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Wealth with personal finance expert

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Gene Chatzky Edelman Financial Engines

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Now, here's Gene Chatzky

0:59

Hey, everyone. I'm Gene Chatzky. Thanks so

1:01

much for joining me today for everyday

1:04

wealth. So, one of the things that

1:06

has drawn a big response over the past

1:08

couple of months is when we

1:10

answer your questions, questions

1:12

from our listeners. And so we

1:15

thought we'd take a recent question

1:17

and use it as the jumping

1:19

off point for today's show.

1:22

The question is, can you

1:24

talk about the changes

1:27

in the Secure Act 2.0

1:29

for 2024 and beyond?

1:32

And in particular, can you talk

1:34

about them in regards to

1:36

provisions around retirement

1:39

savings? This is a great

1:41

question. It is a timely question.

1:44

It's on a lot of people's minds and

1:46

believe me, there is a lot there.

1:48

So to help us dig into the topic,

1:51

Isabel Barrow is with us. She's a wealth

1:53

planner at Edelman Financial Engines

1:55

and a familiar face and

1:57

voice to most of you. Hey, Isabel, thank

2:00

you for being here. Nice to see you. You

2:03

too, Jan and great to be here and great to

2:05

see you. So let's just back

2:07

up for a sec before we get into

2:09

the specifics around

2:11

this question. And let's talk about

2:13

context. What is Secure

2:16

2.0 so

2:18

secure 2.0 was a pretty broad

2:21

and sweeping tax

2:23

law change that impacted

2:26

retirees, right? So retiree savings,

2:28

Ira s workplace plans.

2:31

The goal was ultimately to try to help

2:33

people to grow their retirement savings

2:36

to urge small employers

2:38

to offer retirement plans. This law

2:40

change passed in December of 2022.

2:43

And while some of the provisions

2:45

kicked in right away, there were a lot of others

2:47

that just are, you know, kicking in over

2:50

time. So some that

2:52

will start, start in 2024 some

2:54

that start in 2025 2627

2:56

and even others that are not

2:59

gonna kick in until 2033.

3:01

So, you know, we've seen some pretty

3:03

significant changes already kick

3:06

in specifically thinking about

3:08

required minimum distribution. So

3:10

it used to be 70 a half and then it was

3:12

72 and then with 2.0

3:14

now it's 73 and

3:17

soon to be 75 in a decade or

3:19

so. So we're continuing to see

3:21

changes go into effect through 2024

3:24

and later. So when

3:26

you look at this broad swath

3:29

of provisions, I mean, you're, you're not

3:31

understating it, there are more than 90

3:33

of them. Fortunately for our listeners

3:35

today, they don't all kick in in 2024

3:38

but let's talk about the changes

3:40

that we're going to see in the very near term

3:42

and how they may impact the

3:44

folks who are listening. Yeah. Well,

3:46

I let's just start with someone

3:49

who may be paying on student

3:51

loans. So there is one

3:53

provision in secure 2.0

3:56

that states that starting in 2024

3:58

employers are now able

4:01

to make matching contributions

4:03

to a retirement account that

4:05

matches your contribution

4:07

or employee's contribution to their student

4:09

loan payments, even if that

4:12

employee who has student loans is not

4:15

making contributions to the regular 401k

4:17

plan. So that could make it a little bit easier

4:19

if you are, you know, trying to pay

4:21

off school loans. Um you're

4:23

a young worker and you know, just getting started, it might

4:25

not be able to add to the 401k yet because

4:27

of the loans. And this is gonna help you to take

4:29

that match or what would have been a match

4:32

for the 401k, put it towards

4:34

retirement if you're making payments on those

4:36

loans. So that's a pretty cool thing for student

4:38

loan. But I love this

4:40

because a lot of the questions

4:43

that I get and that I know you get are

4:45

either or questions, right. I

4:48

can't afford to both pay

4:50

my student loans and save for retirement.

4:52

What should I do? And those

4:55

questions kind of put us in a pickle because

4:57

although we can run the numbers

4:59

and figure out where you're likely to get the greatest

5:01

return on your money. What

5:03

it doesn't help is the

5:05

fact that your early years

5:08

of contributing to your retirement

5:10

are the most powerful years. And this

5:12

is, this is really a fix for that.

5:15

Absolutely. And I think, you know, it goes

5:17

back to the fundamentals of

5:19

financial planning when we think about how do you prioritize,

5:22

where do you put your dollars? And it's really tough

5:24

when, you know, you might have dueling

5:26

goals. I want to get out of debt, but I really

5:29

need to save for retirement. And this is again,

5:31

this is kind of going to, um, you know, this

5:33

is going to kill two birds with one stone, so to speak.

5:35

So this is a nice provision and interestingly,

5:37

so there's another provision related

5:40

in a, in a, you know, kind of similarly when

5:42

you're thinking of 520

5:44

nines. So another 2.0 provision

5:46

is that for those

5:48

who have money left over in their 520

5:51

nines. So, you know, one of, one of the things that

5:53

we deal with often is I

5:55

want to save for my kids' college, but is it better

5:57

for me to save in a 529 or

5:59

save elsewhere or just

6:02

save for them for retirement or, you know, what's

6:04

the best way for me to do this? And, and I'm worried

6:06

about overfunding a 529 which

6:08

let's face it. I mean, with the prices of

6:10

college these days, if your kids are going to college,

6:12

I mean, what's the likelihood you're going to overfund a 529?

6:15

I would say it's relatively tough, however,

6:18

it can happen. And one

6:20

of the provisions in 2.0

6:22

again, secure 2.0 is that

6:24

if you have money left over in your 529

6:27

or your child? 529

6:29

after 15 years, you may

6:32

and this again, this starts in 2024. So

6:34

this wasn't a provision for 2023

6:36

but you may be able to use some of the

6:38

leftover balance to actually

6:40

convert to a Roth Ira

6:43

for that student's benefit for future,

6:45

for retirement. So the rules

6:47

are, you know, there, there are quite a few

6:49

things that you need to be aware of

6:51

before you start doing this. It has to be open

6:53

for at least 15 years. There is

6:55

a maximum contribution of $35,000

6:58

from that 529 plan to a Roth

7:00

Ira. And it is subject

7:03

still to the typical annual

7:05

Roth contribution limit. So that's going

7:07

to be income limit and whatever the annual

7:09

contribution limit is in the year that you're

7:11

making that conversion. So a couple

7:13

of loopholes that you'll have to jump through, but in general,

7:16

it's a way that we can look at, look

7:18

save for retirement at the same time you're saving

7:20

for college. So if you overfund that 529

7:23

it's not as much of a concern that now I might

7:25

be penalized to, to take money back out

7:27

if we haven't used it all because now

7:29

you have an option where you can say, look, if we haven't

7:32

used it all, great, we can put it towards

7:34

our child's retirement and they can get it in 35

7:36

years or 50 years or whenever they act retire.

7:39

Yeah. No, I think it's, it's a fabulous

7:41

provision. And it also, I think goes

7:43

to tamp down the fears

7:46

of parents or grandparents

7:48

who say, look how, how am I going to

7:50

know if this baby is

7:52

even going to go to college? Right. How,

7:54

I don't know who this person is going to be

7:56

yet, they're not fully formed. How do I know

7:59

if this is a smart move? So this

8:01

is great and these first two I think are

8:03

going to be really good for both college

8:05

savers. But also for those people who are

8:08

trying to dig out from college

8:10

debt, there are also some changes

8:12

I know on the horizon when it comes

8:15

to Roth Ira S, can we dig into those?

8:18

Well, so we'll start with ROTHS

8:20

as they relate to 401 Ks.

8:22

So Roth 401k

8:25

S, if you have an employer sponsored

8:27

plan that has a Roth 401k

8:29

option and you then

8:31

retire, you have

8:34

just like you have a required minimum

8:36

distribution for your non Roth

8:38

401k when you hit. Well,

8:40

now 73 maybe in the future

8:42

75 you had a required minimum

8:44

distribution that you had to take out of the Roth as well. And

8:46

so now that has been eliminated.

8:48

So if you have a Roth 401k,

8:51

just like a Roth Ira,

8:53

you don't have a AR MD or required

8:55

minimum distribution to take on a Roth

8:57

Ira, you can just leave that as long as you live,

9:00

you never were forced to take any money out of it.

9:02

Of course, tax has already been paid so you

9:04

can just leave it alone if you don't need it. Similarly,

9:07

you can now do that in the Roth

9:09

401k. So it makes it even a little

9:11

bit more appealing for, for those who

9:13

are thinking about putting money into

9:15

a Roth 401k. And another one as it relates to

9:17

retirement plans is emergency

9:20

savings. So this is a totally

9:22

new one. Employer plan sponsors

9:24

can now create emergency savings

9:26

accounts for the employee, the participants

9:29

in the plan who can

9:31

now make Roth pay ins. That's after

9:33

tax money again to

9:35

a savings account within the plan

9:38

now that you can't put more than $2500.

9:40

And so it is like very specifically

9:42

an emergency fund account and

9:45

the way that that kind of works is

9:47

that you can make a couple of distributions in a year

9:49

without any penalties or taxes on that.

9:52

Another one that, that relates

9:54

again to Roth's then this was

9:56

supposed to start in 2024. But then because

9:58

of the complexity of the record

10:00

keepers and how it was all going to be dealt with payroll,

10:02

et cetera. It was supposed to start in 2024.

10:05

It's been pushed back to 2026

10:08

but still an important one to know

10:10

is that there is an income, look

10:12

back provision for 401k s

10:15

in terms of the catch up contributions.

10:17

So, so

10:20

if you're over 50 you're making

10:22

contributions either to an IRA. But in this case,

10:25

we're talking about a 401k plan, you

10:27

can make a catch up contribution so you can add

10:29

a little extra over the annual limit.

10:32

However, what this is stating this new

10:34

rule change and again, starting in 2026

10:37

is that if you earn more than 100

10:39

and $45,000 in the prior

10:41

year, which will be indexed for inflation,

10:43

by the way, your catch up contributions

10:46

have to go to

10:48

a Roth within the company plan.

10:50

And this is why they had to push it back because not every

10:52

plan has a Roth, right? So

10:55

basically what they're saying is look, if you make

10:57

over 100 and $45,000 we're not

10:59

going to allow you to continue to

11:01

make these contributions and take a tax

11:03

deduction for those catch ups.

11:05

So you're gonna have to make that to the Roth piece.

11:08

So that's, you know, it's ok. And I think,

11:10

you know, for some, it may even be better that they're,

11:12

they're adding a little bit to the Roth depending on what their

11:15

total situation looks like. But it is something

11:17

to be aware of because

11:19

it could mean that it changes your

11:21

tax landscape starting in 2026.

11:24

So be sure to talk to your tax professional

11:26

about that when you're looking at contributions

11:30

to your 401k and

11:32

you have the choice of putting

11:34

money into an emergency

11:36

savings account versus retirement.

11:40

How do you parse that? So,

11:43

I think that that number one,

11:45

you want to build your emergency fund,

11:47

but if you have

11:49

an employer match on your retirement plan,

11:52

you don't want to

11:54

sacrifice that free money from

11:56

the employer match. So, it's one of these

11:58

questions. It's like six of one half dozen of the other.

12:00

Right? I think it's very context

12:03

specific to your situation. I

12:05

would say that if I really had to choose

12:07

one, I would say Emergency fund trumps everything

12:09

because you could drive yourself into

12:11

debt very easily if you don't have an emergency

12:13

fund and you have a major car repair or a health

12:15

incident or whatever it is. And so

12:17

that emergency fund can really help you from

12:20

getting into sort of that debt spiral.

12:22

At the same time, I'd really like for you to have

12:24

both if you can, whatever sacrifices

12:27

need to be made in order to just get up

12:29

into that 401k plan to get your

12:31

employer match. If there is one

12:34

again, you know, kind of dueling goals, I guess

12:36

emergency funds sort of trumps the other, but

12:38

they're both super important to do.

12:40

Agreed. Absolutely. And

12:42

these are the kind of tradeoffs and

12:44

what ifs that, I'm sure you

12:47

help people with all the time

12:49

and this is where having a planner comes

12:51

in handy. Absolutely.

12:53

And you can always give us a call if you have questions about

12:55

this as it relates to your situation, as it relates

12:58

to your 401k.

13:00

And, you know, I'm, I'm thinking about

13:02

whether or not I need to be adding to

13:04

a Roth or if I need to be adding to a Roth

13:07

Ira or, or, you know, what are all the sort

13:09

of, how do I prioritize as

13:11

I'm thinking about my retirement savings,

13:13

this is where a financial planner can come in to help

13:15

everyone's situation might be different. So I might be

13:17

saying an emergency fund is, you know, is

13:20

the most important thing to have right off the bat.

13:22

But if you have a really

13:24

secure job and, you know, you've

13:27

got other resources or you've got a home equity

13:29

line of credit or, you know, lots of, lots

13:31

of other things that we could be thinking about. We

13:33

might tell you to go ahead and just go, you know, add

13:35

to the 401k instead. So it's all about

13:38

helping you to understand how to prioritize

13:41

your financial goals. That's

13:43

just the very basics of financial planning

13:45

is just coming up with sort of a list of what

13:47

are the priorities and how do I, how do I really go

13:49

down this list and know what do I do first?

13:52

What's the most important thing for me? Given my situation?

13:55

Yeah, it's all personal,

13:57

right? Personal finance is more personal

13:59

than finance and, and putting your own

14:01

spin on it with help is key

14:03

particularly I think it at the start

14:05

of every new year. When we're focused

14:08

on these things, we were talking

14:10

Isabel about catch up contributions

14:12

and the changes that are coming to 401k

14:15

catch up contributions. How

14:17

about Ira? Catch up contributions

14:20

and I'm saying, catch up, not catch

14:22

up, but there you go. I

14:25

always like when I say it enough times,

14:27

I'm always, always eventually start

14:29

thinking about the red stuff coming out of the bottle. I

14:32

know it's like saying Ira or

14:34

Ira or R MD or required

14:36

minimum distributions. And somebody says MRD,

14:39

you know, yeah, there there's all wrong.

14:41

It does. Yes, but you know, so

14:43

the Secure Act 2.0 is changing

14:46

a lot of stuff like you said, 90/90

14:48

different provisions and, and updates

14:50

and changes for retirees or retirement

14:52

planners. And so one of those is for those who

14:54

have a catch up contribution,

14:57

that's people that are 50 or older,

14:59

this relates to their Ira contributions

15:02

and starting in 2024

15:04

this is good news that catch up

15:06

limit will now be indexed for

15:08

inflation. So, meaning that could increase

15:11

every single year depending on the federal

15:13

cola. Another one that's getting

15:15

indexed for inflation is the

15:17

what we call the Q CD, that

15:19

is a qualified charitable donation

15:21

and that amount will now also

15:23

be indexed for inflation. So

15:26

these are things again, you want to talk to your tax

15:28

professional, your financial planner about how

15:30

these changes could impact you

15:33

um because if you're not on top of it, you might be

15:35

missing out on some extra tax deductions

15:37

or some extra tax breaks that you didn't know about

15:39

that you could be getting. So again, and one

15:41

of those things that we talk about as financial planners

15:44

all the time is that stuff

15:46

is always changing whether or not it be in your life

15:48

or relating to the markets or relating

15:50

to taxes or rules

15:52

or whatever. And it's really hard to stay

15:55

on top of all that stuff. So it's nice to have

15:57

somebody to be able to talk to that can just

15:59

break down for you. Here's what you need to

16:01

know and how it relates to you too bad.

16:03

These didn't take effect the last couple

16:05

of years when inflation was running

16:07

hot and heavy. Right. Let's hope

16:09

that doesn't happen again. So the indexes might not be quite

16:11

as good as they were in 2021

16:14

and 2022 and 2023.

16:16

A couple of other things I just want

16:18

to touch on when we talk about uh significant

16:21

changes for, for 2024

16:24

there's a provision to help victims

16:27

of domestic violence and domestic

16:29

abuse. There is.

16:31

So if you are a victim of domestic

16:33

abuse and you are under 59.5,

16:36

you know, ordinarily in order to access

16:38

funds from your retirement, your ira

16:40

or your 401k, you're

16:42

going to pay a penalty and tax on

16:45

those distributions. Well,

16:47

now, if again, a domestic abuse victim

16:49

under the age of 59.5 can take up

16:51

to $10,000 out of their IRA

16:53

or 401k. This is a one time

16:56

without having to pay that, that 10%

16:58

penalty tax up to $1000

17:01

can be taken again, penalty free

17:03

from your IRA or from your 401k

17:05

for emergencies. So even if you,

17:07

you haven't reached 59.5, another

17:10

change is the employer contribution

17:12

limits for simple Ira S is increasing

17:14

that that one doesn't apply to that many people. I think

17:16

simple Ira s are we come across

17:19

them more rarely, but they are still,

17:21

you know, small employer plans and those, those

17:23

contribution limits are increasing as well. Employers

17:26

with no existing retirement plans can

17:28

now offer starter 401k accounts

17:31

with a default enrollment.

17:33

And so then the pay in is basically going to be the same

17:35

as as that for an Ira. So that's kind

17:37

of a neat thing as well for smaller

17:40

employers, they're getting not only increases

17:42

but changes in the types of plans

17:44

they can offer. And the automatic

17:46

enrollment, which automatic enrollment is basically

17:48

saying, look when you start working

17:51

for our company, we're gonna automatically put you on our

17:53

401k plan and deduct some money. So it's,

17:55

it's like you don't have, it's kind of an opt out

17:57

instead of an opt in. So it's a big incentive

18:00

for employers who want to help

18:02

their employees get started

18:04

without having to beg

18:07

them to add to the plan, they can

18:09

automatically enroll them. Yeah. And

18:11

it's why 401k plans have been

18:13

so effective over the past decade

18:16

or so. I mean, as soon as that

18:18

provision started to be put in, in larger

18:20

companies, they saw 401k

18:22

enrollment shoot up from 50%

18:24

to 80 or 90%. So I'm

18:27

all for this kind of Big Brother

18:29

impact. Um, lots and lots of

18:31

changes is what I'm hearing

18:33

for 2024. And

18:35

as you said, at the top

18:37

of the show, we're going to continue to get more of these

18:39

in 2020 5, 2026

18:41

2027. Just

18:44

another reason to make sure

18:46

that you're working with somebody that you're working

18:48

with a wealth planner like Isabel

18:51

so that you can take advantage of these

18:53

new provisions as they continue

18:55

to roll out. We started

18:57

this show by taking one listener

19:00

question. Let's continue

19:02

and, and take a few more after the break. Sound

19:04

good to you. I love that. My favorite part

19:06

is answering the questions. Perfect.

19:08

Stick with us everybody. We'll be right back,

19:11

we are back. We're gonna wrap up this show

19:13

by answering a few of

19:15

your questions. The first

19:18

one asks, what percentage

19:20

of your 401k should you

19:22

withdraw annually in

19:24

retirement? Isabel? I suspect

19:26

this is a trick question. This

19:28

is definitely a trick question because this is like, is

19:31

there a number that I can use.

19:33

That will be my answer, my magic

19:36

ticket for retirement planning. Like,

19:38

what's the, what's the answer to a retirement

19:40

plan? And as you suspect,

19:42

there is really no answer. I mean, generally

19:45

speaking, you know, you hear

19:47

a lot about a 4% rule and what that means

19:50

is, you know, the 4% rule

19:52

says you should be able to draw 4%

19:54

off of your account and

19:56

have your account last for 20 plus

19:58

years under many different past

20:01

market conditions. But I will say that

20:03

that rule of thumb is

20:05

really not what you should be using as you think

20:07

about your entire retirement

20:09

distribution strategy, right? Because if

20:12

you're 50 when you retire, 4%

20:14

I would argue is way too high. And if

20:16

you're 80 when you retire, 4%

20:18

might be way too low. So

20:20

I think there is not a right answer.

20:23

You also have to think about all of the legs of your

20:25

stool. You know, how much Social Security do you have?

20:27

And when are you going to take it? Do you

20:29

have other accounts outside of your

20:31

401k? Do you have a mortgage? You only have

20:33

five more years to pay on? Well, your

20:35

distribution rate might be higher in

20:37

the first five years than it is in,

20:40

you know, after that. So I think

20:42

it's, this is really, you know, a question

20:44

that kind of goes back to the fundamentals of,

20:46

well, what are your goals? What's your inflow?

20:48

What's your outflow? And also,

20:51

I mean, the the complexities of this

20:53

are so are so great when we start

20:55

now, talking about, what about health

20:57

insurance? Are you on Medicare? Do you have

20:59

to worry about Medicare surtax premiums

21:01

if you, you know, if you take out

21:04

too much and you have to pay Irma on top

21:06

of your regular Medicare premium,

21:08

you know, what about your taxes? Are your tax rates

21:10

going to be higher now lower now than

21:13

they are in the future? What are

21:15

your goals? Are your goals to retain as much

21:17

in your 401k as possible

21:19

for your, you know, later in life or for your

21:21

beneficiaries or to spend as much as you can

21:23

now and die with your last dollar. I hear that one a lot.

21:26

Um That's kind of hard to plan around, to

21:28

be honest. But um, unless you know, the day you're

21:30

gonna die, it's not really one that we can,

21:32

you know, mathematically, formulate for you, but

21:35

I think everybody has a different goal

21:37

around what they want to accomplish. And

21:39

this is the point of financial planning and this is why

21:42

if you don't know how much to take out

21:44

and you don't know what that's gonna look like, you really

21:47

need to talk to somebody about it. Like right

21:49

now. Not, don't wait, don't wait until you are retired

21:51

and then say how much can I take out of this account, it might not

21:53

be enough and it might be,

21:55

it might be really tricky when you take that into account

21:58

with all of your other, you know, the other again, legs

22:00

of the stool or pieces of the puzzle, so to speak.

22:03

I have heard you and Andy Smith who's

22:05

also on the show a lot, say,

22:07

save as much as you can for as long as you

22:09

can. You know, when it comes to

22:11

advice for accumulating for retirement,

22:14

I think you can, you can bucket it

22:16

like that and it tends to work when

22:18

it comes to the flip side to pulling money

22:21

out in retirement.

22:23

It is so much more complicated than

22:25

the accumulation phase. And I think

22:28

even if you've never had an

22:30

advisor before, when

22:32

you get to withdrawal,

22:35

you absolutely need one. So

22:37

I'm with you on that. We've got

22:39

another retirement related question

22:42

is social security still going

22:44

to be around for someone who is 48

22:47

and planning to take it at 62.

22:50

We could just go all day with

22:52

these trick questions, you know,

22:54

and this is maybe the most common

22:57

question I get and my least favorite question

22:59

to answer because it is a trick question.

23:01

I mean, how would I, I don't know any more than the,

23:03

the about this and the legislation

23:05

and what the likelihood is of one thing or another

23:07

happening than anyone else who's calling

23:10

to ask about this or anyone else? Who's thinking

23:12

about it? So, do I know the answer of whether

23:14

or not social security will be around forever in the

23:16

same format that it is now? I don't know.

23:18

But what I do know is that if you're worried

23:21

about it, then you need to plan for that, you need

23:23

to plan accordingly. So you should have a financial

23:25

plan that takes into account

23:27

social security or not social security

23:29

or maybe takes into account some portion of social

23:32

security. If you're worried that your benefits will be cut,

23:34

then let's think about, ok, what

23:37

is a reduced amount from social security? That's

23:39

most likely, you know, is it 70% is

23:41

it 50% and plan around

23:43

that? So, if you're young and you're

23:45

worried about the longevity of

23:47

social security or the likelihood of it paying,

23:50

then it may mean you need to save a little bit more

23:52

now to account for that, you know, and

23:54

then if social security does come in or

23:56

it's, you know, some amount more than you

23:58

were expecting or more than you plan for. Great.

24:00

It's a bonus, right. You can spend a little

24:02

bit more or maybe we can pivot,

24:05

you know, if there are a lot of changes that come

24:07

in the next five years to social

24:09

security and you're only 48 and you haven't yet

24:11

started taking it. Well, guess what

24:13

if you're planning as if it wasn't going

24:15

to be there and then it gets changed

24:18

and it looks like it is going to be there just in a different

24:20

format. Then, guess

24:22

what? You, now you can pivot and change, right.

24:24

One of the things that we know about financial

24:27

planning is that there's always

24:29

going to be something that is changing. Right. But

24:31

2.0 Secure Act 2.0 we've been talking

24:34

about 90 changes, 90 provision changes

24:36

including RM DS and Ira contributions

24:39

and all this. So you've been planning for your whole life

24:41

to have to take an R MD at 70

24:43

a half and then it was 72 and then 73

24:46

and maybe 75. Well,

24:48

these are all changes you have to kind of roll with,

24:50

right? And there's always going to be

24:52

something. So whether or not it be Social

24:54

Security or Medicare changes or tax

24:56

changes or contribution limit changes,

24:59

whatever inflation you got to just

25:01

be able to roll with it. And that's

25:04

kind of the magic of, of having

25:06

a financial planner that you can meet with regularly

25:08

is that you can stay on top of these things,

25:10

right? You don't have to wait for five or 10 years and say,

25:12

oh, well, you know, I wasn't planning

25:15

for social security to go away and

25:17

now it, you know, now I'm getting less than I thought I was

25:19

going to and now I have to pivot

25:21

and work longer. Well, start planning now

25:23

and make updates and adjustments to your plan

25:25

along the way. Love that

25:28

one final question. It's broad.

25:30

So maybe you could give us one or two.

25:32

But what tips do you have for

25:35

health care coverage for retirees

25:37

before age 65? So

25:39

people who have left their main

25:42

job, right? Don't have health care coverage

25:44

but are not yet qualifying

25:46

for Medicare. So Medicare

25:49

starts to kick in when you're 65. And

25:51

as long as you are eligible,

25:53

you're gonna automatically qualify at 65

25:55

for Medicare A, you have to opt in

25:57

for Medicare B or C or D or any of

25:59

the other ones. But prior to

26:02

that, you've got a couple of different options.

26:04

Now, none of them are all that

26:06

cheap, but you do have some

26:08

options. So number one, your employer

26:10

may offer a retirement

26:13

sponsored health care plan. So federal

26:15

government employees, for example, a lot of state

26:17

government, a lot of teachers

26:20

or union employees, you might have a retiree

26:22

health care plan, which you can

26:24

stay on through retirement until you hit

26:26

65. You know, if you're military, you have

26:28

Tricare and you can stay on that until

26:31

you hit 65 for others.

26:33

You're likely looking at potentially

26:36

Cobra. So you can stay on Cobra depending

26:38

on the circumstances of why you

26:40

left work, it may be 18 months,

26:42

it might be as long as three years Cobra

26:45

can cover you and your family. So

26:47

if you're not, you know, if you don't have coverage

26:49

through a spouse or another family member. Um,

26:51

you know, you can stay on cobra from your employer

26:53

and that's probably four

26:55

or $500 a month per person. So

26:58

it's expensive, but you're keeping your same plan.

27:00

So that's part of the appeal. Now,

27:03

another alternative is a private plan.

27:05

You can always just go out and buy a plan

27:07

privately. Right. So you can go to if you like

27:10

Aetna Blue Cross Blue Shield, whatever you can go

27:12

on and buy a plan privately through

27:15

that direction or that route, what

27:17

is typically going to be

27:19

potentially easier to get and less

27:21

expensive depending on your health and

27:23

depending on your qualifications. So

27:26

you do need to know that that in order to be qualified

27:29

for the Affordable Care Act plans,

27:31

those are the ac a state sponsored plans.

27:34

You have to essentially apply for this within

27:36

60 days of your leaving

27:38

your employer. Um That goes for, that goes

27:40

actually for Cobra as well. So you need to, you need to

27:42

do this within 60 days of, of ending your

27:44

employment. But the Affordable

27:46

Care Act plans are usually

27:48

going to be a little bit less expensive

27:50

for the same level of plan.

27:53

So, you know, if we're talking apples to apples in terms

27:55

of what the plans offer then Cobra.

27:57

Um and that's because a lot of

27:59

times you may be eligible

28:01

for if you're not working anymore and you don't have

28:04

as high of an income as you used to, you

28:06

may be eligible for some subsidies.

28:08

Those are just tax subsidies, you know, essentially

28:11

that are going to end up reducing the total

28:13

cost of that plan for

28:15

you. So that might be, you know,

28:17

maybe reducing it down to, for,

28:19

for many people that could reduce it down to almost nothing.

28:22

But typically, I would say without those subsidies,

28:24

those ac a plans are still going to be a little

28:27

bit less than, than Cobra. But it's a different

28:29

plan. You know, you're going to a maybe a different

28:31

health insurer, different plan than you were

28:33

on with your employer, which is one of

28:35

the benefits of Cobra again, is just

28:37

the continuity of the plan, but it's limited

28:39

in the amount of time you can go. But if you retire at 64.5

28:43

and you love your plan and you know, you've

28:45

only got six months to go, you may just opt to stay

28:47

on Cobra. So there, there are a lot of options. We

28:50

do have resources to help people kind of wade

28:52

through that me. But

28:54

um it is, you know, it is definitely one of the things

28:56

that I would say is, is really complicated

28:58

about an earlier than 65 retirement is

29:00

just trying to figure out all the healthcare stuff. Absolutely.

29:03

And we did actually a whole show on this.

29:05

If you're looking for more information,

29:07

you can go back to everyday wealth.com

29:10

and look for episode 42.

29:12

It's called Healthcare in Retirement

29:15

on the subject. And Isabel, that's it.

29:18

That's all the time that we have today. Thank you

29:20

so much for doing this. Thanks for having me.

29:22

This was fun. Of course. And if you've

29:24

got questions about anything

29:26

related to the Secure Act and how

29:29

it may impact your retirement

29:31

savings or the different strategies

29:33

that you should think about when it comes

29:35

to building your wealth in the coming year.

29:38

Give the folks at Edelman Financial Engines

29:40

a call, talk to a planner like

29:43

Isabel. They can help you reach your

29:45

financial goals and be sure to

29:47

subscribe to the Everyday Wealth podcast

29:49

wherever you stream your favorite podcasts

29:51

or visit us at everyday wealth.com.

29:54

All of our episodes are available

29:56

to you. Thanks so much for listening

29:59

and we'll talk soon.

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