Table Of Content

Outlook Vol.3, No. 1 Published by the August, 2002 Massachusetts Port Authority Employees’ Retirement System (MPAERS) FOCUSING ON RETIREMENT ISSUES FOR MASSPORT EMPLOYEES PAST AND PRESENT Benefiting from Security: Examining the Value of Your Massport Pension W hen the stock now touting defined benefit Not Like It Used to Be the growing popularity of market was plans as a key piece to the Gone are the days where every offering defined contribution booming a few retirement puzzle, although worker in every household plans such as the 401(k), rather years ago and people were scores of employers no longer earned a pension. Now, than defined benefit plans like seeing record high returns on offer this type of plan. according to Wolff’s study, the one we have at Massport, their investments, defined A study called “more than 40% of households has benefited mostly the upper- contribution retirement “Retirement Insecurity: The headed by someone between the class in American society. Wolff plans such as 401(k) plans– Income Shortfalls Awaiting ages of 47 and 64 will not be able concludes, “the contraction of the private sector retirement the Soon-to-Retire” was to replace even half of their pre- traditional defined benefit savings plan, conducted retirement income once they pension plans and their and 457(b) Gone are the days recently by stop working. Nearly 20% will replacement by defined plans which Edward N. have retirement income below contribution plans appears to where every are the public Wolff and the poverty line.” According to have helped rich, older sector tax- worker in every released by the study, these numbers are Americans but hurt a large deferred household earned the Economic even worse for African group of lower-income compensation Policy Americans and Hispanics. Americans.” a pension. plans, have Institute. “Among these households, the received high This study percentage that will have to live Unstable Ground praise as compared with the discusses problems that many on less than half of their pre- As we see it, one drawback to seemingly unchanging value Americans face due to the retirement income shot up defined contribution plans is of defined benefit plans like short supply of traditional even higher, to 52.7% in 1998.” that they don’t offer a the Massport pension plan. pension plans like Massport’s, The somewhat surprising ☞ Continued on page 5 While those plans still and the increased popularity results of this study imply that represent an important part of defined contribution plans. of a well-designed overall With defined contribution ERI Update retirement plan, experts are plans, responsibility for taking another look at the investment decisions, as well value of traditional pension as the risk involved, is Authority Votes on Early plans which have the ability transferred to the hands of the Retirement Incentive to provide a steady stream of worker. income in retirement, without Wolff’s study shows that The Massport Board of Directors recently approved being tied to fluctuations of “despite the recent the stock market. Although unprecedented stock market an early retirement incentive (ERI) package for certain they are becoming scarcer in boom and rapid proliferation employees who were affected by the implementation today’s business world, of 401(k) retirement plans, of the Authority’s fiscal recovery plan following the defined benefit plans offer typical Americans now facing events of September 11th. solid value and are looking retirement will have to tighten more attractive in this their belts harder than ☞ Continued on page 5 turbulent economy. Many are previous retirees.” For Your Benefit Suffering in the Stock Market T he way the stock years until retirement, you market has been may want to continue on your performing lately, course despite the market some of us might be afraid to downturn. If you are someone open the statements for who does not like risk you deferred compensation, IRA, may want to choose more stocks, international, fixed deferred compensation or brokerage plans when conservative investments. A income, cash, etc.). The provider, ING, has begun to they arrive professional method of thinking here is offer a financial advisory If you have more in the mail. advisor can that when one asset class is service, but as with any other While it than ten years until help you to performing poorly, another financial planning service, we is certainly determine could be doing well. You may recommend that you interview retirement, you disconcerting both your alleviate some of your losses at least 2 –3 service providers/ to see big may want to time this way. It is important to planners to find one that you losses, keep continue on your horizon and have a balanced portfolio. trust and are comfortable with a few things asset before acting on their advice. in mind: course despite the allocation $ Get professional help! For more help in selecting a market downturn. strategy. For many people, making qualified financial planner, you $ Invest investment decisions is not an can refer to the previous issue of for the long-term $ Diversify, diversify, easy task. That is why you Outlook which featured the Your time horizon is an diversify should consult a certified article “Finding a Financial important factor in how much Most people should have financial planner before doing Planner.” You can also contact risk you can afford to take. money spread across different anything drastic with your the retirement office to obtain If you have more than ten asset classes (i.e. domestic retirement savings. Our a copy of the article. Blueprints for the Future: Grab a Book from the Retirement Library We have made several new Investment Guide You’ll Ever retirement (and are actually by Mary Farrell. We also additions to our retirement Need” by Andrew Tobias. getting closer) we have many have several other books on library and the shelves are If you are trying to get titles to choose from. A few investing including two now filled with books on a out of debt, “The Complete good ones include: “From Work authored by Fidelity expert variety of topics to Cheapskate” by Mary Hunt is to Retirement” by Marion E. Peter Lynch. accommodate the diverse a popular choice. Other titles Haynes, “The Retirement The library also contains needs of our members, both that you may find helpful at Catch-Up Guide” by Ellen books on estate planning young and old. this point in your life include: Hoffman, “Retirement Places and tax issues including J.K. For the beginner, we “Financial Peace” by Dave Rated” by David Savageau, and Lasser’s “New Tax Law recommend the following Ramsey, “Your Money or Your “What Do You Want to Do Simplified” as well as titles: “Get a Financial Life” by Life” by Joe Dominguez & When You Grow Up? Starting classics such as “Making the Beth Kobliner, “Get in the Vicki Robin, and “Life or Debt: the Next Chapter of Your Life” Most of Your Money” by Jane Game! The Girls’ Guide to A One-Week Plan for a by Dorothy Cantor. Bryant Quinn. Money and Investing” by Lifetime of Financial Freedom” If you want to rethink Stop by our office at the Vanessa Summers, “Let’s Talk by Stacy Johnson. your investment strategy, we Logan Office Center or call Money” by Dee Lee & David For those of you who are have received wonderful Lisa at (617) 568-3903 to Caruso, or “The Only counting down the days to feedback on “Beyond Basics” request a book today! 2 The Miracle of Compound Interest O ne of the easiest ways to watch If you save $5.00 a day . . . your savings grow is through the power of Based on Based on 5% daily zero interest compounding compound interest. Compound interest uses the After 1 year, you will have: $ 1,825 $ 1,871 amount of interest your money has earned and adds After 5 years, you will have: $ 9,125 $ 10,366 that to your total investment. Barron’s Dictionary of Finance After 10 years, you will have $18,250 $ 23,677 and Investment Terms defines compound interest as After 30 years, you will have: $54,750 $127,077 “interest earned on principal plus interest that was earned earlier.” This process of adapted from FDIC Money Smart, FDIC Financial Education Curriculum compounding can take place daily, monthly or annually depending on the type of Downside of important to pay attention to planning for retirement account you have. The Compounding the interest rates you are (or achieving any long-term greater the interest rate and People who have a great deal being charged and savings goal). Of course, the more often your money is of credit card debt witness concentrate on paying down younger you are, the more compounded the faster your the negative effects of the high interest debt first. advantages you have for long- compounding, as they watch term investing. However, it is savings will grow! their debt expand quickly Save, Save, Save NEVER too late to start This table demonstrates (with interest rates Without a doubt, compound saving and begin reaping the how compound interest can sometimes soaring higher interest can be the most benefits of compound boost your savings, especially than 20%). This is why it is valuable tool you have in interest! over the long term. The Rule of 72 - How to Double Your Money Collecting From Social Security or Deferred Comp If you want to figure out how long it will take to double May Inhibit Life Insurance Coverage For Some your money by investing with compound interest, you T he plan description pension or when you begin to start collecting in the near can use something known as for the $50,000 life collecting social security future while still employed at “The Rule of 72”. All you do insurance policy that benefits or disbursements Massport, you need to be is divide 72 by the interest Massport provides to its from the deferred aware that you will not be rate you are receiving and it employees states in its plan compensation (457) plan – covered by this $50,000 life will tell you how long it will description that employees even if you are still working at insurance policy. What you take to double your initial who retire are no longer Massport and have not begun can do, however, is convert to investment. For example, if covered by the policy. The collecting your pension. an individual policy. Please you are earning 5 percent document defines retirement What this means is that if contact human resources’ interest, your money will as the point when you start you are currently collecting benefits office at (617) 568- double in 14 years and 4 collecting a Massport social security benefits or plan 3906 for more information! months (72 divided by 5). 3 Web Watch For those of you who have access to the Internet, there is a wealth of information to be found there. In this section we will highlight web sites that we have found helpful, informative, interesting or just plain fun. Invest Some Time Here Girl $tuff milk or creating orange play A great web site for those In iVillage’s financial section dough (which happens to who want to learn more there is an abundance of have antibacterial about investing is the practical advice for women properties). Here you can educational site Investopedia dealing with all types of also learn how to create a (www.investopedia.com). money issues. Log on to bridal memory book, paint Services include a useful www.ivillage.com/money to view a beautiful wall mural in dictionary identifying more articles like “8 (Cheap!) Ways your home or make appetizer than a thousand investment dishes from seashells . . . to terms and acronyms, a name just a few of the many frequently asked questions detailed projects. Transitions area, and a tutorial section for beginner to advanced levels. Go Digital The site also features If personally handcrafting ★ Congratulations biographies of great investors delicate invitations is not The following people and timely articles and your cup of tea, maybe you retired recently and we analysis like “Why You should try the other end of wish them all the best Should Care How Your the spectrum. For friends for a successful future: Financial Advisor Makes $” and family who are tech- and “Cooking the Books 101.” savvy (or at least know how May to Beat the Summer Heat” or to check their e-mail), skip ★ Margaret McDonough “Garage Sale 101.” It also the paper and send out touches on more serious invitations through Evite June topics with offerings such as a (www.evite.com). With this ★ Martin Cayon Debt Support Group and free service you may choose ★ Pasquale Giovino articles like “Cutting from a variety of templates ★ Donna Hickey- Retirement Costs” and “115 serving every occasion from Goldberg Money Tips for Surviving barbecues, bowling and ★ Jeffrey Maynard Divorce.” bachelor parties to a girls’ ★ Carol Saffran night out or weekend Move Over Martha getaway for two. Plan For those of you who are do- something just for the fun it-yourselfers, check out the of it! ❦ Condolences Do-It-Yourself Network’s web We regret to inform you site at www.diynet.com. The that the following retiree list of projects serves all types. has passed away: It has instructions on how to change your engine coolant or ❦ John Driscoll air filter or install a subwoofer in your car. Projects to We also extend our entertain the kiddies include condolences to family making paint from powdered and friends of Logan Airport Facilities employee Charles “Chickie” Doherty who * Legal note: The Retirement System is not responsible for the content of these webs sites or for the accuracy and passed away recently. completeness of any information contained in them. 4 Benefiting/Cont’d from page 1 you to monitor; no asset compensation plan is a great allocation with which you way to do this. However, we guaranteed benefit. The must be concerned; and no also hope that you fully amount that you have in your need for you to worry that the understand the benefits to account is the amount that money won’t be there ten which you are entitled and you are left with for the rest of years down the road. Your especially realize the value of your life. Many retirees relying Massport pension represents your Massport pension. A Don’t forget about on defined contribution plan the part of your retirement vacation buybacks! investments as their sole plan that is secure and stable You are eligible to source of retirement income (at a time in your life when If you are within three have experienced drastic that could be of the utmost retire at age 55 if you years of retirement, reductions in their savings, importance). The current have 10 years of every vacation sometimes resulting in a economic climate is a creditable service. If buyback that you do change of lifestyle and possibly reminder to all of us just how the need to return to work. important this guaranteed you have 20 years of will be incorporated benefit can be. into your three-year creditable service you Sound Assessment We do not wish to salary average. If you Please understand that we are discourage anyone from may retire at any age. are in your last year not saying that our defined making the most of defined benefit plan is perfect. The contribution plans that are and don’t need the available to them. In fact, we traditional pension plan like time off, it’s almost a wholeheartedly encourage you ours is becoming a rare breed, no-brainer, buy back To view the retirement to save for retirement in order but it is one with which we that vacation time percentage charts go to to supplement your pension – are quite proud to be ASAP! www.massport.com/ and the 457 deferred associated! about/retir_public.html or call (617) 568-3951 ERI/Cont’d from page 1 to request a copy. The vote, which was approved by the Board on June 20, 2002, grants benefit enhancements as provided under the Massachusetts General Laws Chapter 219 of the Acts of 2002 to retirement-eligible employees who were either laid off or system has flaws and we are well aware of the inequities volunteered to retire early under the Authority’s $15,000 cash incentive plan. Under imposed on us by statute. the legislation which was originally introduced by Governor Jane Swift in However, the bottom line is December of 2001, the ERI can be offered only to Group 1 employees (i.e. general that if you retire from employees including clerical, administrative and technical workers and laborers). To Massport, you have the be eligible for the enhancement, the employee must have a minimum of 10 years of security of knowing that your service with the Authority. Approximately 25 people will benefit from the Board’s pension is not dependent on decision. stock market performance or other kinds of fluctuations in Included in the vote as part of a “go forward” piece, the Massport Board the economy. You will know preserved the right to offer an ERI to current retirement-eligible employees through exactly how much you will be the end of the fiscal year (June 30,2003). paid each month and you Please note: This update is intended as an informational piece only. If you have know that you will receive further questions about the ERI we encourage you to contact us. Please understand this payment for the rest of that while we do not always have all the answers and cannot speculate on future your life (and possibly for the rest of your spouse’s life) along actions of the Authority, we will always make an effort to provide you with as much with annual increases to information as possible. account for cost-of-living. There are no investments for 5 Legislative Update Calendar AUGUST 15 Retirement Board Meeting: Logan Office Center, Retirees Receive Annual Board Room, 10 a.m. Pay Increase 27 Retirement checks mailed T he retirement board base of $12,000 and SEPTEMBER has once again represents an increase of up 2 Labor Day: Massport offices closed unanimously to $30 per month. Pursuant approved a 3% pension to Massachusetts General 11 Day of Remembrance increase adjustment for our Law Chapter 32, Section 103 19 Retirement Board Meeting: Logan Office Center, retirees and survivors, which (c), retirement systems may took effect July 1, 2002. In grant a pension increase Board Room, 10 a.m. the past we have referred to adjustment consistent with 23 Autumn begins this increase as a cost-of- the Consumer Price Index living adjustment or COLA, (CPI) used by the Social 26 Retirement checks mailed however, because we feel Security Commission. This that term is no longer year’s CPI is 2.6%. However, accurate, we now prefer to under Section 103 (i), the OCTOBER call it a pension increase retirement board may choose 14 Columbus Day (Observed): Massport offices adjustment. to increase this percentage This pension increase up to a maximum of 3%. closed adjustment is only payable to With the Authority’s 16 National Boss Day individuals who retired prior support, the Massport to July 1, 2001. Our recently Retirement Board has 27 Daylight Savings Time ends — Turn your clocks retired members whose dates granted the maximum 3% back one hour of retirement fall on or after pension increase adjustment. 28 Retirement checks mailed July 1, 2001 will receive a This means that Massport pension increase adjustment retirees and survivors are 30 Retirement Board Meeting: Logan Office Center, in July of next year. receiving the highest Board Room, 10 a.m. The pension increase increase allowable under adjustment is computed on a the law. 31 Halloween — Trick or Treat! *Meeting schedules are subject to change Retirement Board & Staff Outlook is published Managing Editor Retirement Board quarterly by the Lisa Allen Brown James P. Costello, Chairman Massachusetts Port [email protected] David W. Davis, Elected Member ([email protected]) Authority Employees’ Michael A. Grieco, Appointed Member Retirement System Contributors Leslie A. Kirwan, Treasurer-Custodian (ex officio) (MPAERS) Jim Costello Philip H. Mallett, Elected Member ([email protected]) Dick Heidlage One Harborside Drive Retirement Office Staff Bonnie Matthews Suite 200S Irene E. Moran, Director of Retirement ([email protected]) Irene Moran Boston, MA 02128 Nancy Bournival, Financial Analyst ([email protected]) (617) 568-3951 Lisa Allen Brown, Retirement Communication Specialist Design ([email protected]) Colvin/Williams, Inc. Laura E. Barbosa, Retirement Coordinator ([email protected])