Wednesday, May 28, 2014

Demystifying The Annuity Savings Accumulation Fund.


One of the nice perks that New York City teachers get is the Annuity Savings Accumulation Fund, known as the ASAF.  However, its also a fund that most teachers don't know they have and how it operates.  The ASAF is created for each teacher that has completed step 8b of the salary scale.  Every year the DOE gives $400 to the teacher's ASAF and the City chips in by crediting the total account balance with an annual interest rate of 5%.
 
For example, let's take a hypothetical teacher who is scheduled to retire after thirty years of teaching.  Assume that the teacher started at salary step 1A of the teachers salary scale and completed 8b after eight years.  That means that for the last twenty two years of employment, the teacher received $400 from the DOE for a total of $8,800.  However, when you include the City's 5% interest rate contribution, the total ASAF account balance is nearly doubled to $16,200!

The good news about the ASAF doesn't stop there either.  Once the hypothetical thirty year teacher retires, the ASAF account balance is annuitized and depending on the age of the teacher when he or she retires, the teacher will get between $1,300 to a bit over $2,000 annual pension supplement for as long as the teacher lives. This pension supplement will be included as part of the pension check. Of course the numbers will be different for different lengths of employment.

The table below shows the different age-based correction factor used to determine the annual ASAF pension supplement for the hypothetical thirty year teacher used in this post.

Thirty Year Teacher Retires With $16,200 In The ASAF

Age.......................Multiplier...............Pension Supplement

55............................0.0843...........................$1,366
60............................0.0893...........................$1,447
65............................0.1042...........................$1,688
70............................0.1259...........................$2,040

Hopefully, this post has demystified the puzzling  ASAF and shows its importance in providing extra pension income in retirement.  As Mr Spock states "Live long and prosper" and the ASAF is a significant part of making that happen.

This is the first article about how our retirement and pension system works and I hope this is informative to all who are fortunate enough to retire with a nice chunk of money.

15 comments:

nyamyj said...

Thank you, i never knew that! I needed something to cheer me up since the new contract came out. Maybe we will get lucky and it won't be ratified. One can hope.

Anonymous said...

MORE= less

Anonymous said...

One would question can a teacher last ten??twenty??thirty years??anymore???
good info chaz just difficult times in this preofession

Anonymous said...

The powers that be are turning it into a "peace corp" profession...3 years at most and out...no security... no pension...

Anonymous said...

LESS = unity

Anonymous said...

The union is morphing itself into something less. Less than a union, more like a racket. It reminds me of the carpenters union 608 a few years ago. The union heads are all in prison now. Perhaps its time the UFT is investigated.

live football said...

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Anonymous said...

Chaz,
If Tier6 makes you work until 63 years old, what is the message when they don't want teachers to stay in this profession for a long period? How can you avoid staying in for a long time if you have to go to 63? I mean if you start teaching at 23, you would have to do 40 years which is what the state is saying, yet they're complaining if you actually stick around? What's going on? They can't have it both ways. Why are teachers the only civil service group being singled out? Does everyone realize that Sanitation workers are making 120K a year picking up garbage with no education credits, where we have a Bachelors, Masters, and Beyond?

Anonymous said...

MORE=Democracy
UNITY=Dictatorship

Anonymous said...

Chaz thanks for this valuable information. I didn't exactly know how it was used.

Thanks again.

Anonymous said...

Helpful and interesting info! I am just past year 2 of my career, but at 8B in the salary schedule thanks to the DOE accepting previous work experience. After reading this I checked TRS and the money has started to coming into the ASAF!

Now if I can only hold out to collect at the end!

Anonymous said...

I have read reports that many teachers are willing to retire early with a pension reduction by relying on their TDA. They are aware how severely they will be penalized with their reduction in pension, but EASILY make up for it with their HUGE TDA that they started let's say 20 years ago when we were getting 8.25%. Even when it decreased to 7%, people made serious money.

When you contribute 15-20% to TDA, it is quite easy to accumulate 250K over a 20 year period by keeping it all in fixed. So when you have a 250K cushion to rely on, it is understandable why so many teachers are willing to jump ship early even if it means a pension reduction. Thank Gd for the TDA!

retired teacher said...

I don't think that a lot of teachers know a lot about the pension system. At retirement there are three sources of income -first there fixed part, based on years service. Secondly is the annuity (ASF or ASAF ) depending on tier and the TDA. It is possible to annuitize the TDA if you are 59 and a half hears old.

The fixed percentage for the TDA is currently 7% - which is phenominal.

The pension is a very technical subject. No two pensions are the same and there is a lot of misinformation floating around. The UFT used to publish pension manuals. I don't know if they still do - they may be available on line. Ask your chapter leader to find out if there are manuals currently in print.

every teacher should avail themselves of the free annual pension consultation offered by the union. Also they run summer workshops and the UFT Chapter Leader might be able to get a UFT pension speaker to come to your building.

The union never advises people on how to invent or what options to choose. There are a lot of charlatan pension "analysts" out there who charge for their services. One has to be careful listing to any advice. If you educate yourself you can then decide for yourself what is best.

Chaz said...

Anon 10:07

I certainly agree with you. That's why I am going to post weekly information on our benefits and retirement system so that my readers can be informed.

OneMoreYearToGo said...

Anon 8:37 is right. Why or how would anyone last 20 to 30 years the way things are right now? The ASAF is nice if you can last. Not likely, however.