Outlook Newsletter Summer 02

6 Pages·2002·0.21 MB·English

by  Massachusetts Port Authority

Outlook
Vol.3, No. 1 Published by the
August, 2002 Massachusetts Port
Authority Employees’
Retirement System
(MPAERS)
FOCUSING ON RETIREMENT ISSUES FOR MASSPORT EMPLOYEES PAST AND PRESENT
Benefiting from Security:
Examining the Value of Your Massport Pension
W hen the stock now touting defined benefit Not Like It Used to Be the growing popularity of
market was plans as a key piece to the Gone are the days where every offering defined contribution
booming a few retirement puzzle, although worker in every household plans such as the 401(k), rather
years ago and people were scores of employers no longer earned a pension. Now, than defined benefit plans like
seeing record high returns on offer this type of plan. according to Wolff’s study, the one we have at Massport,
their investments, defined A study called “more than 40% of households has benefited mostly the upper-
contribution retirement “Retirement Insecurity: The headed by someone between the class in American society. Wolff
plans such as 401(k) plans– Income Shortfalls Awaiting ages of 47 and 64 will not be able concludes, “the contraction of
the private sector retirement the Soon-to-Retire” was to replace even half of their pre- traditional defined benefit
savings plan, conducted retirement income once they pension plans and their
and 457(b) Gone are the days recently by stop working. Nearly 20% will replacement by defined
plans which Edward N. have retirement income below contribution plans appears to
where every
are the public Wolff and the poverty line.” According to have helped rich, older
sector tax- worker in every released by the study, these numbers are Americans but hurt a large
deferred household earned the Economic even worse for African group of lower-income
compensation Policy Americans and Hispanics. Americans.”
a pension.
plans, have Institute. “Among these households, the
received high This study percentage that will have to live Unstable Ground
praise as compared with the discusses problems that many on less than half of their pre- As we see it, one drawback to
seemingly unchanging value Americans face due to the retirement income shot up defined contribution plans is
of defined benefit plans like short supply of traditional even higher, to 52.7% in 1998.” that they don’t offer a
the Massport pension plan. pension plans like Massport’s, The somewhat surprising
☞ Continued on page 5
While those plans still and the increased popularity results of this study imply that
represent an important part of defined contribution plans.
of a well-designed overall With defined contribution
ERI Update
retirement plan, experts are plans, responsibility for
taking another look at the investment decisions, as well
value of traditional pension as the risk involved, is Authority Votes on Early
plans which have the ability transferred to the hands of the
Retirement Incentive
to provide a steady stream of worker.
income in retirement, without Wolff’s study shows that
The Massport Board of Directors recently approved
being tied to fluctuations of “despite the recent
the stock market. Although unprecedented stock market an early retirement incentive (ERI) package for certain
they are becoming scarcer in boom and rapid proliferation employees who were affected by the implementation
today’s business world, of 401(k) retirement plans, of the Authority’s fiscal recovery plan following the
defined benefit plans offer typical Americans now facing
events of September 11th.
solid value and are looking retirement will have to tighten
more attractive in this their belts harder than ☞ Continued on page 5
turbulent economy. Many are previous retirees.”
For Your Benefit
Suffering in the Stock Market
T
he way the stock years until retirement, you
market has been may want to continue on your
performing lately, course despite the market
some of us might be afraid to downturn. If you are someone
open the statements for who does not like risk you
deferred compensation, IRA, may want to choose more stocks, international, fixed deferred compensation
or brokerage plans when conservative investments. A income, cash, etc.). The provider, ING, has begun to
they arrive professional method of thinking here is offer a financial advisory
If you have more
in the mail. advisor can that when one asset class is service, but as with any other
While it than ten years until help you to performing poorly, another financial planning service, we
is certainly determine could be doing well. You may recommend that you interview
retirement, you
disconcerting both your alleviate some of your losses at least 2 –3 service providers/
to see big may want to time this way. It is important to planners to find one that you
losses, keep continue on your horizon and have a balanced portfolio. trust and are comfortable with
a few things asset before acting on their advice.
in mind: course despite the allocation $ Get professional help! For more help in selecting a
market downturn. strategy. For many people, making qualified financial planner, you
$ Invest investment decisions is not an can refer to the previous issue of
for the long-term $ Diversify, diversify, easy task. That is why you Outlook which featured the
Your time horizon is an diversify should consult a certified article “Finding a Financial
important factor in how much Most people should have financial planner before doing Planner.” You can also contact
risk you can afford to take. money spread across different anything drastic with your the retirement office to obtain
If you have more than ten asset classes (i.e. domestic retirement savings. Our a copy of the article.
Blueprints for the Future: Grab a Book
from the Retirement Library
We have made several new Investment Guide You’ll Ever retirement (and are actually by Mary Farrell. We also
additions to our retirement Need” by Andrew Tobias. getting closer) we have many have several other books on
library and the shelves are If you are trying to get titles to choose from. A few investing including two
now filled with books on a out of debt, “The Complete good ones include: “From Work authored by Fidelity expert
variety of topics to Cheapskate” by Mary Hunt is to Retirement” by Marion E. Peter Lynch.
accommodate the diverse a popular choice. Other titles Haynes, “The Retirement The library also contains
needs of our members, both that you may find helpful at Catch-Up Guide” by Ellen books on estate planning
young and old. this point in your life include: Hoffman, “Retirement Places and tax issues including J.K.
For the beginner, we “Financial Peace” by Dave Rated” by David Savageau, and Lasser’s “New Tax Law
recommend the following Ramsey, “Your Money or Your “What Do You Want to Do Simplified” as well as
titles: “Get a Financial Life” by Life” by Joe Dominguez & When You Grow Up? Starting classics such as “Making the
Beth Kobliner, “Get in the Vicki Robin, and “Life or Debt: the Next Chapter of Your Life” Most of Your Money” by Jane
Game! The Girls’ Guide to A One-Week Plan for a by Dorothy Cantor. Bryant Quinn.
Money and Investing” by Lifetime of Financial Freedom” If you want to rethink Stop by our office at the
Vanessa Summers, “Let’s Talk by Stacy Johnson. your investment strategy, we Logan Office Center or call
Money” by Dee Lee & David For those of you who are have received wonderful Lisa at [phone] to
Caruso, or “The Only counting down the days to feedback on “Beyond Basics” request a book today!
2
The Miracle of Compound Interest
O
ne of the easiest
ways to watch If you save $5.00 a day . . .
your savings grow
is through the power of Based on Based on 5% daily
zero interest compounding
compound interest.
Compound interest uses the
After 1 year, you will have: $ 1,825 $ 1,871
amount of interest your
money has earned and adds
After 5 years, you will have: $ 9,125 $ 10,366
that to your total investment.
Barron’s Dictionary of Finance
After 10 years, you will have $18,250 $ 23,677
and Investment Terms defines
compound interest as
After 30 years, you will have: $54,750 $127,077
“interest earned on principal
plus interest that was earned
earlier.” This process of adapted from FDIC Money Smart, FDIC Financial Education Curriculum
compounding can take place
daily, monthly or annually
depending on the type of Downside of important to pay attention to planning for retirement
account you have. The Compounding the interest rates you are (or achieving any long-term
greater the interest rate and People who have a great deal being charged and savings goal). Of course, the
more often your money is of credit card debt witness concentrate on paying down younger you are, the more
compounded the faster your the negative effects of the high interest debt first. advantages you have for long-
compounding, as they watch term investing. However, it is
savings will grow!
their debt expand quickly Save, Save, Save NEVER too late to start
This table demonstrates
(with interest rates Without a doubt, compound saving and begin reaping the
how compound interest can
sometimes soaring higher interest can be the most benefits of compound
boost your savings, especially
than 20%). This is why it is valuable tool you have in interest!
over the long term.
The Rule of 72 - How to
Double Your Money
Collecting From Social Security or Deferred Comp
If you want to figure out how
long it will take to double May Inhibit Life Insurance Coverage For Some
your money by investing
with compound interest, you
T
he plan description pension or when you begin to start collecting in the near
can use something known as
for the $50,000 life collecting social security future while still employed at
“The Rule of 72”. All you do
insurance policy that benefits or disbursements Massport, you need to be
is divide 72 by the interest
Massport provides to its from the deferred aware that you will not be
rate you are receiving and it
employees states in its plan compensation (457) plan – covered by this $50,000 life
will tell you how long it will
description that employees even if you are still working at insurance policy. What you
take to double your initial
who retire are no longer Massport and have not begun can do, however, is convert to
investment. For example, if
covered by the policy. The collecting your pension. an individual policy. Please
you are earning 5 percent
document defines retirement What this means is that if contact human resources’
interest, your money will
as the point when you start you are currently collecting benefits office at (617) 568-
double in 14 years and 4
collecting a Massport social security benefits or plan 3906 for more information!
months (72 divided by 5).
3
Web Watch
For those of you who have access to the Internet, there is a wealth of information to be found there. In this section
we will highlight web sites that we have found helpful, informative, interesting or just plain fun.
Invest Some Time Here Girl $tuff milk or creating orange play
A great web site for those In iVillage’s financial section dough (which happens to
who want to learn more there is an abundance of have antibacterial
about investing is the practical advice for women properties). Here you can
educational site Investopedia dealing with all types of also learn how to create a
(www.investopedia.com). money issues. Log on to bridal memory book, paint
Services include a useful www.ivillage.com/money to view a beautiful wall mural in
dictionary identifying more articles like “8 (Cheap!) Ways your home or make appetizer
than a thousand investment dishes from seashells . . . to
terms and acronyms, a name just a few of the many
frequently asked questions detailed projects. Transitions
area, and a tutorial section for
beginner to advanced levels. Go Digital
The site also features If personally handcrafting ★ Congratulations
biographies of great investors delicate invitations is not
The following people
and timely articles and your cup of tea, maybe you
retired recently and we
analysis like “Why You should try the other end of
wish them all the best
Should Care How Your the spectrum. For friends
for a successful future:
Financial Advisor Makes $” and family who are tech-
and “Cooking the Books 101.” savvy (or at least know how
May
to Beat the Summer Heat” or to check their e-mail), skip
★ Margaret McDonough
“Garage Sale 101.” It also the paper and send out
touches on more serious invitations through Evite
June
topics with offerings such as a (www.evite.com). With this
★ Martin Cayon
Debt Support Group and free service you may choose
★ Pasquale Giovino
articles like “Cutting from a variety of templates
★ Donna Hickey-
Retirement Costs” and “115 serving every occasion from
Goldberg
Money Tips for Surviving barbecues, bowling and
★ Jeffrey Maynard
Divorce.” bachelor parties to a girls’
★ Carol Saffran
night out or weekend
Move Over Martha getaway for two. Plan
For those of you who are do- something just for the fun
it-yourselfers, check out the of it! ❦ Condolences
Do-It-Yourself Network’s web
We regret to inform you
site at www.diynet.com. The
that the following retiree
list of projects serves all types.
has passed away:
It has instructions on how to
change your engine coolant or ❦ John Driscoll
air filter or install a subwoofer
in your car. Projects to
We also extend our
entertain the kiddies include
condolences to family
making paint from powdered
and friends of Logan
Airport Facilities
employee Charles
“Chickie” Doherty who
* Legal note: The Retirement System is not responsible for the content of these webs sites or for the accuracy and
passed away recently.
completeness of any information contained in them.
4
Benefiting/Cont’d from page 1 you to monitor; no asset compensation plan is a great
allocation with which you way to do this. However, we
guaranteed benefit. The must be concerned; and no also hope that you fully
amount that you have in your need for you to worry that the understand the benefits to
account is the amount that money won’t be there ten which you are entitled and
you are left with for the rest of years down the road. Your especially realize the value of
your life. Many retirees relying Massport pension represents your Massport pension. A Don’t forget about
on defined contribution plan the part of your retirement vacation buybacks!
investments as their sole plan that is secure and stable
You are eligible to
source of retirement income (at a time in your life when If you are within three
have experienced drastic that could be of the utmost retire at age 55 if you years of retirement,
reductions in their savings, importance). The current have 10 years of every vacation
sometimes resulting in a economic climate is a
creditable service. If buyback that you do
change of lifestyle and possibly reminder to all of us just how
the need to return to work. important this guaranteed you have 20 years of will be incorporated
benefit can be. into your three-year
creditable service you
Sound Assessment
We do not wish to salary average. If you
Please understand that we are discourage anyone from may retire at any age.
are in your last year
not saying that our defined making the most of defined
benefit plan is perfect. The contribution plans that are and don’t need the
available to them. In fact, we traditional pension plan like time off, it’s almost a
wholeheartedly encourage you ours is becoming a rare breed, no-brainer, buy back
To view the retirement
to save for retirement in order but it is one with which we
that vacation time
percentage charts go to to supplement your pension – are quite proud to be
ASAP!
www.massport.com/ and the 457 deferred associated!
about/retir_public.html
or call [phone] ERI/Cont’d from page 1
to request a copy.
The vote, which was approved by the Board on June 20, 2002, grants benefit
enhancements as provided under the Massachusetts General Laws Chapter 219 of
the Acts of 2002 to retirement-eligible employees who were either laid off or
system has flaws and we are
well aware of the inequities volunteered to retire early under the Authority’s $15,000 cash incentive plan. Under
imposed on us by statute. the legislation which was originally introduced by Governor Jane Swift in
However, the bottom line is December of 2001, the ERI can be offered only to Group 1 employees (i.e. general
that if you retire from
employees including clerical, administrative and technical workers and laborers). To
Massport, you have the
be eligible for the enhancement, the employee must have a minimum of 10 years of
security of knowing that your
service with the Authority. Approximately 25 people will benefit from the Board’s
pension is not dependent on
decision.
stock market performance or
other kinds of fluctuations in Included in the vote as part of a “go forward” piece, the Massport Board
the economy. You will know preserved the right to offer an ERI to current retirement-eligible employees through
exactly how much you will be the end of the fiscal year (June 30,2003).
paid each month and you
Please note: This update is intended as an informational piece only. If you have
know that you will receive
further questions about the ERI we encourage you to contact us. Please understand
this payment for the rest of
that while we do not always have all the answers and cannot speculate on future
your life (and possibly for the
rest of your spouse’s life) along actions of the Authority, we will always make an effort to provide you with as much
with annual increases to information as possible.
account for cost-of-living.
There are no investments for
5
Legislative Update Calendar
AUGUST
15 Retirement Board Meeting: Logan Office Center,
Retirees Receive Annual
Board Room, 10 a.m.
Pay Increase
27 Retirement checks mailed
T
he retirement board base of $12,000 and
SEPTEMBER
has once again represents an increase of up
2 Labor Day: Massport offices closed
unanimously to $30 per month. Pursuant
approved a 3% pension to Massachusetts General 11 Day of Remembrance
increase adjustment for our Law Chapter 32, Section 103
19 Retirement Board Meeting: Logan Office Center,
retirees and survivors, which (c), retirement systems may
took effect July 1, 2002. In grant a pension increase Board Room, 10 a.m.
the past we have referred to adjustment consistent with
23 Autumn begins
this increase as a cost-of- the Consumer Price Index
living adjustment or COLA, (CPI) used by the Social 26 Retirement checks mailed
however, because we feel Security Commission. This
that term is no longer year’s CPI is 2.6%. However,
accurate, we now prefer to under Section 103 (i), the OCTOBER
call it a pension increase retirement board may choose
14 Columbus Day (Observed): Massport offices
adjustment. to increase this percentage
This pension increase up to a maximum of 3%. closed
adjustment is only payable to With the Authority’s
16 National Boss Day
individuals who retired prior support, the Massport
to July 1, 2001. Our recently Retirement Board has 27 Daylight Savings Time ends — Turn your clocks
retired members whose dates granted the maximum 3%
back one hour
of retirement fall on or after pension increase adjustment.
28 Retirement checks mailed
July 1, 2001 will receive a This means that Massport
pension increase adjustment retirees and survivors are 30 Retirement Board Meeting: Logan Office Center,
in July of next year. receiving the highest
Board Room, 10 a.m.
The pension increase increase allowable under
adjustment is computed on a the law. 31 Halloween — Trick or Treat!
*Meeting schedules are subject to change
Retirement Board & Staff
Outlook is published Managing Editor Retirement Board
quarterly by the Lisa Allen Brown James P. Costello, Chairman
Massachusetts Port [email protected] David W. Davis, Elected Member ([email protected])
Authority Employees’ Michael A. Grieco, Appointed Member
Retirement System
Contributors Leslie A. Kirwan, Treasurer-Custodian (ex officio)
(MPAERS)
Jim Costello Philip H. Mallett, Elected Member ([email protected])
Dick Heidlage
One Harborside Drive Retirement Office Staff
Bonnie Matthews
Suite 200S Irene E. Moran, Director of Retirement ([email protected])
Irene Moran
Boston, MA 02128 Nancy Bournival, Financial Analyst ([email protected])
[phone]
Lisa Allen Brown, Retirement Communication Specialist
Design
([email protected])
Colvin/Williams, Inc.
Laura E. Barbosa, Retirement Coordinator ([email protected])