What if You Are Not on Track to Retire?

After you’ve calculated your retirement income and budget, you may realize that you might not have enough money to retire. Here are six strategies that can help you boost your retirement resources.

1. Delay receiving Social Security retirement benefits. You can start collecting Social Security retirement benefits as early as age 62. However, your monthly income will be reduced if you decide to collect benefits before your full retirement age. The full retirement age has been increasing gradually and will reach age 67 for those born after 1959. Your Social Security income increases each month you delay taking benefits until age 70. Remember to sign up for Medicare Part A when you reach age 65, even if you continue to work or delay taking retirement benefits. Read the Health Care Planning for Retirement article for more information about health insurance in retirement.

2. Postpone your retirement. When you continue working, you maintain your income stream. You have more years to save, and you reduce the number of non-income-producing retirement years in which you are drawing down your financial resources, including the United Methodist Personal Investment Plan (UMPIP) and Horizon 401(k) plans. In addition, you may receive higher benefits in retirement. The defined benefit component of the Clergy Retirement Security Program (CRSP) provides participants who delay their retirement with higher monthly payouts due to their added years of credited service. The Ministerial Pension Plan (MPP) plan benefits may increase due to the longer investment period, as well as the fact that the annuity will be paid over a shorter expected lifespan. Supplement One to CRSP (Pre-82) may also pay a higher monthly benefit either by reducing actuarial adjustments or by actuarial increases depending on your age and years of service at retirement. A delay of only a few years could be enough to help you meet—or even exceed—your retirement income needs. Use the Retirement Benefits Projection or speak to a General Board representative to determine how delaying your retirement may affect your benefits.

3. Delay receiving your retirement benefits. Once you retire and stop working, you may want to begin receiving benefits immediately. However, you are not required to begin monthly benefits or to begin taking distributions from your accounts until you reach age 70½ or retire, whichever is later. In some cases, delaying retirement benefits can cause them to increase, so this might be a good strategy if you have other income sources for the short term. But in other cases, a delay could cause a reduction. Each retirement plan is different:

   • CRSP—Once you stop earning credited service in the defined benefit portion of CRSP, the formula used to calculate this benefit will be frozen. You will not receive an actuarial increase if you delay receiving this benefit after your normal retirement date. If you haven’t reached your normal retirement date, your benefit will be subject to an early retirement reduction—if you start receiving benefits immediately (full benefits will be available if you wait for your normal retirement date to start receiving your benefit). As with your MPP account balance, the defined contribution portion of your CRSP benefit will increase or decrease depending on how it is invested and how the market performs.
   • MPP—The size of your benefit payment will be determined by your age, account balance and the conversion rate at the time your annuity is set up, as well as other factors—each factor works independently. Because your MPP account balance is invested, delaying converting your account balance into an annuity could result in a higher or lower balance, depending on the market returns you experience. The annuity conversion rate is calculated monthly and can be higher or lower depending on the market interest rates. A higher rate may increase the amount of your benefit payment, while a lower rate may reduce your benefit.
   • Pre-82—This monthly benefit is the greater of what a defined benefit formula will pay you or the annuity amount that an account balance would be converted to. Unless you terminated your conference relationship and did not retire (in which case your benefit is frozen as of the date you terminated), your formula benefit amount will increase each year, regardless of whether begin receiving benefits. So, there is no incentive to delay receiving a formula benefit if you have retired. However, some conferences have established funding accounts on behalf of their participants. Your funding account may provide a larger benefit than your formula benefit. Market gains or losses in your account could increase or decrease your monthly benefit up to the point that you start receiving it. As with MPP annuities, the conversion rate for this account balance depends on prevailing interest rates.
   • UMPIP—Your UMPIP account balance is invested according to your direction among the General Board’s investment funds, which may experience investment gains and losses. If you delay withdrawals from your account, your balance will increase or decrease with the market. However, you may want to maintain some exposure to the market in order to keep pace with inflation.

4. Try to save more. Saving a little is better than saving nothing at all. UMPIP is a valuable savings vehicle. You can save a substantial amount of your cash compensation and have it deducted automatically from your paycheck. Talk to your employer or salary-paying unit about enrolling in UMPIP. If you are already participating, you may want to consider increasing your contributions.

5. Tap your home equity. If you own a home, you may be able to tap into its equity. For example, you could sell your home and move to a smaller house, perhaps even in an area where property is not as expensive. Not only will you free up cash, but you may reduce your property taxes, utility costs and other expenses.

6. Reduce your budget. Carefully review your budget and honestly assess if there are “extras”—such as entertainment or travel expenses—that you can live without. If not, reconsider those strategies mentioned above. Be sure to speak with a financial planning professional as you prepare for retirement. (Ernst & Young Financial Planning Services may be available to you at no cost, if you are an eligible participant in a General Board’s retirement plan.) You may spend two decades or more in retirement, so you should know how much money you will have, your expenses and how much you can spend. Even if you’re planning to retire in the very near future, a professionally prepared retirement plan can give you valuable guidance for your retirement years.