Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

The Internal Revenue Service (IRS) announced inflation adjustments for many tax provisions in 2024, including higher contribution limits for various types of accounts and updated tax brackets.



<h2 class="wp-block-heading">Retirement account contribution limits</h2>



The IRS <a href="https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000" target="_blank" rel="noreferrer noopener">increased contribution limits</a> for individual retirement accounts (IRAs), as well as 401(k), 403(b), and most 457 plans.



The maximum amount a worker can contribute to 401(k)/403(b)/457 plans is $23,000 in 2024, an increase of $500. The IRA contribution limit also increased $500 to $7,000. Catch-up contribution limits remain unchanged in 2024.



<h2 class="wp-block-heading">HSA &amp; FSA contribution limits</h2>



The amount workers can contribute to medical savings accounts will also increase in 2024.



Individuals enrolled in a high deductible health plan (HDHP) with a health savings account (HSA) will be able to contribute up to $4,150 and those with family coverage will be able to save a maximum of $8,300.



For workers who don’t have an HDHP with an HSA and instead use a flexible spending account (FSA), the maximum contribution for 2024 is $3,200. For plans that allow unused balances to roll over, the maximum amount that can be rolled over will increase to $640.



<h2 class="wp-block-heading">2024 tax rates</h2>



Below are <a href="https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024" target="_blank" rel="noreferrer noopener">updated marginal tax rates</a> for single taxpayers and married couples filing jointly. See the <a href="https://www.irs.gov/irb/2023-48_IRB#REV-PROC-2023-34" target="_blank" rel="noreferrer noopener">IRS website</a> for more tax tables and additional details. Since these changes will take effect for tax year 2024, they will generally apply to tax returns filed in 2025.



<ul>
<li>10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)</li>



<li>12% for incomes over $11,600 ($23,200 for married couples filing jointly)</li>



<li>22% for incomes over $47,150 ($94,300 for married couples filing jointly)</li>



<li>24% for incomes over $100,525 ($201,050 for married couples filing jointly)</li>



<li>32% for incomes over $191,950 ($383,900 for married couples filing jointly)</li>



<li>35% for incomes over $243,725 ($487,450 for married couples filing jointly)</li>



<li>37% for incomes over $609,350 ($731,200 for married couples filing jointly)</li>
</ul>



In addition to updated tax rates, the IRS announced increases to the standard deduction for tax year 2024:



<ul>
<li>Single taxpayers and married couples filing separately: $14,600 ($750 increase)</li>



<li>Heads of household: $21,900 ($1,100 increase)</li>



<li>Married couples filing jointly: $29,200 ($1,500 increase)</li>
</ul>



Visit the <a href="https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024" target="_blank" rel="noreferrer noopener">IRS website</a> for more adjustments and tax changes for 2024.



<h2 class="wp-block-heading">PERA benefits and taxes</h2>



Colorado PERA benefits are subject to federal income tax, as well as applicable state and local taxes. PERA retirees who would like to update their tax withholding can do so by <a href="https://www.copera.org/member-login-registration" target="_blank" rel="noreferrer noopener">logging in</a> to their secure member account or completing a paper Form W-4P. Learn more information at <a href="https://www.copera.org/taxes-on-benefits" target="_blank" rel="noreferrer noopener">copera.org/taxes-on-benefits</a>.

Updated Tax Brackets, Contribution Limits, Other Changes for 2024

Generation X – the group of Americans born between 1965 and 1980 &#8212; is often referred to as the “Forgotten Generation.” It’s a smaller group than both the Baby Boomers that came before and the Millennial generation that followed.



With the oldest members of Generation X soon approaching retirement, it’s important to look at where they stand financially. New <a href="https://www.nirsonline.org/reports/genx/" target="_blank" rel="noreferrer noopener">research from the National Institute on Retirement Security</a> (NIRS) finds that many members of Gen X are struggling to meet retirement savings targets and risk having a significantly lower standard of living when they stop working.



<h2 class="wp-block-heading">Access to employer-sponsored retirement plans</h2>



According to the NIRS researchers, the decline in the number of employers offering defined benefit (DB) pension plans is a major factor in Gen X’s retirement readiness. In 1980, more than 80 percent of workers in the private sector had access to a DB plan, according to the U.S. Bureau of Labor Statistics.



Today, few private employers offer pensions to their workers. Most employees only have the option to save for retirement in employer-sponsored defined contribution (DC) plans like 401(k)s or on their own in individual retirement accounts (IRAs). According to NIRS, just 14 percent of Gen Xers were participating in a DB plan as of December 2020.



The potential challenge of relying solely on DC plans is a person’s retirement income depends on how much they contributed over the course of their working years and the investment gains they may have earned over that time.



Since Generation X was the first generation to enter the workforce when DB plans were on the decline, they’re the first to see the effects of that shift on their finances on a large scale.



<h2 class="wp-block-heading">Generation X’s retirement readiness</h2>



The NIRS researchers found that just over half of Gen Xers participated in an employer-sponsored retirement plan in in 2020. Of those contributing to a private account like a 401(k), the average balance was $129,994. The median account balance, which isn’t skewed by high earners, was $10,000 for individuals and $40,000 for households.



Additionally, 40 percent of Gen Xers have accounts with no balance at all, according to NIRS.



The researchers warn that retirees who don’t have enough savings to live on will have to rely on Social Security, which wasn’t designed as a full income replacement. In 2023, the average Social Security benefit is about $1,700 a month.



It’s not all bad news, however. The youngest Gen Xers are in their early 40s, which are often a person’s prime earning years. That means younger members of the generation still have time to bolster their savings and improve their retirement security.



<h2 class="wp-block-heading">How PERA combines the best of DB and DC plans</h2>



The State of Colorado created PERA in August 1931 and since then, PERA has grown to include DB and DC offerings covering more than 670,000 current and former public employees.



The PERA Defined Benefit Plan is available to all PERA members and is designed to provide lifetime income in retirement. The <a href="https://peraontheissues.com/pera-by-the-numbers-a-closer-look-at-the-2022-annual-report/" target="_blank" rel="noreferrer noopener">average monthly benefit was $3,238</a> in 2022.



Some members have a choice between the PERA DB Plan and the PERA DC Plan, which features a variety of low-cost investment options for members who want to invest their retirement funds on their own. Members can also annuitize their account balance at retirement to convert it to regular monthly income.



PERA also offers the optional <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus</a> 401(k) to all members, and some PERA employers also offer the PERAPlus 457 Plan. Both are low-cost options for setting aside extra money for retirement, and both have Roth options for saving after-tax dollars.



Together, PERA’s defined benefit and defined contribution plans help ensure that Colorado’s public employees have the income they need in retirement, regardless of which generation they’re a member of.

How the Shift Away From Pensions Has Affected Gen X’s Retirement Readiness

The last week of February is America Saves Week. From Feb. 27 to March 2, financial institutions across the country will aim to raise awareness about the importance of saving money and share tips for saving more.



The week comprises five themes:



<ul>
<li>Monday: Saving automatically</li>



<li>Tuesday: Saving for the unexpected</li>



<li>Wednesday: Saving for major milestones</li>



<li>Thursday: Paying down debt is saving</li>



<li>Friday: Saving at any age</li>
</ul>



Whatever the goal, setting money aside for the future is vital to financial security, and recent polling shows it’s something that many Americans continue to struggle with.



<h2 class="wp-block-heading">The state of savings in 2023</h2>



Bankrate has been polling Americans about their emergency savings since 2014. <a href="https://www.bankrate.com/banking/savings/emergency-savings-report/" target="_blank" rel="noreferrer noopener">This year’s survey</a>, which was conducted in December, found less than half of respondents could pay for an emergency expense from their savings, and reliance on credit cards is at an all-time high.



If faced with a $1,000 expense for an emergency room visit or a car repair, 43 percent of people told Bankrate that they would use their savings to pay the expense. Twenty-five percent of people said they would use a credit card, which is the highest percentage since the survey began in 2014.



The Bankrate survey also found that people across generations are concerned about their level of emergency savings — particularly younger generations. Bankrate said 85 percent of Generation Z and 79 percent of Millennials are worried about having enough savings to cover a month’s worth of living expenses, compared to 69 percent of Generation X and 53 percent of Baby Boomers.



When it comes to retirement savings, Americans express similar sentiments. According to the <a href="https://www.fool.com/research/average-retirement-savings/" target="_blank" rel="noreferrer noopener">most recent survey from the Federal Reserve</a>, less than half of respondents nearing retirement age said they felt like they were on track. That survey also found that a quarter of all non-retirees had no retirement savings at all.



<h2 class="wp-block-heading">PERA offers built-in options for additional savings</h2>



Colorado PERA members are already saving automatically for retirement with every paycheck. PERA also offers several options for members who want to set aside even more money.



All PERA members have access to the optional <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k)</a> to set aside extra pre-tax money each month. Some employers also offer the PERAPlus 457 plan. Both plans feature a variety of investment choices as well as <a href="https://peraontheissues.com/pera-offering-new-lifetime-income-options-to-dc-plan-participants/" target="_blank" rel="noreferrer noopener">lifetime income options</a> to make savings go further in retirement.



America Saves Week is a great opportunity to take stock of your savings and make a plan for saving more. If you’re already enrolled in a PERAPlus plan, <a href="https://www.copera.org/member-login-registration" target="_blank" rel="noreferrer noopener">log in today</a> to check your balance, and consider increasing your contributions if you’re not on track to meet your goals.



Follow Colorado PERA on <a href="https://www.facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener" class="broken_link">Facebook</a>, <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a> and <a href="https://www.copera.org/do-you-have-a-savings-plan-for-2023" target="_blank" rel="noreferrer noopener" class="broken_link">Instagram</a> for more tips during America Saves Week.

Do You Have a Savings Plan for 2023?

In late December, Congress passed a <a href="https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf" target="_blank" rel="noreferrer noopener">$1.7 trillion spending bill</a> to keep the government funded through September. Included in that bill, now signed into law by President Biden, was a package of retirement-related reforms collectively known as the SECURE 2.0 Act.



SECURE 2.0 builds on the original SECURE Act from 2019, which aimed to improve access to retirement savings for all Americans.



There are nearly 100 provisions in SECURE 2.0. While most of them aren’t particular to public defined benefit plans like Colorado PERA, many of them could affect public sector workers and retirees who have money saved in a defined contribution account like a 401(k) or 457 plan.



Here are some of the major provisions included in the legislation and what they mean.



<h2 class="wp-block-heading">Automatic enrollment in 401(k) plans</h2>



One of the biggest changes resulting from SECURE 2.0 will be automatically enrolling workers in their employer’s 401(k) plan starting in 2025. Unless they opt out, eligible employees will automatically contribute at least 3 percent of each paycheck to their retirement account, and that amount will increase by 1 percent each year until it reaches at least 10 percent (but not more than 15 percent). The mandatory 401(k) auto-enrollment provision will not apply to government plans like Colorado PERA.



<h2 class="wp-block-heading">Student loan matching on retirement accounts</h2>



This provision is aimed at people who aren’t saving for retirement because they’re paying off student loans and can’t afford both. Beginning in 2024, employers will be allowed to match a worker’s student loan payments and deposit that money into their 401(k) or 457 plan account.



<h2 class="wp-block-heading">Emergency savings accounts</h2>



Many Americans lack a dedicated savings account for emergency expenses and often end up tapping into their retirement savings to pay for unexpected costs. Under this provision, employers will be able (but not required) to automatically enroll workers in an emergency savings plan, with employees contributing no more than 3 percent of their salary on a Roth basis. The first four withdrawals from the account each year will be exempt from any fees or charges solely on the basis of such withdrawals.



<h2 class="wp-block-heading">Changes to required minimum distributions (RMDs)</h2>



Under current law, retirees are required to start taking withdrawals (required minimum distributions, or RMDs) from retirement accounts like 401(k)s when they reach a certain age. The previous SECURE Act raised that age to 72 in 2019. SECURE 2.0 raises the age to 73 as of Jan. 1, 2023 (retirees who turned 72 in 2022 and already began taking RMDs will need to continue taking their RMDs). The RMD age will then rise to 75 in 2033. SECURE 2.0 also reduces the penalty for failing to take RMDs from 50 percent to 25 percent.



<h2 class="wp-block-heading">New allowable distributions</h2>



Several provisions of SECURE 2.0 lay out new circumstances under which a person can withdraw money from their retirement account(s) before they’re retired without facing a penalty. The new rules allow for penalty-free withdrawals for personal or family emergencies (one distribution up to $1,000 per year), in domestic abuse cases (the lesser of $10,000, indexed for inflation, or 50 percent of the participant’s account), to pay for long-term care insurance (up to $2,500 per year) and for terminally ill patients.



<h2 class="wp-block-heading">Retirement account lost-and-found</h2>



For workers who have held multiple jobs throughout their careers and left behind retirement accounts, it can be a challenge to find and claim those old accounts. It can be similarly difficult for plan administrators to find account holders who may have moved or changed names. This provision creates a nationwide database of retirement plans under the Department of Labor, allowing account holders to more easily find the contact information for plan administrators and claim their old accounts.



Read a more detailed section-by-section explanation of each of the provisions in <a href="https://www.help.senate.gov/imo/media/doc/secure_20sectionbysection.pdf" target="_blank" rel="noreferrer noopener">SECURE 2.0</a>.

What’s in SECURE 2.0?

October is National Retirement Security Month — a time to examine one’s financial situation, assess progress toward retirement savings goals, make plans to get on track, or make a goal and get started.



Retirement security is at the core of everything we do and everything we offer at PERA. This commitment is reflected in our mission statement: To provide retirement security for our members while ensuring the sustainability of the fund.



In 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees. Each of those retirees can rely on receiving regular income from PERA’s Defined Benefit Plan for as long as they live.



Some PERA employers offer a choice between the Defined Benefit (DB) Plan and the Defined Contribution (DC) Plan, and PERA members also have access to optional PERAPlus 401(k) and 457 plans to save more for retirement. Knowing what combination of plans to choose can be challenging.



To help members further bolster their retirement knowledge and security, PERA launched an online <a href="https://www.copera.org/financial-wellness-library?utm_source=POTI&amp;utm_medium=email&amp;utm_campaign=10-12-22" target="_blank" rel="noreferrer noopener">Financial Wellness Library</a> with a regularly updated collection of articles on retirement planning. These articles put into perspective the many factors that can impact saving for retirement, while providing suggestions that make the planning a little easier.



<h2 class="wp-block-heading">Financial Wellness Library</h2>



The educational content in PERA’s Financial Wellness Library is split into numerous sections, including: creating a budget, investing basics, preparing for life events, protecting your assets, saving and planning, getting ready to retire, and activities in retirement as well as links to PERA benefits and tools to help you achieve your financial goals.



There’s also a link to additional financial wellness content from <a href="https://www.empower.com/learning_center/#/">Empower Retirement</a>, PERA’s partner in administering the PERAPlus 401(k), 457 and DC plans.



In addition to general financial literacy information, the library includes articles to help you get more familiar with your PERA benefits and how they can help you meet your goals:



<ul>
<li>Get the Most Out of PERA: View Your Member Dashboard: Learn about the features available when you log into your member account on copera.org, including checking your account balance, seeing your estimated monthly retirement benefit, submitting forms and more.</li>



<li>PERA is With You Every Step of the Way Throughout Your Career: Whether you’re new to PERA or getting ready to retire, we have resources available to help you make the most of your benefits.</li>



<li>The Benefits of PERA Membership Start Well Before You Retire: PERA is more than just a retirement plan; we also offer survivor and disability benefits, voluntary savings plans and more.</li>



<li>Four Things New Members Should Do: If you’re new to PERA, this is a great place to start on your path to retirement security.</li>
</ul>



Visit <a href="https://www.copera.org/financial-wellness-library?utm_source=POTI&amp;utm_medium=email&amp;utm_campaign=10-12-22" target="_blank" rel="noreferrer noopener">copera.org/financial-wellness-library</a> to learn more.



Additional reading:



<ul>
<li><a href="https://peraontheissues.com/what-retirement-security-means-to-pera-members/" target="_blank" rel="noreferrer noopener">What ‘Retirement Security’ Means to PERA Members</a></li>



<li><a href="https://peraontheissues.com/survey-millennials-gen-x-especially-pessimistic-about-retirement-prospects/" target="_blank" rel="noreferrer noopener">Survey: Millennials, Gen X Especially Pessimistic about Retirement Prospects</a></li>



<li><a href="https://peraontheissues.com/how-retirement-systems-like-pera-plan-for-the-biggest-financial-risks-retirees-face/" target="_blank" rel="noreferrer noopener">How Retirement Systems Like PERA Plan for the Biggest Financial Risks Retirees Face</a></li>



<li><a href="https://peraontheissues.com/pera-offering-new-lifetime-income-options-to-dc-plan-participants/" target="_blank" rel="noreferrer noopener">PERA Offering New Lifetime Income Options to DC Plan Participants</a></li>
</ul>

Financial Education Resources for National Retirement Security Month

The COVID-19 pandemic has had a profound impact on many people’s finances over the past two years – surveys show many people have <a href="https://apnorc.org/projects/economic-consequences-of-the-coronavirus-outbreak/" target="_blank" rel="noreferrer noopener">been saving more money</a>, and the percentage of Americans who say they have savings on hand to cover a $1,000 emergency expense is on the rise. However, that number <a href="https://www.bankrate.com/banking/savings/financial-security-january-2022/" target="_blank" rel="noreferrer noopener">is still less than 50 percent</a>.



The last full week of the month, Feb. 22 to 25, is <a href="https://americasavesweek.org/" target="_blank" rel="noreferrer noopener">America Saves Week</a>, an annual effort by financial institutions across the country to raise awareness of the importance of saving for the future. It’s a good time for a financial “checkup” of sorts – to look at one’s budget and overall finances, and make a plan to save more, if possible.



Saving money is easier said than done, and there’s no one right way to do it. Finding small ways to save here and there can make a huge difference in a person’s financial situation. Each day of America Saves Week highlights a particular savings strategy or theme:



<ul>
<li>Monday | Save Automatically: One of the easiest ways to save money is to do it automatically — that could mean a regularly scheduled bank transfer, payroll deduction like a 401(k), or using an app to round up debit card purchases and put the spare change in a savings account.</li>



<li>Tuesday | Save for the Unexpected: “Unexpected” doesn’t have to mean “emergency.” Establishing a fund for unexpected expenses can mean you’ll have money on hand for special occasions, trips, gifts, etc.</li>



<li>Wednesday | Save to Retire: It’s never too early to start thinking about retirement and your various options for saving money for your golden years.</li>



<li>Thursday | Save by Reducing Debt: Paying off debit might not be the first thing that comes to mind when thinking about savings, but reducing debt can help in a number of ways, including raising your credit score and reducing the amount of interest and fees you pay each year.</li>



<li>Friday | Save as a Family: Having conversations with your kids about money and the importance of saving from an early age can help set them up for financial success later in life.</li>
</ul>



<h2 class="wp-block-heading" id="how-pera-helps-its-members-save-for-the-future">How PERA helps its members save for the future</h2>



Saving automatically and saving for retirement are what PERA has been doing for Colorado’s public employees since 1931. Every member of Colorado PERA, whether they’re enrolled in the Defined Benefit (DB) Plan or the Defined Contribution (DC) Plan, saves for retirement automatically with each paycheck.



In 2020, PERA paid more than $4.2 billion in benefits to more than 107,000 DB plan retirees living in Colorado, with an average monthly benefit of $3,204.



PERA also offers the optional <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k) and 457 plans</a>, which allow members to set aside an additional pre-tax portion of each paycheck. And with <a href="https://peraontheissues.com/pera-offering-new-lifetime-income-options-to-dc-plan-participants/" target="_blank" rel="noreferrer noopener">new lifetime income options</a> in the PERAPlus and DC plans, members have even more options to help make their savings go further in retirement.



When PERA On The Issues asked PERA members about the most useful piece of advice they’d like to pass on to others, several of them mentioned saving in a PERAPlus 401(k) or 457 account in addition to the DB Plan.



“Enroll in the PERA Defined Benefit Plan and start saving in a 401(k) or 457 plan the first month of your employment,” said Rob W., a retiree from Salida.



“If you are a working PERA member, stay in PERA if you are in a job you enjoy doing,” said Mike M., a retiree from Westminster. “A retirement plan such as PERA can provide you with retirement security at a time when you need it in later years.” 



PERA will be sharing savings tips on social media throughout America Saves Week, so give us a follow on <a href="https://www.facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener" class="broken_link">Facebook</a>, <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a>, and <a href="https://content.copera.org/nearly-1700-people-respond-to-reader-survey/" target="_blank" rel="noreferrer noopener">Instagram</a> to join the conversation.

Give Yourself a Savings Checkup During America Saves Week

In this story:



<ul>
<li>Members of Generation X and Millennials are more concerned than other generations about their ability to save enough for retirement</li>



<li>Younger generations are also more likely to be worried about the effects of the pandemic on their retirement planning</li>



<li>Generations agree on the value of defined benefit plans like Colorado PERA</li>
</ul>



<hr class="wp-block-separator has-css-opacity"/>



A <a href="https://www.nirsonline.org/reports/generations/" target="_blank" rel="noreferrer noopener">recent survey</a> by the National Institute on Retirement Security found that Americans who fall into the Generation X and Millennial categories are more pessimistic than older generations about their retirement prospects and are more likely to be concerned about how the COVID-19 pandemic might have affected their retirement plans.



The survey also found the various age groups have some important points of agreement, including the overall state of retirement security and the need for greater access to retirement plans like those offered by Colorado PERA.



<h2 class="wp-block-heading">Where the generations differ in retirement outlooks</h2>



The National Institute on Retirement Security surveyed 1,203 people in December 2020. For the purpose of the survey, Millennials were defined as those who were 25 to 43 years old, Generation X as 44 to 55 years old, Baby Boomers as 56 to 74, and the Silent Generation as anyone 75 and older.



NIRS found that while the generations agree that there’s a retirement crisis in the United States, Generation X and Millennials have generally more pessimistic views of the situation. Seventy-two percent of Millennials and 59 percent of Generation X said they’re concerned about achieving a financially secure retirement, versus 43 percent of Baby Boomers and 26 percent of the Silent Generation.



Additionally, 64 percent of Millennials and 54 percent of Generation X said they’re more concerned about their retirement in light of the COVID-19 pandemic, while 42 percent of Boomers and 25 percent of the Silent Generation said the same.



The younger generations were also far more likely to have dipped into their emergency or retirement savings during the pandemic, according to the survey.



<h2 class="wp-block-heading">Where the generations agree</h2>



The <a href="https://www.nirsonline.org/reports/generations/" target="_blank" rel="noreferrer noopener">NIRS survey</a> found broad agreement across the generations on the challenges workers face while saving for retirement, with large majorities of each group saying the average worker cannot save enough money for retirement on their own.



The four generations also agree that it’s important to provide for retirees. Majorities of each group support Social Security and would be in favor of increasing contributions. Each group also agreed on the importance of defined benefit retirement plans, also known as pensions, which provide retirees with a lifetime benefit they can’t outlive. Eighty-one percent of Millennials described their views of pensions as favorable, and 68 percent of the Silent Generation said the same. All four generations agreed that every American worker should have access to a pension plan.



<h2 class="wp-block-heading">Where PERA factors in</h2>



In Colorado, the state’s largest workforce — public employees like state workers, teachers, corrections officers, snow plow drivers and others who serve our state — has access to a pension through Colorado PERA.<ins></ins>



PERA is a <a href="https://content.copera.org/survey-millennials-gen-x-especially-pessimistic-about-retirement-prospects/" target="_blank" rel="noreferrer noopener">hybrid defined benefit plan</a>, providing a defined benefit pension to most members and offering a choice between the defined benefit plan and defined contribution plan to others. Of those given the choice between the DB and DC plans, 9 out of 10 choose the DB option.



The average PERA member retires at approximately 59 years old and lives until their early 80s, receiving benefit payments from PERA every month while they’re retired. In 2020, PERA paid more than $4.2 billion in pension benefits to more than 107,000 retirees living in Colorado, with an average monthly benefit of $3,204. At a time when many workers are anxious about their ability to save enough for retirement, defined benefit plans like PERA not only provide peace of mind in retirement, they also serve as an effective recruiting tool for public employers looking to attract and retain employees.

Survey: Millennials, Gen X Especially Pessimistic About Retirement Prospects

The last week of February is <a href="https://americasavesweek.org/" target="_blank" rel="noreferrer noopener">America Saves Week</a>, and now more than ever, it’s vital to have a plan for saving money.



The events of the past year made clear the importance of having money set aside. The COVID-19 pandemic and the resulting shutdowns and layoffs threw a wrench in the finances of families across the country.



Despite the turmoil, surveys have shown that many Americans are actually <a href="https://apnorc.org/projects/economic-consequences-of-the-coronavirus-outbreak/" target="_blank" rel="noreferrer noopener">saving more money</a> and paying down debt during the pandemic. In an informal poll on PERA’s <a href="https://facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener" class="broken_link">Facebook</a> and <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a> pages, more than 200 people weighed in and nearly 60 percent of them said they, too, have been saving more.



Increasingly, PERA members know the value of participating in the voluntary PERAPlus 401(k) and 457 plans to boost their retirement savings.



In 2019, the average PERA benefit was $3,153 a month, or $37,836 a year. Reliable lifetime income is a financial cornerstone for many PERA members, but many also plan to have additional income in retirement. To do this, they participate in voluntary retirement savings plans. In 2019, more than 87,000 PERA members contributed to a PERAPlus 401(k) or <a href="https://www.copera.org/america-saves-week-five-savings-tips-for-getting-finances-on-track" target="_blank" rel="noreferrer noopener" class="broken_link">457 plan</a>, up several hundred from the year before.



The nonprofit Consumer Federation of America organizes America Saves Week every year to encourage even more people to take up good money habits and start saving for the future. Each weekday has its own theme to get people thinking about different aspects of saving.



They are:



<h2 class="wp-block-heading">Save Automatically</h2>



One of the easiest ways to save money is to do it automatically. The <a href="https://www.copera.org/recap-of-pera-boards-september-meeting" target="_blank" rel="noreferrer noopener" class="broken_link">PERAPlus 401(k) and 457 retirement plan</a>s allow members to make automatic contributions every time they get paid. Those in the plans also have the option to contribute a percentage of each paycheck, rather than a simply flat dollar amount. This makes increasing retirement savings automatic, too, as the amount of savings increases any time pay increases.



Another option for automatic saving is rounding up debit card purchases and putting that extra change into a savings account. A growing number of banks and mobile banking apps offer this hands-off saving feature.



<h2 class="wp-block-heading">Save for the Unexpected</h2>



Many experts recommend having three to six months’ worth of living expenses stashed away, but that’s easier said than done. Starting small and aiming for an emergency fund of $500 can make a big difference, as research has shown that even before the pandemic, many Americans <a href="https://www.cbsnews.com/news/most-americans-cant-afford-a-500-emergency-expense/" target="_blank" rel="noreferrer noopener">couldn’t afford an unexpected $500 expense</a>. Setting aside about $1.37 a day (roughly $42 a month) will result in savings of $500 in one year’s time.



<h2 class="wp-block-heading">Save to Retire</h2>



Members of PERA are already on the path to saving for retirement, as workers and their employers both automatically contribute to the employee’s PERA account each month. PERA invests these funds on behalf of its members in the Defined Benefit (DB) plan in order to provide a monthly benefit that retirees cannot outlive. PERA members in the Defined Contribution (DC) plan have the flexibility to choose their investments to meet their retirement goals.



The voluntary <a href="https://www.copera.org/recap-of-pera-boards-september-meeting" target="_blank" rel="noreferrer noopener" class="broken_link">PERAPlus 401(k) and 457 plan</a>s, available to those in both the DB and DC plans, offer even more flexibility with the option to set up additional retirement savings and invest that money to plan for a more secure future.



<h2 class="wp-block-heading">Save by Reducing Debt</h2>



Accrued debt like student loans and credit cards can be a big obstacle to saving more money. That’s why it’s important to make a plan to reduce debt wherever possible – a good rule of thumb is to focus on high-interest debt like credit cards first. This results in saving money on interest charges long-term.



<h2 class="wp-block-heading">Save as a Family </h2>



It’s never too early to learn about saving money! Parents should think about setting aside some time to talk to their children about money and the importance of saving. This could even be a great opportunity to set a young child up with a piggy bank, if they don’t already have one.



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