Month: October 2023

Key takeaways

Just like buckling your seatbelt whenever you drive, it makes sense to take some regular precautions in navigating the digital world.

Even if you feel confident in your ability to spot a scam, it’s important to stay vigilant against phishing attempts in your daily life.

Increasingly, your phone service has become a master key to accessing your digital information. So take steps to protect and monitor it.

Stay up to date with the latest levels of protection available on your accounts and devices.

We all take calculated risks every day in our lives. Hop in the car and you’re at risk of an accident. Step out for a walk and you might risk tripping on a sidewalk, or (depending on where you live) getting bitten by a tick.

We don’t see these risks as reasons to hide in our homes all day. Instead, we take reasonable precautions—like wearing a seatbelt, putting on bug repellent, and staying aware of our surroundings—and then go out into the world to live our lives.

Similarly, there are ever-present risks in the digital world. Short of living “off the grid,” it would be nearly impossible to avoid all digital risk. But it is possible, with some precautions and awareness, to greatly reduce your exposure to these risks, and to limit the potential damage that could be done to your life and finances.

Here are 4 ways to protect yourself against scams and identity theft.

1. Stay vigilant against phishing

Phishing is a technique criminals may use to try to trick you into giving them your personal information—information that they may then use to try to steal your identity. They often do this by impersonating a company or institution, and then asking you to click on a link, open an attachment, or to “confirm” your date of birth, Social Security number, or account credentials.

Even if you feel confident in your ability to spot a scam, it’s important to stay vigilant in your daily life. Most phishing attempts are carried out by email, text message, or phone. Here are several warning signs that should raise suspicion:

Warning signs of phishing attempts

• Someone contacting you to say that you have won an award or freebie.

• Someone contacting you with a deal that sounds too good to be true.

• Phone calls, emails, or texts that claim to be from the IRS.

• Unusual communication from someone asking for help.

• Unusual communication (that may sound legitimate) claiming to be from a company you work with.

• Communication from an unfamiliar email address or phone number.

Remember that phishers may use urgent-sounding language to try to get you to click on a link or attachment right away—before you have time to think it through. To create this sense of urgency, they might claim that something very good has happened (like you’ve won some money), or that something very bad has happened (like you’re in debt with the IRS). Be suspicious anytime you receive an out-of-the-ordinary text, call, or email that makes such claims.

Here’s how you can protect yourself, particularly if you’ve received a suspicious or unexpected communication:

Protecting yourself against phishing attempts

• Stop communication with the phisher immediately.

• Hang up the phone, or ignore the suspicious email or text.

• Do not click on any links or download any attachments.

• Do not provide or “confirm” any of your personally identifying information.

• If you think the communication could be a legitimate request from a company you do business with, hang up and then call the company directly.

• Never grant remote access to your computer or read back a one-time security password (unless you have initiated the service call to a company’s official phone number).

2. Protect your phone service

Think of how protective you are with something like your Social Security number. You know that if a criminal were to obtain it, they might be able to take out a credit card in your name, obtain your tax refund, or even worse.

Increasingly, your cell phone account is becoming something you need to protect just as diligently. If criminals can gain access to your phone calls and text messages, they can potentially steal one-time passcodes and break into your accounts.

For example, one way they may do so is with “SIM swapping.” (A SIM card is a small plastic card that stores identifying information on your cell phone, and that allows you to make and receive calls.) With this scam, a fraudster may call your cell phone provider pretending to be you, saying that you have a new SIM card to activate. If the scammer already has some of your personal information (like the last 4 digits of your Social Security number, your date of birth, or your password for your mobile provider account), they might be able to convince the cell phone carrier that they are you and get your phone number reassigned to their SIM card.

Here are several warning signs not to ignore:

Warning signs that your phone has been compromised

• You stop receiving phone calls and text messages.

• Your phone says “no service” or “emergency calls only.”

• Restarting your phone does not restore service.

• You receive emails from your cell phone provider about changes to your account.

If you notice any of these warning signs, contact your provider right away to see if your account has been compromised. You can also take some proactive steps to help better protect your cell account:

Protecting your cell phone against hackers

• Set up a PIN on your mobile account.

• If you believe your PIN has been compromised, reset it.

• Secure your cell phone and internet service accounts, like by setting up multi-factor authentication.

• Ask your cell provider about additional ways to secure your account.

3. Strengthen your account security

Many companies, including Fidelity, go to great lengths to safeguard customers’ information and accounts, and are continually working to build new and enhanced layers of protection.

You can help reinforce those safeguards by being cautious with your passwords, opting in for new security measures, and making sure the companies you work with know how to reach you if they ever need to.

Here are some proactive steps you can take to strengthen security for your accounts:

Protecting your financial and other accounts

• Set up online access for your accounts, if you haven’t already.

• Sign up for multi-factor authentication, when available.

• Use complex passwords, and change them if you believe they’ve been compromised.

• Don’t use the same password for multiple accounts.

• Make sure your institutions have up-to-date phone and email contact information for you.

• Sign up for automated alerts of suspicious account activity, when available.

• Monitor your accounts.

Fidelity offers a number of security-strengthening measures that customers should be aware of. For example, customers can turn on additional login security with multi-factor authentication. Customers can also use money transfer lockdown to block electronic money movement out of their accounts, if they believe or know they have recently been a victim of fraud or identity theft. Enrolling in Fidelity MyVoice® means that when you call Fidelity, you no longer have to enter a PIN or password, and your identity is instead verified using your voiceprint.

4. Secure your devices

Finally, any device you use that’s connected to the internet can become an avenue for cybercriminals to attack. Hackers may get in through newly discovered security holes in these devices and systems. From there, they may also be able to record your keystrokes, access your personal information, or even break into your accounts.

Here are some measures you can take to help secure your devices:

• Protecting your devices from hackers

• Change any default passwords when setting up your devices.

• Apply operating system and application patches as soon as the system maker releases them.

• Don’t download apps or games from companies you don’t know.

• Run antivirus and personal firewall software.

• Avoid conducting financial or other sensitive transactions using shared devices or unsecure networks.

• Avoid public Wi-Fi unless you are taking steps to encrypt and protect your activity.

In conclusion

Protecting your information and online accounts can help avoid the hassle and heartache of ID theft. Take advantage of all security measures offered—and remember that the best way to prevent theft and scams is with a strong defense.

If you believe you have been a victim of identity theft, a scam, or a cybercrime, there are government resources that may help you.

To report identify theft and establish a recovery plan, visit the Federal Trade Commission’s Identity Theft page
To report a scam, visit the Federal Trade Commission
To report a cybercrime, visit the FBI’s Internet Complaint Center

Source: https://www.fidelity.com/learning-center/personal-finance/family-financial-safety/4-ID-theft-protection-tips?ccsource=email_weekly_1005_1037578_64_0_CV2

Potentially higher tax rates in the future could be good for Roth conversions today.

Fidelity Viewpoints

Key takeaways

• Important tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) will sunset at the end of 2025, which may mean higher taxes on the horizon.

• If you convert traditional 401(k) or IRA assets to a Roth, you’ll owe taxes on the converted amount. But you won’t owe any taxes on qualified withdrawals in retirement.

• With Roth IRAs, there are no required minimum distributions during the life of the original owner and beneficiaries may be able to take withdrawals tax-free—making them valuable estate planning vehicles.

Converting money in a traditional 401(k) or IRA to a Roth 401(k) or Roth IRA has long had many potential advantages. Of course, you need to pay taxes on the converted amount. But once the money is in a Roth IRA, you don’t pay taxes on qualified withdrawals, giving you more flexibility to manage your taxes in retirement and boost after-tax income. Plus, there are no required minimum distributions (RMDs) on Roth IRAs during the lifetime of the original owner, allowing for continued tax-deferred growth and making them valuable vehicles for estate planning.

Note: RMDs are required for Roth 401(k)s in employer-sponsored retirement programs through 2023. However, RMDs for the original account owner will no longer be required for employer plans starting in the 2024 tax year.

One reason to consider a Roth conversion this year: Tax rates are set to rise in the future with the sunsetting of the 2017 Tax Cuts and Jobs Act, which expires at the end of 2025. That could mean some big changes in tax rates, unless there are other revisions to tax law. The top bracket could revert to 39.6% from 37%, and some of the lower brackets could increase by as much as 4 percentage points.

Intrigued? Here are answers to common Roth conversion questions. Always consult a tax advisor about your specific circumstances.

Can I convert money from a traditional 401(k) to a Roth 401(k)?

Yes, you can if your plan offers a Roth 401(k) feature and allows in-plan conversions. Of course, taxes may still apply, depending on the source of the balances converted.

Can I convert money from a traditional 401(k) to a Roth IRA?

Yes, once retired or while still working if your plan permits in-service withdrawals from your 401(k). You can convert your traditional 401(k) either through a direct rollover to a Roth IRA or by rolling funds over to a traditional IRA, and then converting to a Roth IRA.

Can I convert to a Roth IRA even if I earn too much to contribute?

Yes, there are no income limits on conversion. Also, if you and/or your spouse have high income levels and are not eligible to contribute directly to a Roth IRA, and you do not already have a traditional IRA, you may want to consider opening a traditional IRA and making a nondeductible contribution, then converting it to a Roth IRA. This strategy is sometimes called a back-door Roth contribution.

How can I estimate my tax liability on an IRA conversion?

Remember, all the traditional IRAs you own (with the exception of inherited traditional IRAs) are considered one traditional IRA for tax purposes, no matter how many accounts you have. Your tax liability is based on 2 things: the taxable income generated by the conversion and your applicable tax rate.

To figure out how much of a conversion from a traditional IRA to a Roth IRA may be taxable, you’ll need to know the types of contributions you made to all of your traditional IRAs (not just what’s being converted). There are 2 types of contributions.

1. Pre-tax, or deductible contributions. These are contributions that are deducted from your taxable income for the tax year in which the contributions were made.

2. After-tax, or nondeductible contributions. Any contribution for which you do not take a tax deduction is known as a nondeductible contribution. Such contributions create what is sometimes called “basis” in your traditional IRA. The amount of these contributions is not included in taxable income for the purposes of a Roth IRA conversion.

Estimating the taxable income from a conversion is straightforward if you’ve never made nondeductible contributions to any traditional IRA. If that is the case, whatever amount you convert will all be taxable income.

Note that earnings are always taxable when converted, whether they are attributable to deductible or nondeductible contributions, so for purposes of figuring out taxes on a conversion, you can think of your balances as falling into just 2 categories: (1) nondeductible contributions, and (2) everything else.

According to IRS rules, you cannot cherry-pick and convert just nondeductible contributions, leaving deductible contributions and earnings in the account, in order to avoid taxes. Instead, you must figure out the proportion of your total traditional IRA balances that is composed of nondeductible contributions, then use that percentage to find out how much of your conversion will not be taxable. Note that inherited IRAs are excluded in this calculation.

Keep state taxes in mind too. A Roth IRA conversion is a taxable event. If your state has an income tax, the conversion will generally be treated as taxable income by your state as well as by the federal government.

Tip: If your spouse has IRAs with mostly nondeductible contributions and you have IRAs with mostly deductible contributions, you might consider converting your spouse’s IRAs before yours to reduce the potential tax impact of conversion. The IRS views your IRA and your spouse’s independently for the above calculation.

How can I manage taxes on a Roth conversion?

Tax deductions can also help offset the tax cost of a Roth IRA conversion. For example, you may be able to take a tax deduction for donations to qualified charities. In general, by making charitable contributions with cash, you can deduct your charitable contribution up to 60% of your adjusted gross income (AGI) if you itemize. The deduction is usually limited to 30% of AGI for donations to some private foundations and some other organizations, as well as for contributions of noncash assets. Note, however, that if your itemized deductions—which include charitable contributions—do not exceed the standard deduction, there wouldn’t be any tax benefit from those charitable contributions. So be sure to consult with your tax advisor to plan your charitable strategy—there are techniques that can help ensure you enjoy the potential tax benefits of your charitable giving.

Does time of year matter?

Converting earlier in the year generally gives you more time to pay taxes. Taxes aren’t due until the tax deadline of the following year, so you may have more than 15 months to pay the taxes on your converted balances. (Note: If you pay estimated taxes, you may need to make some payments sooner.)

But there are also some advantages to converting later in the year:

• You can still start the clock on the 5-year rule as of the beginning of the year. This IRS rule requires a waiting period of 5 years before withdrawing converted balances or you may pay a 10% penalty. But the clock starts on January 1 of the year you do the conversion—no matter when during the year it actually happened. The 5-year rule is counted separately for each conversion.

• You’ll have more information about your income for the year. Since the amount you convert is considered taxable income, you may want to consider converting only the amount that would bring you to the top of your current tax bracket.

A conversion must be completed by December 31 to be included in that year’s taxable income. Managing the tax impact of a Roth IRA conversion requires careful analysis. A review with a financial or tax advisor is always a good idea.

If I want to keep a specific stock or asset in my IRA in my portfolio for the long term, can I keep that asset and convert it to a Roth IRA?

Yes. If you are holding investments in a traditional IRA—ones you want to keep for a number of years—and you think you may be in a lower tax bracket this year than you might be in the future, then a “focused conversion” may be a strategy to consider. With this strategy you move specific assets from a traditional IRA to a Roth IRA, rather than selling the assets first and then moving the resulting cash. In terms of the taxes, there is no difference between the 2 techniques.

During her daily morning walk, Anna’s 75-year-old mom tripped and fell, breaking her hip. Treatment would require surgery and inpatient rehab, followed by weeks of physical therapy. Her mom lived alone, and Anna and her sister had jobs and families of their own. Her mom was adamant that she could continue living in her home, but with limited mobility, could she? Should they hire help for her? If she couldn’t live alone at home, where would she go?

Anna and her sister had a mountain of decisions to make with no way of knowing whether they were making the right ones. This weighed on Anna, her sister, and especially her mom, a once independent person who was not accustomed to relying on her children.

Scenarios like this can catch many families off-guard, and they must quickly make decisions that can have a lasting impact on the aging loved one and their family. Where can families turn for help? Fortunately, a knowledgeable guide is available.

First, What’s an Aging Life Care Manager

An aging life care manager (ALCM), also known as an elder-care manager or geriatric-care manager, is a designated professional who helps families make healthcare decisions–even during crises–and can assist with ongoing care management. They’re not caregivers, but they assess a loved one’s condition, anticipate future needs, and help with planning and decisions regarding care, housing, transportation, etc. These conversations can be difficult for families, particularly when emotions are running high and disagreements aren’t uncommon. Aging-life-care-managers also serve as mediators and help calm family tensions.

ALCMs often have a background in nursing, psychology, sociology, or gerontology and are care-manager certified. They understand the intricacies of healthcare and insurance systems, advocate for quality care, and search for cost-effective resources.

ALCMs also have in-depth knowledge about:

• State and local regulations that impact care and services

• Services provided—and services that aren’t provided—by local retirement communities and care facilities Eligibility guidelines for government programs and federal and state entitlements

• Insurance claims and filing appeals

• Relationships with relevant professionals such as estate planning and elder-law attorneys

Many people have never heard of ALCMs, despite the significant benefits they provide. Let’s look at what some of those are.

Second, Four Key Benefits of Using an Aging Life Care Manager

1. Peace of mind about important decisions: After a fall, you might not know if it’s safe for your loved one to live alone at home. But what are the options? ALCMs can help families make decisions about whether an aging loved one can continue aging in their home or not. ALCMs have inside knowledge about local facilities, e.g., long-term care facilities, assisted-living communities, or senior-living communities. They know how well-staffed they are, how responsive caregivers are to residents’ needs, and have developed relationships with managers and directors. This better equips ALCMs to help families determine the safest and most affordable living options.

1. Ease a loved one’s fears about being a burden: When an aging person faces a health crisis, they often fear losing control or being a burden to their family. According to one ALCM, Audrey Zabin, “an ALCM can help the aging loved one maintain as much independence and control over their lives as possible.” The family members are kept in the loop, but the client has someone outside of the family to talk to about sensitive topics and to help guide them with decisions.

1. Helps prevent families from taking on too much: Caring for a loved one may be noble and rewarding, but family caregivers often underestimate all that it entails. Caregivers can feel overwhelmed as they try to meet all their loved ones’ needs, look after their own families, themselves, and, in many cases, perform at work. An aging life care manager can help provide families a realistic evaluation of the caregiving needs so they can determine what they’re capable of managing or if they should consider hiring help.

1. Cost savings: ALCMs can help you make practical and informed caregiving and housing choices first, so you don’t have to fix them later, which typically costs more time and money. For example, after a fall you may decide it’s best to move your loved one into an assisted-living facility. You find one close by, sign the admission agreement and move your loved one in, only to realize three months later that your loved one is unhappy and the care is poor. Zabin says, “In that situation, an ALCM may have realized that the facility you chose wouldn’t be a good fit and could have helped you avoid this costly, both financially and emotionally, disaster.”

Third, How to Find and Hire an ALCM

The Aging Life Care Association (aginglifecare.org) allows you to search for aging life care managers by zip code and check their education and certifications. Some questions to ask when interviewing an ALCM are:

• Do you have a comprehensive list of services and fees?

• What credentials or licenses do you have?

• How long have you been in this industry?

• How will you communicate with me and my family?

• Can I call you in an emergency or after hours?

• Would you provide three references?

ALCMs typically aren’t covered by insurance, so you want to have an idea of what they could cost. Generally, an initial assessment can cost between $800-$2,000, with ongoing hourly rates ranging from $50-$200 per hour1. These amounts can vary depending on where you live.

While the initial assessment may seem like a large expense, it’s thorough and extensive. The ALCM will review an aging loved one’s medical history, medications (including purpose and dosage), evaluate the client’s physical and cognitive health, assess their home’s safety, and review all medical professionals involved and their specific roles. Then, they’ll develop a care plan, usually 3-5 pages, providing options and recommendations for optimizing your loved one’s care. The assessment might be sufficient, or you might want an ongoing partnership with the ALCM to help manage caregiving.

“Aren’t There Free Services Like This Available?”

Some organizations offer free guidance, but families should consider them carefully. Many are paid through referral fees when they place clients at participating network-care facilities or use network home-care providers. This arrangement could lead to biased guidance about housing or caregiving decisions.

Aging life care managers are impartial. They don’t receive any compensation from doctors, care facilities, or care providers. Their priority is the safety and well-being of your loved one.

Remember Three Things About Aging Life Care Managers

First, life care managers are a valuable and impartial resource whose goal is to help you and your loved one through aging or a crisis. Second, they can help you make informed and cost-effective decisions about the care and health of your loved one during a specific health challenge or for ongoing caregiving needs. Third, aging life care managers and their service offerings are easy to find online.

The Gift of Time Is Priceless

Without an ALCM, families may need to make caregiving decisions or provide care for an aging loved one themselves. The amount of detail and time required can be overwhelming, and it can affect a family’s relationship with their aging loved one.

Zabin says, “The most important service I provide is helping families have quality time together.” Without an ALCM, families can become consumed with conversations and obligations related to a loved one’s care. This often leaves little time to simply be a family, and relationships can become strained. With ALCMs help, families can have some assurance that a caregiving plan is in place, focusing on being present and enjoying each other’s company.

Sources:

1 Geriatric Care Managers Advocate for Older Adults — and Their Caregivers, AARP, 10/2022

August 25, 2022 By Mary Beth Franklin

It seems like a good time to review the who, what, when and how much of Social Security spousal benefits, and the different rules — and benefit amounts — for spouses versus survivors.

I’ve received numerous questions from InvestmentNews readers about Social Security spousal benefits. There also seems to be a lot of confusion regarding the difference between spousal benefits, when one’s mate is alive, and survivor benefits after one’s spouse dies.

So it seems like a good time to review the who, what, when and how much of Social Security spousal benefits and the different rules — and benefit amounts — for spouses versus survivors.

A spouse who hasn’t worked long enough — at least 10 years — to qualify for his or her own retirement benefit may still be eligible for spousal benefits. A spousal benefit is worth up to 50% of the working spouse’s full retirement age benefit amount. To collect spousal benefits, the couple must be married at least one year, and the working spouse must claim Social Security retirement benefits to trigger spousal benefits for the other spouse. Different rules apply to divorced spouses.

Today, many spouses are entitled to their own retirement benefit. In addition, they may be eligible for a spousal benefit. Traditionally, if an individual’s benefit as a spouse is higher, they will get an additional amount so that the combination of benefits equals that higher amount.

People who were born before 1954 may be eligible to claim a spousal benefit first and switch to their own maximum retirement benefit at 70. The last eligible group of people who can use this switch strategy turn 70 in 2023. All others who were born in 1954 or later don’t get a choice. Whenever they file for Social Security, they will be paid the highest benefit to which they are entitled at that age, whether on their own earnings record or as a spouse.

One adviser, Charlie, asked about an optimum Social Security claiming strategy for his clients Linda and Rick.

Linda reaches her full retirement age next month and is eligible for a $1,100 monthly benefit. Her higher-earning husband, Rick, reaches his full retirement age six months later in March, when he will be eligible for $3,300 monthly benefit.

Charlie asked: Can Linda start drawing her $1,100 benefit next month and then switch to the higher spousal benefit of $1,650 — half of Rick’s full retirement age benefit of $3,300 — next March?

Yes, I responded. If Linda claims Social Security at her full retirement age, she will automatically step up to a higher spousal benefit amount once her husband claims his Social Security.

Another adviser, Kyle, asked what happens if a wife who’s not eligible for her own retirement benefit collects reduced spousal benefits early. Does an early claiming decision lock in that reduced amount for the rest of her life? And what happens if her husband dies first? Does her spousal benefit stay the same because she claimed early?

If the wife isn’t eligible for her own Social Security retirement benefit, she would be entitled to a spousal benefit once her husband claims his Social Security, I responded. But if she claims her spousal benefit before her full retirement age, it would be worth less than half of her husband’s full retirement age benefit amount. The earliest age she can claim spousal benefits is 62, and the amount is permanently reduced.

But if the husband dies first, she would no longer be a spouse. She would be a survivor. Even though her spousal benefits are permanently reduced if she claims before her full retirement age, her early claiming decision will have no impact on her survivor benefits if she is at least full retirement age when she collects them.

Survivor benefits are worth 100% of what her late husband was collecting when he died, or what he would have been entitled to at the time of his death if he died before claiming benefits. That assumes his wife is at least full retirement age when she collects her widow’s benefit.

Survivor benefits are available as early as age 60, compared to 62 for retirement benefits, but the amount is reduced to as little as 71.5% of the late worker’s benefit amount if the survivor claims before full retirement age. Once the widow steps up to the larger survivor benefit, her smaller spousal benefit would disappear.

There are a few other important points about survivor benefits. If a wife is collecting spousal benefits on her husband’s record and he dies first, she will automatically step up to the larger survivor benefit — even if she is not yet full retirement age — meaning she would be forced to accept a smaller benefit.

But if a spouse is collecting her own retirement benefit when her husband dies, she can choose when to start her survivor benefit. A survivor benefit is worth the maximum amount if collected at the survivor’s full retirement age. Unlike retirement benefits, survivor benefits do not continue to grow by 8% per year if postponed beyond full retirement age up until age 70.

Finally, if a spouse is entitled to his or her own retirement benefit and hasn’t yet claimed Social Security when a mate dies, he or she can choose which benefit to claim first and switch to the other larger benefit later.

A financial professional can help you evaluate your retirement goals, timeline, and more.

Questions this article can help you answer:

• What do I need to know about the emotional factors of retirement?

• What do I need to think about if I want to retire early or later?

• How can my financial professional help me determine if I’m ready for retirement?

For some people, retirement used to mean receiving a gold watch at age 65, but today things are different. Your plans for retirement – from setting your goals to determining your timeline – can be the ultimate reflection of what you want to achieve and what’s most important to you in this next phase of your life.

Creating a plan to get you to and through retirement is essential in helping you feel confident that you can live the retirement lifestyle you want. There are also three other important items to consider: understanding cultural and social influences on your financial goals, preparing for the emotions associated with the transition to retirement, and determining your preferred retirement timeline. Talk to your financial professional to learn how they can help you optimize your plan based on how these important factors can impact your transition into retirement.

1. Revisit Your Retirement Goals

When you started planning your retirement, you likely had certain goals in mind and an idea of what your retirement would look like. Do those goals and ideas still reflect what you want right now? A survey found that one-quarter of people with $250,000+ in investable assets had changed their plan for retirement six times or more. Common reasons that may have you rethinking retirement goals include the progression of your career, family events, and changing market conditions.

Common Factors That Cause People to Change Their Plans for Retirement

• Career Events
• Family Changes
• Health
• Desire to retire earlier or later
• Changes in the market

The Impact of Family and Friends on Goals

It’s worth considering what circumstances initially shaped your goals. One study showed that 35% of people currently employed had sought advice on retirement planning from family and friends. While that can be a safe place to seek opinions, it’s important to remember that their retirement ideas or experiences were shaped by their personal goals and financial situations. Your ideal retirement may match theirs in some ways, but it’s also unique to you, and you may need to take a different approach.

How Your Financial Professional Can Help You

Your financial professional understands that plans for retirement can change and may need to be adjusted. You can use an annual check-in with your financial professional to discuss any new goals you may have or how your life or priorities have changed. Your financial professional can also provide you with another perspective on how your situation may be different from those of your friends and family who might have influenced your plans for retirement. For example, perhaps you’re in a better financial position than your parents were, so you may be able to travel more than you were anticipating. Your financial professional can walk you through how those adjustments may impact your plans and discuss strategies you may want to consider to help you achieve your updated goals.

2. Prepare Emotionally for Retirement

When people think of retirement planning, the financial component is often one of the first things they think about. However, there’s also a significant emotional element to the transition into retirement. For those who find their work fulfilling and whose social networks are connected to their employment, retirement can lead to anxiety, stress, and depression.

Some couples experience additional challenges related to the emotional aspect of the transition into retirement. For couples who retire at the same time, there’s typically an immediate increase in the amount of time spent together. You may decide to find a mix of shared interests and individual hobbies that gives both of you time to spend together and time to enjoy on your own. For couples who have a staggered retirement, it can still change the dynamic at home. You may want to consider a new approach to chores around the house, especially if the person still working typically did most of the chores before. Preparing for these changes in your home life may help you take advantage of the new opportunities that the transition to retirement offers.

How Your Financial Professional Can Help You

One of the reasons people often find the transition to retirement difficult is they have a vision of what retirement is going to be like, but it’s not necessarily a day-to-day vision. Retirement may give you the opportunity to travel more or allow you to catch up on some home improvements you’ve been planning to make, but what does retirement look like when you’re not traveling or when the project is complete?

If your finances, job, and other responsibilities will allow it, your financial professional may suggest that you take a test-drive of retirement. Taking a month or so for a mini-retirement may help you determine if retirement is what you expected and how you might spend your days. Then, talk to your financial professional about how it went. If you find that you’re already itching for more activity than the mini-retirement provided, you may need to work with your financial professional to re-evaluate how long you want to stay in the workforce full time, whether you want to transition into a part-time retirement where you still work some, or if there are other aspects of your plan you’d like to adjust. A mini-retirement can also give you a good sense of how much money you might spend in an average month as a retiree, which can help you and your financial professional modify your plans, if necessary, to provide for more retirement income.

3. Determine Your Retirement Timeline

Once you’ve determined that your goals are aligned with your desires and you’ve considered whether you may be emotionally ready for retirement, it’s time to assess when you want to retire. This is a decision that is driven by several financial and emotional factors. Keep in mind that your preferred retirement timeline might change. Nearly half of retirees said they retired earlier than they expected, most often because they were financially ready to or they were forced to due to health concerns or changes in their employment.

Early Retirement Considerations

About 70% percent of people in their 40s and 67% of those in their 50s said they would retire immediately if they had the financial ability to. The Financial Independence Retire Early (FIRE) movement has many people considering saving aggressively and curbing spending in order to try to retire as early as possible. But there are more considerations than just how much you’ve saved, including:

• Health care: Early retirees should think about the cost of health insurance if they will no longer be covered by an employer-sponsored plan since Medicare coverage generally doesn’t begin until age 65. Medicare is also individual insurance, so even if you qualify, your spouse may not. If your spouse is still working, you may be able to join their health plan. Other options may include COBRA, which can extend your employment benefits by 18 months or more after you leave the workplace; private insurance; or an individual or family plan on the public marketplace. These options can be expensive. On average, employers pay about 80% of health insurance premiums for their workers, so one way to estimate what you might pay per month is to multiply your current premium by five.
• Social Security benefits: The fewer years you work, the less you contribute toward Social Security and the lower your benefits may be. Nearly 90% of people rely on Social Security as part of their retirement income. You may need to consider other sources of guaranteed lifetime income, such as an annuity, to supplement Social Security and provide you with protection against market volatility during your retirement.

Late Retirement Considerations

People who feel they may not be financially ready for retirement, or who enjoy their work and have no desire to stop working, may be more interested in a later retirement. Retiring later can have some advantages. If you wait to begin claiming Social Security benefits, your monthly benefit when you do start claiming may be higher. For example, someone born in 1960 or later would typically receive 100% of their monthly retirement benefit if they retire at age 67. If they delay retirement until age 69, they would receive 116% of the original monthly benefit. By waiting until age 70 or later, they would receive 124% of the original monthly benefit. People who work longer may also continue to be covered by their employer’s health care plan until they qualify for Medicare.

Delaying Claiming Your Social Security Benefits May Result in Higher Monthly Income

Those who want to work longer may need to consider the emotional side, however. If your friends and co-workers retire earlier than you do, will you miss the social interaction with them in the office and feel like you’re missing out on the experiences they’re having in retirement?

How Your Financial Professional Can Help You

As you work to determine your retirement timeline, your financial professional can show you how different scenarios, such as retiring a year or two earlier or later, may impact your retirement savings and income. They could also show you how a slower transition into retirement, such as moving from full-time to part-time work or leaving the full-time workforce to serve as a consultant or contractor, could impact your plans.

How Your Financial Professional Can Serve as a Trusted Resource

Your financial professional can serve as your trusted resource during all phases of your retirement planning, helping you manage both the financial and the emotional considerations associated with retirement so that you can feel more confident in pursuing your goals and ambitions. Talking to your financial professional about these three important topics will allow you to work together to customize your retirement timeline and approach to retirement in a way that can help you feel more prepared.

1 Road to Retirement Survey. TD Ameritrade, January 2020.

2 2021 Retirement Confidence Survey. Employee Benefit Research Institute, 2021.

3 Adjusting to Retirement: Handling the Stress and Anxiety. HelpGuide, November 2021.

4 The FIRE Movement Is Alive and Well. Kiplinger, February 24, 2022.

5 Leaving your job? 5 questions you should ask about COBRA benefits. Aetna, as of May 2022.

6 2020 Retirement Confidence Survey Summary Report. Employee Benefit Research Institute, April 23, 2020.

7 Retirement Benefits: If you were born in 1960 your full retirement age is 67. Social Security Administration, as of May 2022.

Brighthouse Financial, Inc. is not affiliated with nor endorses any businesses or organizations that appear in this material. This information is for educational purposes only and brought to you courtesy of Brighthouse Financial, Inc.