I wish I had a dollar put in my personal retirement account for every time since January I have been asked this question. “What are they doing to my retirement system?” Though well-meaning in the intent of the question and the accompanying concern, I have been extremely troubled at the ensuing conversations. There are three things in particular I think we should review together.
What is Your Financial Plan for Retirement?
First and foremost, and the part that no one wants to hear but must, if it is “your” retirement, what are you doing for it? Public safety is a hard job. It is tough on you mentally and physically. Public servants are underappreciated. You deserve a functional, equitable and timely retirement. I am not going to debate the merits of a 25 year retirement plan versus any other duration, but simply will focus on that magical date that we all dream about as Day One of the rest of your life.
For every person reading this article in relation to retiring, the real issue HAS to be, how are you preparing today for Day One? Not lip service or dreams but, my friends, we are all in the business of pre-planning and we are very skilled at that process. Have you preplanned for Day One? What is your debt load going to be at Day One? (How much are you gonna have to pay the man?) Cars, houses, health insurance – these are prominent payments that you must plan for today and expect when Day One comes knocking.
Cars only last so long. Have you paid off the kids’ student loans? What are your monthly bills? Can you continue the lifestyle to which you have become accustomed? What’s your plan?
It’s methodical, it’s simple, and it’s an article for another day, but you can do it. You must simply be regimented enough to hold yourself and your family accountable to sitting down and writing it out. You have to take care of your retirement plan. Do not delegate that very important part of your life to someone at the State Capital. If you are leaving it up to someone else, then you must not think it is real important. Firefighters are smarter than that!
What Are You Doing at Retirement?
Your age and physical condition at Day One must be realized with some perspective. If you started as a rookie at age 21 and you work 25 years and decide to retire, you realize that most likely you will live longer under retirement than you worked. Let’s review to make this simple. I start at 21; I retire at 46; I live 34 years as a retiree. Simply, at 46, what are you going to do for 34 years? Well Joe, I am going fishing. I am going to travel. I am going to do whatever I want to (single person’s answer). Great. The average public safety officer, who retires from the S.C. PORS, retires at a salary of $38,000 per year and draws a retirement benefit of $18,000 per year. So all the above things you just listed for me you are going to do with $18,000 per year — after you have taken care of the stuff in item one above?
Nineteen percent of the people that retire from S.C. PORS do so under disability. So the odds say that 19 percent of the folks reading this article will retire with some limitation on your working ability. How does that affect your plan? Friends, it will take more than what the state can do for you for those 34 years — forget about any changes that may be happening in Columbia. (The numbers above were generated before any changes to the state system.)
Are you saving now for supplemental retirement with a 401K, etc.? Whatever, you better get engaged. Frustrated people that haven’t planned or those who have given their retirement responsibility to an elected official kick in by saying:“But Joe, they promised me a retirement check!” Yes they did. Under a defined benefit program such as the S.C. PORS, you were guaranteed (I use this term carefully) a benefit upon retirement and there it is, $18,000 on average. Maybe you might want to go and visit your retirement system and check up on your program if you are within five years of “Day One.” And just maybe, when safety and health conferences come around, you might want to attend to prevent yourself from being part of that 19 percent. (Boy, my seat just got warm.)
South Carolina Retirement Changes
To get the best picture of all the detailed changes, you need to visit the S.C. State Firefighters’ Association web site or the SC Legislature online site. What I offer here can only scratch the surface and will not do justice to the whole bill. Bottom line — if you are vested in the system, you are grandfathered to these changes. I have a tough time with many understanding this as fear factor takes over. If you are already retired and back to work; if you are already employed with more than five years; most of the big changes that you have heard about don’t apply to you. New employees will be required to work 27 years under the new PORS plan. A rule of 90 is used under the SCSRS program (your years of service and age must equal 90 for full benefit retirement). Annual final compensation computation will go from three to five years for new employees. Annual leave and sick leave cannot be used by new employees for calculations of retirement. Employee contribution rates will go up 1.5 percent over the next three years. Full vestment will go to eight years for new employees. Retire and rehire under both plans will change (known as TERI under the SCSRS). TERI will be phased out and closed to new employees. PORS retire and rehire has an earnings cap of $10,000 (When you make more than $10,000 with the government entity you returned to work with, your retirement annuity will end for that year).
We have to share in the goal that we want a viable retirement program for our future. We may differ in the strategy and we debate the methodology, but we must accept this change as needed — fault or blame aside.
Do not misinterpret this as a failure to fight for our benefits from established bodies. The past six months have been a series of structured compromises on the part of a great many persons smarter than I to get to a point of ensuring the future. We deserve a benefit, we have earned a benefit. But, I cannot lay the responsibility fully at someone else’s door when I am not ready for the issue myself. A structured benefit from your employer cannot fully support many of the retirement plans I see and hear from the firefighters which I visit. Either we must get real or get serious planning.
Did you realize that within two to three years of retiring from the SCSRS or PORS that you have drawn out all the funds you put in to the plan? Further, did you realize that in another four years all the funds your employer put in has been depleted? What you start living on for those last 27 years of retirement (assuming the scenario above) will be profits from the investment of those funds. And what happens when the investment market does not produce? Well here we are.
Some that take the time to read this article will not be in South Carolina or participate in the S.C. Retirement Systems. To you I offer that the premises have no border. You must, whether a volunteer or paid firefighter, take the time to look forward into your future and plan. A happy, successful and balanced retirement must be your responsibility. It isn’t hard and it isn’t rocket science — as is evidenced by my involvement — but you must get started today. Little steps will produce big results in the future of what “You” do to “Your” retirement.
Joe Palmer currently serves as the Executive Director of the SC State Firefighters’ Association in Columbia SC. Previously he served for 14 years as the Fire Chief for the City of Newberry, SC, where he still lives with his family. Joe is a Past President of the Firefighters’ Association.