March 27, 2009

Your Retirement - Georgia's TRS and AIG VALIC

I wanted to try and explain something that I have noticed for the past few weeks. I have seen an increasing number of e-mails and searches regarding the Georgia Teacher Retirement System (TRS) and AIG VALIC.

For some reason, most people seem to be thinking that the Georgia TRS and AIG VALIC have some relationship. They are not one in the same, and one has nothing to do with the other. I tried to explain this to someone yesterday on the phone, and the example that they understood was the following:

Think of your retirement as a house. You have water, natural gas, and electricity to run your house. If there is a problem with one of those companies, it does not effect the others. If there is a water problem, the water company takes care of it, etc., etc. So think of Social Security as water, AIG VALIC as natural gas, and TRS as electricity. They are completely independent of each other. This is not to say that they may not all have their own issues, but the relationship between them is only at your level.

TRS may have made investments in AIG, but this is not the same as a AIG VALIC account. That investment would affect the overall value of the TRS fund, but your benefit is based completely on a published list of variables. According to previous annual reports, the TRS fund is very diversified betweens various stocks and bonds. Additionally, its holdings in any one stock are only small percentage wise investments.

  • Remember your benefit from TRS is guaranteed by Georgia state law, and you can call TRS to discuss with them your projected benefits or download your most recent TRS statement via their website.
  • Your AIG VALIC account has only the money within the account (and any future contributions and gains/losses). Any funds that you eventually withdraw from the account will come from there.
I hope this helps, but if there are additional questions, please e-mail me.


Lee Brewer Jones said...

An AAUP representative told a group of Board of Regents faculty Thursday that legislation is pending which would allow ORP participants to join TRS and "buy" prior years of service. Do you have any information about such legislation, its chances of passing, and what sort of formula would be used for buying years? Thanks, and I will look forward to whatever you may be able to say.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...


Thanks for your comment, and no... I have not heard about this at all. I know a number of people though that would be interested in something along these lines, so I'll try to do some research and post something soon.

As for the formula, I would imagine that they would use something along the lines of purchasing out-of-state service, but that would remain to be seen. I also have to believe that they would allow someone to purchase more than the 10 year out-of-state service max.

Thanks for letting me know about this development. I'll try to have something in a few days.