READY FOR RETIREMENT?
Whether retirement has finally arrived or it’s approaching rapidly, you’ve worked hard
for a long time to get here. Bringing your career to an end (or even cutting back on the
amount of time you devote to work) leads to all sorts of changes and forces you to make
many important decisions that will determine the quality of the years ahead. Indiana
Members Credit Union created this guide to help you make the right choices for your
situation and needs.
HOW WELL HAVE YOU PREPARED?
While most people will spend plenty of time thinking about what they’d like to do in their retirement years, far fewer actually take the time or the steps to prepare. According to Money Magazine, one-third of Americans have no retirement savings, and another 23 percent have only been able to save less than $10,000. (Only 13 percent have managed to put away at least $300,000.)
The best time to start planning for retirement is many years before you expect to retire.
The main reason for that is the power of compound interest. The money you save or
invest for retirement grows over time, as it earns interest and its value increases. When
the value increases, so does the interest and additional value you’ll receive.
Compare two people, both of whom put $2,000 each year into an investment that grows
at an average rate of 10 percent annually. The first investor starts at age 25 and makes
that $2,000 annual investment for just ten years, and then she stops investing. The
second starts at age 34, and makes his investment for 30 years. Who ends up with more
money? Amazingly, it’s the first investor. Although she only invested a total of $20,000,
by the time she reaches age 65, her fund has grown to $556,197. The second person
invested a total of $60,000, but because he started later, his fund only grew to $328,988
by age 65.
WILL SOCIAL SECURITY BE ENOUGH?
The government created Social Security to be a supplement for other retirement savings,
not the main source of income for retirees. Many experts say that retirees should plan to
have about 70 percent of their pre-retirement income, and for the average person, Social
Security will only provide 40 percent. That’s why it’s so important to have additional
retirement savings and investments.
HOW DOES IT WORK?
While you’re working, part of your paycheck (currently 6.2 percent of annual income up
to $127,200) goes to Social Security taxes. You earn credits from Social Security based
upon the amount of money you make and the number of years you’ve worked. Then,
when you’re ready to retire, Social Security will pay you a monthly benefit to help with
your living costs.
WHEN DO I COLLECT?
Social Security gives you options as to when you start collecting benefits. While some
people can start collecting as early age 62, the longer you wait to apply, the bigger the
monthly benefit you’ll receive. If you’re in good health and expect to live many years, you may want to wait until age 69 or 70 to start collecting benefits, because the difference can be substantial.
HOW MUCH CAN I EXPECT?
The amount of your benefit depends on how much you’ve paid into Social Security, when you plan to retire, and other factors. You can obtain a free estimate of the benefits you can expect at any time by visiting http://www.ssa.gov/myaccount/.
HOW DO I APPLY?
Social Security recommends that you begin the application process about three months
before you want to start receiving your benefits. The easiest way to apply is to visit www.
socialsecurity.gov/applyforbenefits. That site will tell you which documents you’ll need
to provide as part of your application.
YOUR RETIREMENT FINANCES
HOW MUCH INCOME WILL YOU NEED?
One of the most common questions asked by people approaching retirement is how
much money will I need to live on? There’s no single answer, because it depends on your
personal needs and how you plan to spend your retirement years. If you enjoy dining out at nice restaurants and want to see the world, you’ll need more income than someone who prefers to stay around the house.
Because you probably won’t be working, you won’t have to worry about paying for your
daily commute or maintaining the wardrobe for your job. Most experts suggest that the
average retiree will need about 70 percent of the income he or she had in pre-retirement
years to maintain the same kind of lifestyle. Retirement incomes generally come from
three sources: pension and retirement plans, Social Security, and retirement savings or
DON’T STOP INVESTING
Just because you’ve retired doesn’t mean you can stop investing. People are living longer
these days, and if you’re healthy, you could easily live 20 or more years after you retire.
You’ll need to make sure you don’t outlive your retirement savings. While you’ll want to
keep at least part of your savings in conservative investments, it’s a good idea to keep
some money in more aggressive investments that have a better growth rate.
If your employer offered a pension plan, the benefits staff will be able to tell you how
much you can expect each month. If you instead saved for retirement using IRAs
(individual retirement accounts), or a 401(k) or 403(b) retirement plan, it will be up to you to determine how much you’ll withdraw each month, and to make sure you pay any taxes that are due.
With traditional IRAs, you’ll owe income tax on any withdrawals you make. With Roth
IRAs, you’ve already paid taxes on your contributions, so you won’t have to pay on any
withdrawals (as long as the money has been in the IRA for at least five years). If you make IRA withdrawals before age 59 1/2, you’ll also have to pay a 10 percent tax penalty (there are exceptions for certain types of withdrawals, such as for medical needs). You aren’t required to start withdrawing money from your IRA until you reach 70 1/2. Similar rules apply to 401(k) and 403(b) retirement plans.
Another important element of retirement planning is thinking about what will happen to what you own after you die. Many people who have worked hard have built up assets that they’d like to pass on to their children and grandchildren, or to organizations and causes that are important to them.
If you don’t have a will that specifies where you want your assets to go, developing one
is a good start. But a will is just the beginning. Today, there are a number of strategies
that can help you accomplish much more than you can with a will. For example, a living
(or inter vivos) trust can help you pass your assets along to your loved ones with minimal hassles and tax liabilities. Other estate planning strategies can offer ways to let loved ones or favorite charities earn income from your assets while you’re still alive, and then pass them along to your heirs upon your death. These strategies can be complex, so it’s a good idea to consult with estate planning professionals.
NEED SOME HELPFUL ADVICE?
There’s a team at Indiana Members Credit Union that can help you with questions about
your retirement finances and estate planning. Just ask the manager of your nearest
location to connect you with them!
LIVING AND WORKING AFTER RETIREMENT
WHAT WILL RETIREMENT LOOK LIKE FOR YOU?
Retirement today is quite different from what it meant a generation ago. Today’s seniors
tend to be healthier and more active. Few have plans to sit quietly in a rocking chair on
the front porch. In fact, many people approaching retirement age really don’t want to
stop working. They may want to cut back the number of hours they work each week, or
shift to volunteer activities that are important to them.
If you’re planning to stay busy, good for you! But there are a couple of things you’ll need
to keep in mind. The first is that many retirees encounter health issues that interfere with their plans to stay active. In fact, nearly one in three retirees in a recent national survey reported that they were forced to stop working earlier than they expected because of health problems.
The other point is that if you’re under the full retirement age and receiving Social Security benefits, and your employment income is more than $17,040 for the year (in 2018), your Social Security benefits will be reduced. So if you plan to keep working after you start receiving Social Security, plan carefully to make sure you don’t lose too much income.
WHERE WILL YOU LIVE?
As you enter your senior years, you’ll have to think about where you’ll live, and how you’ll meet your daily needs. Many seniors hope to stay in the current homes, which is known as aging in place. As long as they remain in good health and can get around the home, that may be an option. But if the home has stairs or other issues that may interfere with mobility, they may want to reconsider.
Today’s seniors have more housing choices than ever, with many new retirement
communities designed specifically for their needs. Senior housing provides the
amenities seniors want, and communities often provide maintenance such as mowing
lawns and shoveling snow. Many communities also offer dining options for those who no
longer want to cook every day, and activities to encourage socializing.
Frequently, retirement communities offer what’s known as a continuum of care, to
meet the changing needs of residents as they grow older. These communities typically
begin with independent housing options, such as small houses or condominium-style
units. Seniors who need more care with daily living activities such as bathing and
medical needs can transition into assisted living, which offers additional services in an
apartment-like environment. If a resident’s health declines, communities often have
skilled nursing homes and special facilities for those with dementia.
While it can be difficult to leave a house you’ve called home for many years, as we age, it
can become tougher to keep up with home maintenance needs. Planning ahead for other
housing options will help you stay in control of your life.
LONG-TERM CARE INSURANCE
One of the biggest misconceptions among older Americans is that Medicare will cover
the costs if they’re forced to move into a nursing home. That’s not the case. While
Medicare may pay part of some care, it’s usually for a specific needs for a very limited
time. That’s why many seniors purchase long-term care insurance that provides funds to
help with the cost of nursing home care, as well as in-home nurses and physical therapy.
Not all long-term care policies are the same, so it’s important to choose carefully. There’s
a team at Indiana Members Credit Union that can help you with questions about long-term care insurance. Just ask the manager of your nearest location to connect you with
RETIREMENT AND YOUR WELL-BEING
IT PAYS TO STAY ACTIVE AND HEALTHY
Thanks to better medicine and nutrition, people are living longer and staying far more
active. Many retirees view it as a time to do the things they always wanted to do, and it’s
not unusual to hear recent retirees marvel at how busy they’ve become.
That’s a good thing, and we hope everyone finds retirement to be an active, fulfilling
time of life. But that doesn’t happen by accident. If you want to be one of those active
retirees, you need to take care of your physical and emotional health.
EAT WELL & EXERCISE
A healthy diet is just as important in your senior years as it was when you were younger.
Proper nutrition keeps the body working and the brain functioning, and the right diet can reduce your chances of heart problems, high blood pressure, cancer, and possibly even dementia. If you’re taking medications, be sure that nothing in your diet is interfering with them.
Regular exercise is a tremendous contribution to both your physical health and your
mental well-being. While you may not be up for a vigorous daily workout, basic stretching and simple exercises such as walking and swimming will help you keep your joints flexible and your bones and muscles strong. Many communities have special exercise programs designed for seniors, which also give you the opportunity to spend time with others.
EXERCISE YOUR MIND, TOO
Use this time to take up a hobby, travel, or participate in activities. Some seniors take college classes — not because they have to for work, but because they’re curious about the world around them. There are special educational programs for seniors. One of them, Elderhostel, offers classes all over the world for people 55 and over.
Another way to keep your mind sharp is to become involved in community activities. For
example, you could volunteer as a docent at a local museum, help out in classrooms
in your community’s elementary schools, or work with local service organizations
that help the less fortunate. If you’re not sure what place is right for you, visit www.
volunteermatch.org, a website that matches opportunities to your interests.
People who are age 65 or older (and some younger folks with disabilities) participate
in the national health insurance program called Medicare. Like Social Security, this is
a program that is funded by a tax on your wages while you’re working. It’s designed to
make care more affordable for seniors. (Medicaid is a separate program for people with
There are four components to the Medicare program. Medicare Part A is insurance that
pays for hospital care and some follow-up services. Medicare Part B is optional added
insurance that covers doctor appointments and care outside of hospitals. Medicare Part
C, also known as Medicare Advantage, is an alternative plan that can be chosen instead
of Parts A and B. Finally, Medicare Part D is optional coverage for prescription drugs.
You should sign up for Medicare three months before your 65th birthday, even if you’re
not planning to retire at 65. You can sign up through Social Security at http://www.ssa.gov/benefits/medicare. You’ll find more information about Medicare at http://www.medicare.gov, or by calling 1-800-MEDICARE (1-800-633-4227)
If you need more information about retirement, or about adjusting to life after you’ve
retired, there are plenty of resources that can help. We’ve included several here.
A free app that can help you set and track financial goals.
Want to know how close retirement is for you?
Calculators to help you make key decisions.
Investment tracking, with Nest Egg and Retirement Income calculators.
All sorts of useful information for seniors.
Articles about and strategies for retirement planning.
Financial Literacy Resources Center
Learn more about retirement and investing.
Senior Job Bank
Hoping to keep working? You’ll find good information here.
Social Security Administration
Get answers to your questions about Social Security and Medicare.
Looking Forward: An Optimist’s Guide to Retirement by Ellen Freudenheim and
My Next Phase: The Personality-Based Guide to Your Best Retirement by Eric
Sundstrom, Michael Burnham, and Randy Burnham
The New Retirement: The Ultimate Guide to the Rest of Your Life by Jan Cullinane
and Cathy Fitzgerald
Social Security, Medicare and Government Pensions: Get the Most out of Your
Retirement and Medical Benefits by Joseph L. Matthews and Dorothy Matthews
Wall Street Journal. Complete Retirement Guidebook: How to Plan It, Live It and Enjoy
It by Glenn Ruffenach and Kelly Greene
*Please note: IMCU does not provide tax advice and you should consult your attorney
with any legal and tax related questions.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI),
member FINRA/SIPC , a registered broker/dealer and investment advisor. CBSI is under
contract with the financial institution to make securities available to members.
Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not
a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.