Are you close to retirement? Are you hoping to retire in the next five years?
Now is the time to take a financial “snap-shot” and fix any financial shortfalls you may have in planning for a comfortable retirement. This is reflection time about retirement goals, retirement savings and your continued working life. It is also time to reflect on your risk tolerance for investments.
Many of us want to live better or at least as well in retirement as we did while working, so now is the time to take stock.
Money Management
Insurance
Investments
Spending Plan/Budgeting: Maybe you set-up a budget when you were starting out but have you looked at it in the last few years? Are you part of “sandwich generation” and taking care of both children and parents at the same time? Is your mortgage almost paid off? Have you added college tuition or will it be coming soon? Are you taking on some elder care expenses? Have your investments performed as well as you had projected? Track your expenses for a couple of months, both bills and cash, use our GEBA budget calculator to see how you are doing.
In addition, use our net worth calculator to understand how much you are really worth, i.e. your debts/liabilities subtracted from your assets. Develop a spending plan; know how much you make and how much you spend on fixed (rent, insurance, loans) and discretionary items (dining, clothing, shopping). Since you are closer to retirement your spending plan should be focused on making up any shortfall in your savings. Cutting some expenses now will help you save more in the short-term. If you have high interest credit card debt, pay down as soon as you can.
Emergency Fund: Start a savings plan for six to twelve months of your monthly expenses. Save six months if you are single and twelve months if you are married. You don’t want to be derailed by expensive car repairs or other major unplanned expenses. Keep this money in a savings account, money market or CD (certificate of deposit) that can’t lose value and is FDIC insured.
Investment Planning: Come in and meet one of GEBA’s Member Services Representatives to chart out your next phase of savings and investing goals. You probably have been saving for retirement for a number of years but review the assumptions; (how long have you been working?, how much money have you been setting aside every year?, what is the average return rate on your investments?, what are your costs in retirement?) and make sure they are still accurate. Review your beneficiaries. Also review your investments with a view toward risk and whether you want to lower your risk now that you are closer to retirement. GEBA can help map out your financial future one step at a time. See our Planning Section for more information.
Wills: If you don’t have a will, now is the time. They can be a simple 1-2 page document that tells a court and your family how you want your assets to be taken care of in the event of your death. Each person needs a will and it has to be notarized. For more information, visit here.
Tax Planning: Meet with a qualified tax professional to understand the multitude of tax consequences that happen when you start withdrawing money from your retirement accounts. Many accounts that were tax-deferred will no longer be when you start withdrawing the funds at the appropriate legal age. For more information, visit here.
Medical Insurance: Your health is your most important asset. You may have rubber-stamped your health care and health insurance choices over the last few years. Read the fine print this year and review your choices and pick the one that best fits your current health and finances.
Do you know your health insurance options for retirement? Will you be covered under Medicare (age 65) or will you have private insurance? Do you know how much the private insurance will cost?
Ask now about getting a High Deductible Plan with a Health Savings Account (HSA) to stock pile some tax-free dollars in a HSA that can be used for future health care needs. Answer these questions and see if making a change is right for you.
Dental Insurance: Just like brushing twice a day is important for the health of your teeth, so are bi-annual cleanings and dentist check-ups. A single filling or cap can be hundreds of dollars. Review your choices and see if coverage is available and at what cost. Use your dental insurance while you are still working to have any major restorative work completed before retiring. Do you know your dental insurance options for retirement? GEBA offers a variety of plans through Delta Dental at very competitive group rates.
Vision Insurance: As we age, many of us need assistance with our vision. Help offset the cost of your annual vision check-up and frames and lenses with vision insurance. Review your choices and see if coverage is available and at what cost. GEBA offers a plan through Vision Benefits of America (VBA) with competitive rates. There are also discounts available for Lasik surgery.
Homeowners Insurance: Your home is your castle, so protect it as such. Make sure your home is protected from loss, theft or damage. A single water leak from a broken faucet could cause thousands of dollars of damage, in addition to taking time off work for repairs. Can you link your homeowner’s policy to your auto policy and save money? If you have a vacation home you also need homeowners insurance and if you use it for rental income you may need renter’s insurance. Are you thinking of downsizing when you retire? Does the housing market look good for you to sell your home for a profit? Per IRS Publication 523, you can keep up to $500,000 (filing jointly) or $250,000 (filing singly) of profit on the sale of your principal residence without paying taxes on the proceeds. If you sell, use some of the proceeds to fund your retirement.
GEBA offers plans through MetLife. As a GEBA member, you could save up to 15% with your group discount from MetLife Auto & Home, plus you can save an additional 10% if you choose to pay your policy through payroll deduction.
Auto Insurance: Your automobile is probably your major source of transportation. Do you have two cars? Would it be less expensive to have one insurance company for both your auto and homeowners policies? One minor fender-bender can alot of money to fix, let alone the problem of having no transportation while it is getting repaired. Protect your ride by having auto insurance with well thought out coverages and deductibles. You may be able to raise your deductibles if your cars are getting older. GEBA offers excellent protection through MetLife at competitive group rates of up to 10%. You can even get a free online quote here. (Be sure to enter "GEBA" as the company name.)
Life Insurance: Life insurance provides financial protection for your loved ones when you are no longer living. Your income has probably increased with your career progression. You may have bought life insurance a decade ago but that may not be enough for your family now. Review your FEGLI coverage first. GEBA may be more affordable for Basic Coverage than FEGLI. With GEBA’s coverage you are able to keep your insurance if you retire or resign. Use GEBA’s comparison calculator to help get the best rates and coverage.
Federal Employee Guaranteed Life Insurance (FEGLI): As a current federal government employee, you are automatically signed-up for FEGLI unless you cancel in writing. The amount of your basic coverage is your annual pay rounded to next higher $1,000 plus $2,000, with minimum $10,000 coverage. GEBA may be more affordable for Basic Coverage than FEGLI.
Professional Liability Insurance: Are you a director, manager, supervisor or in law enforcement in the U.S. Intelligence Community? Professional Liability Insurance pays the full cost of your legal defense and covers the expense of damages awarded against you. Lawsuits against federal employees are increasing at an alarming rate. Members of the public - even fellow co-workers - can bring personal lawsuits against you. You are at risk whenever you are acting within the scope of your job - including delegating assignments, evaluations, working at your desk, or meeting with the public. GEBA offers very affordable Professional Liability Insurance.
Disability Insurance: Accidents happen. What would happen if you couldn’t work for an extended period of time? Would you be able to pay all of your monthly bills? Protect your home, car and assets with long-term disability insurance. GEBA’s long-term disability insurance is a cost effective and smart way to protect your income in case you become injured. GEBA offers long term disability through the Hartford Life and Accident Insurance Company.
Long Term Care Insurance: Will you need long-term care? Long-term Care Insurance is a growing concern among GEBA members because the costs associated with home health care and nursing home care are rising significantly; in fact, the cost of care in the Baltimore-Washington area is averaging $200 per day!
Medicare's coverage is very limited and will not cover the majority of nursing home costs or those related to home health care. Nursing homes and extended care facilities can wipe-out individual’s life savings if they don’t plan ahead. Call GEBA today to discuss your long-term care insurance needs.
Emergency Travel Plan: In the event of a serious illness, accident or death, are you financially prepared to be with your family when they need you? If an emergency arises and you need to travel to get home (U.S. or abroad), the costs of last-minute airfare or train fare can be extremely expensive. GEBA’s Emergency Travel Plan provides partial reimbursement for you to travel to visit immediate family members due to serious illness or death, up to 80% of your ticket costs up to $1,500.
Veterinary Pet Insurance: Do you have a pet(s)? You responsible for their health A regular check-up with a vet can be $100 or more. An emergency illness with an overnight stay at a pet hospital can cost even more. The cost of even routine visits can add up quickly. Can you afford not to have pet insurance? GEBA offers discounted pet insurance through Veterinary Pet Insurance (VPI) to help defray these costs.
This is a critical time to review your investments and make any changes needed for a secure retirement. Discuss options with a GEBA Member Services Representative to make up any savings shortfalls.
Federal Government Thrift Savings Plan (TSP): Invest the maximum amount allowable from your pay each period to supplement your retirement savings (for 2010 the IRS maximum is $16,500 and $22,000 if you're over the age of 50). If that is more than you can afford, you should still contribute but at least to the amount your employer matches (5%). The employer match is free money to you!
Catch-up contributions are supplemental tax-deferred contributions available to TSP participants age 50 or older who are already contributing the maximum amount of regular TSP contributions for which they are eligible up to the maximum IRS elective deferral limit $16,500 in 2009. Catch-up contributions have their own annual limit $5,500 in 2009. Your catch-up contributions are invested in the TSP funds according to your most recent contribution allocation.
Individual Retirement Plan (IRA): Utilize the tax-deferred benefits of IRAs to save for your retirement. Currently you can contribute $5,000 per year under the age of 50 and $6,000 if you're over the age of 50. GEBA offers both Traditional IRAs and Roth IRAs to meet your needs.
Annuities: GEBA offers annuities that can help with your investment objectives. Speak to a Member Services Representative about our Variable Annuity Contract (VAC) or our Non-Qualified Group Annuity. GEBA's Member Service Representatives can speak with you about the specific uses of an Annuity and how it may be applied to your personal financial plan.
Stable Value Account: The GEBA Stable Value Account is the new and improved investment product that will replace the GEBA Guaranteed Investment Contract (GIC) as of January 1, 2010. The Stable Value Account is a low-risk, high quality investment that seeks to provide a stable rate of return and to preserve principal (plus accrued interest (book value)). It offers similar returns to the GIC, but pays a rate that adjusts gradually with market rates. Stable Value Accounts have been offered for years in 401K plans. GEBA is now making this product available to its members outside of a 401K.
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