Retirement Revealed

Understanding how the results of the 2024 election could affect your decisions in retirement.

It’s natural to wonder if political shifts will impact your financial decisions. Many are predicting major changes in legislation and economic strategy due to the results of the 2024 election, and while there is merit in anticipating major changes, I find that there are some general principles of managing your retirement plan that can help you navigate the uncertainties that come with changing winds of politics. With that said, let’s dive into some of the most common questions I’ve been hearing related to finances out of the 2024 election.

Why Elections Don’t Change Core Investment Principles

Each election season, it’s easy to get swept up in the latest political shifts. Maybe the stock market reacts positively or negatively, but does that mean you should make knee-jerk changes to your portfolio? Not necessarily. I often say this on my podcast and to my clients: the key to investment success isn’t trying to predict market swings based on elections or political figures—it’s about aligning your portfolio with your needs and timeframe.

Consider this: if you’re looking to use your funds in the short term, your investments should reflect that, emphasizing stability over volatility. Long-term needs, on the other hand, can typically tolerate a bit more fluctuation because they have more time to recover from market swings. Elections, presidents, and political shifts come and go, but your personal timeline and financial goals remain constant.

The Fed, Interest Rates, and Presidential Influence

I often get asked how presidential elections and Federal Reserve decisions might interact and affect the economy. In the latest example, we saw the Fed drop interest rates recently, coinciding with the election. People wonder if this shift is tied to who holds office, but in reality, the Federal Reserve operates independently. Fed Chair Powell, for instance, has firmly asserted the Fed’s independence from political influence. The Fed’s mission is to focus on economic stability and not to sway with each political wind.

What does this mean for you as an investor? It reinforces the idea that you shouldn’t base your decisions on political shifts. Whether a president wants to cut taxes or pursue particular economic policies, your portfolio’s health is still more dependent on your timeline and objectives.

Social Security: Will It Be There for You?

Social Security will likely go under the microscope in the next few years, particularly in relation to the taxation of benefits. Recent conversations have raised concerns about potential changes to Social Security taxes, especially with the suggestion that taxes could be lowered or even eliminated on benefits. While lower taxes sound appealing at first, they come with trade-offs. If taxes on Social Security benefits were reduced to zero, for example, that would cut about $50 billion annually from the Social Security trust fund—a significant portion of its funding.

If Social Security taxes decrease, it could mean fewer funds for future benefits, impacting the program’s sustainability. While no one can predict the future, the key takeaway here is that while tax reductions may have personal appeal, it’s essential to think about the policy implications. 

Should You Be Doing a Roth Conversion Now?

With the election results, many people are wondering if they should speed up their plans to convert to a Roth IRA. Historically low tax rates, thanks to recent policy changes, have made Roth conversions attractive. However, if recent election results signal that the current administration may extend these lower rates, the urgency to convert may diminish.

Still, a Roth conversion can provide substantial benefits if it aligns with your tax strategy. For many retirees, spreading out Roth conversions over multiple years can minimize tax impact. But remember—financial planning software and tax calculators work on assumptions, which often don’t account for policy changes. Flexibility and the ability to adjust over time will always serve you well.

Maximizing Your 401(k) Contributions

Another common post-election topic revolves around new contribution limits for 401(k) plans. For 2024, contribution limits have increased slightly. If you’re aiming to max out your 401(k), it’s worth recalculating your contributions to take advantage of this extra room. And for those between ages 60 and 63, there’s a new opportunity to put aside even more with catch-up contributions. However, while an extra $500 or so may not seem significant, compounding can make a difference over time, so don’t overlook these adjustments if you’re nearing retirement.

The Proposed Change to Capital Gains Tax and Inflation Indexing

If you’ve heard discussions about the potential for capital gains to be indexed to inflation, you might be wondering how this could affect your portfolio. This proposal aims to adjust the taxable amount on long-term investments by accounting for inflation. For example, if you bought a stock for $10 and sold it for $20 after ten years, indexing for inflation might mean that only $7 of that $10 increase would be taxed as a capital gain.

If enacted, this could benefit investors by reducing the tax burden on long-term gains, but it’s still just a proposal. My advice here is simple: let’s wait until we see concrete policy before making changes to your investment approach. Holding onto stocks for the long term, regardless, continues to be a beneficial strategy.

Keep Politics Out of Your Portfolio

Finally, let’s talk about the elephant in the room: political affiliation. Time and again, I’ve seen clients worried about market performance based on who wins an election. Yet history has shown that the market has performed relatively consistently over time, regardless of the president. So rather than making decisions based on who’s in office, focus on what matters to you: when you need the money, the type of risk you’re comfortable with, and what you hope to achieve.

This election cycle has been no different from the last in terms of stirring up financial worries. But staying steady and focusing on your plan has always been the winning approach for those in or approaching retirement. Elections are just a moment in time, while retirement requires a well-thought-out strategy that you can maintain through all of them.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

– “TRUMP WINS, NOW WHAT FOR YOUR INVESTMENTS?” – Mr. Retirement YouTube  – “Why You Need to Rebalance Your Investments (2024)” – Mr. Retirement YouTube

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

5 Steps to prepare your savings within 12 months of your retirement.

When you’re on the verge of retirement, say within the next 12 months, you might think you’ve done everything you need to do: saving diligently, investing wisely, and maybe even attending a webinar or two. But have you truly prepared for the retirement you want? Based on real-life examples from my financial planning practice, I’ve found that many retirees wait too long to make crucial decisions about their savings and investments. Today, I’ll share some insights to help you avoid common pitfalls and ensure you’re ready for retirement when the time comes.

Waiting to Plan Can Cost You

Recently, I looked at data from our retirement webinars and noticed something surprising: most people attend our webinars after they’ve retired, not before. While it’s a good idea for anyone to join these webinars regardless of where you’re at in the retirement process, doing so before you retire could make a significant difference in the quality and security of your retirement.

If you’re planning to retire next year, you should start taking concrete steps now. Market fluctuations, unexpected health issues, or even company layoffs could drastically alter your timeline. Proactive planning is essential, especially when you’re this close to retiring.

Lessons from Real-Life Retirees

Let me share two real stories from my clients that illustrate the importance of early retirement planning. In the fall of 2019, I met with a gentleman who was planning to retire on April 1, 2020. He liked our five-step retirement plan but decided to wait until he officially retired to start working with us. Unfortunately, just before his planned retirement date, the stock market dropped by 12% in a single day, and his portfolio took a significant hit. In March 2020, the market crash coincided with the onset of the COVID-19 pandemic, further complicating his situation. He contracted COVID-19 and ended up postponing his retirement every year—for 4 years. Starting his retirement plan earlier would have likely reduced the impact of the market downturn on his retirement savings and helped him hit his retirement target.

Another couple I worked with in 2019 were also approaching retirement, about two years out. After reviewing their portfolio, we discovered that they were taking on more risk than they realized. We adjusted their investments, cutting their exposure to market volatility by half. When the market dropped in March 2020, they were able to sustain their retirement plan because of the work we had done to restructure their portfolio. They stayed on course and retired exactly on time, enjoying their post-retirement life with grandkids and the retirement income they had planned for.

Don’t Wait for a Perfect Moment—It May Never Come

One of the biggest mistakes I see is people waiting for the “perfect” retirement date or market condition before they take action. A couple of my clients were planning to retire at the end of 2020, hoping to continue growing their 401(k)s until the final day. But when the market dropped by 30% in March 2020, they panicked, moved their investments into cash, and were then laid off in June. Then they called me in July, after they were forced to retire, after the market dropped, after they moved to cash and missed on the market recovery. These clients missed out on market recovery because they had no plan in place to adjust their investments as they neared retirement. Instead of trying to time the market or wait until the last minute, take action now to safeguard your savings.

The Retirement Red Zone: Why Timing Is Critical

If you’re within 10 years of retirement, you’re in what’s often called the “retirement red zone.” This period, which extends five years before and five years after your retirement date, is when market volatility can have the most significant impact on your retirement. During this time, a sudden market drop can lead to substantial losses that could take years to recover from, affecting the income you’ll have in retirement. By planning ahead and adjusting your portfolio, you can reduce the likelihood of such risks.

Key Steps for Pre-Retirees

So, what should you do if you’re planning to retire in the next 12 months? Here are five critical steps to take:

Estimate Your Retirement Spending (SPEND)
One of the easiest ways to estimate how much you’ll spend in retirement is by looking at your current take-home pay. Whatever shows up in your checking account now is likely what you’ll spend in retirement. Adjust this number for any anticipated changes, like paying off a mortgage or increased healthcare costs. Review Your Income Sources (MAKE)
Retirement doesn’t mean you stop earning money. You’ll have Social Security, and possibly a pension or income from investments. Make sure to evaluate how you can maximize these sources. For example, delaying Social Security can increase your monthly benefit, especially if the higher earner in your household waits to claim. Plan for Taxes (KEEP)
Taxes in retirement can be complicated, and they often fluctuate depending on your income level. Develop a strategy to manage taxes over your lifetime, rather than focusing on reducing them in any given year. This way, you’ll keep more of your savings in the long run. Reassess Your Investment Strategy (INVEST)
As you approach retirement, it’s essential to rethink your investment strategy. You’ll no longer have the luxury of time to recover from market downturns. Consider dividing your assets into short-term and long-term buckets. Money you’ll need in the next few years should be in more stable, low-risk investments, while funds for later years can remain in growth-oriented assets. Plan Your Legacy (LEAVE)
Finally, think about what you’ll leave behind. This includes not only financial assets for your loved ones but also a plan for managing any remaining debts or expenses. Planning your estate properly ensures that your legacy benefits your heirs without complications.

Start Your Planning Now

If you’re planning to retire soon, don’t wait until your retirement date to start making these critical decisions. By planning ahead, you’ll have peace of mind knowing that your savings are protected, and you’re set up for a successful retirement. For more guidance, visitFiveStepRetirementPlan.com and get started today!

Remember, it’s always better to be proactive. If you’re unsure where to begin, reach out, and let’s create a plan tailored to your needs.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

www.5stepretirementplan.com  “Is Your Retirement Facing a Midlife Crisis?” – Retirement Revealed, guest David Blanchett

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Learn how to turn your grief into goals in order to make the most of your next chapter in life.

Today’s episode of Retirement Revealed touched on something deeply personal and profoundly moving. My guest, Lynn Banis, shared her story of navigating a series of heartbreaking losses: her mother, brother, dog, and husband, all within a short span of time. For anyone, that’s a staggering amount of grief to process. Yet, through it all, Lynn found a way to rebuild her life and find a new purpose.

It’s a journey that many face, especially in retirement, when life can take unexpected turns. Retirement is often painted as a time of relaxation, but for Lynn, it became a period of profound transformation, starting with a hurricane and a broken hip.

Caring for Her Mother: A Labor of Love

Lynn’s journey into this new chapter began when her 100-year-old mother faced a life-threatening hurricane. Lynn asked her brother to bring their mother to safety, but a fall led to a broken hip, a major setback for anyone, let alone someone of her age. At that moment, Lynn became her mother’s primary caregiver until she passed at the remarkable age of 106.

What stands out here is not just the care that Lynn provided but the fulfillment she found in fulfilling a promise she had made long ago: to never let her mother be alone. “It was a blessing for both of us,” she shared. In that space, amidst the challenges of caregiving, Lynn found purpose. Her retirement took on a new meaning as she honored her commitment to her mother, a relationship that shaped her identity during this difficult time.

The Weight of Multiple Losses

Within three years, Lynn lost her mother, her brother, and then her husband. These were not the ordinary transitions into the golden years of retirement but rather a succession of grief. Her husband’s death, in particular, hit the hardest, coming unexpectedly and leaving her in a state of shock. As she described returning home to an empty house, it’s easy to imagine the profound loneliness and confusion she felt.

Lynn shared something so many can relate to: brain fog. This sense of disorientation, where even simple tasks become difficult and decision-making seems impossible, is common in the grieving process. “I always tell my clients not to make any big decisions for at least a year,” she advised, pointing to the risk of making life-altering choices during this period when your mind is not thinking clearly. And yet, she admits she didn’t follow her own advice.

The Healing Power of Action

Despite her own advice to wait, Lynn found herself downsizing her home. She moved, sold her house, and embarked on a new chapter. The busyness of moving kept her distracted, but her body eventually sent her a message to slow down. After settling into her new home, Lynn fell ill, a sign that her grief and exhaustion had caught up with her.

But this period of illness also led to an epiphany. In the quiet moments, Lynn realized that she had a new purpose—one built from her experiences of loss. Rather than letting the grief define her, she decided to use it as a catalyst for helping others. As she said, “I don’t care how old I am. I’ve been through this several times. I can help other people.” And so, she began her new venture of supporting widows and others through their own journeys of grief.

Finding Purpose in a New Reality

One of the most powerful insights Lynn shared was how she, and others like her, have to grapple with losing not just loved ones but also the future they had envisioned. Retirement is often seen as a time of freedom and joy, but when the future you planned is no longer possible, you’re left asking, “What now?”

Lynn spoke about the importance of finding a new purpose. This isn’t just about “moving on” but about actively creating something new from the ashes of loss. For her, it meant realizing that she still had so much to offer. “You need to find your purpose. What are you all about? What sets you on fire?” she asked. These are questions that anyone facing a major life transition can relate to.

For Lynn, it became clear that she wanted to help others who were struggling with loss, especially widows. She noted that many widows struggle with their identity after losing their spouse, feeling stuck in the label of “widow.” Lynn encourages them to redefine themselves as individuals with a new life ahead of them. “You’re not just a widow; you’re a single person now, with the opportunity to create your life,” she explained.

Creating a New Identity and Legacy

Lynn’s story is one of hope. Even after tremendous loss, she found a way to honor both her past and her future. She talked about creating an environment that supports who you want to be, surrounding yourself with people and things that nurture your new identity. It’s a reminder that even after loss, there is still room for growth, purpose, and joy.

As a psychologist and coach, Lynn now helps others do the same. She helps them align their values and beliefs, quiet their negative self-talk, and open their minds to new possibilities. In doing so, they begin to see a clear vision of the life they want to build moving forward.

Lynn’s story is a powerful testament to the resilience of the human spirit. Even in the face of profound loss, she found a way to create something new—something meaningful. And in doing so, she’s not only rebuilt her own life but is helping others to do the same.

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If Lynn’s story resonates with you and you’re looking for support in your own retirement or transition, feel free to reach out. At Keil Financial Partners, we’re here to help you navigate life’s unexpected changes and create a plan for a fulfilling and purposeful retirement. 

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Contact Lynn Banis – lbanis@ameritech.net  Widows Rising Together – Facebook – https://www.facebook.com/profile.php?id=61567127332821 

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Learn how to master Medicare and get the coverage you need at the best rate available.

Too many people are guilty of making Medicare either too complicated or too simple. How do you find that middle ground? Last week’s episode of “Retirement Revealed” with Melinda Caughill was an extensive deep-dive into Medicare that provided impactful information related to making your Medicare decision. This week I’m breaking down the simple 6 step process to mastering Medicare based on Diane Omdahl’s book “Medicare for You”.

1. Timing Your Medicare Enrollment

One common misconception is that you must enroll in Medicare at age 65. While many people do, it’s not a one-size-fits-all rule. If you’re already receiving Social Security benefits, your enrollment is automatic. However, if you’re not, you’ll need to sign up manually. Consider your employment status and current health coverage. Many people are unaware that if you’ve got coverage through a group health plan from a current employer (either yours or your spouse’s), you might be able to delay your Medicare enrollment without penalty.

2. Choosing Your Medicare Path

Deciding between Original Medicare and Medicare Advantage is a crucial step. Original Medicare includes Part A (hospital insurance) and Part B (medical insurance) and gives you the option to add Part D for prescription drugs and Medigap policies for additional coverage. Medicare Advantage, on the other hand, bundles these services and often includes additional benefits. Consider your healthcare needs, budget, and flexibility preferences when making this choice. Remember, transitioning between these options down the line can be challenging, so weigh your long-term needs carefully.

3. Selecting the Right Plan

Once you’ve chosen your path, it’s time to select a plan. This often involves sifting through numerous brochures or consulting with an insurance agent. I suggest finding an independent brokerage insurance agent, preferably one who represents multiple companies to get a comprehensive view. In some regions, you might find both Medigap and Advantage plans offered by various companies. Your choice should align with your healthcare providers, drug prescriptions, and budget. Be cautious of biases; sometimes, agents might suggest plans with higher commissions.

4. Enrolling in Medicare

Enroll in Medicare well ahead of your birthday month to ensure you’re covered when you turn 65. The enrollment process is straightforward and can be done quickly online at ssa.gov. Registering early avoids gaps in coverage and ensures you’re ready to select your preferred plan when needed. Remember, enrolling in Medicare is the first step before selecting any specific Medigap, Advantage, or Part D plan, as you’ll need your Medicare number to proceed with these.

5. Enroll in a Plan

Take advantage of tools available like the Medicare.gov Plan Finder to assess your options. This resource helps you compare plans based on coverage, cost, and your healthcare needs. If this feels overwhelming, Melinda Caughill’s platform, HeyMOE.com, offers personalized assistance in finding the most cost-effective drug coverage plans. Keep an open mind and explore all available resources to make informed decisions about your Medicare options.

6. Annual Coverage Review

Medicare isn’t a one-time decision—it requires an annual review. Plans change, as do your health needs, so reassess your Medicare coverage every year. Changes in network providers, drug formulary updates, or shifts in your medical needs necessitate a yearly evaluation to ensure you’re still on the best plan. Use tools like the Medicare.gov Plan Finder for yearly assessments, or consult services like HeyMOE.com to avoid missing critical updates or cost-effectiveness opportunities.

By following these six steps, you can manage your Medicare choices with confidence, ensuring that your healthcare in retirement aligns with your personal needs and financial strategies. 

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

www.medicare.gov – Medicare Open Enrollment https://www.medicare.gov/plan-compare/ – Medicare Plan Finder www.heymoe.com – Annual Open Enrollment Plan Reminder & Evaluator, Melinda Caughill “Medicare for You” by Diane Omdahl: https://www.i65.com/store/medicare-for-you-book 

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Melinda Caughill shares the secrets of Medicare enrollment in 2024, what to avoid and how to pick the right coverage.

As Medicare Open Enrollment begins, the importance of understanding Medicare and making the right decisions during the enrollment period cannot be overstated. For this week’s episode of “Retirement Revealed” I sat down with Melinda Caughill, co-founder of 65 Incorporated, to discuss her playbook for Medicare in 2024. This open enrollment period is particularly crucial due to significant changes that will affect all Medicare enrollees. Here’s what you need to know to navigate these waters wisely.

The Complexity of Medicare Choices

Medicare decisions are not as straightforward as picking a plan. Many people mistakenly believe it’s a simple choice between Medicare Advantage and a Medigap supplement. However, the decision path involves understanding whether to stick with Original Medicare or shift to private, corporate-run Medicare options. Each choice comes with its own set of advantages and challenges.

Original Medicare vs. Medicare Advantage

Original Medicare:Under this path, the government serves as your healthcare provider, offering substantial coverage with reliable benefits. You add a Medigap policy to cover costs that Medicare doesn’t, and a Part D plan for prescription drugs. This provides predictable out-of-pocket costs but comes with monthly premiums. Medicare Advantage: This option, managed by private insurers, often advertises zero-dollar premiums and numerous perks such as dental and vision coverage. However, these plans require adherence to strict networks and prior authorization for services, creating potential hurdles in accessing care when you need it most.

Timing Is Everything

Understanding the right time to enroll or delay enrollment in Medicare is critical. For many, this means determining the best time based on current employment status or other personal circumstances. Each individual’s situation requires a unique approach to avoid penalties and ensure adequate coverage.

The Looming Impact of the Inflation Reduction Act

The Inflation Reduction Act introduces a $2,000 out-of-pocket maximum for Part D drug costs, which initially sounds like a positive change. However, as part of the cost-shifting measures, private insurers may increase premiums significantly or change what drugs are covered to offset their increased financial burden. This change, effective in 2025, starts impacting decision-making now. It underscores the necessity of reviewing your current drug plans during the upcoming open enrollment.

Choosing the Right Path

When faced with a decision of which Medicare path to choose, it’s critical to think long-term. While Medicare Advantage plans are enticing with their low upfront costs, the rigidity and potential high costs of care down the line need to be carefully considered. Original Medicare generally offers broader access to providers and clearer costs.

Avoiding Medicare Pitfalls

One of the biggest traps that enrollees fall into is relying on Medicare insurance salespeople without understanding potential conflicts of interest. Sales agents earn commissions based on sales from limited portfolios, which doesn’t always align with what’s best for you. Seek independent guidance to navigate your options without bias.

Tips for 2024 and Beyond

Review Annually: Each year, from October 15th to December 7th, use the Medicare open enrollment period to reassess your Part D drug plan options and any Advantage plan changes. Plan Ahead:Stay informed about changes in Medicare that could impact costs, coverage, and your healthcare decisions. Seek Expert Advice: Use services like 65 Incorporated to ensure you’re making informed choices, especially if you’re approaching Medicare eligibility. Stay Informed on Policy Changes: The ramifications of the Inflation Reduction Act highlight a shifting landscape. Keeping abreast of these changes ensures your decisions are proactive rather than reactive.

Medicare has long-reaching implications, and navigating it successfully means more than just enrollment—it’s about understanding the full picture and getting the coverage that fits your specific needs. Whether you’re planning for the first time, reassessing your current coverage, or helping a loved one make these decisions, make the Medicare decision that fits your unique health and financial needs.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

www.i65.com – Melinda Caughill & Diane Omdahl, 65 Incorporated LinkedIn – Melinda Caughill www.medicare.gov – Medicare Open Enrollment

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Learn how to supercharge Social Security and capitalize on up to $200,00 that the average couple misses in retirement.

Did you know that the average couple is missing out on $100,000 to $200,000 in Social Security benefits over their lifetime? If that number sounds ridiculous–or you’re worried that you’re on that same track with your benefit–this blog is for you!

In today’s episode of Retirement Revealed, I’ll walk you through five strategies to help you maximize your Social Security benefits and avoid leaving money on the table. Whether you’re just starting to think about retirement or are approaching it soon, these tips will help ensure you get the most out of Social Security.

Tip #1: Full Retirement Age Is Not Your Maximum Retirement Age

One of the most common misconceptions people have about Social Security is that filing at their “full retirement age” will get them the maximum benefit. This belief stems from the language used by the Social Security Administration, which calls it “full” retirement age. The problem is, full retirement age isn’t the maximum you can receive — age 70 is.

For most people, “full retirement age” is around 66 or 67. At that point, you are eligible to receive your standard benefit. But if you wait until age 70, your benefit grows by about 8% each year. That’s a significant increase, and it’s especially helpful for those who expect to live longer.

So when you hear “full retirement age,” think of it as just a baseline. If you want the maximum benefit, age 70 is your goal.

Tip #2: Don’t Forget About Spousal and Survivor Benefits

Social Security isn’t just about your own retirement benefit. If you’re married or have been married, you may be eligible for spousal, ex-spousal, or survivor benefits – even survivor benefits on your ex-spouse! Coordinating these benefits can make a big difference in how much you and your spouse receive over your lifetimes.

For example, if you are widowed, you can start claiming a survivor benefit as early as age 60. You might choose to do this and then switch to your own retirement benefit at age 70 to maximize your income later on. Alternatively, if you’re married, you could claim your retirement benefit early and then switch to a survivor benefit when your spouse passes.

The key is to consider all the benefits available to you and coordinate them in a way that maximizes your total lifetime income, rather than focusing on just one benefit.

Tip #3: Focus on Lifetime Benefits, Not Immediate Payouts

A common mistake I see is people fixating on how much they’ll receive right away, rather than how much they’ll receive over their entire retirement. Many people want to start Social Security as soon as possible, thinking it will provide more money in the short term. But this short-term mindset can cost you in the long run.

Retirement is about ensuring you have enough income for the rest of your life, not just the next few months. When you’re planning for Social Security, think about how to maximize your benefits over your lifetime. This might mean delaying your claim, even though it’s tempting to start early.

Tip #4: Remember What Social Security Is For — Old-Age, Survivors Insurance

The full name of the Social Security program is “Old-Age, Survivors, and Disability Insurance” (OASDI). It’s a safety net designed to help you in your old age, provide for survivors if you pass away, and offer inflation-adjusted income throughout your retirement.

Because it’s designed to provide protection against living longer than expected or running out of savings, you should approach Social Security as a form of insurance. It’s there to help you and your spouse maintain income stability for life. This mindset helps you prioritize long-term security over short-term gains.

Inflation adjustments are another reason to consider delaying Social Security. The longer you wait to claim, the higher your base benefit will be — and that higher benefit will continue to grow with inflation, offering better protection as the cost of living rises over time.

Tip #5: Manage Both Risks — Dying Too Soon or Living Too Long

People often focus on one risk when it comes to Social Security: the fear of dying too soon and not getting enough out of the system. While this is a valid concern, there’s another risk to consider: living longer than expected. If you live longer than you planned for and you claimed Social Security early, you might find that your monthly benefit isn’t enough to support your needs in the later years of retirement.

When there are two of you, plan strategically. One strategy is to have the spouse with the higher benefit delay their claim as long as possible, possibly until age 70. This way, if one spouse passes away, the surviving spouse will receive the higher benefit for the rest of their life. On the other hand, the spouse with the smaller benefit might consider claiming earlier, ensuring that both partners are receiving income throughout their retirement, but that the larger benefit is maximized for when it’s most needed.

By balancing these risks and planning accordingly, you can optimize your Social Security benefits for both of you, providing financial stability regardless of how long you live.

Take the Next Step

Social Security is a crucial part of your retirement income, but it’s easy to make mistakes if you don’t approach it with the right strategy. Check out my free guide to more retirement tips to maximize your retirement over your lifetime atAvoidBigRetirementMistakes.com.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

www.avoidbigretirementmistakes.com “How to Get the Most Out of Your Social Security Benefits” – Geekwire.com “When is the Right Time to File for Social Security?” – Mr. Retirement YouTube Channel “How to Maximize a $2M Retirement” – Mr. Retirement YouTube Channel

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Debunking 3 Medicare myths and examining the ways you can avoid falling for common Medicare mistakes.

As you approach retirement, it’s easy to feel overwhelmed with the various decisions you need to make, especially when it comes to Medicare. In this post, I want to focus on three major Medicare myths that can lead to costly mistakes. Understanding these myths will help you navigate Medicare with confidence, helping you avoid unnecessary expenses and headaches.

Myth #1: Medicare Is Free

One of the most widespread misconceptions is that Medicare is free. In fact, 72% of Americans believe this myth, and they’re often surprised when they reach 65 and realize that Medicare does indeed come with costs.

It’s true that Medicare Part A—which covers hospital insurance—is typically premium-free, as long as you or your spouse have paid Medicare taxes for at least 10 years. However, Medicare Part B, which covers doctor visits and outpatient care, does come with a monthly premium. As of now, that premium is roughly $175 per month. For many, that’s an unexpected expense.

Remember, Medicare is designed so that your taxes help cover about 80% of the costs. The remaining 20%, including premiums, is your responsibility. So, don’t be caught off guard when you’re faced with Medicare expenses as you enter retirement. Properly planning for those costs will ensure that you’re financially prepared when the time comes.

Myth #2: Everyone Pays the Same for Medicare

Here’s another big myth: the idea that everyone pays the same amount for Medicare. Roughly half of Americans are under the impression that Medicare premiums are uniform, but that’s not the case.

Your Medicare premiums, specifically for Medicare Part B and Medicare Part D (prescription drug coverage), can vary based on your income. The government looks back at your income from two years ago to determine whether you’ll need to pay more through what’s called an Income-Related Monthly Adjustment Amount (IRMAA). For example, if you’re a couple and your income was above $206,000, or if you’re single and your income exceeded $103,000, you’ll end up paying extra for Medicare.

Now, before you panic, understand that this extra cost is only temporary. It’s calculated based on your income from a specific year—two years ago—and it only affects you for that one year. Afterward, it resets. So, if you had an unusually high income due to a one-time event, such as selling a property or receiving a large bonus, you won’t be stuck paying higher Medicare premiums forever.

In some cases, you can even appeal the extra charges if your circumstances have changed. For example, if you’ve recently retired, lost a spouse, or experienced a significant decrease in income, you can file for an adjustment. This is something we help our clients with regularly, and we’ve seen many successful appeals. So, if you get hit with an IRMAA notice, don’t worry—there are ways to address it.

Myth #3: Medicare Covers Long-Term Care

This myth can be particularly dangerous because it leads to a lack of planning for long-term care needs. Many people believe that Medicare will cover long-term care in a nursing home, but that’s not the case.

Medicare does cover short-term stays in a skilled nursing facility if you’re expected to recover after an illness, surgery, or injury. However, this coverage is limited to up to 100 days, and it only applies to situations where you are expected to improve.

On the other hand, if you need ongoing assistance with daily activities—like bathing, dressing, or managing a declining memory due to dementia—that’s where long-term care comes in. Unfortunately, Medicare doesn’t cover this type of care. You’ll either need to pay for it out of pocket, purchase a long-term care insurance policy, or, in some cases, qualify for Medicaid after depleting your assets.

Given that long-term care can be one of the most significant expenses in retirement, it’s crucial to plan ahead. Understanding that Medicare won’t cover these costs will help you prepare and ensure that you’re not left in a financially vulnerable position later in life.

What You Can Do to Avoid These Medicare Mistakes

Now that you’re aware of these three Medicare myths, you’re in a much better position to avoid costly mistakes. Here are some steps you can take:

Plan for Medicare Costs: Don’t assume that Medicare is free or that your premiums will be the same as everyone else’s. Make sure you’re budgeting for Medicare premiums, especially if you expect to have a higher income in retirement. Understand IRMAA: If you’ve had a high income in the past, prepare for the possibility of paying extra for Medicare. But remember, this is temporary, and you may be able to appeal it if your income has decreased. Prepare for Long-Term Care: Medicare doesn’t cover long-term care, so you’ll need to explore other options, such as long-term care insurance or Medicaid. Don’t wait until you need care to figure this out—plan ahead to ensure you have the resources you need.

Once you understand the facts, limitations and cost of Medicare, you can adjust your retirement plan to make sure you’re getting the benefits you need as you plan for your future.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

i65.com – Medicare Resource “Medicare For You” – by Diane Omdahl Biography – Melinda Caughill, Cofounder of 65 Incorporated

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

David Blanchett discusses the survey results that reveal a building crisis among near retirees who are unprepared for retirement.

When we hear “midlife crisis,” we usually think of people making drastic changes like buying a sports car or changing careers. But when it comes to retirement, the stakes are even higher. A financial midlife crisis can significantly impact how well you live out your golden years. So, what’s going on? Why is this happening, and more importantly, how can you avoid it?

The Survey that Started It All

My guest on this week’s episode of “Retirement Revealed” is David Blanchett, Managing Director, Portfolio Manager and Head of Retirement Research for PGIM DC Solutions. David shared that a recent survey by Prudential Financial brought this crisis into focus. The results were alarming but not surprising. Many Americans over 55 are feeling financially insecure, and they are beginning to worry if they’ll be able to retire comfortably, if at all. Interestingly, the survey showed that while older adults, like those in their 70s, tend to be more financially stable, those in their mid-50s are caught in a whirlwind of financial uncertainty.

A big part of the problem? These individuals are often feeling squeezed by multiple financial pressures: rising healthcare costs, providing care for aging parents, and often, supporting adult children who haven’t yet gained full financial independence. It’s no wonder that many 55-year-olds feel like they’re in the middle of a financial storm.

A Wish for an Earlier Start

One of the most common things David hears from clients in their mid-50s is, “I wish I had learned about this earlier.” Whether they’re talking about saving more, investing smarter, or working with a financial advisor, the sentiment is always the same: the earlier, the better. Many even express regret for not instilling better financial habits in their own children. David’s research echoes this, showing that those who start financial planning earlier—whether by themselves or with the help of an advisor—tend to feel more secure as they approach retirement.

It’s clear that proactive planning is crucial. But what does that actually mean for someone in their mid-50s? What actions should they be taking?

Caregiving: The Hidden Financial Strain

Another layer of complexity for many midlifers is the role of caregiving. Many people in their 50s are caring for aging parents, while still trying to prepare for their own retirement. In my conversation with David, we discussed the immense financial and emotional strain that caregiving adds to an already challenging situation.

One of my previous podcast guests, Danielle Miller, shared her own experience of providing care for her grandmother while still early in her career. Her story highlights a growing reality: caregiving responsibilities are falling on younger generations, often when they’re least prepared for the financial and emotional demands. What makes it even more challenging is the fact that women are more likely to bear the brunt of caregiving duties. Societal expectations and personal circumstances often leave women shouldering the responsibility, further complicating their financial planning for retirement.

Longevity: The Silent Risk in Retirement

Another major issue facing midlife Americans is the risk of outliving their savings. As David mentioned, many people focus too much on maximizing their income in the short term—getting the most out of Social Security or squeezing as much as possible from a pension. However, the real challenge is making your money last for your entire lifetime, and this is where things get tricky, especially for women.

If you’re part of a couple, it’s often the woman who outlives her spouse. Statistically, women tend to live longer, and this presents unique financial challenges. Traditional pensions, for instance, typically provide only partial payouts to surviving spouses, often cutting benefits by 25 to 50%. Without proper planning, a surviving spouse can face a significant drop in income.

That’s why it’s essential to consider products like joint annuities, which can provide a more secure income stream throughout both spouses’ lives. Right now, in the summer of 2024, the pricing for joint lifetime annuities is quite favorable. These products help mitigate the financial risks of longevity and can provide peace of mind for the surviving spouse.

What Can You Do Now?

If you’re in your mid-50s and feeling the weight of financial uncertainty, you’re not alone. The good news is that there are actionable steps you can take today to improve your financial outlook. David provides some keys to how individuals, financial advisors, and employers can address the midlife retirement crisis:

Individuals: The best thing you can do is save more. It may sound simple, but increasing your savings rate, even by a few percentage points, can have a huge impact on your retirement income. Also, make sure to start planning not just for the short term but for your entire lifespan. Financial Advisors: Our job is to help clients focus on what they can control and plan for the long term. This means educating clients on their options and helping them make informed decisions that account for future risks like longevity and market volatility. Employers: Employers can play a significant role in helping their employees prepare for retirement. Offering robust retirement plans and providing financial education in the workplace can make a huge difference in how employees approach their savings and investment strategies.

The Retirement Red Zone

One of the best concepts that came out of Prudential’s research is the “Retirement Red Zone.” This refers to the critical years just before and after retirement when financial decisions are incredibly important. Mistakes made during this period can be costly and difficult to recover from, especially since you only get one shot at some major decisions, like filing for Social Security or choosing a pension payout.

For example, if you retire at 65, you’ve probably had around 1,000 paychecks in your lifetime. Each of those represents a chance to make financial adjustments. But when you file for Social Security or choose a pension option, you may only get one chance to get it right.

As David pointed out, being in the red zone means that every financial decision counts. That’s why it’s crucial to make informed, strategic choices during this time.

Final Thoughts

Navigating the midlife retirement crisis isn’t easy, but with the right planning, it’s entirely possible to come out on top. By taking proactive steps—whether through saving more, working with a financial advisor, or making thoughtful decisions about pensions and annuities—you can ensure a more secure and comfortable retirement.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

LinkedIn: David Blanchett David Blanchett, PGIM “How to Survive the ‘Retirement Red Zone’” – Kristian Finrock, Kiplinger Personal Finance “Protect Your Finances: Essential Tips for Family Caregiving with Danielle Miura” – Retirement Revealed Episode 162 “AEI Social Security Expert Andrew Biggs Explains Why “there is No Retirement Crisis” – https://www.aei.org/press/aei-social-security-expert-andrew-biggs-explains-why-there-is-no-retirement-crisis/

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Understanding the options available to civil servants entering retirement under FERS.

If you’re one of the 2 million people in the federal workforce, this post is designed to help you make the most of your retirement plan by understanding the Federal Employee Retirement System (FERS). As we head toward the end of the fiscal year, it’s a great time to revisit how FERS works and how you can maximize your benefits.

Breaking Down FERS: The Three Key Components

Before we dive into the details, let’s recap the basic structure of FERS. There are three main components that federal employees need to pay attention to:

Pension: A defined benefit that provides income based on your years of service and salary. Thrift Savings Plan (TSP): A defined contribution plan, similar to a 401(k), where you can contribute pre-tax or post-tax (Roth) dollars. Social Security: Just like most employees, you’ll also receive Social Security benefits, so don’t forget to factor this into your retirement planning.

When thinking about retirement, it’s essential to plan not only for when to start your FERS pension but also when to tap into your TSP and file for Social Security. The coordination of these three components can make a big difference in your retirement income.

Maximizing Your FERS Benefits

Recently, I was asked by Money Geek how federal employees can maximize their retirement benefits. Two key strategies stand out:

Maximize Your TSP Contributions: For 2024, you can contribute up to $23,000 to your TSP, with an additional $7,500 if you’re over 50 (catch-up contribution). The TSP is one of the most cost-effective retirement savings plans out there due to its low fees, so take full advantage of it! Know Your Full Retirement Age: Surprisingly, many people I talk to aren’t sure of their full retirement age (FRA) under FERS. Knowing this is crucial because it affects when you can receive your maximum pension benefit. For instance, retiring before age 62 or with fewer than 20 years of service could significantly reduce your pension payout.

There are some important distinctions to be aware of, particularly if you retire before age 62 or with fewer than 20 years of service. For example, retiring at 61 with 19 years of service gives you only 19% of your high-3 salary as a pension. However, waiting one more year to reach age 62 and 20 years of service increases that to 22%—a 15% boost in your pension for life! That extra year could be well worth it.

Understanding Your High-3 Average Salary

Your pension is based on your high-3 average salary, which is the average of your three highest consecutive years of earnings. While this is often your final three years, it’s not always the case. It’s important to accurately estimate your high-3 salary when planning your retirement.

Additionally, if you’ve had military service, you can potentially add military service credits to your federal service time. This could increase your pension benefit, so be sure to check your service record to ensure all your years are accounted for.

Special Considerations for Specific Roles

Certain federal roles, such as law enforcement officers, firefighters, and nuclear materials couriers, are eligible for enhanced pension benefits. For example, they receive 1.7% of their high-3 salary for the first 20 years of service, compared to 1% for most employees. Members of Congress are also eligible for the 1.7% rate, making it important to know which category you fall into.

Steps to Take in the Years Leading Up to Retirement

As you approach retirement, there are four steps you should focus on to ensure you’re on track:

Maximize Your TSP Contributions: The more you contribute, the more you’ll have for retirement. For those over 50, make sure you’re taking advantage of the catch-up contribution. Confirm Your Full Retirement Age: Double-check your FERS records to know exactly when you’re eligible for full retirement. Don’t rely on hearsay—verify the information yourself. Estimate Your High-3 Salary and Years of Service: This will help you calculate your expected pension. Make sure your service record is accurate with the Office of Personnel Management (OPM) to avoid any surprises. Consult a Financial Advisor: It’s always a good idea to work with someone who understands federal employee benefits. A Chartered Federal Employee Benefits Consultant can help you navigate the specific rules that apply to you.

Common Mistakes Federal Employees Make in Retirement Planning

Over the years, I’ve seen federal employees make several common mistakes in retirement planning. One of the biggest is failing to adjust their TSP investments as they approach retirement. Many people keep their TSP allocation at the same risk level they had in their 20s, even when they’re nearing retirement age. Be sure to reassess your risk tolerance as your retirement date approaches.

Another frequent mistake is not planning for the transition from a paycheck to a pension. It can take several months for your FERS pension to start, so having a financial cushion to cover this gap is crucial.

Plan Ahead and Get Expert Help

As you prepare for retirement, whether you’re a federal employee, military personnel, or transitioning to corporate work, the same principles apply: know the rules, do the math, and follow the plan.

By maxing out your TSP contributions, understanding your full retirement age, and working with a knowledgeable financial advisor, you can ensure a smooth transition into retirement. Remember, the choices you make in the years leading up to retirement will impact your income for the rest of your life. Make sure you’re making informed decisions based on your specific situation.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

“Understanding Retirement Plans and Options for Federal Employees” – moneygeek.com article Thrift Savings Plan contribution limits – www.tsp.gov FERS Information – U.S. Office of Personnel Management “How to Plan for a Military Retirement, with General Michael Meese” – Retirement-Revealed.com “Avoiding 10 Common Retirement Planning Mistakes Made by Federal Employees” – Retirement-Revealed.com

Connect With Jeremy Keil:

Keil Financial Partners LinkedIn: Jeremy Keil Facebook: Jeremy Keil LinkedIn: Keil Financial Partners YouTube: Retirement Revealed Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.