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http://www.Michigan.gov/ORS

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In this issue:

• From Anthony's Desk
• Verify your service credit
• Retirement tax changes phasing in
• SECURE Act 2.0 changes rules for retirement savings
• Budgeting, managing spending, and self control add up

From Anthony's Desk

Notes from ORS Director Anthony Estell

Welcome to your June 2023 issue of the Proactive newsletter.

Summer is near and it's almost midyear. This is a great time to review your budget and financial habits.

If you're like me, you automate your payments for many of your bills. Thirty-nine percent of people report using autopay for recurring bills, according to a 2022 consumer behavior study; with 85% of all monthly bills paid online.

While automatic payments are helpful, they can also result in unwanted expenses that can add up. If you're like me, you've signed up for a free or reduced cost trial to a subscription service so that you could watch the show that everyone was talking about.

After you saw the show, you didn't get around to cancelling. Or maybe you signed up for some membership that you aren't using anymore. And what was free turns into $4.99, $6.99, or $10.99 a month.

Maybe you're subscribing to services you no longer want or don't realize you're still subscribed to. Review your payments and charges for increased subscription and service fees. Examine your monthly statements to verify that no unauthorized charges or changes were made. A few minutes of review can result in real savings.

Be strategic and check in regularly on your automatic payments. And if you haven't yet automated your finances and bills, Michigan State University Extension offers some great tips on doing so.

Remember: Small steps taken today help make your big plans happen.

Anthony Estell, director
Michigan Office of Retirement Services

Verify your service credit

Especially if you are close to retirement in the defined benefit plan and are getting ready to retire, we recommend that you check your years of service (service credit) in miAccount. For security reasons, you will use MILogin to access miAccount.

Years of service is part of the retirement equation that determines your pension benefit. The years of service shown in miAccount are from reports that your employer(s) have submitted each pay period. Reviewing your service credit lets you verify that it's approximately what you expected, and that you will have enough service credit by your planned retirement effective date.

If you review your service credit and have questions or suspect errors, discuss it with your employer. An ORS customer service agent can explain what your record in miAccount shows, but only your employer can correct any errors, and they must submit these corrections or adjustments before your retirement effective date.

Retirement tax changes phasing in

Public Act (PA) 4 of 2023 modifies the Income Tax Act of 1967 and will roll back the state income tax on pension income. ORS will change the state tax it withholds from pension checks in October 2023.

Troopers and sergeants are eligible for the full deduction, regardless of age, beginning with implementation of PA 4, which is 90 days after the legislative session ends this year.

SECURE Act 2.0 changes rules for retirement savings

The SECURE Act 2.0 of 2022 is a federal statute signed into law Dec. 29, 2022, which enhances the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

Some provisions are in effect (as of Dec. 29, 2022) while others will go into effect in later years.

Here are some high-level changes:

Deferral to payroll cycle
Beginning immediately, when you change your deferral rate, or the percentage of compensation that is assigned to a specific retirement plan, it will take effect at the next payroll cycle. Previously, such changes took effect only on the first day of the next month.

Changes to Roth account rules in effect Jan. 1, 2024
Beginning Jan. 1, 2024, for participants whose prior-year Medicare wages exceeded $145,000, any catch-up contributions to 401(a) plans and 457(b) plans will be required to be made as Roth contributions. ORS may decide to require all catch-up contributions be made as Roth contributions, which are subject to taxes at the then-current tax rate, but can be withdrawn later without tax liability.

More details will become available as the different provisions are phased in and implemented. Keep your eye on future editions of this newsletter for more information.

Budgeting, managing spending, and self control add up

I'm living paycheck to paycheck. I don't have any money to set aside for savings, retirement, or emergencies.

This is a statement many have heard or lived through. While the well-meaning recommendations are to save more, it can be difficult to do.

Not saving enough can affect retirement security, relationships, health, and well-being.

Consider these steps to take control of your personal finances and your life:

• Identify. Understanding the psychology behind spending may provide the insights you need to look at money objectively. Living within your means factors in managing spending. Can you afford it? Is it a need or want?
• Plan. It's important to determine where your money goes. If you have a grocery list, stick to it. Find something other than shopping to entertain yourself. Impulse buys account for nearly 60% of all purchases.
• Execute. Create a budget. Use it to identify and control expenses as you make financial decisions.

Budgeting tips

The 50/30/20 approach is helpful in getting started with budgeting.

As a rule of thumb, it's suggested you:

• Save 50% of income for essential expenses (needs), such as housing, groceries, and utilities.
• Save 30% of income for non-essential expenses (wants), such as entertainment, traveling, or hobbies.
• Save 20% of income as savings, such as an emergency fund, retirement accounts, investments, and paying down debt.

Consider free budgeting tools to help.