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US Treasury: stateActiveV1N2

US Treasury: stateActiveV1N2

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Published by: Treasury on Jan 23, 2008
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Retiring Times
  Volume 1 Number 2 State Employees Summer 2001
   T   h  e   N  e  w  s   l  e  t  t  e  r  o   f  t   h  e   V  e  r  m  o  n  t   S  t  a  t  e   E  m  p   l  o  y  e  e  s   ’   R  e  t   i  r  e  m  e  n  t   S  y  s  t  e  m 
Message from Vermont State Treasurer James DouglasMessage from Director of Retirement Cynthia L. Webster
We all hear about how little Americans save.Will you have enough for retirement? I know,you have your pension plan and social security, but will that be enough when the time comes?A three-legged stool is often used to describeretirement needs for most individuals. Thethree legs consist of: 1) a pension plan,2) social security and 3) personal sav-ings. No stool will stand alone on onlytwo of these three legs.I hope you have already invested in atax-advantaged savings plan. There aretraditional IRA’s and Roth IRA’s, and the Stateof Vermont offers a Deferred CompensationPlan that is available to all state employees.The plan administrator is Citistreet, and theyhave an office at 138 Main Street in Montpe-lier. Their phone number is (802) 229-2500 or toll-free at (800) 333-8701. If you have not yettaken advantage of this plan, I encourage you todo so. It is a wonderful way to save for retire-ment – with before-tax dollars.Do you think that you cannot afford to save? I bet you can. It can often be difficult to savesomething out of each paycheck, but even a lit-tle bit of money put aside in a deferred compsavings plan can grow to a tidy nest egg whencompounded over time. If you save just the minimum $20 every two weeksover a 30-year time horizon, you couldhave nearly $60,000 when you retire atthe end of those 30 years, if your in-vestments compound at only 8%. Be-sides, since your contributions are pre-tax, you will see your bi-weekly paycheck re-duced by only $16.25 because you save $3.75in taxes. If you are in a higher tax bracket, your tax savings are even greater.If you don’t have 30 years until retirement,your money will still compound and grow. Be-sides, now that you are a little older, perhapsyou can afford to save more than the minimum
(continued on page 2)
It was a relatively quiet year up at the StateHouse for active state employees. Neverthe-less, we were able to pass the following legisla-tive changes for active members:
full retirement credit for active mem- bers who go on an approved leave of absence to serve in the military if theyreturn to work within a specified periodof time.
up to three years of retirement creditfor active members who served in themilitary during the Korean or VietnamConflict periods even if they are eligi- ble to receive a military pension for 
military service. Non-regular military service is defined asguard or reserve duty. This provision brings Vermont into compliance withthe federal law.
If you have a mini-mum of 15 years of creditable servicein the retirement system, and served aminimum of one year of full-time ser-vice during the Korean or Vietnam
(continued on page 2)
2Director’s Message
(continued from page 1)
Conflict periods, but were pre-viously unable to receive agrant of credit because youwere receiving or eligible toreceive a military pension for guard or reserve service, youshould contact the RetirementDivision to apply for the grantat this time.In addition, new legislation that affectsretired state employees was also en-acted:
a retroactive adjustment to aretiree’s pension if he servedin the military during the con-flicts in Korea or Vietnam.This pension adjustment onlyapplies if the individual wasnot eligible for a VermontState Employees’ Retirementgrant for this military service prior to his retirement becausehe was eligible to receive amilitary pension for 
regular military service. Non-regular military service is de-fined as guard or reserve duty.
a one-time stipend of $500 for each year served, up to a maxi-mum of 3 years, to state em- ployees who retired prior toJuly 1, 1999, and who servedin WWII, the Korean Conflictor the Vietnam Conflict, inrecognition of their service toour country.
Retirement Board of TrusteesChair: Roger DumasMembers:
Sean Campbell
 James Douglas
Patricia McDonald Jane Osgatharp
 Warren Whitney Catherine Simpson,
Director of RetirementSystems:Cynthia Webster133 State StreetMontpelier Vermont 05633-6901828-2305 or 1-80-642-3191 (In-State)
Retiring Times
is pub-lished quarterly by the Vermont State Employ-ees’ Retirement System.Editor: Joseph Bahr
Treasurer’s Message (continued from page 1)
out of each paycheck. Even after 10 years, the$20 minimum will have grown to over $7500,if compounded at 8%, which is three times whatyou contributed. At present, the maximum youcan contribute each year is 25% of your salary or $8500, whichever is less.The Deferred Comp Plan has 18 different mutualfund investment options. Most of these are do-mestic stock funds, but there are internationalstock funds, bond funds and blended funds aswell. If you feel insecure about investing, thefolks at Citistreet will be glad to assist you. In ad-dition, they offer three pre-assembled portfoliosthat have an asset mix all set for you. All youneed to do is determine how many years you haveuntil retirement and how much risk you are willingto assume. More risk usually means higher ratesof return, but you have to be able to sleep at nighttoo.Another tax-advantaged savings plan available inVermont is the Vermont Higher Education Invest-ment Plan offered through the Vermont StudentAssistance Corporation (VSAC). This plan helps parents save the money necessary to provide a col-lege education for their children. The contribu-tions are after-tax, but when withdrawals are madefor qualified higher education expenses, the in-come is exempt from Vermont State Income Taxand is scheduled to be exempt from Federal In-come Tax next January 1.I urge all of you to consider the Deferred Compen-sation Plan. I have been contributing to it for years, and it has been terrific to watch my assetsgrow. Now is the time to start saving; a little bitcan go a very long way when it has a long time togrow before you retire.
Cynthia L. Webster 
Here are a few tips to consider if you will be con-sidering retirement in the next ten years.First, attend a Retirement Issues workshop. Of-fered four times a year and listed in the CyprianLearning center catalog, the workshop is for any-one who is thinking about retiring in the next fiveto ten years. The workshop helps you plan for thetransition from employment to retirement. Theworkshop presents many ideas and suggestions tomake the transition as smooth as possible and willdefinitely help you to avoid the common mistakesthat could hamper your retirement dreams.Second, when you are within a year of retiring,call the Retirement Office for an estimate of your  benefits. The Office will need a tentative retire-ment date and your beneficiary’s name and date of  birth to give you an estimate of your benefits.Third, make an appointment to see a retirementcounselor at the Retirement Office. This meetingshould occur at least two to three months beforeyour actual retirement date. Bring your spouse or other significant person to the meeting with the
(continued on page 4)
Planning Your Retirement
Your Deferred Compensation plan just got better.Congress approved the following changes as partof the Economic Growth and Tax Relief Act of 2001. The effective date of these changes is Janu-ary 1, 2002, although many will gradually be phased in over five years.In the next five years, the limiton annual contributions to a De-ferred Compensation plan willgradually increase from $8,500to $15,000. However, in thethree years before retirement,you will be able to contributeup to $30,000 a year. This fea-ture may be particularly usefulto two-income families – onespouse’s income could go to-ward retirement via DeferredCompensation while the other spouse’s income could pay for current living expenses.There had been a cap on contributions that wasequal to one-third of your income. That cap has been eliminated – you may now contribute up to100% of your income (with a maximum of $15,000 a year by 2006) to a deferred compensa-tion plan. Again, this provision may be most use-ful to two-income families that could divert oneincome to Deferred Compensation and meet cur-rent living expenses with the other income.A “catch-up” provision already allows people whoare older than 50 to exceed their normal contribu-tion limit. The idea is to give people who haven’tsaved enough a chance to put asideextra money in the years leadingup to retirement. The limits on the“catch-up” provision will graduallyrise from $1,000 per year to $5,000 per year. However, you cannotuse both the “catch-up” provisionand the $30,000 contribution pro-vision that is available during thelast three years before retirement – for any single year, you can useone of these two ways to increaseyour maximum contribution butnot both.The last change eliminates the re-quirement to select a payout option upon retire-ment. Currently, this payout option is irrevoca- ble – once made, it cannot be changed. Under thenew law, the irrevocable decision is eliminatedand more payment choices will be available.Citistreet, the contractor for the Deferred Compen-sation plan, will fully explain all of these changesin the newsletter that comes with your quarterlyaccount statement in mid-October.
Improvements in Deferred Compensation

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