Planning Financially for Retirement

Continue AEA membership after retiring

Become a retired AEA member to avoid loss of member benefits. Become a NEA-Retired Lifetime Member to save money and receive a special planning for retirement package entitled "Planning for the Best Years of Your Life".

Getting a jump start on retirement with
AEA Valuebuilder or RSA-1 accounts

Everyone has experienced the effects of procrastination at some time or another in their lives. But did you know how costly procrastination could be when it comes to saving for your retirement?

The best way to illustrate the power of getting an early start on saving for retirement is simply to compare the numbers. Let's look at two hypothetical AEA members. The first member, Mary, starts investing $100 per month in her AEA Valuebuilders retirement account at age 25. After just 10 years she will have invested $12,000 into her account. Assuming an interest rate of 8.5% compounded monthly, even if she stops investing and just allows her account to compound, she'll have saved over $215,000 by age 65.

Our second member, John, postpones starting his retirement investment program until age 35. He contributes $100 per month, a practice he continues until he retires at age 65. Over the 30 years he will have invested $36,000, yet assuming the same 8.5% interest rate, his accumulated savings will be under $156,000. The sobering reality is that he will have invested $24,000 more than Mary, but his nest egg will be almost $60,000 less.*

Just imagine the difference if Mary had continued to contribute to her retirement account throughout her entire career. The message is clear-the earlier you start investing, the greater your chances are to achieve the financial freedom you desire for your retirement years.

If you're interested in learning more about the advantages of starting your retirement investment program early, contact your AEA Valuebuilder Financial Counselor. He or she will be happy to help you sidestep the pitfalls of procrastination.

To speak with an NEA Valuebuilder Financial Counselor, call toll-free, 1-800-NEA-VALU, or visit NEA Member Benefits online at www.neamb.com.

*This illustration does not take into account the effect of any state or federal taxes. The performance of the assumed interest rate selected in the illustration is hypothetical and in no way relates to the actual or expected performance of any investment. The results of an investment in your NEA Valuebuilder Account may differ substantially.

Information about RSA-1 Deferred Compensation Plan

The RSA-1 is a deferred compensation plan that allows you to contribute pre-tax dollars to be returned to you after retirement when your tax bracket should be lower. For more information about this plan available through the Retirement Systems of Alabama go to www.rsa.state.al.us/RSA-1/rsa-1.htm.

DROP benefits can be a part of your
finanacial plans for retirement

     The Deferred Retirement Option Plan (DROP) became effective June 1, 2002. The Teachers' Retirement System provides an extensive description of the program. To get an approximate idea of retirement income under DROP and under the regular retirement scenario, use theRetirement Systems of Alabama calculator.

           Public education and state employees considering retirement have a financial incentive to stay on the job. DROP allows teachers to continue to contract to teach for not fewer than three nor more than five years after they have retired. During that period of time their retirement income is placed in an escrow account while they receive their teaching salary. The contributions to the retirement system from their teaching salaries are also added to the escrow account.

     The teacher retains (and accrues) sick leave during this contract period. At the end of the contract period the teacher's retirement benefit is recalculated to include any sick leave remaining from that which had been earned upon retirement (at the beginning of the contract). The sick leave days accrued after retirement may be used for sick leave, but may not be used to increase the retirement benefit.

     At the end of the contract, the teacher will receive the amount of retirement funds in the escrow account. These funds should be rolled into a retirement account such as AEA ValueBuilder or RSA-1 to defer taxes.