Retirement is a big step that involves important personal decisions. This information is intended to help you through the process as you embark on the exciting transition to retired life.
The decision to retire can be hard and stressful and sometimes sparked by several factors: reaching a specific age, hitting a savings goal, being laid off in a tumultuous job market, or health issues. But being prepared mentally and financially can make your decision easier and less stressful. Below are questions to ponder.
Retirement isn’t only about quitting your job. It’s an opportunity to have complete control over how you spend your time. Make sure you have ideas about how you will fill the eight or more hours per day you previously spent working and commuting. Some people miss the sense of purpose and friends that their job provided for them, while others finally have the time for hobbies and projects, they have been waiting years to tackle.
You must decide when to take Social Security, what health coverage you should have, where you will live and how to manage your budget and investments.
If not, it’s important to create a network. Retirees with a good network of friends are more likely to be happier than retirees who lack such a network.
A part-time job is increasingly becoming common in retirement years. Many people downshift to a job with shorter hours and less responsibility before retiring completely, while other people return to work after a break. The income, and sometimes benefits, a part-time job provides allows you to withdraw less of your retirement savings each year. Some people also find jobs they enjoy that allow them to interact with former colleagues, consult on the occasional project, or learn a new skill.
Your paychecks are about to stop so you must determine whether you’ll have sufficient income and assets, given your household’s retirement expenses and liabilities. To do that, you should create a financial plan and stress test your plan. The best way to do this is to “crunch the numbers” and create a budget. There is no better way to determine an appropriate income-replacement ratio to help you know exactly what your needs will be in retirement.
Simply put, a budget will eliminate the guess work and the worry. If you do your budget with an online tool or Empower’s calculators, you’ll more easily be able to compare your actual spending vs. projected spending. Be sure to factor changes into your budget throughout retirement and prepare for the unexpected by building in some flexibility.
Review the Retirement Timeline below for guidance.
Retirement is a big step, and this retirement timeline will help prepare you to take that step with confidence. The timeline guides you through the retirement process and highlights important topics and information you’ll need to consider.
Your first step is, admittedly, a daunting one—you need to see where you stand financially. Your retirement planning depends on it. How much have you saved, and will that money, plus Social Security and any other income, generate enough cash to cover your expenses in retirement?
You may discover you need to act. This is the time to confront the truth, knowing that there’s still time to change your investments to generate bigger returns, cut back your current spending to find more money for savings or (worst case) rethink your retirement expectations.
A qualified investment adviser who specializes in retirement planning and a tax advisor can help you plan and create the correct strategy.
What will your sources of income be in retirement? The average retiree has income from Social Security, savings, retirement accounts such as IRAs and 401(k)s and for some, pensions, stocks, bonds, annuities, mutual funds, etc.
How much can you expect from each source and for how long? After years of growing your nest egg, you now must figure out how to tap it for income that will sustain you throughout retirement. To meet that challenge, you can begin with a modest initial withdrawal—say, 3% to 4%—and then adjust that amount annually for inflation to maintain purchasing power. The “4% rule”—initially withdrawing 4% of retirement savings and then increasing that dollar amount annually by the inflation rate—has long been touted as the go-to strategy. If you want a high level of assurance, your nest egg should last at least 30 years.
You should not assume that there’s some magic formula or withdrawal rate that can generate the income you need while guaranteeing you won’t run short on savings or end up with more assets than you need at the end of your life. You must determine the correct percentage to withdrawal which could be less than or more than 3-4%.
Like it or not, in retirement you must roll with the punches and make occasional adjustments, just as you did during your working life.
Before you embark on any withdrawal strategy, you should consult a retirement plan and tax advisor for guidance. Consider the impact inflation will have on the future buying power of your dollars; how much living expenses should you hold in cash equivalents, and will you be working after you retire from your job?
Visit the Social Security Administration’s “my Social Security” website to get your benefit estimate and earnings statement. You should decide on a Social Security claiming strategy that best fits your needs. Do you take your benefits early or do you delay until your full social security retirement age or longer.
Review IMA’s retirement benefits, including your 401(k) and IMA stock you may have purchased through the ASPP. You should visit the IMA Human Resources department and Shareholder Relationship Department, so you understand these benefits before you decide to retire.
If you are married and your spouse is retired or retiring, you should incorporate into your plan your spouses’ sources of income, including Social Security benefits and other retirement benefits they may receive.
Don’t make the mistake of considering only your gross income, but make sure you understand your after-tax income (net income) and whether you can live on that amount. You shouldn’t compare the amount of your retirement benefits to your take-home pay because your retirement benefits, from a pension, Social Security, and/or you 401(k), 403(b), 457 and the like are in gross dollars.
The most important thing to remember is that over the course of a long retirement any number of things—market setbacks, unexpected expenses, higher-than-expected inflation—can wreak havoc with even the best-laid retirement income plan. Stay flexible and be ready to adjust your spending as conditions require.
New retirees should expect a swing in expense patterns. During the early years of retirement, expenses may be near pre-retirement levels or even higher as you conquer all those travel plans or projects you put off until retirement. But once your retirement routine kicks in, expenses should drop over time.
Health care costs including premiums and out-of-pocket expenses may drive expenses up so you must be prepared for this with prudent planning. Long term care needs should be considered when building your plan.
If you love to travel, you should try to incorporate those expenses into your plan. Traveling can be expensive so plan appropriately.
For those who have had an interesting and busy work life should identify the things you’ve always wanted to do and how you will get started is important— whether it’s launching a new business, having deeper community involvement or developing new skills. These types of items can add fulfillment and excitement to your retirement planning process, but make sure you are accounting for any expenses that may arise from your new adventures.
Where will you live? Most of us plan to stay in our current homes and communities when we retire, but there might be practical reasons to move. If your home is too big, too hard to maintain and not suitable should you become impaired, you might consider downsizing to a newer, more accessible home in a less-expensive area, and use the money to supplement your retirement nest egg. Even if moving is not on the radar, it’s helpful to think through your changing housing needs as you age.
You should plan for different phases of retirement. For couples, there are two general phases in retirement for which to plan. One, when both are living, and two, when either one is the survivor. If people stopped to think about this for a moment, they’d realize their retirement choices can have a big effect on the second retirement era when only one person is living. Some retirement, mainly pension plans, can have different levels of survivor benefits ranging from 100% to 0%. You should also consider Social Security benefits and how to maximize them for the second retirement era.
You should determine whether you’ll have enough income to support your desired lifestyle in retirement—before you retire. This is the time where you stress test your plan. Chances are you may have less to spend in retirement from all sources compared to working, so this is when you practice the transition.
If you can successfully live on less over a period of time – say six to 12 months, you’ve shown yourself you can retire as planned. If you can’t, you need to work longer and keep saving.
Start thinking about where you are going to live. If you own your home, now is the time to take a good look at your house. Whether you’re thinking about selling it to downsize or determined to stay in it forever, it may need some updating. Better to pay for it now while you’re drawing a salary.
You might also look at refinancing your mortgage or even opening a home equity line of credit, which will be easier to do while you’re still earning income. Your goal should ultimately be to reduce debt, not take on more of it, but a line of credit could come in handy in an emergency.
Maybe a retirement community someday. If this appeals to you, start researching communities now even if you may not move into one until you are in your 70s. You’ll find there’s a wide variety of amenities and price ranges, and the most popular ones have waiting lists that you can join with a refundable deposit.
When thinking about your later years, many are rightly concerned about long-term care. This is when a senior needs full-time help to do even the most basic activities, such as dressing, bathing and eating. The national median cost for long-term care can range from $50,000 to $100,000, according to the Genworth Cost of Care Survey – here you can check cost for your state. Many people purchase long-term care insurance, and some will let you transition without an increase in your monthly fee, others charge more as your needs increase.
Before you take on the expense in your budget for a long-term-care policy, considering whether you truly need it. Working with a financial planner or crunching the numbers yourself, you may find you have enough assets to pay for those expenses without insurance. You need to think about how long you may need a policy, what type of coverage and how much coverage do you need as these policies can be expensive.
This is also the time to create a will or trust or review yours if you already have them established. If you don’t have one yet, get it done this year. It makes things much easier for your heirs when you die. Depending on the complexity of your estate and where you live, it should cost $1,000 to $5,000 to prepare. Also, make sure you have established a health directorate, so your wishes are clear to your family and doctors.
This is the year to contemplate what retirement will mean for you. You may want to travel a bit or a lot, and maybe go someplace warm for the winter months. But what about your day-to-day existence? What will you do with yourself?
Don’t fail to consider how you will feel once you are removed from the workforce. Work can be stressful, but it can also be rewarding to feel important and have a sense of accomplishment and belonging. This is when you should explore taking classes, volunteering, joining a social group or exploring hobbies you enjoy while still working. Figure out what makes your bucket full.
You may have potentially tax-saving opportunities early in retirement. It’s possible your taxable income will drop by a lot in the calendar year after you stop working. If you don’t start taking Social Security payments and withdrawals from your tax-deferred individual retirement account until later years, you may find yourself in the lower tax bracket for a while.
You could take advantage of this by converting some of the money into your tax-deferred IRA or 401(k) plan into a Roth IRA during this window. Following a Roth conversion strategy requires some planning. It can be complex, so you should discuss it with a tax professional. You’ll owe tax on the money as it comes out of your IRA, but you may be in a lower tax bracket during this first year. Once it converts to a Roth, you won’t owe any federal tax when you take it out later. And unlike traditional IRAs, which require minimum annual withdrawals at a certain age, Roth IRAs allows you to take the money out anytime, tax free, if you’ve held the Roth IRA for five years or more. Some people start a Roth IRA sooner to cover the five-year period so if you have 401(k) Roth investments, they can roll without worry about a five-year time period before you can take distributions tax free.
You’ll need to have access to enough cash to cover your living expenses while you’re in this low-income, low-tax-bracket period. If you’re going to generate that cash by selling stocks, mutual funds or other investments that have appreciated a lot over the years, see if you can hold off on the sale until the calendar year after you’ve retired. There’s a chance you will owe little or no federal capital gains tax on it.
Again, it’s best to consult a financial advisor and tax specialist before you take on any withdrawal strategy.
If you have not already done so, create your financial retirement budget and start stress testing your plan.
Looking for ways to reduce spending – do you really need Netflix, Hulu, Disney+, Paramount+, and Starbucks each day?
Discuss your current benefits with your Human Resources representative for you and your spouse. You need to understand what benefits will be available to you after retirement and how they will affect your financial plan. You also should contemplate what benefits to enroll in at your next open enrollment period.
This is also a good time to figure out your health insurance needs. Medicare won’t start until age 65, and you can learn about its different coverage levels (and what they cost) at medicare.gov. If you plan to retire before you are eligible for Medicare at age 65, you can investigate COBRA, a program that allows you to continue your employer coverage for 18 months after you leave employment. It’s also important to research medical plans and costs for your area on the ACA healthcare marketplace.
You may contact Leigh Bennett, IMA Medicare Advisory Services Sales Manager at no cost to help find the correct Medicare plan.
You could explore a reverse mortgage if you’re planning to stay in your current home. This is where you hand over the equity in your home to a lender and get regular monthly payments in return. But approach this option with care as they should be used only if you need a line of defense. You’ll need to continue to maintain the home and pay the property tax, and you must understand what will happen if you leave the home. The bank may get it, not your heirs.
Now, take another look at your investment portfolio. If your savings appear on target to deliver the income you need in retirement, many advisers recommend pulling back on your stock holdings and adding cash and other short-term investments as your final day at work nears. Maybe allocate a year’s worth of expenses or more to cash, certificates of deposit or short-term bonds, if possible.
It’s not that you suddenly must become an ultraconservative investor. You still need your portfolio to grow over the next couple of decades or more, and that means exposure to stocks. But should the market take a big hit right as you retire, you don’t want to be selling stocks or long-term bonds at a loss to cover your expenses.
Think about somebody who was due to retire in 2008 and was basing their assumptions from 2007. It would have been a very sour, negative surprise that could have upended their retirement plan strategy and withdrawal rate.
Again, working with an adviser a few years before retiring can help you significantly with your plan. And, yes, you can find a financial planner even if you are not rich.
This is when you should begin discussions with your employer about your retirement date. Leaving your job with everyone completely trained to cover your responsibilities will be satisfying for you and a great way to end your career.
The time has come for you to retire, and all the retirement parties are over, you have turned in your ID card to the building – now what? It’s now time to enjoy your retirement years. But don’t forget you need to review your plan annually to make sure you are still on track for the long haul and adjust as necessary.
This package contains important information from the IMA Financial Group, Inc., regarding the loss of your benefit(s) and your rights pertaining to those benefit(s) because of your separation from IMA. It is important that you review this information carefully.
If you were enrolled in the IMA medical, dental, and vision plans, your health insurance coverage will end on the last day of the month in which you terminate employment. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan. Coverage may be continued for limited periods of time and under certain circumstances. For example: voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.
COBRA provides you with the right to continue medical, dental and vision coverage for up to 18 months because of your separation for yourself and your dependents enrolled in these plans prior to separation. A longer period may be obtained under certain circumstances. You will receive a complete guide to your COBRA rights from IMAs Third-Party Administrator, within fourteen (14) days of your coverage end date. Please review the information in its entirety and then complete the COBRA application(s) for continuation coverage if you wish to enroll. You will have sixty (60) days from your benefits termination date to enroll in COBRA and then forty-five (45) days to make the first payment. Please note: Claims and prescription coverage will remain in a terminated status until an election is made and all COBRA premiums are paid through the current month.
If you were enrolled in the IMA Health Care Flexible Spending Account (HCFSA) plan, coverage will end on your termination date. Continuation of a HCFSA may only continue through the end of the year in which you separate employment and if you have not been reimbursed more than you have contributed. If you are eligible for this COBRA continuation benefit, please look for information from IMA’s administrator to continue coverage.
Additionally, if you were enrolled in the HCFSA and you choose not to continue participation in the HCFSA, you can continue to submit claims for 90-days after your termination date, for those expenses incurred on or prior to the date your coverage terminated.
If you were enrolled in the IMA Dependent Care Flexible Spending Account (DCFSA) plan, you can continue to submit claims for 90-days after your termination date, for those expenses incurred on or prior to the date your coverage terminated.
If you were enrolled in a Health Savings Account (HSA) through HealthEquity, HealthEquity partners with Wells Fargo as the custodian of your account. As the account owner, your HSA is completely portable, meaning you keep your HSA even when you change jobs, become unemployed, or move to another state. The funds in your account are yours to keep. For help with accessing or transferring your funds, you may contact HealthEquity at 1.866.346.5800.
You may elect one of the following options:
If you have a balance in your IMA 401(k) account, Empower Retirement will mail you a letter that explains your 401(k) distribution options. An electronic version of the letter can be found on the Empower site: https://participant.empower-retirement.com/participant/#/login?accu=Empower under Account/Statements and Documents. In addition, here is a link that walks you through your options: https://www.empower.com/options. If you would like your paperwork sent as soon as possible, you may contact Empower Retirement at 1.800-338-4015 and request distribution and/or rollover paperwork. The IMA 401(k) plan number is 335611-01. The options are as follows:
If you have an outstanding loan and terminate employment prior to the end of the loan term you will be required to pay off the loan at severance of employment as provided by the plan unless arrangements are made to continue repaying via coupons by contacting Empower at 1.800.338.4015. You may avoid treatment of an unpaid loan as a deemed distribution and reporting of income to the IRS by paying the loan balance by the end of the grace period. Non-payment will force a deemed distribution and reporting of taxable income for the year the deemed distribution occurs.
Loans are in arrears and delinquent when any payment is missed. A late loan payment notice will be issued after the end of the calendar quarter in which the payment is delinquent. If the loan is not paid in full by the end of the calendar quarter after the calendar quarter in which a payment is first delinquent, the loan will be in default. In that event, the entire outstanding loan balance, consisting of the missed payments, remaining principal and all accrued but unpaid interest, will be reported to the IRS as taxable income on a Form 1099-R for the year in which the loan default occurs. Should you wish to continue paying your loan payments to Empower, please contact them at 1.800.338.4015 to coordinate your payments to keep them from going delinquent.
If you were a participant in the terminated IMA Stock Bonus Plan (SBP), your stock in IMA Financial Group, Inc. (IMA) formerly held in the SBP was distributed to a self-directed IRA at Inspira Financial in August of 2018. Your IMA shares held in the IRA at Inspira Financial are subject to the restrictions and conditions set forth in IMA’s Articles of Incorporation and the Associate Shareholder Agreement, including IMA’s discretionary right to redeem those shares. Upon IMA’s election to redeem your shares, you will be contacted by IMA’s Shareholder Relations department and provided all information needed to complete the redemption.
Once the redemption of your IMA shares is complete, you should contact Inspira Financial at 1.800.618.6177 or via email at inst@inspirafinancial.com for instructions regarding how to roll your proceeds to your own personal IRA outside of IF, invest your current balance in your current IF account or take a taxable distribution of your sale proceeds from your IF account.
If you have not already done so, reach out to Inspira Financial to update your email to your personal email address instead of your IMA email address.
Should you have questions, please contact the IMA’s Shareholder Relations Department at 1.316.267.9221.
If you purchased IMA common stock through the IMA Associate Stock Purchase Plan your IMA stock or received stock through the Long-Term Incentive Program your IMA stock is subject to IMA’s discretionary right of redemption as set forth in the Associate Shareholder Agreement. Upon IMA’s election to redeem your shares, you will be contacted by IMA’s Shareholder Relations department and provided all information needed to complete the redemption.
If you have any questions, please contact the IMA’s Shareholder Relations Department at 1.316.267.9221.
Long-Term and Short-Term Disability coverages are not eligible for conversion or portability. Your coverage under these plans ends on your date of separation.
You have thirty-one (31) days from the end of the month in which you terminate employment to complete the conversion or port your coverage for which you are eligible. You will be mailed the appropriate paperwork to continue coverage from Lincoln Financial Group shortly after your separation date. If you have any questions regarding your conversion or portability rights, please contact Lincoln Financial Group at 1.877.321.1015.
You have thirty-one (31) days from the end of the month in which you separate employment to complete the conversion or port your coverage for which you are eligible. If you have any questions regarding your conversion or portability rights, please contact The Lincoln Financial Group port/conversion team at 1.877.321.1015.
If you were enrolled in the IMA UNUM LTC plan, you have thirty-one (31) days from the end of the month in which you separate employment to request portable coverage for which you are eligible. If you were enrolled in the PS&F UNUM LTC plan, you have thirty-one (31) days from the date of termination to request portable coverage for which you are eligible. This means that your election to continue must be postmarked no later than midnight on the date listed above. UNUM will bill you directly to your home for the premium.
You and your family members can continue to access EFAP through Headspace for 7 days after your employment termination. If you want to continue access to Headspace after this period, you can enroll in a consumer plan. For questions or to enroll in a consumer plan please contact 1.855.420.0734.
If enrolled, your ID Watchdog coverage will end on the date of your employment termination. Lock in the same low monthly rate and features of your subscription by contacting ID Watchdog to set up autopay. Call 1.866.513.1518 24 hours a day, 7 days a week to update your billing information to a credit or debit card.
If you or your spouse/partner are enrolled in a Maven program, you will be able to finish the program however, activating a new Maven program will not be available. If you have questions or need customer service support, please email support@mavenclinic.com.
Medicare is administered by the Centers for Medicare and Medicaid Services (CMS) and is health insurance for Americans aged 65 and older, but also for some younger people with disability status as determined by the Social Security Administration, including people with end stage renal disease and amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease). Every year, Medicare’s open enrollment period is October 15 – December 7.
Medicare coverage starts the month you turn 65. (If your birthday is on the first of the month, coverage starts the month before you turn 65.) It is important that you visit medicare.gov to understand when you first become eligible, how much you will may pay for Medicare, what Social Security benefits have to do with getting Medicare and much more.
You can download/print the “Medicare and You” handbook which will explain Medicare benefits, the cost, your rights and protections, answer to common questions and much more. The handbook is available in many different formats and languages, including large print, braille, and more.
Medicare is different from Medicaid which is a joint federal and state program that provides health coverage for some people with limited income and resources, what Social Security benefits have to do with getting Medicare and much more.
Medicare is divided into four Parts: A, B, C and D. The specific details on these four Parts are as follows:
Unlike Original Medicare (Part A and B), Part D coverage is not standardized (though it is highly regulated by the Centers for Medicare and Medicaid Services (CMS)). Plans choose which drugs they wish to cover but must cover at least two drugs in many different categories and cover all or “substantially all” drugs in the following protected classes of drugs: anti-cancer; anti-psychotic; anti-convulsant, anti-depressants, immuno-suppressant, and HIV and AIDS drugs. The plans can also specify with CMS approval at what level (or tier) they wish to cover it and are encouraged to use step therapy.
Some drugs are excluded from coverage altogether and Part D plans that cover excluded drugs are not allowed to pass those costs on to Medicare, and plans are required to repay CMS if they are found to have billed Medicare in these cases.
Visit Medicare (medicare.gov) for more information on creating an account; finding health and drug plans; finding care providers, hospitals and nursing homes and much more.
You can also contact Leigh Bennett, IMA Medicare Advisory Services Sales Manager for free with help finding the correct Medicare plan.
Medicaid is the largest source of funding for free medical and health-related services for people and those with disabilities who have low income and resources in the United States. The program is partially funded and primarily managed by state governments. The federal government sets baseline standards for state Medicaid programs and provides a significant portion of their funding but states also have wide latitude in determining eligibility and benefits. In general, Medicaid recipients must be U.S. citizens or qualified non-citizens, and may include low-income adults, their children, and people with certain disabilities.
Medicaid was established in 1965 and was significantly expanded by the Affordable Care Act (ACA) passed in 2010. In most states, anyone with income up to 138% of the federal poverty line qualifies for Medicaid coverage under the provisions of the ACA. In 2012, a Supreme Court decision established that states may continue to use pre-ACA Medicaid eligibility standards and receive previously established levels of federal Medicaid funding. For states that make that choice, income limits may be significantly lower, and able-bodied adults may not be eligible for Medicaid at all.
Medicaid also covers long-term services and support, including both nursing home care and home- and community-based services, for those with low incomes and minimal assets; the exact qualifications vary by state.
Medicaid covers healthcare costs for people with low incomes, while Medicare is a universal program providing health coverage for the elderly. Medicaid offers elder care benefits not normally covered by Medicare, including nursing home care and personal care services. There are also dual health plans for people who have both Medicaid and Medicare.
The Children’s Health Insurance Program (CHIP) is a program administered by the Department of Health and Human Services and provides matching funds to states for health insurance to families with children. The program was designed to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid.
Visit Medicaid (medicaid.gov) for more information on creating an account, resources for States, CHIP and much more.
The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act (PPACA) was a Federal statute enacted by the Congress and signed into law by President Barack Obama on March 23, 2010. The ACA mandated that health insurance exchanges be provided for each state. The exchanges are regulated, largely online marketplaces, administered by either federal or state governments, where individuals, families and small businesses can purchase private insurance plans. Some exchanges also provide access to Medicaid.
States that set up their own exchanges have some discretion on standards and prices. For example, states approve plans for sale and thereby influence (through negotiations) prices. They can impose additional coverage requirements and can make the federal government responsible for operating their exchanges.
Open enrollment for health insurance plans normally begins November 1 and ends on January 15. This is when you can buy individual and family insurance plans from the Affordable Care Act (ACA) marketplace or your state’s marketplace.
Caregiving can be a wonderful but also stressful and physically demanding experience for those who have not chosen caregiving as their career. Being a caregiver means providing support to someone in need, often a family member or friend who is experiencing illness, disability, or challenges associated with aging. Caregivers play a crucial role in assisting individuals with daily activities of which some are listed below.
Caregiving is not something everyone can do even if you love the person who needs care. The responsibilities on families, who are being asked to shoulder greater care burdens for longer periods of time can have health risks including mental health risk which can hinder the ability to provide quality care. This can affect the quality of life of both the caregiver and care receivers. Below are links to helpful resources.
https://www.caregiveraction.org/
https://www.aarp.org/caregiving/
https://www.hhs.gov/programs/providers-and-facilities/resources-for-caregivers/index.html
