DIY, Financial Wellness at Work, Silver Edition

 

Photo Credit: Benold Financial Planning

 

Republicans are taking aim at Social Security and Medicare; employers are struggling to fill jobs. What better time to talk about phased retirement? It has a win/win quality that deserves serious attention from both employers and older workers.

I knew I wanted to delay drawing on Social Security until I turned 70. I also knew that while I had been a steady saver, my 401(k) was not as plump as it needed to be to support my husband and me for what could be as much as three decades. I had planned to talk with my employer about phased retirement, but as a result of an informal merger, my intense, nonprofit COO position was eliminated a few years before the time was right. Having my job disappear both accelerated & complicated my plans.

I was lucky. 

I found a great job as a Finance Director at a smaller nonprofit. It was a new position; a less-than-full-time schedule worked for the organization as well as it did for me. For the organization, it was a chance to experiment with adding a new level of expertise. For me, it was a chance to begin phased retirement.

Three years later, I'm still working part-time, even though I've taken on a larger scope of work. There are challenges both for me & for the organization, but--so far--we've dealt with them successfully. The benefits continue to outweigh the disadvantages for both of us.

If you are nearing retirement age, phasing is something to explore. Ideally, you'll be able to do it with your current employer, but if that doesn't work, don't give up! 

Photo credit: superguide.com.au

One thing I did do differently than what is outlined in the linked articles below: I enrolled in Medicare when my full-time job ended. In my opinion, if that is an option for you, it's worth considering. Being able to waive the company's health insurance can be an attractive bargaining chip.

And...a caveat. While these articles rightfully report that if you are collecting Social Security before you reach your full retirement age and you are also working, your Social Security benefits will be reduced. What they don't mention is this: If you've reached your full retirement age--currently 67 (if you were born after 1960)--there is no reduction to benefits, no matter how much you earn.

Since 1984, when Ronald Reagan was President, Social Security benefits have been subject to federal income tax. If you live in one of eleven states (Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont), they are also subject to state income tax. However, in most states (like California) Social Security isn't taxed. So, depending on where you live, you get a bit of a tax relief, too.

Beware, however: One of the things likely to be put on the table in the fight over the debt ceiling is raising the full retirement age from 67 to 70 & the eligibility age for Medicare from 65 to 67.

Resources:

 https://www.forbes.com/sites/steveparrish/2021/11/29/phase-into-retirement-with-a-phased-retirement-plan/?sh=3ffec6f8297a

https://www.realsimple.com/work-life/money/money-planning/retirement/what-is-phased-retirement

https://amberriver.com/phased-retirement/benefits-and-challenges-of-a-phased-retirement/

 

Pay It Forward - Name A Charity As One of Your IRA or 401(k) Beneficiaries

My mother was a frugal woman. That’s not surprising. She was born in the depths of the Great Depression, to first generation Americans, people whose lives were governed by a fierce yearning for security. Mom dropped out of high school, but she inherited her parents’ talent for making a penny do the work of a dime. When she died last March, she left a small estate, a portion of which was held in a well-diversified IRA.

Because of the rules that govern inherited IRAs, we kids had the choice of paying taxes on all the money at once or paying taxes on small annual distributions spread out over our lifetimes. For me, the choice was simple—leave the nest egg to grow and pay a small amount of tax each year.

What was also simple was choosing a beneficiary for the account. 

Mom struggled to make ends meet. When she was laid up after knee surgery, we survived on disability insurance, the school hot lunch program, and help from relatives. When she couldn’t afford a car, we walked. When out-sized bills came due, Mom made draperies. Her second shift happened in the dining room, at night and on weekends, on the portable sewing machine she’d given me for Christmas.  

Who helps people like Mom? Who connects people to basic services like food pantries and infant health care? Who saves struggling families hundreds or thousands of dollars through the Earned Income Tax Credit? Who provides supportive, one-stop centers where people get credit counseling, improve job skills, and build assets?  United Way Bay Area. 

Mom sent a son and two daughters to college, bought a house in late middle age, and avoided being a financial drain on her children in retirement. That last thing was important to her—in fact, it was far more important to her than it was to us. Naming United Way Bay Area as the beneficiary of the inherited IRA is how I help my mother give back--tax free! Now that she’s finished worrying about the catastrophes that tomorrow might bring, I think she’d be pleased to invest in other families living on the edge. I know I am. 

Whether you are making estate plans for the first time or re-evaluating, I hope you’ll join me, Kenneth Edlin, Peter Noon, Barbara Joan Deepe, and many others. Together, we guarantee that United Way Bay Area will always be here to help. For more information on making UWBA a part of your life’s legacy, please contact Neil Muller (nmuller@uwba.org). He’s looking forward to hearing from you, as am I.  From simple bequests to sophisticated charitable annuities, we have lots to offer.

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For details on leaving retirement assets to charity see: https://www.fidelitycharitable.org/philanthropy/donating-retirement-assets-to-charity.shtml