Plan For Your Retirement and Save More


CarolinaFireJournal - Dale R. Folwell, CPA<
Dale R. Folwell, CPA<
10/16/2020 -

The road to retirement is long and the process of preparing for retirement is long-term, requiring an unwavering commitment. Saving for retirement can be challenging in any given year, but this year has delivered a mountain of uncertainty, inspired lessons in patience and driven us to refocus attention and prioritize efficiencies.

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By starting to save or contributing more, you are making an investment in you that will help provide your income in retirement and supplement any additional funding sources you may have.

The Department of State Treasurer (DST) is steadfast in working with staff and the Boards of Trustees to grow, invest and maintain solvency in the seven North Carolina pension funds. We have been transparent and committed to maintaining these benefits for current, past and future employees of the State of North Carolina, local governments, school systems, volunteer firefighters and EMS workers. In maintaining the conservative investment strategies of previous state treasurers and placing a focus on operational efficiency, we are prepared to exercise patience when needed.

Earlier this year, prior to the COVID-19 economic shutdown, the North Carolina pension systems posted record fund levels of $106.9 billion. As the pandemic grew and uncertainty rattled markets and communities, the fund assets dropped and were valued just above $98 billion. But because of our focus on long-term goals, maintaining our conservative strategies and exercising patience, we saw gains for the pension funds of 6.38 percent for the second quarter and exceeded the pre-pandemic record.

The North Carolina pension system is widely regarded as one of the best funded in the nation. In fact, Moody’s Investors Service recently reported that North Carolina’s Retirement Systems, which includes state and local employees, is the best funded in the nation when looking at its Adjusted Net Pension Liability.

Being “best funded” isn’t about reaching a milestone monetary amount, like $106 billion.  It is the ebb and flow of having members paying into the system, along with employer contributions and investment returns, and being able to sustain current and future benefits for vested members and retirees. For the first time in history, there are less people paying into the North Carolina Retirement Systems than those that are not. We also have to take into consideration that interest rates are near zero and people are living longer, healthier lives, extending their retirement years.

As a firefighter or EMS worker in the state of North Carolina, you may be contributing to the Firefighters’ and Rescue Squad Workers’ Pension Fund (FRSWPF) and/or be a member of the Local Governmental Employees’ Pension Fund (LGERS). As of December 31, 2019, the FRSWPF is 92.3 percent funded and LGERS is 89.4 percent funded. When we look at the 2019 end of year data for LGERS, we see that 132,058 current employees are paying into LGERS, while 154,590 are not current employees paying into the retirement system, but are receiving or entitled to receive a future benefit.

Retirement pension benefits are derived from more than what an individual member pays into the system. If you are a member of LGERS, you contribute six percent of your paycheck. On average, your employer contributes 12 percent and contributions are also made by the General Assembly and through investment returns. Combined, these make up your potential benefit payable in retirement.

The Department of State Treasurer also plays a part by making sure we are running the business of retirement benefits efficiently. This means that we are proactive and resourceful in the way we conduct day-to-day operations and invest funds. We have staff that continues to receive documents, process retirements and issue retiree payments on time. The efficiencies in the Retirement Systems Division consistently result in a lower cost-per-member than most other systems. And, because of the size of the NC pensions funds, we have been able to take action and negotiate lower fees and costs. To date, we have cut more than $350 million in Wall Street fees. All of that money goes back to the members of the retirement systems.

This is also true for the North Carolina Supplemental Retirement Plans, like the NC 401(k) and NC 457 Plans and the NC 403(b) Program. Every two years, the NC Supplemental Retirement Board of Trustees hires a firm to present a benchmarking report. This has consistently shown that the NC Supplemental Retirement Plans have low fees and are competitive when compared with other options.

Having a long-term plan and patiently staying the course through times of market volatility may prove challenging, but doing so will help you realize where you want to be in retirement.

This begins by taking three things into account: (1) your North Carolina pension benefit, (2) Social Security benefits and (3) other savings, like the NC 401(k), NC 457 and/or the NC 403(b) Program. These will ultimately contribute to the payment you receive in retirement. In thinking long-term, you need to ask yourself where you want to be and for how long. Are there choices you can make now that will help you budget efficiently to save even more for retirement?

By starting to save or contributing more, you are making an investment in you that will help provide your income in retirement and supplement any additional funding sources you may have.  The better you plan now, the easier it will be to do the things you want to do when you move into retirement.

As you get closer to that time, there are many questions and details that need to be considered.  Our dedicated team of retirement benefits counselors in the Retirement Systems Division is available to help you understand when you qualify for retirement, what your benefit payment may look like, provide guidance in the application process and answer your questions. We have a series of education webinars and conferences so you can better prepare for retirement. No matter where you are in your career, you can learn about your benefits at myNCRetirement.com. If you participate in the NC Supplemental Retirement Plans, we have cost comparison documents that will help you compare fees and costs with outside plans.  This is an important tool because you can not only leave your savings in the NC Supplemental Retirement Plans up to and through retirement, but you can also roll into the Plans. This gives you the opportunity to continue to receive the benefits of strong Board oversight and lower, competitive fees.

No retirement is the same.  Each person’s situation is different. However, there are things everyone can do to make sure they are more financially secure in a longer, healthier retirement. Educate yourself and make sure that you know your benefits and understand what makes your retirement. This will allow you to be patient in volatile times, maintain a long-term strategy, budget more efficiently and focus attention on the retirement you envision.

I encourage you to take the time to plan for your retirement and save more. Thank you for your service to the people and communities in North Carolina.

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