This letter was sent by Paul on September 20th. A very good question that deserves an answer.
Hi all…shouldn’t actuarial reductions make retirement benefits “fair”? They used to be fair under tier 1, in my opinion, at 3% per year prior to Full Retirement Age (FRA)
Don’t stop emailing, calling, writing, talking, etc.! We need reform
Here is my latest email to the LCPR and TRA Board
LCPR and TRA Board,
Would anyone be willing to explain to me how tier 2 calculates its reduction factors for an “early” retirement and what makes them fiduciarily responsible, at least for the retiring member?
The current life expectancy in Minnesota is 78.6 years (76 for men and 81 for women).
My understanding was that any reduction should make sure that by the average life expectancy a person on an early retirement would receive roughly the same funds as a person retiring at their FRA (66 for TRA Tier 2).
Am I correct that someone retiring at 55 should withdraw roughly the same amount of funds as sometime retiring at age 66, if they both have the same service credit (based on salary percent) by the age of 79, since that is their expected age of death, only after that age having the FRA person receive more of a benefit?
Example a TRA tier 2 member retires at 55 and 30 years of service, after all applicable reductions they are receiving 20% of their salary, they are NOT eligible for COLAs until age 67 (am I correct?).
A TRA tier 2 member retires at 66 and 30 years of service with no reductions and are receiving 57% of their salary, they are eligible for COLAs one year in (age 67).
Based on my work which could be full of errors since I have no official TRA numbers, but it doesn’t seem to me that the person working the same amount of years retiring at 55 gets a fair shake to the person retiring at 66:
Wouldn’t the more fair reduction be a 3% per year reduction prior to retirement age like all tier 1 members receive? A 33% reduction at 55 should get the break even point at life expectancy, isn’t that what actuarial reductions are for?
Please, let me know where I have gone wrong, thanks.
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The chart below is just percentage of salary collected by age, a person retiring at 30 years of service at 55 receives 20% of their salary while a person retiring at 66 years old and 30 years of service receives 57% of their salary.
