What You Need To Know If You Plan On Retiring This Year

Michael T. Braden, MAY 4, 2024, BRADEN MEDICARE INSURANCE

WARNING SIGN SHOWING RETIREMENT AHEAD

IF YOU PLAN ON RETIRING THIS YEAR, YOU NEED TO READ THIS ARTICLE

I have spoken with almost all of my clients at some point about retirement. And, you know what, it seems insignificant, but determining when to retire really comes down to timing! If you pull the trigger too soon, you may not have all of your ducks in a row.  But if you wait too long, you find you are not enjoying work at all; in fact, the majority of those working past age 65 say the last year has been brutal.

The best thing you can do for yourself and for your family when you retire is to plan Your Retirement properly. This involves speaking with your Financial Advisor and setting a target for the money you want to have when you do retire.

I hope you enjoy this article and are motivated to put your plan into motion so you and your entire family can enjoy your Golden Years. I wanted to give everyone something to think about before you finally put your briefcase in the closet for good! 

FAST FACTS ABOUT RETIRING THIS YEAR

• Did you know that the two most significant factors in a successful retirement plan are retirement income and healthcare costs?

• Everyone should spend some time with a Medicare Broker to get a feel for what Medicare will cost in retirement.  I know you cannot be 100% accurate in projecting premiums too far in advance, but retirees need to understand the financial implications of Healthcare once they retire.  

• You need to plan for and understand Medicare effectively.  Including but not limited to your Medicare options, and knowing what sort of costs you will have with the plan you think fits you and your lifestyle the best.

• You need to ask questions and know how Social Security and IRMAA work before being surprised, and not necessarily in a good way.  

• Know that you have prepared your Estate Plan, Living Wills, and Beneficiaries for all of your investments, pensions, etc, and that you have a Long Term Care Policy in place, as well as Life Insurance or a Final Expense policy in place.

  
  

There are many factors to consider.  But the better prepared you are, the more enjoyment you will get out of life, and the better example you will set for your Children and Grandchildren. 

UNDERSTANDING MEDICARE AND HAVING A ROCK-SOLID PLAN FOR YOUR HEALTHCARE

As a Medicare broker, we understand how critical withdrawals are and the problems they can create. Medicare’s Income-Related Monthly Adjusted Amount (IRMAA) is something all Medicare Beneficiaries need to consider every year when making these income and withdrawal decisions in retirement. 

IRMAA determines the additional costs you might incur for Medicare  Part B and Part D premiums based on your modified adjusted gross income  (MAGI). Social Security looks back at your income tax two years before determining your Medicare premiums. To manage IRMAA, you want to minimize your taxable income, for example, by making Roth IRA conversions or by timing capital gains. 

Understanding the income thresholds for IRMAA is crucial. If you move into a higher income bracket, it may result in higher Medicare premiums, which you may not have accounted for when initially planning your retirement. Stay informed about these annual thresholds to help manage your income and avoid financial surprises. 

MEDICARE AND YOUR HSA PLAN 

Health Savings Accounts (HSAs) offer significant tax advantages and a unique opportunity for retirement planning. 

Before applying for Medicare, you can contribute to your HSA.  However, you cannot contribute to an HSA when you are enrolled in any part of Medicare. If you plan to enroll in Medicare at age  65, you should stop contributions before the 1st of your 65th birthday month to avoid an IRS penalty. 

If you continue to work past 65, our advice is to quit making HSA contributions 6-12  months before enrolling in Medicare. This is because your Medicare Part A will become retroactive by six months. 

Either way, your accumulated HSA funds can be used tax-free for qualified medical expenses during retirement, including Medicare, Medicare Advantage, and Medicare Part D premiums, providing a valuable financial cushion for foreseeable healthcare costs. Another often overlooked option is to use a portion of your HSA funds to pay for LTC Premiums.  Your age typically limits these amounts, but it is worth exploring.

LEARN HOW TO AVOID MEDICARE PENALTIES IN ADVANCE 

Medicare primarily covers those 65 and older, around the time most expect to retire. However, did you know that failing to enroll at the right time can lead to Medicare penalties that will never go away for the rest of your life?  Even though these amounts are typically small, you have worked too hard to give money away lightly. If you do not sign up for Medicare during your Initial Enrollment Period or do not have creditable employer coverage, delaying enrollment may result in permanent penalties you’ll have to pay in addition to your monthly premiums. 

HOW YOU CAN MAXIMIZE YOUR SOCIAL SECURITY BENEFITS 

Social Security remains a cornerstone of retirement income for many individuals. If you anticipate Social Security as your primary or only source of income in retirement, consider maximizing your Social Security benefits by delaying your claim. 

You can start receiving Social Security Benefits as soon as you turn 62. However, the longer you delay, the higher your monthly amount will be. Full Retirement Age (FRA) or beyond can significantly increase your monthly payments. 

STAY, SMART, AND EFFICIENT WITH YOUR WITHDRAWALS

Working with a financial advisor can help you develop tax-efficient withdrawal strategies. There can be tax implications when tapping into different retirement accounts, so it’s essential to understand how to optimize your income while reducing your tax liability. Especially in the early years of retirement, as you’re still adjusting to the transition, getting a handle on how and when to withdraw can be beneficial. 

 

ESTATE PLANNING

Create a clear estate plan that includes a will, power of attorney, and healthcare directives. 

If needed, discuss your intentions and the reasoning behind certain decisions with family members and loved ones to avoid potential future disputes. 

If you have two homes in different states, check with your Estate Planning Attorney and see if there are advantages to where you claim your full-time address in retirement.

LONG-TERM-CARE INSURANCE IS CRITICAL 

One area we often see slip through the cracks is the need for long-term care insurance. This type of insurance can help protect you if you need extended care in a nursing home or assisted living facility. 

If you have never had to broach this subject with your parents, trust me, you need to plan for it.  Spend a few hours understanding what the process is for qualifying for Assisted Living or Nursing Home Care.  It isn't very comforting.  

Remember, women generally outlive their husbands. They are typically the primary caregivers at home, but what happens if you are no longer there?  You need to be proactive and have a plan in place so they are secure and have options for themselves, whether that means staying at home with caregivers or eventually moving into an Assisted Living Facility.

Please don’t wait until you need it; Medicare does not cover most costs associated with assisted living, and long-term care can be expensive. Evaluate your options when beginning retirement planning to help minimize any future financial setbacks this issue could cause.

ENVISION YOUR LIFE IN RETIREMENT, THEN FOCUS AND MAKE IT HAPPEN

Ultimately, retirement planning is about maximizing your benefits and minimizing potential pitfalls. If you can implement these tips for retirement and optimize the different facets of your retirement plan, you can stay the course you have mapped out and enjoy a smooth journey throughout your retirement.

WRAPPING THINGS UP

• Each decision you make in retirement has a greater impact than when you were in your 40s. Be cautious and strategic in your decision-making. Invoke the Beach-Ball Theory so that you are looking at things from every conceivable position and angle.  Your retirement decisions must be strategic and should account for multiple factors.

•  Consider seeking advice from Medicare experts or financial advisors to optimize retirement benefits. It never hurts to meet with an experienced Medicare Broker for a conversation. Then, judge for yourself if you think you would benefit from having an expert in the field to assist you.  It will not cost you anything but a few hours of your time.  

•  Plan for potential healthcare needs and financial issues to ensure a secure retirement lifestyle. The easiest thing to say is to ask what you want from your health plan today. At age 64 or 65, the most challenging question for many people to answer is: what do you want from your Health plan when you are 70 or 80?