Today we’re talking about the Social Security Normal Retirement Age, also called the Full Retirement Age, which is between ages 65 and 67 depending on the year you were born. When you begin drawing Social Security retirement benefits, the amount you will received each month will depend on whether you start before your normal retirement age, at that age, or after.  If you were born before 1937 your Normal Retirement Age is 65. If you were born in 1960 or later, your Normal Retirement Age is age 67. Everybody else, yours is in-between age 65 and 67. Check out your exact Normal Retirement Age in years and months on the Social Security website https://www.ssa.gov/oact/progdata/nra.html.

I highly recommend you go to the Social Security website if you haven’t already, and establish an account. https://www.ssa.gov/site/signin/en/ You’ve been earning Social Security credits based on your earnings record. Your employers have been withholding Social Security and Medical taxes from your pay and reporting to Social Security what they paid you each year. You want to be sure these earnings records are accurate. Your retirement benefit will be based on your highest 35 years of income, so every year is important.  Log into ssa.gov once a year and compare what earnings they recorded for last year with your tax documents to and make sure it’s accurate, or correct any mistakes. The website will also give you estimates of future payments. Find out how much you would qualify for if you become disabled, what your family members would receive if you die, and what your Social Security retirement benefits would be.

Your Normal Retirement Age. is the age you can start receiving your full Social Security retirement benefit. The formula used to compute it is very complicated, but its’s easy to see the amount when you log into your account. Everyone eligible can apply and begin receiving benefits anytime from age 62 to age 70. But if you start early you receive less each month. Start later and you receive more.  As an example, if you were born in 1990. Your Normal or Full Retirement Age is 67. You want to begin receiving Social Security retirement benefits at age 62. That’s 5 years early, so your monthly benefit would be reduced by 30%. If you full retirement benefit is $2,000 a month, you would receive only $1,400 a month if you start at age 62. You could choose any age between 62 and 67. But the earlier you begin benefits, the lower the payments.

For each year you delay benefits after your full retirement age up to age 70, your benefit will increase by 8% year. That’s huge. In our example. For someone with a full retirement benefit of $2,000 a month, if you delay receiving benefits until you’re age 70, your payment will be $2,480 a month. Looking at the yearly amounts, you could retire with $16,800 a year at 62, $24,000 a year at 67, or $29,760 starting at age 70. 

How do you decide when to start drawing benefits? It depends on your situation. Will you have enough resources to live on while you delay? Delaying is a low risk way of getting a higher benefit. How long will you live? Just from a numbers perspective, the longer you live the better off you are delaying benefits. One of the biggest concerns when planning for retirements is making sure you don’t run out of money before you run out of life. Delaying drawing Social Security can help prevent that. If your health is poor and  and you think you will die younger than average, it may be better for you to start benefits earlier. Taxes can also impact your decision. Your Social Security benefits are taxed when you other taxable income crosses certain thresholds.

At age 65  Americans are eligible for Medicare and most  must enroll Medicare Part B or face a stiff premium penalty. You can delay enrolling in Part B if you or your spouse are working and covered by a workplace group health plan with 20 or more employees. In that case, you would need to enroll in Medicare Part B within 8 months of stopping work or losing your workplace health coverage, which ever is sooner in order to avoid penalty.  The penalty is 10% increase in premiums for every 12 months you delay, for the rest of you life.

If you are a federal employee  you can carry your  Federal Employee Health Benefit (FEHB)  into retirement and are not required to sign up for Medicare.  You can  keep FEHB and sign up for Medicare for more complete coverage. There are pros and cons to to the different strategies. But it’s beyond today’s discussion. 

f you are a military retiree and federal government employee you have the option of using FEHB or Tricare for Life when reach age 65. Listen to my Episode 5 for pros and cons if it applies to you. https://www.buzzsprout.com/934996/4770596

The main reason I’m focussing on military Tricare for Life is that it often catches retired military off guard. It’s like a Medicare/Tricare shotgun wedding. Also know as wrap around coverage. Key points:

1. The Tricare plan you have now ends at 65, period.
2. You are required to enroll in Medicare Parts A and B, if you want continued Tricare health insurance. (Which you should.
3. Medicare Part A is free. Medicare Part B will cost you. The standard Part B premium is $148.50 a month. This fee is based on your annual income and is higher after certain tresholds. This is allot more than the Tricare Standard or Prime  yearly fees  You won’t have any  yearly fees to pay to Tricare under Tricare for Life, but will pay premiums to Medicare for Part B. 
4. But it’s unfair to only compare annual fees and premiums. Tricare for Life is wrap around insurance. What that means is that Mediare and Tricare for Life work together to pay for your healthcare. Medicare pays first. What they don’t cover automatically gets passed to Tricare. Some things Medicare doesn’t cover, but Tricare for Life does. And visa versa. There are a few things neither Medicare or Tricare cover, but nearly every thing is paid for between the two with no copay or cost share. With Tricare for Life, there are no copays or cost shares that you have with regular Tricare.
5. Also Tricare for Life covers you overseas. Medicare does not pay outside of the US and some territories. So if you will be living outside the US part or all of the time, Tricare for Life has you covered as the primary payer.
6. Eligible family members stay on Tricare Standard or Prime until age 65 when they must sign up for Medicare Part A and B themselves and switch to Tricare for Life.
7. Be careful when using Tricare for Life and Veterans Affairs health providers for non-service related care. Because VA providers are not allowed to bill Medicare, you can’t be reimbursed through Tricare for Life for any care from a VA provider, you’d pay for any VA expenses out of pocket.

Great resources and details can be found on the Tricare and Medicare websites, as well as my Episode 5 podcast.

All about Tricare for Life:  https://tricare.mil/tfl

Medicare basics and signing up:

https://www.medicare.gov/basics/get-started-with-medicare

Medicare Part B premiums:

https://www.medicare.gov/your-medicare-costs/part-b-costs

By the time you hear this broadcast, I should be on a vacation adventure with my husband Rob in Yosemite National Park. I love visiting new places and it seems like a lifetime since we’ve taken a big trip. So I thought I take a few minutes to talk about saving for a bucket list vacation. Since I’m a financial planner, It shouldn’t be a big surprise that I recommend you start your trip with planning.

 The first step is to decide what kind of trip you want to take, and think about what it is about the trip that will make it special for you, and what won’t.  Is your dream to lay in the sun on the sand and listen to the waves, then going during hurricane season may literally rain on your parade. Want to visit a famous amusement park? Standing in line all day in the summer heat and humidity may be unbearable for you or make the kids cranky.

 Next, figure out how much your vacation will cost. Remember transportation like airfare and rental car or road trip gasoline, hotels or other lodging, food, and entrance, show tickets, tours… Break it out in detail with numbers and add it up for a total trip cost.

 Then decide how you will pay for it. If you already have enough money set aside for your trip, you're golden. But I DON’T recommend you go in debt for entertainment or vacations. A better way is to save first, then spend. Studies actually show that we get as much enjoyment thinking about and anticipating something as we do actually doing it. So dream, plan, save, go.

 Let’s say you decide you want a weeklong beach vacation with your spouse and two children. You’ve done some checking online and see a beachside hotel is $250 a night, airline flights $1,000,  hotel 150 a day, and  $100 a day on souvenirs and  activitieshat's $4,250.

If you save $150 a month you  go on your dream vacation in 2 years and 4 months.  Not happy with that? Think back what about your vacation that makes it a dream for you. And what isn’t that big a deal. Let’s say you really love to build sand castles with the kids. But you all just dash in and out of the water. Consider going in the off season when everything is cheaper and the  water is cooler. 

Kids dragging sand in everywhere sound more like work than vacation? Try a cheaper hotel off the beach with a pool and walk to the beach if you want. Or have the vacation exact vacation you dreamed, but for 4 days. Or drive to save the airfare. 

 These kinds of tough choices often come up in all areas of life. I like to say you can have anything you want, just not everything. What’s most important to you? Length of time away ? A particular season or year?  Special activity? Specific location?

 Want to go sooner? Maybe you can save more money now by cutting other regular expenses for a while, or find some ways to earn extra money. I can remember when I was young my parents said the family could go on a vacation to Florida. But my brothers and I would have to save the gas money which was going to be $100. We did odd jobs and skipped desert at school to make it happen. Dreaming about the vacation helped motivate us to save and I think we enjoyed it more  having skin in the game.

 And our vacation today? It’s epic. We’ve been planning and saving for a couple of years. We both love the outdoors, so we are splurging on lodging inside three national parks. Got train sleeper car ticketst with points. And haveg a cooler for drinks and food to save on eating out. That’s how we are having our dream, guilt-free vacation.

 What about you? Focus on the what will really make the trip special for you and negotiate on the everything else. Save more, save longer, or find ways to spend less. The go enjoy your vacation! And know when you came home you’ll have all those special memories and none of the debt weighing you down. 

Today we’re going to talk about Cryptocurrencand I’ll try to cut through some of the hype. If your new to crypto, check out Investopedia’s cryptocurrency page. https://www.investopedia.com/cryptocurrency-4427699 

Cryptocurrencies are systems that allow for secure payments online directly between individuals without  middlemen. Cryptocurrencies use virtual tokens which are created, called mining, on a network of dispersed computers that randomly record blocks of cryptocurrency transactions, called blockchain technology. Bitcoin and Ethereum are two well known cryptocurrencies.

You can make money directly by mining cryptocurrency, but that takes massive computing power. Or by buying a cryptocurrency, and then selling (hopefully) at a profit. The value is based solely on supply and demand and prices have had huge price swings up and down. Blockchain technology is often cited as the real prize. But you can’t buy the blockchain any more than you can buy the internet. 

There more ways to play. BlockFi https://www.blockfitrust.com/ is offering an account that pays interest on cryptocurrency deposited with them, as well as cryptocurrency trusts. There are Cryptocurrency exchange-traded funds (ETFs) and Blockchain ETFs that own stocks in companies that have business operations in blockchain technology.  

But ingenuity and innovation are still far out pacing regulation and disclosure. Finding information on trading costs is tough. After digging through Coinbase’s website I found “it depends”. They disclose trading costs just before you place a trade. On Venmo, I had to go to the literal fine print . “When you buy or sell cryptocurrency, we will disclose an exchange rate and any fees you will be charged for that transaction. The exchange rate includes a spread that Venmo earns on each purchase and sale.” https://venmo.com/about/crypto/   Grayscale which offers a fund only open to accredited investors clearly states it charges a 2.5% management fee. https://grayscale.com/wp-content/uploads/sites/3/2021/08/dlc-fund-fact-sheet-august-2021.pdf  

Price manipulation is another concern. Interestingly, Coinbase addresses this in its crypto slang guide, rather than an easy to find disclosure section. https://www.coinbase.com/learn/tip-and-tutorials/crypto-slang-guide

A pump and dump is a coordinated effort to artificially inflate the price of an asset and cash out before it tumbles back to down. Think Gamestock. The biggest holders of crypto, known as whales, have the potential to move markets with their trades. The top 100 Bitcoin addresses out  800,000 plus held more than 20 percent of all BTC according to bitinfocharts.com. 

Lastly, there’s taxes and recordkeeping. You need to keep detailed crypto records to to file your income tax returns, or again pay someone else to do the record keeping for you. The cryptotrader.tax website has a good blog that covers a lot of the (many) tax rules you need to consider. https://cryptotrader.tax/blog/the-traders-guide-to-cryptocurrency-taxes

 Keep learning and if you want to start playing in crypto, don’t go all in.  I’m not recommending it at all just yet. But if you try it,  don’t invest any more than you are willing to completely lose

Two of the biggest questions I get about retirement are “How much do I have to save” and “Do I have enough?” But first we have to step back and answer the question “How much will I spend in retirement?”  I recommend you map out your current cash flow, also called a budget, in detail. Spend some time envisioning the kind of lifestyle you want in retirement. Then make adjustments from your current cash flow to build a retirement budget.
Let’s start with income. Pull out your Leave and Earnings Statement and pay stubs. Military look for your total entitlements. Federal civilians look for your base pay plus locality pay . Working spouses and others use a recent pay stub. Jot down these sources of income. 
Do the same for expenses. Look for deductions and allotments. Then list t other expenses you pay and categorize them. If possible use a year’s worth of expenses. If you don’t already keep a detailed list of expenses, now’s a good time to start. For now make an educated guess and begin logging your spending. A budgeting app like YNAB or Mint may help.
Now  adjust your current expenses to estimate your retirement expenses. Here are some expenses that often change in retirement. Social Security and Medicare taxes are only withheld from money you earn through work. Retirement savings like the Thrift Savings Plan (TSP), 401(k) plans, and IRAs a will stop when you stop work. Drop these expenses from the retirement budget. Will  your household living expenses like rent, utilities, income taxes, entertainment, charity, and travel? Adjust the budget.
 If you pay off a mortgage, remember you still have to pay your property taxes and homeowners insurance. Will you downsize? Less expensive homes usually have lower property taxes, costs of insurance, utilities, and maintenance. If you want to buy a vacation home your total housing cost will go up.
 Food and commuting costs often go down in retirement. Plan on traveling a lot or starting an expensive hobby? Add those higher expenses down in the budget.
Your healthcare costs are likely to go up. Tricare for military retirees is very reasonably. Get costs at https://tricare.mil/-/media/Files/TRICARE/Publications/Misc/Costs_Sheet_2021.pdf However, many military retirees are surprised once you reach age 65. You will be moved to Tricare for Life, which is free. But you are required to sign up for Medicare Parts A&B.  Generally there's very little  out of pocket expenses. But, you have to pay Medicare Part B premiums, which will be higher than your Tricare Prime or Select premiums were.  https://www.medicare.gov/your-medicare-costs/part-b-costs
Federal retirees can carry FEHB into retirement. The premium you pay will be the same as working federal employees, but due to premium conversion you will pay more in taxes.  For everyone else, your employer likely paying a large part of your premiums which will much higher if you stop work before Medicare kicks in at 65. Healthcare expenses like nursing home care are a wild card and can spike near the end of your life. Budget for that spike or for long term care insurance premiums.

Once you know what expenses you need to pay in retirement, you can begin planning how to have the income to cover it. Coming up short? The earlier you know this the better. You have time to adjust. You might decide to seek a higher paying job now to save more, retire later, or work part-time in retirement. It’s your retirement and planning early can help you have it your way. Would you like help answering your “Will I have enough?” questions? I love helping clients like you budget, plan, and save for the future you want. You can email me at [email protected]

Today were celebrating episode 60 by talking about Guard and Reserve retirement. If you find trying to figure out what your retirement pay will be and how to qualify, you are not alone. Here's a link to the online DoD retirement calculator https://militarypay.defense.gov/Calculators.aspx and Doug Nordman’s blog post in The Military Guide at https://the-military-guide.com/reserve-retirement-calculator/ Doug gives you the numbers and formulas written out more background.

 First, to determine if you will be eligible for retirement you need to look at the number of points you build up and the number of “good years” you completed. When you’ve cleared these two hurdles, you’ll translate your points earned into years of service for the purpose of calculating your retirement pay. Once you're eligible for retirement you can continue to serve or retire. But a key difference between a reserve retirement and an active duty retirement is that with few exceptions, you won’t actually start receiving your retirement pension until you reach age 60.  You earn 15points for each year of service. Drilling reservists and Inactive Ready Reserve (IRR) get these 15 points a year. You accumulate more points for drill weekends, active duty periods, and things like serving on funeral honors detail. Every active duty day count is one point. Each drill counts one point, usually 4 a  weekend. 

For example, a drilling reservist could earn 77 points one year: 15 points for annual participation, 48 points for four drills a month for 12 months, and 14 points for 14 days of annual training.

A good year is when you earn a minimum of 50 points within a 12 month period and maintain your mobilization readiness. Your considered eligible for retirement when you’ve completed 20 good years of service.  Continue serving and earning more points will increase your retirement pension. 

When you retire you have a very important decision to make. You either Retire Awaiting Pay or Resign. The key benefits of Retire Awaiting Pay are your seniority continues to accumulate as if you were still serving, called longevity. And when you reach 60 your retirement pay will be based on active duty pay table in effect that year. However, you could still be recalled to duty for full mobilization.  Almost every Guard and Reserve retiree chooses to Retire Awaiting Pay and take the risk.  If you resign your pension will be frozen at your resignation date.

 You should receive a Notification of Eligibility once you had 20 good years. Keep this and a record of your points earned a safe place. Your retirement pay won’t start automatically at age 60. You will need to file and don’t delay. If you wait more than six years you will lose one day of pay for any day more than that you waited. 

How much will you  get paid? First, divide your total earned points by 360 to translate points into years. Then if you’re a Final Pay or High Three retiree multiply those “years” times 2.5% times your pay on the pay scale for the year you turn 60. Again, those years in rank, or longevity, continued to tick up while you were retired awaiting pay so look for that column on the pay chart. If you’re in the Blended Retirement System or BRS, it’s 2.0% times your years times your pay. And remember, you can only use the pay chart for the year you turn 60 if you chose to retire awaiting pay. If you chose to resign, use the pay chart and years of service for the year you resigned.

You may be eligible to begin retirement pay three months early for every 90 consecutive days of mobilization for war or national emergency.

Have more questions about your Guard Reserve retirement, reach out to [email protected]

When your reach 59 ½ years old you can withdraw money from your qualified retirement plans like Thrift Savings Plan (TSP), 401k, and IRAs without paying the 10% early withdrawal penalty tax.   There are some exceptions to the 10% tax penalty. In particular if your separate from service after you reach 55 years old, you can begin withdrawing from that employer’s retirement plan penalty free. And there are a just a few other exceptions to the early withdrawal penalty.

You also need to know if you make withdrawals from a ROTH IRA, ROTH TSP, or ROTH 401k, you can withdraw your contributions penalty free. But your earnings taken from the ROTH within 5 years of our first contribution will be subject to the 10% early withdrawal penalty, even if you’re over 59 1/2.

Otherwise, when you reach 59 ½, no more tax penalty. You will still owe income tax on withdrawals from regular IRA, 401k and Traditional TSP, but the penalty is behind you.  If you are still working, like most people this age, you can still continue contributing to your retirement accounts including cathup contributions after age 50.

In the meantime, it's a good time to take inventory and take another look at how you envision your retirement. When would you like to stop working? Or perhaps go to part time? What will your retirement lifestyle be like? What budget will you need to support that lifestyle? Up through our fifties, most people save as much as they can, or have had a particular target amount of savings for retirement. By 60 it’s a great time to see if you are still on track or if your needs or wants have changed. It’s gets harder to make up ground as you close in on retirement, so the sooner you know if you need to make any changes the better.

While it is best to leave your retirement saving to grow, it is good to know that if you need to you can access your qualified retirement plans after 59 ½ without a tax penalty. It can act as an emergency fund allowing you to save more now if you need to. And this may be a great time to “test drive” a retirement budget. By saving more now, you will have less cash available for spending. You can see how that tighter budget might fit your lifestyle and needs in retirement. This could give you more confidence that you are on track or may push you to consider other options like working longer or part time.

Another factor to consider as your looking forward is what will you do for health insurance if you stop working before age 65 when you would be eligible for Medicare? Military retirees are covered by Tricare, including Guard and Reserve retirees over age 60. But the cost of healthcare insurance can be shocking when it is no longer sponsored and subsidized by your employer. Know your options and costs.

And lastly, if you haven’t already, open an account on the Social Security website at https://www.ssa.gov/myaccount/ .  They gave great tools and online calculators to estimate your social security payments for different scenarios based on your personal earnings history at https://www.ssa.gov/benefits/calculators/ 

So to wrap things up,once you hit 59 1/2 you can withdraw saving from any regular IRA or 401k and Traditional TSP penalty free. You just pay the income tax. ROTH accounts are also penalty free after 59 ½ as long as it’s also been 5 years since your first contribution. But don’t withdraw your money just because you can. It’s a great time to take another closer look at your retirement pan and savings so far. Refine your budget, see if you need save more work longer. And also make a plan for healthcare and Social Security, both of which we’ll talk about in future episode.

Have a question you’d like answered on a future podcast, sent it my way to [email protected] 

A risk profile is used to help you select an appropriate investment mix to best meet your unique needs while also staying in your individual comfort zone. Risk is the chance that the value on your investments will go up and down. We consider a steady eddy investment is less risky. A high flier with large up and down swings, more risky. You may make smart investments that are risky in the hope your investments will grow and provide money for your future. 

As a financial planner is help plan, save, and invest for your needs and dreams. A key step is to help you identify your willingness and ability to take on risk in your investment portfolio. If you express a strong desire not to see the value of your account decline and are willing to give up potential investment growth to smooth things out, we say you have a low willingness to take on risk or are risk-averse. 

If an you have a desire for the highest possible growth on your investments and are willing to endure large swings in the value of your account to achieve it, you have a high willingness to take on risk and are a risk seeker. I usually talk with my clients about their relationship with money and use a questionnaire that asks questions.  The worst time to find out that you don’t really like to take a lot of risk is after your investment drops by half overnight. You can’t sleep, you can’t think, your terrified you’ll lose the rest, and you bail out at the bottom, locking in those huge losses.

 What’s your ability to take on risk? If you saved well in a retirement account or TSP, have a solid emergency fund and insurance coverage, and a dependable job or a government pension you have a higher ability to take on risk. If your investments take a temporary dive, you have other assets to tap if you need to. Also, the more time you have, the more ability you have to take on risk. Most investment portfolio losses are temporary, if you leave them be. This is why younger people with low debt and solid savings often have a higher risk ability. And if they also have a matching comfort with taking risk, an investment portfolio heavy in more volatile stocks that offer higher reward may be a great fit.

The opposite may be a 80 year old retiree living on Social Security and taking withdrawals from very modest savings. They may not be able to work more if they have unexpected expenses or cost of living increases, so they have to live on what they have. They probably won’t have the ability or time to recover from a huge drop on the value of their investment portfolio. This person would have a low risk ability, even if they are willing to take on risk.

 As an advisor, I generally recommend investing based on the lowest risk, either your willingness to take on risk or your ability. What if you want or need higher investment growth? If the challenge is your ability to take risk, shoring up your safety net is the first step. An emergency fund, insurance, and the flexibility to tighten your belt if need be will increase your ability to take on more risk, and in the long haul enjoy higher investment rewards. 

What if your risk tolerance, or comfort taking risks with your investments is low? Focus on smoothing your investment returns with diversification and investments that are lower risk, lower reward like more bonds may be a good move. But you’ll need to take a realistic look at whether this investment growth will provide for your future needs and wants. 

A good financial planner, like me, is a great way to explore your risk profile, see how it matches up with your needs and dreams, and help you save and invest to reach your best future. If you prefer to go it alone, most investment platforms offer online tools to help you identify your willingness to take investment risk. If you have any questions, or want help with your special needs and dreams reach out. I live to help.