Evolving Employment: 6 Questions Government Employees Should Be Asking
1. When can I afford to retire?
If you’re worried about being able to retire, you’re not alone. Millions of Americans are concerned about whether their retirement savings will be enough to keep them comfortable. Though Americans in public service have historically relied on comfortable pensions and retirement benefits, unfunded liabilities and major changes to the retirement landscape mean that government employees must carefully evaluate their financial options.
The decision to retire is a very personal one that depends on a number of important factors like your age, years of service, financial circumstances, health, and family situation. It’s also important to understand the particulars of when you may be entitled to collect a retirement benefit from your pension or sponsored retirement plan. A professional can help you understand the conditions under your specific retirement system.
If you’ve run the numbers and think that you may have a retirement income shortfall, don’t panic. There are several strategies that can help increase your potential retirement income or reduce your expenses.
2. What does my dream retirement look like?
Take a moment to think about what an ideal retirement looks like. Does it mean spending more time with loved ones or enjoying your passions? Are you interested in a second career? Do you want to travel? Everyone’s retirement dream is different and an important part of developing a retirement strategy is thinking about how you want to spend your time. Today’s retirees can expect to live long, active lives, making retirement more like the beginning of a new chapter of life rather than its sunset. Increasing numbers of energetic Americans are redefining retirement for themselves in new and interesting ways.
3. How will I pay for healthcare in retirement?
Healthcare expenses are a major concern for today’s retirees and those who aren’t thinking ahead may find themselves in trouble down the road. Life expectancy is rising, and many of today’s retirees can expect to live well into their 80s. Medical advances are expensive and healthcare costs can go up fast during a serious illness. Research shows that Medicare covers only about half of healthcare costs for those over 65.
Fortunately, there are strategies that you can use to help tame healthcare costs in retirement. Determine whether you are eligible for any employer-sponsored healthcare benefits once you retire. Any assistance you receive could reduce your out-of-pocket costs and thus, the amount you need to save for medical expenses. A financial professional can help you determine whether this option is available to you and show you how it may fit into your overall retirement strategies. For most retirees, Medicare will form the backbone of their healthcare plan. Medicare has gone through some significant changes due to the Affordable Care Act (ACA) and there’s no way to predict how it may change in the future. Talk to your financial professional about things like eligibility, coverage, deductibles, and benefits to make sure that you understand all of your options.
4. What are my retirement plan options?
- Defined Benefit (DB) Plans provide guaranteed retirement benefits to participants based on factors like age, years of employment, and salary.
- Defined Contribution (DC) Plans are the most common type of employer-sponsored retirement plans available today. The most common types are 401(k)s, 403(b)s, 457s, and Thrift Savings Plans (TSP). Many employers offer DC plans in addition to a defined benefit pension plan.
- Hybrid Retirement Plans combine features of both defined benefit and defined contribution plans.
- Supplemental Retirement Plans may be provided by your employer to allow you to save more for retirement beyond what’s contributed to your primary retirement plan.
5. What do I need to do before retiring?
- Sit down with your spouse or loved ones to think about the future.
- Estimate your expenses in retirement.
- Review your income sources, including guaranteed benefits and Social Security.
- Evaluate your retirement savings and determine whether additional savings are necessary.
- Review your healthcare coverage options and note important Medicare and insurance deadlines.
- Review legal documents like wills, trusts, medical directives, beneficiaries, and powers of attorney.
- Contact your plan sponsor to request information about your retirement requirements, distribution options, and necessary documents.
- Speak to a qualified financial professional who specializes in working with clients like you and can help you make the most of your options.
6. How can a professional help me?
Regardless of what your dream retirement looks like, prudent financial preparation can help you achieve it by helping you build retirement strategies to maximize your income while managing risk. A financial professional can help you understand your current financial circumstances and develop strategies to take you toward your future goals. We believe strongly in the value of experienced guidance and objective advice when navigating the transition to retirement. Many Americans have complex financial situations and it’s very common to have questions and concerns about meeting your obligations in retirement. As financial professionals, we have helped hundreds of clients follow their dreams of a more comfortable retirement.
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- “How to plan for healthcare in retirement without going broke.” Market Watch
- “Medicare FAQ.” Nolo.
- “How to plan for rising healthcare costs.” Fidelity
- The Henry J. Kaiser Family Foundation, 2018
- “Costs of Care.” Genworth
- “Defined Benefit and Defined Contribution Plans: Understanding the Differences.” EBRI