I just celebrated my 64th birthday last month, and it’s hitting me like a ton of bricks that I’ll be enrolling in Medicare next year! The enrollment period lasts 7 months, starting 3 months before you turn 65, so that means next July I’ll be exploring my plan.
Did you know that you must enroll on time, or you face a penalty?
Knowing all the rules and deadlines for benefits like Medicare and Social Security is so important, and that is why I have become a Certified Social Security Claiming Specialist (CSSCS), in addition to being a Certified Financial Planner (CFP®), and Certified Senior Advisor (CSA™) working with senior issues.
What I am finding as I explore retirement income planning with women and couples is that each of us have such unique situations. For example, my husband, Mark, will be turning 60 in 2024 and plans to retire from the Detroit Symphony Orchestra. Sixty may seem young, but French horn players on average retire around 62. Mark has a unique situation in that he won’t even be eligible for Medicare for five years after he retires. We both have Social Security benefits, savings, and Mark has two pensions from his 42 years of service. He won his audition with the DSO when he was just 18.
Deciding what age to trigger Social Security and the pension benefits as well as when to access your savings is a true art. Mark’s first inclination, like 44% of retirees, was to take Social Security at age 62, but after crunching the numbers, he was astounded to see that he could increase his benefits not only by 76% by waiting until age 70, but by up to 108% because of the accumulated COLA that is tracked from age 62.
However, it’s more complicated than you’d expect. Consider this:
• In 2005, the Social Security Administration implemented a policy which prohibited their employees from giving advice.
• A married couple between the ages of 62 and 70 has several hundred possible filing options to consider.
• The Social Security Administration has nearly 3,000 filing rules.
• And the difference between one option and another may be the determining factor whether or not you run out of money during your lifetime.
I want to point out that once you are ready to retire, you actually need a retirement income plan which is much different than a financial plan, which is designed to get you to retirement. A retirement income plan identifies all of your income sources and how to optimize them so you can utilize the least amount of assets to create the most income.
I’m sad to say that our current system of generating retirement income from a stock and bond portfolio is a 20th century model, and this year’s stock and bond market proved its weakness. Not only are retirees or those close to retirement in shock this year because the 60/40 balanced portfolio did not work, but many of those individuals are having to rethink their plans for retirement. I promise, there are other options that most individuals are not aware of, and it is a game changer.
According to a new survey in the Wall Street Journal, “American’s now think they need at least $1.25 million for retirement, a 20% increase from a year ago. And while Americans say they will need more money after they retire, the average amount in a retirement savings account has dropped this year to $86,869, an 11% decline from 2021. The expected retirement age also ticked up to 64 years of age, compared to 62.6 last year.”
Have you looked deeply into your personal financial and income planning to see where you stand and what your options are? With the volatility in the financial markets, rising inflation, and income taxes increasing in 2025, sitting down to create a stable and tax efficient retirement income plan is crucial.
There is magic in knowing these numbers. With this knowledge, you can make smart choices.
I highly recommend that you find a person you can trust and someone willing to help you identify your vision for your ideal life, with the skill to crunch the numbers and to evaluate all your options. Having a trusted adviser is one of the very best gifts you can give to yourself.
If you are in or nearing retirement, you may be exploring your bucket list, but you may also be exploring a second or third act. Some call this a side hustle, but to many, retirement is the opportunity to explore something that has been on the back burner … or a totally new career. It could be one that you do very part time that allows you to travel and enjoy hobbies and get in great health.
Having a 2nd or 3rd act is ideal for those who may have to wait until their portfolios rebuild. Earning just $384 per week with a second or third act would generate $20,000 extra a year to supplement your retirement income. This may not seem like a lot, but if you were to ask your broker how much you should take from a $500,000 portfolio, for example, they would tell you about $20,000 per year! This is because of the 4% withdrawal rate rule that is commonly used.
As a retirement income specialist, I have other tools that can double that percentage and create guaranteed lifetime income, so your savings can go much further and not be subjected to the market corrections we are seeing right now. I always say that the amount of money you save is not as important as the amount of income you can create. We’ve seen how depending on the stock market to generate retirement income can put the best plans back on the shelf, but it doesn’t have to be this way.
No matter where you are right now, there is always a plan. Since you will probably be pulling all your financial documents out this month, it could be an ideal time to schedule a meeting with your financial advisor or CPA. These articles are intended to provide general information. Please consult your financial or tax professional for guidance on your unique situation before implementing any of the ideas presented.
If you are nearing retirement and would like to know the difference between traditional financial planning and creating a retirement income plan that will optimize your Social Security, pensions and savings, feel free to reach out to me for a free discovery session at www.talkwithkatana.com, or email me at katana@katanaabbott.com and I’ll be happy to help you explore all your options.
Katana Abbott, CFP®, CSA™, CSSCS, is a Midlife Millionaire® Coach, founder of the Smart Women Companies, and the host Smart Women Talk with over a million subscribers. For over 30 years, Katana has shown women how to take charge of their life and finances and believes it’s never too early to plan for expected and unexpected events like retirement, encore careers, moving abroad, or preparing for long-term care. She has written several books, created a financial literacy course, and is a popular speaker. Katana has been honored by NAWBO as one of Detroit’s Top 10 Business Women, receiving the Breakthrough Award. To download her new retirement guide, Three Smart Strategies to Maximize Your Retirement Income visit www.katanaabbott.com