Hi, my name is Phil Ratcliff and I wanted to make this short video so that you would have something a little bit more personalized to talk about ARP.
I’ve been working in this marketplace for about a decade helping people with their ARP, university benefits, et cetera. I know there’s not a lot of information out there. Employers are doing a little bit better job of making PDFs and sometimes running some seminars but most people just don’t have the time to schedule and go to those. Let’s be honest, most people aren’t going to read the big 20 page books even though it’s probably very important for a lot of people to do that.
First of all, the alternative retirement program is a program that was legislated back in 1998, really went into effect in 1999. What it says is that university employees, staff and faculty, have the option to opt out of the Ohio Public Employees Retirement System or State Teachers Retirement System. Of course, you have that in lieu of Social Security. You really already have a privatized Social Security right now that you can elect. However, you only have 120 days to do so.
So many people get caught up in their orientation and to learning their new jobs and to moving the family or whatever the case is when they get one of these transitions into these types of positions that you can very easily go past 120 days. This isn’t an oops, I forget let me put in my form now. This is a state law. You missed that 120-day election it is an irrevocable one-time election unless you leave service for more than a year and then come back or you have a substantial change in job like if you went from being a staff to a faculty you have the opportunity to re-elect in those circumstances.
It’s very important and one of the things that you have to consider is how long am I going to be here. A lot of people say, “well I want to do the rest of my career.” I can’t tell you how many people, I’d say over 80% of people tell me that but only about 50% of people do. We really look at vesting, so how much of the employer contribution are you going to get to keep if you leave prematurely.
With the pensions, it’s a little bit more harsh. You get more security. There are health insurance options, there are more income based options kind of like Social Security, which you think of getting an actual pension check with the pension. There also can be more security for people, especially in the younger generation that on average are going to have eight different employers before they retire and so that’s very important. Different universities have a little bit different rules. I’m not going to go into specifics here just because I don’t want to be wrong in your individual circumstance.
The next thing is really understanding the difference of what you’re electing. When you go into OPERS or STRS, you’re talking about a defined benefit plan; you’re talking about an income. In the future they’re going to pay you a stream of income and that is very useful and beneficial and you really got to look at where your other streams are going to come from.
When you elect something like ARP, what you have is an asset. This can be super beneficial. You actually have this, like if you die after you start collecting your benefits from the pension or from Social Security, most of the time they’re going to go away. That’s it, they’re gone. If you live a really long time, you get to collect a lot. Whereas with an account, you can spend the money however you want to. If you get diagnosed with something terminal six years after you start taking your retirement then you can make a big bucket list and go spend it or give it to your kids or your church or some other charity. There is a fundamental difference between having an asset and having an income. This is another important thing to understand.
Usually when I help people between this we will look at what if I did 10 or 15 years under this scenario, what if I did the same thing under this scenario. We really run an opportunity costs so that you make an informed decision. Most people don’t do that and ti can really cost, it can really cost someone. What it really boils down to in terms of us having gone over this because I think those really are the two most important things.
Now there are other considerations like health insurance and security for spouses and family conditions, et cetera and I would really have to address those with an individual specifically. The two ones that I mentioned are very important and pretty much apply to everyone in terms of 90% of the reason why you would make a decision.
I hope this helps. I do extend to you if you would like me to help you to compare your options or what so, please give us a call, shoot us an email. There’s a link on the website that just says schedule an appointment. You can even just schedule a web conference to where we do a short 30-minute thing where I can go through and answer some questions for you so that we will be able to help.
Again, I appreciate your time and I do hope that this video helps you. Number one thing, please take the time to investigate your options and choose what will work best for you.