Today we attended a very informative pre-retirement seminar put on by the Federal government for employees. Contrary to what some people think, current civilian employees don't get pensions similar to military pensions. Instead they get a small pension based on years of service and salary, social security, and payouts from a retirement savings account similar to an IRA and dependent upon how much the employee contributed. A huge benefit though is the ability to keep participating in health insurance as long as you are willing to pay the employee part of the cost. Hubby is a federal employee so we are trying to learn about all of this and they suggested attending the first time when you are about 5 years from retirement. He has 4 1/2 years to go.
We learned that not only do you have a lot of decisions to make but many of them depend upon what kind of income you need to generate annually, whether or not you want to bet on a long life and buy annuities and what kind of spousal survivor benefits you think might be needed. We also have my social security and IRA savings and Hubby's IRA savings from prior employment. Ouija board anyone?
I'm not going to go into the details of what all we have to think through, but we will have to sit down with a counselor from where are IRAs are (educational employee program) as well to understand our options there. And I think one of us needs to get trained as a financial planner in the meantime LOL.
Seriously, the whole stream of income issue is one every retiree will have to address if they have any sources of income available in addition to social security. I think the decision process has to go something like this.
- What are your annual pre-tax income needs based on your planned expenses?
- How long do you want to assume you will live?
- What inflation rate and investment return rates are you assuming?
- Do you want a fixed annual income or a gradually increasing one to take into account inflation?
- What kind of survivor benefits need to be in place to ensure the widow/widower is not economically strapped?
- What income streams do you have available and how much do you want to take from each annually?
- What do you need to do to set up these income streams? What are the tax implications?
- Who can help you figure this out?????
For those who have already set up their retirement income streams, I am very curious how you thought it through?
I am so glad I have tracked our income and expenses for years as that will help a lot. However, since we will move after retirement our expenses will change in unknown ways.
I did get one question answered. Since I will be eligible for Medicare in a little over a year, I should sign up for part A which is free. Hubby will continue to provide health insurance for both of us. When he retires I can sign up for Medicare Part B with no penalty so there is no need to sign up for it before then and pay the monthly fee.