Retirement planning is stressful and confusing. Allow us to help you save your money so you know you’ll be secure in the future.
STRS Retirement Planning
Sign Up for Your Free Trial Today
We specialize in STRS retirement planning for the Staff and Faculty of Ohio’s Public Universities. In fact, over 30% of our clients are/were staff or faculty at OSU, OU, or UC. Therefore, we have an inherent understanding and experience with STRS because we have helped so many of our clients understand their pension benefits and retire with them over the years.
Below you will find introductory information that you should consider if you are looking to understand your STRS benefits better, planning for an upcoming retirement and/or looking to hire a financial planner to help you with your STRS retirement planning.
How STRS Works
STRS has three different options:
Most of our discussion is targeted towards the Traditional and the pension part of the Combined Plan. The pension or defined benefit plans are built on the premise of defining benefits in the future, thus, they promise some future payout which is usually defined by a formula. In the case of STRS the formula for Straight Life Annuity (SLA – or taking lifetime payments over your life only) is: 2.2% x # years contributed x Final Average Salary (FAS – highest 5yrs of service).
Recent Legislative Changes
In 2012, the Ohio Legislature passed pension reform bills to improve the financial condition of all five Ohio pension systems, including STRS Ohio. Sub. Senate Bill 342 contained benefit plan changes to help bring the system to a 30-year funding period. The multifaceted plan became effective in 2013 and will be fully phased-in by 2026.
See all recent changes here:
Differences You Face With STRS Retirement Planning
Retirement planning can be difficult regardless of your age, employment history, and preferences. However, when you throw in the added complexity of the many choices that STRS offers you, it can be difficult to know what to do. Unlike most people that will just file for their Social Security check when they retire, you will have to make many decisions such as survivor-ship benefits/percentages, beneficiaries, PLOP, healthcare choices. All of these must be weighed in collusion with your other accrued benefits, savings, retirement objectives, and estate plan.
Deciding When to Retire
Deciding when to retire is one of the most important decisions you will make and it involves balancing your non-financial desires with the financial consequences/opportunities of your various alternatives. This decision should not be taken lightly and generally should not be based on a trivial/subjective feeling of retiring at a certain age; even though you may very well be able to accomplish your goal, you just need to test it out to make sure it will work.
Your retirement date/age is one of the most important retirement planning variables that you can easily control that can make a significant difference in your retirement success so don’t throw it away by guessing or making decisions on sentimentality.
This is the culminating event of your many years of work and contribution into STRS and it should not be taken lightly. We have heard too many people say that “it is too late for them to plan because they are already at/nearing retirement.” This is totally erroneous because at this point is where good planning can make a huge difference to the rest of your life and it will have multiple irrevocable effects:
You may be in a position that is tenured and you will be giving up that security if you ever needed/wanted to re-enter the marketplace.
You must coordinate with other benefit programs such as Social Security whose optimization can be tricky and whose elections may also be irrevocable.
You can re-hire to STRS position but your contributions will go to a separate account or to ARP.
You cannot rejoin the system and build up more years.
You cannot elect PLOP later or return the payout for a higher monthly check.
You can’t change your mind and elect a different payout or survivor-ship option.
Generally, you should seek the advice of a financial advisor/planner to determine what your retirement age should/will be at least a year before your desired retirement. You should then engage an STRS counselor ~6 months before retirement to run estimates for you and to educate you further about the intricacies of your upcoming retirement – many of our clients schedule appointments with us immediately after this consultation to integrate this data and any potential changes into their financial plan.
*Please be aware that most financial advisor’s largest conflict of interest when giving advice on STRS is whether you take a Partial Lump-Sum Option Plan (PLOP). This may be a good opportunity for you but you must understand if/how your advisor is biased so that you can ensure that a PLOP is in your best interest. Read more on PLOP on STRS brocure page 18 *
Prep Your Financial Plan with STRS
Few people take this important step. Although STRS is one of your largest assets/incomes, it is still only a piece of your entire financial picture. You need to figure out how all of your pensions, Social Security, retirement/investment accounts, insurance programs, wills, power of attorneys, goals and objectives are going to work together towards an optimal end-state for you and your family.
Planning for Inflation
Inflation is arguably the largest threat to your retirement plan’s success. STRS is good pension and exquisite in protecting you from the financial risks of longevity. However, while it excels as an income source in periods of low inflation or deflation, STRS’ greatest weakness is against Inflation (rising prices). This Achilles heel has recently been exasperated (your inflation adjustment has been reduced) by the aforementioned legislative changes.
As a very important part of your retirement plan, you should be prepared for the potential of higher inflation and how the collusion of all of your retirement assets and income will protect you from this threat.
Optimizing Healthcare Options
Unfortunately, healthcare costs have increased significantly and show little sign of slowing. Retirees are having to come to terms with planning for higher percentages of their net-worth and retirement savings being diverted to pay for healthcare in the future. How you plan now, electing your health plan from STRS, private insurance, Medicare, what you self-insure, how you accumulate funds in HSAs, etc. – will determine how effective you will be in coping with these challenges and preserving your wealth and standard of living.
Maximizing Social Security
Even without STRS in the equation, there are 567 different strategies to claiming your Social Security benefits. Guess how many strategies most retirees consider and the impact that will have on their over-all retirement. Most retirees are leaving considerable amounts of money on the table and many STRS participants are not even sure how their service will affect their SS, not to mention how they might maximize it.
Prepping for WEP & GPO
The Windfall Elimination Provision (WEP) can reduce an individual’s SS payment based on income received from STRS (and other pensions). STRS participants should plan for and work to minimize the effect the WEP will have on their SS benefits (if applicable).
The government pension offset was designed to make sure that middle and upper income individuals and couples did not unfairly benefit from the progressive nature of Social Security’s design. Where this tends to have the most effect is that it can significantly reduce survivor benefits.
The main point is that these issues can have great impact and with good/early planning we can reduce and prepare for its effect on our STRS retirees.
Managing Investments and Creating Income From Them:
Whether you have a 403b, deferred compensation/457b, IRA, Roth IRA, after tax investments, annuities, life insurance with cash value, real estate, etc. these assets take a certain amount of TLC. You need to ensure that they grow effectively, that the right amount of capital is allocated to them based on the other areas of your financial plan, and recognize that they will require a different strategy as you begin to withdraw from them.
Investment management is something we excel in and we have a very thorough process in managing money for our clients, which can reduce costs significantly and provide a individual level of customization for our clients. We even provide our financial planning services to our full-service clients that keep more than $250,000 under our management at no additional cost.
Coordinating a Tax Strategy
Deferring income, withdrawal sourcing (from taxable vs. tax-free vs. after-tax investments), tax harvesting (taking capital gains/losses at good times), roth conversions among many other strategies may significantly impact your future income and legacy outcomes.
Together, with your tax professional, we can help you to integrate a tax strategy that will help you to maximize your assets for you and your family, not the government.