these questions is to look atyour current lifestyle and the amount of income it re
quires. Consider how many of your existing expensesyou’ll still have to pay in retirement. How many newexpenses might you have—particularly ones associat
ed with your medical care? National human resourcespecialists estimate that, on average, 20 percent of aretiree’s income is spent on health care. If you plan totravel, how many trips would you ideally like to takeeach year? If you envision spending quality time withyour grandchildren that may include entertainmentand gifts, what might that cost?Whether you’re already retired or planning forfuture retirement, knowing where you are currentlyspending your money is a good idea. You cannot ac
curately determine the nancial resources you’ll needin the future without knowing what things cost today.
Photo by Dennis Curran
CHAIR:Steve Jeffrey, Employee RepresentativeVICE CHAIR:David Lewis, Employer RepresentativeMEMBERS:
 Jeb Spaulding, Ex Ofcio Member, Vermont State Treasurer
Stephen Rauh, Governor’s Delegate
W. John “Jack” Mitchell, Employee RepresentativeDirector of Retirement Policy and Outreach,Executive Secretary of the Board: Cynthia WebsterDirector of Retirement Operations: Michael Clasen
109 State Street, 4th FloorMontpelier, Vermont 05609-6901(802) 828-2305 or (800) 642-3191 (in-state)
Retiring Times
is published twice yearly by the Vermont Municipal
Employees’ Retirement System.Editor: Lisa Helme
Retirement Board of Trustees
Make an Investment in Financial Education
by Jeb Spaulding, Vermont State Treasurer 
Increasingly Complex Financial Systems Require Greater Knowledge and Skill
Most of us make
“management” decisions each day re
garding our nances. As you prepare for work, you decide youcan afford to eat out that day and so you don’t pack a lunch.As you ll up your car with gas, you quickly decide whetherthe funds should come out of your checking account or thatyou’ll pay with a credit card. Throughout the day you evaluatecredit offers that come your way through the mail, you decidehow much you can spend supporting your child’s school fund-raising event, and you select the home heating oil providerthat is most affordable to your needs. Just how nancially wisethese decisions are is directly impacted by the level of knowl
edge and skills you habitually apply to managing your money.Are you nancially literate?There are national trends that suggest too many of us strug
gle with issues of personal nancial literacy. Consider that thenation’s personal savings rate is now at its lowest rate since theGreat Depression -- a negative one percent. Household debtas a percentage of income hovers at record levels. The ratio of household debt to personal income has risen from 60 percentof personal income to 100 percent. Too many Americans arespending more money than they bring home in income. Whenit comes to saving for retirement, most elderly Americanstoday are relying on Social Security as their major source of in
come. In this state, the average monthly benet for a Vermontworker is approximately $950.Being “nancially literate” means you have the knowledge,skills and habits to successfully manage your money. I believethat empowering every person in the State of Vermont with anunderstanding of how to plan his or her nancial future is oneof the best investments we can make. My ofce recently joined35 other State Treasurer’s Ofces in the country in making acommitment to nancial literacy. As individuals increase theirunderstanding of and practice of sound money managementskills, the nancial well-being of both the individual and thestate will improve.The return on an investment in nancial literacy can be verypositive. Studies show nancial education positively increasesknowledge and changes behavior. For example, studies showthat individuals who complete homeownership counseling pri
or to purchasing a home had loan delinquency rates 34 percentlower than those who did not get such training. Householdshaving nancial difculties because they have over-extendedthemselves experience fewer loan delinquencies and have bet
ter credit risk scores after participating in credit education andcounseling. Employees who attend training workshops aboutretirement savings options offered by their employers oftenincreased their participation in the companies’ 401(k) plans.In advocating for nancial lit
eracy, the Treasurer’s Ofce joinsa network of committed Ver
monters already working withinnon-prot, community, govern
mental and nancial institutionsstatewide. My ofce recentlyplaced online a new databasecalled the Vermont Financial Ed
ucation Resource Clearinghouse.The clearinghouse features fortyunique listings of Vermont- based organizations that offerfree or low-cost instruction andresources. Services are accessible by county to allow people toidentify resources in their localarea. The clearinghouse may beaccessed by going to www.MoneyEd.Vermont.gov, where youwill nd a new nancial literacy section on the State Treasurer’sweb site. There also is information there for teachers and com
munity educators on teaching nancial concepts; resources forsaving for retirement; information on budgeting and managingcredit; and a page for parents and kids.Being “nancially literate” has never been more important.As our nancial markets become increasingly complex andconsumer choices grow, we can quickly nd ourselves off-tracknancially as we make money management decisions not inour best interest. It’s time to make an investment in nancialeducation. I hope you’ll take the time to assess your personalskills and knowledge and then take advantage of the resourcesavailable to you. It’s one investment in time that’s guaranteed to bring you a positive return.
The return on an investment in nancialliteracy can be very positive. Studies shownancial education positively increasesknowledge and changes behavior.
 A word on taxes, COLAs & address changes
 Address Changes in Writing, Please!
This is the time of year that we like to remind our “snow birds”that all address changes need to be received in writing. You needto send us a writtenaddress change whenyou leave Vermont andagain when you returnin the spring or sum
mer. Written addresschanges received by the15th of the month will be processed for thatmonth.
 Tax Withholdings on Retirement
The Vermont Retirement Divisionis now testing the State’s new Ver
mont Pension Administration System(VPAS). The new software system willreplace the current pension data man
agement system that’s been in place formore than 25 years. VPAS features a fully integrated browser- based pension system. The new system will allow membersaccess to their information via the web. It’s estimated that web- based access will be available early in 2009.Work now underway includes a “cleaning” of the data to en
sure accuracy and the performance of the new system. The rstphase of a two-phased approach to install the pension softwareis expected to “go live” this February. Phase one, the activemembers phase, involves the activities dealing with a memberprior to retirement and includes employer reporting, annualstatements, estimates and retirement planning, and purchasesof service credit. The second phase, the retired member phase,deals with the activities of members once retired and includespension payments, tax withholdings, and insurance deductions.The benet phase is expected to “go live” in January 2009.Retirement division staff began training on the system inNovember. Next, staff will operationally test VPAS using awide-range of user scenarios. Training for payroll ofcers forthe Municipal and Teachers’ systems will begin in Februaryand March of 2008.“During this peak implementation period, retirement divisionstaff will work to balance member requests for informationwith the VPAS phase-in,” said Marge Sweeney, RetirementProject Manager. “Staff will prioritize requests for information based on the time urgency of the need, such as members clos
est to ling for retirement. Division staff will do their best torespond in a timely fashion.”
“During this peak implementation period, retirementdivision staff will work to balance member requestsfor information with the VPAS phase-in.”
-- Marge Sweeney, Retirement Project Manager
Cost of Living Adjustment Effective January 2008
Retirees from Group A, B, C and D will receive a COLA (Cost-of-Living Adjustment) in January of 1.35%. To receive the COLA, youmust have received at least 12 pen
sion checks. If you have not yet re
ceived your rst 12 pension checks,you will not receive a COLA until January of 2009. Retirees who re
tired under an early retirement arenot eligible for a COLA until the January following attainment of normal retirement age.Most of your retirement income from the Vermont RetirementSystems (VRS) is taxable, but an exclusion ratio will be appliedso that a specied amount will be excluded from tax if you madecontributions prior to July 1, 1998 on an after-tax basis. This exclu
sion ratio is based on the total after-tax contributions that youmade during employment, or from a pre-tax purchase of servicecredit prior to retirement. When you retired, you were providedwith specic information regard
ing the taxability of your benet.In most cases, once you havereceived the total amount of thecontributions you paid into VRSwhile you were working, yourretirement benet will become alltaxable. While you were working,you received a W-2 form fromyour employer reporting yoursalary earned for that year. As aretired member, you will receivea 1099-R tax form from VRS to be used in preparing your income tax return. VRS will mail your1099-R form by the end of January of each year. Whether youshould have taxes withheld depends upon your personal nancialsituation. Some retirees do not have monthly deductions takenfrom their monthly retirement income because they make quar
terly estimated tax payments directly to the IRS. You have theoption of having federal and Vermont state income taxes withheldfrom your monthly benet payment. To estimate your federalincome tax withholding, please refer to the “MONTHLY PAY
ROLL PERIOD” tables in the IRS Federal Tax Guide. At the timeof your retirement, VRS had you complete a “Form W-4P” (With
holding Certicate for Pension or Annuity Payments). You maychange your tax withholding election at any time, and as often asyou wish; simply complete a new “Form W-4P”. Changes in taxwithholding must be received in the VRS ofce by the 15th of themonth to be effective for the next month’s benet payment. If youare satised with your current withholding, no action is required.To change your withholding, complete a Withholding for Pen
sion Payments form (IRS W-4P). You must indicate the numberof withholding allowances and your marital status on the form.Under current law, you cannot designate a specic dollar amountto be withheld. However, you can designate additional amountsto be withheld. Please note that questions about the amount of taxes to withhold or the need for tax deduction should be directedto a professional tax consultant.
Plans Call for Launch of Active Member Phase in Feb.

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