RETIREMENT SAVINGS AND SOCIAL SECURITY DEFICITS
By: Kevin O’Donnell, CPA, CEBS
We are pleased to report that the Plan assets at August 31, 2012 exceed $37 million dollars and deferral accounts are approximately $4.3 million dollars with participation now exceeding over 400 participants. You can view your account any time or obtain a statement on demand for any time period at the plan’s website www.noituiap.com. We urge all participants to review their account statements and call the office at (718) 291-3434 option 6 with any questions.
It’s important to know that the Trustees of Social Security system announced on April 23, 2012 that the fund that sustains retiree and survivor benefits will be exhausted in 2033. There are two components of the program, the Old-Age and Survivors insurance (OASI) and Disability Insurance (DI) program. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the OASI program. Disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program.
The entire annual report is very detailed and is 252 pages, was sent to the President and Congress. The Board of Trustees noted that a combination of actions would be required from increasing tax rates to reducing scheduled benefits. The Trustees recommend that the Lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes and give workers and beneficiaries time to adjust to them.
Please go to www.socialsecurity.gov to review your annual statement which will contain your retirement age, your estimated benefits and earnings record. One thing is for certain, lawmakers have a hard time solving the big problems this country faces and the best thing you can do is save some portion of your wages on a pretax basis for your retirement.
It’s important to understand the power of compounding money over time. We are providing the following example for illustration purposes only. This projected account balance is in addition to your employer account balance.
|
ESTIMATED RATE OF RETURN (6% PER ANNUM) WITH A DEFERRAL RATE OF $25 PER WEEK
|
|
YEARS
|
TOTAL ACCOUNT BALANCE
|
CONTRIBUTIONS
|
DEFERRAL EARNINGS
|
|
5
|
7,768
|
6,500
|
1,268
|
|
10
|
18,163
|
13,000
|
5,163
|
|
15
|
32,074
|
19,500
|
12,574
|
|
20
|
$50,690
|
$26,000
|
$24,690
|
The illustration shows that by making a commitment of $25 per week, your pretax contributions will compound to an estimated balance of $50,690 over a 20 year period. These pretax contributions will reduce your overall federal and state tax liability. Your contribution of $26,000 over 20 years and the power of compounding will result in estimated tax deferred earnings of $24,690.
The vested account balance in your employer contribution account and your deferral account is portable upon termination, meaning you may roll this balance into another retirement plan or into an IRA account.
The deferral account is always 100% vested. In order to enroll in this feature, you must complete an election form and return it to your employer no later than 15 days before the entry date. The entry dates fall on the first day of each calendar quarter (April 1, July 1, October 1, January 1) and you may discontinue the deduction at any time. You can access a portion of your participant deferral account balance while you are still working through a “Hardship” withdrawal for an immediate and heavy financial need as described by the Internal Revenue Service. We recommend consulting your tax advisor, as amounts withdrawn may be subject to additional taxes.
For participants who wish to take an active roll in deciding how their NOITU Individual Account Plan balances will be invested, please see the following chart showing returns for the 5 and 10 year period of the portfolios and core fund options.
|
INVESTMENT NAME
|
TICKER
|
AS OF
|
5 YEAR RETURN
|
10 YEAR RETURN
|
|
Conservative Portfolio (details below)
|
|
8/31/2012
|
6.59%
|
7.45%
|
|
Moderate Portfolio (details below)
|
|
8/31/2012
|
5.15%
|
7.62%
|
|
Aggressive Portfolio (details below)
|
|
8/31/2012
|
1.45%
|
9.88%
|
|
Balanced Portfolio (details below)
|
|
8/31/2012
|
4.42%
|
7.98%
|
|
Schwab Retirement
Advantage Money Fund
|
SWIXX
|
8/31/2012
|
0.87%
|
1.72%
|
|
PIMCO Total Return
Institutional Bond Fund
|
PTTRX
|
8/31/2012
|
9.15%
|
6.98%
|
|
Oakmark Equity & Income Fund
|
OAKBK
|
8/31/2012
|
4.20%
|
8.15%
|
|
T. Rowe Price Capital Appreciation Fund
|
PRWCX
|
8/31/2012
|
4.83%
|
8.90%
|
|
Vanguard Balanced Index Signal Fund
|
VBASX
|
8/31/2012
|
4.24%
|
6.90%
|
|
Vanguard S&P 500 Index Signal Fund
|
VIFSX
|
8/31/2012
|
1.30%
|
6.45%
|
|
MUTUAL FUND
|
5 YEAR RETURN AS OF 8/31/2012
|
10 YEAR RETURN AS OF 8/31/2012
|
CONSERVATIVE
|
MODERATE
|
AGGRESSIVE
|
BALANCED
(QDIA)
|
|
MainStay ICAP
Select Equity I (ICSLX)
|
0.42%
|
7.95%
|
7.5%
|
15%
|
15%
|
|
|
Vanguard S&P 500
Index Fund (VIFSX)
|
1.30%
|
6.45%
|
10%
|
15%
|
15%
|
|
|
MainStay Large Cap Growth I (MLAIX)
|
3.96%
|
8.61%
|
7.5%
|
15%
|
15%
|
|
|
Eagle Small Cap
Growth I (HSIIX)
|
4.87%
|
9.99%
|
5%
|
5%
|
15%
|
|
|
Harbor International Inst’l. (HAINX)
|
-1.23%
|
10.66%
|
5%
|
5%
|
30%
|
|
|
Lazard Emerging Market Inst. (LZEMX)
|
2.33%
|
17.31%
|
0%
|
0%
|
10%
|
|
|
PIMCO Total Return Bond Fund (PTTRX)
|
9.15%
|
6.98%
|
65%
|
45%
|
0%
|
|
|
Oakmark Equity & Income Fund (OAKBK)
|
4.20%
|
8.15%
|
|
|
|
33.34%
|
|
T. Rowe Price Capital Appreciation (PRWCX)
|
4.83%
|
8.90%
|
|
|
|
33.33%
|
|
Vanguard Balanced Index Signal (VBASX)
|
4.24%
|
6.90%
|
|
|
|
33.33%
|
|
TOTAL
|
|
|
100%
|
100%
|
100%
|
100%
|
Participants should consider the investment objectives, risks, and charges and expenses of a fund carefully before investing. Prospectuses containing this and other information about the fund are available on www.noituiap.com. Please read the prospectus carefully before investing to make sure that the fund is appropriate for your goals and risk tolerance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that the shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance.
WHERE TO GO FOR FURTHER INVESTMENT INFORMATION
You may access your account by logging on to www.noituiap.com. Your default User ID is your Social Security Number (no dashes). Your default password is your date of birth in the `mmddyyyy’ format. For example, if your date of birth is July 29, 1959, your password will be 07291959. You may also access your account on the phone system by calling (800) 789-4015. You will be prompted to enter your Social Security Number and Personal Identification Number (“PIN”). Initially, your IN will be the last four digits of your Social Security Number. You may change your password or PIN at anytime. Mobile Apps for iPhone and Android devices are also available to track your retirement savings. Search “Chernoff” in your App store or Android market and download the App today.
To learn more about the Plan’s investment alternatives and procedures for changing how your accounts are invested, you can contact the Plan Administrator at (718) 291-3434 option 6.
