If you’re a longtime state employee, then you have two pieces of the state retirement plan (PERS). You have a pension plan, which depends on how long you’ve worked there and what your salary levels are. That means a guaranteed income in retirement. You also have access to another piece which acts like a 401(k). So those longtime state employees are really better off than most of us out there. Most of us only have the 401(k).
They’ve gotten the news recently that the contribution that they have to make to that plan is going from 7.25% to 9%. That pinches a bit, especially when you consider they’re also going to have to participate more in contributing to their own healthcare. That will be an issue as well. At one point they didn’t have to contribute for healthcare, but that is changing because those expenses are going up.
The good news that I want to say to state employees is, “This is a great plan.” It is very well-managed, and I have talked with many state employees through the years; and many of them end up bringing home more in retirement than they made during their regular work years, which is really nice to hear.
Also, they need to understand that their employer, the State of Mississippi, is also contributing more. Now there is a lesson in there for all of us: If state employees have to contribute 9%, the rest of us need to go back and look at what we’re putting in our 401(k)s. We need to at least do 9%, and, in fact, I encourage to aim for 10%.
Also, state employees, you have access to that Deferred Compensation. It is run by T. Rowe Price. It’s an excellent plan. Look at those. If you can afford to do some optional payments into that retirement plan, do that as well.
We all need to do everything we can, and even those really good plans are having to increase the contributions. You never want to stop at simply matching what your employer is contributing to your account. You always want to exceed that.