In a 403b, the employee elects a payroll deduction amount to deposit funds directly every 2 weeks into an investment account with the potential to grow in the stock market.
The Roth IRA benefits those who wish to make an after-tax contribution towards their retirement. When you retire and make withdrawals, the interest is not taxable if your Roth IRA account was held for 5+ years and age 59 1/2.
DROP (Deferred Retirement Option Program)
DROP is available for those who have worked in the Florida Retirement System for 30 years or have become age 57. The DROP program is a 60 month delay in your official retirement termination. During this time, you will elect from Options I, II, III or IV associated with your FRS pension choice. This monthly amount will be systematically deposited into your DROP account and credited 1.7%.
You can determine the best time to retire during that 5 year period. You will receive both your pension and your DROP balance upon retiring.
Careful not take the DROP benefit in a lump sum as you will incur a 20% manditory tax which negatively affects your retirement outlook. Consider consolidating your funds into an IRA where you have full control of your funds.
This is account holds accumulated sick leave hours and unused vacation days times calculated from your hourly pay. It only yields 1.2%. This lump sum is available to you 45 days after your retirement date.
Consider consolidating your Bencor account into your personal IRA account. This allows you to control your growth and withdrawals.
FRS–Pension & Investment Plan Options
TThe FRS Pension Plan is a defined benefit plan which promises a monthly benefit at retirement, if you meet certain criteria. The amount of your future benefit is determined by a formula, based on your earnings, length of service and membership class. It is adjusted by a 3% cost-of-living each July (adjustments only applicable for FRS service earned prior to July 1, 2011). Your benefit is prefunded by contributions paid by your employer. The Florida Retirement System must ensure that sufficient funds are available when your benefits are due and bears the market risk and investment decisions.
Who’s Eligible for the FRS Pension Plan?
All FRS employees are eligible for the Pension Plan except: Mandatory State University System Optional Retirement Program (SUSORP) members. (This is not an FRS plan.)
How Your Benefit Accumulates
In the Pension Plan, your benefits are generally back-loaded, which means that you accumulate benefits slowly at first and then at a faster rate the longer you stay. This is different from the Investment Plan, where benefits are earned more or less evenly over your career (subject to fluctuations in the financial markets and your investment strategy). So, if you stay with FRS employers for most of your career or for the final years of your career, you’re more likely to receive a greater benefit under the Pension Plan.
When You Own Your Benefit
You will be eligible for a Pension Plan benefit (be vested) when you complete six years of service (if you enrolled in the FRS prior to July 1, 2011) or eight years of service (if you enrolled in the FRS on or after July 1, 2011). If you use your 2nd Choice option to transfer from the FRS Investment Plan to the FRS Pension Plan, you will be able to count your Investment Plan service toward the vesting requirement.
Transfering from the Investment Plan to the Pension Plan, you will create a “buy in” to the Pension Plan by paying an amount from your Investment Plan account balance, plus any potential amount personally. If you have previous Pension Plan service prior to joining the Investment Plan, the buy in cost will be calculated as the present value of the “accrued” FRS Pension Plan benefit. If you do not have previous Pension Plan service, the buy in cost will be the actuarial accrued liability, or total cost, of the “accrued” Pension Plan benefit. The buy in cost could be a substantial amount and could make transferring to the Pension Plan unaffordable.
Retirement Income Options
Under the Pension Plan, you may choose to receive your benefit in retirement under one of four lifetime benefit options including a 3% annual benefit increase each July.
Option 1: Provides a monthly benefit for your lifetime, but does not provide a continuing benefit to a beneficiary.
Option 2: Provides a reduced monthly benefit for your lifetime, with a guarantee that your beneficiary will be eligible for a continuing receiving that benefit from the initial 10 years from the date you retire. After 10 years of retirement, no benefits are payable to your beneficiary, in the event of your death.
Option 3: Provides a reduced benefit to both you and your joint annuitant in the same amount for as long as you or they are living.
Option 4: Provides an adjusted monthly benefit for you and your joint annuitant and is reduced upon the death of either.