Welcome to Part 4, our final article in our multi-part series designed specifically for members of the State Universities Retirement System Retirement Savings Plan (SURS RSP) who are approaching retirement and want clear guidance on their options. We will help you make sense of your choices and confidently decide what to do with your account balance as you transition to retirement.
Who is this guide for?
This guide is tailored for those in the SURS RSP, which is a defined contribution plan. In a defined contribution plan, the amount you and your employer contribute is fixed, but your retirement benefit depends on the investment performance of your account. You are responsible for making decisions about how your balance is managed and ultimately distributed.
Who is this guide NOT for?
This guide does not apply to those in the SURS Traditional and Portable Plans, which are defined benefit plans. In a defined benefit plan, your retirement benefit is determined by a formula based on your salary and years of service, and you receive a guaranteed monthly payment in retirement. SURS manages the investments, and the State of Illinois bears the risk.
Series Recap
In our first article, SURS Retirement Savings Plan Guide Part 1, we introduced the investment options in the RSP. To recap, RSP participants can elect one of the following options with their RSP balance when they retire:
The Secure Income Portfolio (SIP)
A traditional annuity
A lump-sum distribution of funds to invest in the market
In SURS Retirement Savings Plan Guide Part 2, we explored how the SIP compares to the other options in the RSP. We looked at the following comparisons:
The SIP vs. a traditional annuity
The SIP vs. a lump-sum distribution and investing it in the market
Finally, in SURS Retirement Savings Plan Guide Part 3, we evaluated the pros and cons of the distribution options, including how some of the more common variables may affect your decision. We provided guidance on evaluating factors like:
Need for Illinois-sponsored health insurance
Desire to leave an estate to your heirs
Guarantee of income in retirement
Our series will conclude with a retirement checklist for RSP participants. Even after deciding what to do with your RSP balance, there are still things you will need to accomplish to be prepared for retirement. This checklist will provide guidance around what paperwork you need to file, what accounts you need to set up, and who you need to talk to before your retirement date.
The SURS RSP is a complicated retirement plan which requires irrevocable decisions that many would find overwhelming. While we hope our series provides much needed education around the RSP, you still may have questions and a need for ongoing support as you enter retirement. For a comprehensive review of all your options and guidance tailored to your circumstances, we encourage you to schedule an individual consultation with us here.
Retirement Checklist
3-5+ Years Before Retirement
Update your Retirement Plan to ensure you are on track for a secure retirement.
Estimate annual living expenses – while spending may vary, many of our clients find their pre-retirement spending is roughly the same as post-retirement.
Estimate your various sources of retirement income, including your SURS Pension and reciprocal service credit in another qualified retirement system.
Confirm your current savings is sufficient to fund the difference between income and expenses.
Begin planning for or trying out new ways to stay engaged and find purpose after retirement. Loneliness and lack of direction can de-rail a retirement plan.
Consider your Investment Strategy.
Is it time to adjust your portfolio targets or tactics to protect against market adjustments that might derail your retirement?
Have you considered strategies to convert any non-SURS savings into a stream of income after retirement. For example, we find a bond ladder one strategy client’s may wish to consider.
Consider if long term care insurance would be appropriate and apply for coverage if interested. We find many clients have trouble obtaining coverage after age 65.
Review options to buyback service credit and whether that makes sense for retirement.
6-12 Months Before Retirement
Update your retirement plan (above) and ensure you are still on track.
Schedule an RSP counseling appointment with SURS.
Contact HR to see what they need from you.
Download your SURS retirement application.
Evaluate your insurance plan post-retirement.
Are you familiar with your State Employees Group Insurance Program?
Will you need or want to continue State of Illinois Life Insurance?
Decide what to do with your RSP balance.
Annuitize through Principal/TIAA?
Select the Secure Income Portfolio?
Distribute a lump-sum to another qualified plan?
Roll-in qualified outside funds (403bs, IRAs, etc)?
A combination of the above?
Evaluate your eligibility for Social Security and Medicare and make a plan for when to apply (see below).
3-6 Months Before Retirement
Submit your SURS retirement application. Due at least 60 days before your retirement date.
Request an updated retirement benefit illustration from SURS if there are significant changes to your RSP balance or payout rates.
Notify HR of your retirement date and complete any required paperwork.
TIP – If you are eligible for vacation or sick leave payout, consider whether to defer into your 403b or Deferred Compensation plan. If you are over age 59 ½, contributions will avoid Illinois tax and defer Federal tax until withdrawn.
Apply for Social Security if you plan to draw once you retire. You can apply up to 4 months in advance.
Apply for Medicare (if age applicable)
Initial enrollment is 3 months before your 65th birthday month and ends 3 months after your 65th birthday month.
If you never applied for Medicare because you are working, you have up to 8 months after you lose employer coverage.
Decide how to pay Medicare premiums (either through a deduction from your Social Security benefit or through a monthly/quarterly bill).
NOTE: Pay special attention to when you enroll in Part B as you may be subject to a permanent late-enrollment penalty if you miss your designated window.
0-3 Months Before Retirement
Ensure all paperwork is submitted to SURS.
(If you elect to be on TRAIL) After you receive your Medicare card, send a copy of it to CMS Medicare COB.
You’ll then receive a TRAIL Medicare Advantage Initial Enrollment Guide in the mail. The information will also be available online.
Select your TRAIL MAPD plan online or by calling the number provided.
Review your future health insurance plan and prepare for any changes to providers and services.
After Retirement
Confirm that you are receiving your retirement benefits.
It can take around 2-3 months after your retirement for SURS to fully process your benefits. If you elected to annuitize via a traditional annuity or the Secure Income Portfolio you may not immediately begin receiving benefits.
Social Security benefits usually start 1-2 months after you apply.
Continue to monitor your investments to ensure they line up with your long-term goals.
Establish new routines. You’ve gotten used to working 40 hours a week and now it’s time to invest in your existing hobbies or find new ones.
Review your tax plan. We find many retirees’ income go up over time in retirement with deferred pensions, social security, and Required Minimum Distributions (RMDs). Use this time to consider Roth conversions or ways to avoid Medicare premium hikes under the Income Related Monthly Adjustment Amount.
Review your estate plan. In our experience, estate plans are easily pushed to the side while working because that’s the last thing on your mind. Take the opportunity to make edits and review your estate plan with your family.
Set new financial goals. The biggest financial goal up to this point has been to retire. Now that you are retired, what is your next financial goal?
Conclusion
This concludes our series on retiring under the SURS RSP. The SURS Retirement Savings Plan (RSP) can be a complicated retirement system to understand since there are so many options that are offered to participants. If you or someone you know have questions about retiring under the SURS system, understanding the SURS RSP, or navigating retiree health insurance options, we are here to help. It would be our privilege to bring clarity and confidence to your decisions. Schedule a call with us today to get started!
Important Disclaimers
This content has not been reviewed by or endorsed by State Universities Retirement Systems - SURS. Bluestem Financial Advisors, LLC, is an independent advisory firm not affiliated with SURS.
Bluestem Financial Advisors operates on a fee-only retainer model. Our fees are calculated based on our clients’ net worth. This presents an inherent conflict of interest as Bluestem would receive the highest fee if our clients in the RSP elected to take a lump-sum distribution, as surrendering their balance for the SIP or a traditional annuity removes it from their net worth.