Ensuring you have met your savings goals during your retirement planning is incredibly important, but it is just one of many things to consider. Unfortunately, retirement planning doesn’t stop when you retire, and it’s important to make sure you’ll be able to maintain your goals once you have retired. So in this episode, Micah and Tammy will be going over the next steps after your transition out of work, including the dates to be aware of and planning opportunities that may come up.
Listen in as they discuss the decision you may have to make in regards to health care or insurance, as well as why you must make sure you have all the information before making these decisions. You will learn the benefit of moving more money into an IRA, how to avoid overspending during your retirement, and the importance of keeping your address up-to-date.
What We Cover:
- What you have to consider with life insurance and health care.
- Important dates to be aware of after you’ve retired.
- How to create more flexibility and easier access to your money.
- What happens when you are age 59.5.
- How to avoid spending too much money.
Resources for this Episode:
Ideas Worth Sharing:
There are some reasons why you shouldn’t feel guilty if you’re going to move some money into an IRA, because it does give you more flexibility and easier access to the money. – Tammy Flanagan Click To Tweet
Listen to the Full Episode:
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Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan
You can spend. You can save. What is the right thing to do? Federal benefits, thrifts, savings plans, too. You can save your own way, with help from Micah and Tammy. You can save your own way, save your own way…
Micah Shilanski: Welcome back to another amazing episode of the Plan Your Federal Retirement podcast. I’m your cohost Micah Shilanski and with me, as usual, is the amazing, the legendary Tammy Flanagan. Tammy, how are you doing, ma’am?
Tammy Flanagan: I’m doing just fine, Micah. I’m just laughing at the way you introduced me. It’s like, “Oh wow, I’ve got to live up to that reputation now.”
Micah Shilanski: Well, you know, I got to say, I get the benefit of working with clients and other people directly. It’s always nice when I can drop a little, “Hey, I’m going to talk to Tammy Flanagan this afternoon,” they’re like, “Oh, tell Tammy I said hi. I listen to the podcast. I do this other stuff and I followed Tammy for my entire federal career.” So you have been, of course, giving great information out. So it’s a treat to be able to do this with you.
Tammy Flanagan: Yeah. The pleasure as both ways. It’s just a lot of fun doing this, and I’m so happy to do it on this medium because I think it opens us up to a whole new world of people that really need this education and really can benefit from some of the things we’re saying. So I’m glad to hear that we’re getting listened to.
Micah Shilanski: That’s right. That’s because of our listeners, by the way. So thank you, our listeners, that are doing this. If you go through this and you think about anyone, maybe it was at the water cooler, or I guess in the Zoom meetings now, that brought something up about federal benefits, or you want to share this with a coworker, hit that share button, send it out, help us grow, help us get this message out so more federal employees can get great information about their federal benefits.
All right, with that selfish plug out of the way, just to be clear, this is the conclusion of a little series that we’ve been doing, a mini series about the phases of retirement. Now this isn’t phased retirement, right? This was going through the different phases you go through as you’re preparing to retire. Last time we talked about retirement and now we’re moving into that after retired stage, which is like a really nice one because it’s what we work for all this time.
But there’s some really key points that we need to be thinking about as we moved into post retirement, whether it’s key dates to watch out for, whether it’s key things to be looking out for that we need to talk about. So that’s what we’re going to spend a lot of the time chatting about today.
Tammy Flanagan: That’s right, because I think a lot of us, and probably myself included, up until we really started getting into working with clients who are actually retiring and going through the phase of retirement, I always kind of thought, “Okay, we did it. We’re there, we’ve retired. We can put our pen and paper down and just go relax.”
But there are things to do. There are things to watch out. There’s a few pitfalls to avoid. So I’m glad we’re covering this because I think this helps people who have just recently retired know what the next steps are. They got through the transition. Now they’re on that glide path, but there are things that come up along the way.
Micah Shilanski: Absolutely. So let’s go through first and let’s talk about, if it’s all right, some dates to watch out for and when I say watch out for, nothing big happens. Well, nothing detrimental can happen, but these are planning opportunities at certain ages, whether they’re defined by Medicare or the IRS or different things that happen.
So I’d love to start walking through those, and Tammy, to kick it off with, I’m going to throw out at age 62 is potentially the first age that you need to be thinking about. This can do with your first supplement because if you retired under a full retirement, MRA and 30 years of federal service, then you’ve got that supplement, which is beautiful. But age 62, it turns into a pumpkin, regardless on if you turn social security on or not.
Tammy Flanagan: That’s right, and I get that question all the time saying like, “Do I have to notify OPM that I’m turning 62?” No, they know you’re turning 62, but social security doesn’t know that you want to start receiving that benefit. So if you did want to file at age 62, you need to do that at least three months before you turn 62.
But before you do that, listen to our podcast with Mary Beth Franklin, because we talked about the alternatives of delaying social security and spousal benefits. So not everybody’s going to want to file at age 62, but like you said, Micah, that supplement falls off a cliff. So it stops, a good, hard stop the month after you turn 62.
Micah Shilanski: Yeah. That episode with Mary Beth Franklin, I believe it was episode 14. So if you’re interested in that, after you finished listening to this episode, you can jump on our website planyourfederalretirement.com/14, and that’ll take you to that 14th episode, and she had a lot of great information on social security planning.
Tammy Flanagan: Yep.
Micah Shilanski: Yeah. The next thing. So of course, you can hit that 62, and then you got to determine when to turn on social security, what the plan is. Then Tammy, probably the next one is age 65 because a couple of things happen at 65. We have some health insurance things to think about, also life insurance?
Tammy Flanagan: That’s right. So with health insurance, of course, that’s the magic age for Medicare and that’s a big decision because when you turn 65, it’s pretty easy to figure out, “I’m going to sign up for Medicare,” but Part A, is free because you’ve paid for it, but Part B has a premium, and for some of our listeners that premium could be several hundred dollars a month per person per month.
So it is a decision you have to decide about adding Medicare to your federal health benefits, or if you have TRICARE, going under TRICARE For Life. So that becomes a big turning point in how you receive healthcare and your insurance coverage and so forth. So that is a really big deal that you want to prepare for and you want to do some research and get some education on.
I don’t know, did we do a Medicare podcast?
Micah Shilanski: We did. We did a podcast talking about Medicare.
Tammy Flanagan: Yeah. So that’s another one that really requires like a whole podcast or a whole session to really sit down and look at all the different pros and cons because it’s not a clean cut decision. It’s not like, “Everybody should take Medicare Part B.” I think most people should, but there are disadvantages. There is the cost of it. There is the fact that you’re going to coordinate benefits between two plans. So it is something to really think about.
Micah Shilanski: You know, I was talking to a client today because my general recommendation is I default to wanting to recommend a Part B because it just works really well, as we talked about in the podcast, but I have one client who is going to be potentially moving to another country, Japan, at 66. So he’s going to move over there. Okay. Now this is a completely different conversation because Medicare doesn’t work over there, right? So do you pay it? Do you not?
So everyone is going to be different, but you still need to be planning these ages to make decisions because if you miss this window, it comes with a penalty. If we elect not to do anything to sign up for that Medicare Part B, every year you delay in signing up, it comes with a 10% permanent penalty if you do decide to sign up for in the future. So it’s pretty significant and something you really need to think about.
Tammy Flanagan: That’s right. Then the other thing dealing with age 65 is life insurance. So when you retire and you have FEGLI, government life insurance, you have to make an election of how you want to continue that life insurance throughout your retirement.
Well, if you left the government younger than age 65, and let’s say you decided I have five multiples of Option B and I still have kids at home. So I’m going to elect no reduction. So I’m going to keep paying for it. But as we know, with FEGLI Option B, it goes up every five years in price and around age 65, it’s getting pretty pricey. Those kids might be independent by now. The house might be paid off and you may have changed your mind about how much of that life insurance you’re willing to pay for going forward.
So OPM will send you a letter, kind of like a do-over, “What do you want to do now? Do you want to continue that five multiples? Do you want to reduce it? How do you want to continue from this point forward?” So you do have the option with Option B, and also Option C, to change your initial election, to have some of those multiples reduce and others not reduce. You might say, “I want two of them to reduce and two of them to stay at full strength.” So you do get a do over and OPM is supposed to notify you a couple of months before you turn 65. So hopefully that is happening.
Micah Shilanski: And that was great. That was something actually I didn’t know about until today, that little do over option. So always learning about these great benefits.
So another one I want to point out there after 65 is going to be age 70 and a half. So 70 and a half used to be associated with RMDs, required minimum distributions, where the IRS says, “Congratulations for saving money. Now you need to start taking it out.” Now we’ve got to pull some money out, but actually, another one that you’re going to have is, now those RMDs have been moved under the SECURE Act to 72 years young, but at 70 and a half, there’s a beautiful thing that happens, which is you’re eligible for what are called QCDs, qualified charitable distributions.
It’s a tool we use a lot with our clients that are charitably minded, that give to charities. But especially now with our tax code, the standard deduction is so high. When you’re 70 years young, you get to write off $27,000 off of your taxes without having to itemize. So most people don’t think they can deduct their charitable contributions anymore, but after 70 and a half, there’s a special way that you can use IRA money to go directly to charities that comes out tax free. So it’s a great planning opportunity.
Tammy Flanagan: Yeah. The only thing with that is you can’t do it directly from the TSP. So it’s a two-step process.
Micah Shilanski: Yep. Good point.
Tammy Flanagan: Yep. So you need to transfer and I guess there are quite a few things. I was thinking about this the other day because everybody says, “Should I leave my money in a thrift? Should I move it? And the TSP is wonderful. We all love the thrift and it has low administrative expenses, it’s easy, it’s simple. But when it comes to drawing it down, to distributing the money, things like this you can’t do. It’s not quite as simple. It’s not quite as smooth.
So there are some reasons why you shouldn’t feel guilty if you’re going to move some money out of the thrift into an IRA because it does give you more flexibility and easier access to the money. So this is something that, you couldn’t do directly from the thrift. But it’s a great option. Like you said, it can give you that extra deduction, lower your taxable income for Medicare, perhaps. So that’s another benefit to it.
Micah Shilanski: Make Roth conversions, easier. It counts towards your RMD later on. I mean, it just has all these great planning tools. Again, it’s just a tool in the toolbox, which is what I love about this knowledge, Tammy. You don’t have to go and do everything, but once you know what it is, is such freeing, right? Because now you have decisions on how you can choose to do things.
Tammy Flanagan: Yep. The other age we kind of skipped over, but just to mention, and that is 59 and a half. It’s another important gauge. So I’ll let you take that one because that’s a tax-related thing.
Micah Shilanski: It is. So 59 and a half is the age that we can access the vast majority of IRA and retirement accounts. So an IRA account, you cannot access … Well, there is a little bit of rules on how you could, they get complex. We’re not going to talk about them. I generally try to avoid them like the plague with clients because there’s a lot of downsides to them.
So at 59 and a half, you are free where you can access money out of your IRA account without a penalty. You still got to pay taxes. But now you can take money out of an IRA account. On a Roth IRA, you may be able to access money as that as well. That also comes with a five-year rule though. You got to have a Roth IRA for five years and be age 59 and a half. So if you started a Roth at 58, which is so probably a great age to do it, if you don’t have one, that means you got to wait until 63 before you could access that money, five years and 59 and a half.
Now, of course, Tammy, our listeners know this is one of the things that makes the TSP so special because if you’re going to retire before 59 and a half, the TSP allows that if you separate from federal service at 55 or older, you can access that TSP with no penalty. Still taxes. We don’t get away from Aunt IRS, but we can access it without a penalty. If you take that same TSP and you transfer it to an IRA account at 57 and you take money out at 57 from your IRA, now you have a penalty. So this is a good reason and this is a good planning tool for the TSP, right? Maybe it’s a partial transfer, for some reason, we’d leave some money in, some flexibility, but that age 59 and a half is pretty important.
Tammy Flanagan: Yes, it very much is. That’s what’s so nice about the thrift. Just because you retired at, let’s say 57, you don’t have to necessarily do anything with the TSP right away. You can wait until you’re 59 and a half and then decide to do something different. You could be taking monthly payments, stop those payments, transfer some to the IRA. So it’s nice to have that flexibility with that portion of your retirement.
That’s something that the old system didn’t really have. The old system where you got that check every month, which was great, but there was nothing to do. There was no way to add any flexibility to it. You have to compare apples and apples when it comes to CSRS and FERS. But FERS does have that advantage.
Micah Shilanski: You know, and Tammy, one other thing that’s come up this last few weeks when I’ve been meeting with new clients that have come on is they didn’t realize that, actually, even in retirement, they could put money back in their TSP account and sometimes that’s a good planning strategy, right? Where you’re going to use the TSP … we call it our buckets. You can listen to our podcast talking about that.
But you could be taking money out of the G Fund. You could be taking money to live off out of the TSP and you could actually take IRA money and you could transfer it back into the TSP because it’s not a contribution. It’s a transfer of a retirement account to another retirement account. So yeah, a lot of great flexibility to be thinking about.
Tammy Flanagan: Yep, that’s right. The form for that, if anybody needs the form, is a TSP-60, 6-0. That form has all the ins and outs of what can go in and what can’t go into the thrift because there are certain types of accounts that are eligible to be transferred in.
Micah Shilanski: Yeah. We can do a whole podcast on that one, actually, both with IRAs and how that TSP-60 works.
Tammy Flanagan: We’d just sit and read the whole list for the whole 45 minutes.
Micah Shilanski: We’ll make it more interactive than that one.
The other one dimension real fast is age 72. Under the SECURE Act, they’ve changed the required minimum distributions. That’s when the IRS says, again, “Thank you for saving money. Now you need to take it out and be taxed on it.” Now it’s when we’re 72 years young, you have to start taking money out of your IRAs, IRAs and TSP, right? Pretty much anything that’s pre-tax, you have to start taking money out of.
So it’s important to pay attention to because if you’re supposed to take this distribution and you don’t, there’s a 50% penalty plus taxes on the distribution amount. So the IRS is pretty serious about making sure you do it.
Tammy Flanagan: Yep. Unless you’re my brother because he was born before 1949. So he did have to start his distributions at 70 and a half. So this applies to anybody born, I think, it’s July 1st of ’49 or later.
Micah Shilanski: Yeah. Great point. All right, Tammy, let’s change gears a little bit from dates to watch out for two other things to watch out for. What are some snafus? What are some pitfalls that sometimes we can see going into it and I’ll lead on this one if it’s okay.
One of the things, vocabulary that I’m watching for with clients, when they’re getting ready to retire, when they just retired and if they say, “Well, Micah, we worked so hard for it, now we’re just going to go do X.” “Well, Micah, it’s just this one time we really want to go spend X amount of money,” right? Whenever I hear one time or we worked so hard for, we are justifying spending way too much money. That’s what those words mean.
Sometimes it’s not, but nine times out of 10, that’s what happens and over spending in those first couple of years of retirement can be really detrimental. This goes back to our previous podcast, live on retirement dollars early, make sure it’s the right amount you want to live on. But if all of a sudden you get into retirement and you’re blowing up your retirement plan in the first two years because you have spending problems, this is a big problems.
Tammy Flanagan: Yep. Yeah. I’ve seen this twice in the last week, I would say. I had one person who took their TSP, I think they took a distribution of 150,000 in 2020, and just remodeled the whole house. It’s like, really?
Micah Shilanski: Oh wow.
Tammy Flanagan: Now you got to pay tax on all that money, and of course, they’re in a tax state where they have to pay state tax. Nothing was withheld. They’re now, because of that, added to their retirement income, they’re in a much higher tax bracket. So the 20% withheld by the TSP is not going to cut it. So they have a … It’s like a 30 plus thousand dollar tax bill this year, penalties on top of taxes.
Then the other one was somebody who retired as law enforcement because they can retire much earlier. This was somebody who had 25 years of service when they were 46. So they came in as a law enforcement officer at 21, put in their 25 years, retired at 46 and wants to start using their thrift. It’s like, “Well, aren’t you going to go back to work? Like you’re going to have this …” “No, I’m fully retired.” I was like, “Well, you got a long time to be fully retired. You’re not even at the halfway point for some people’s lives.”
But yeah, and he’s got the problem because of the TSP, even though law enforcement officers can retire that young, they don’t necessarily have the freedom to use that thrift unless they retired in the year they turn 50 or later because they did pull that from 55 down to 50 for retired public safety officers. But if you’re able, if you’re lucky enough to go out at 46, you don’t meet that requirement. So now he has to wait until 59 and a half. He was even thinking, “Well, maybe at age 50, I can start.” No, I said, “You have to be 59 and a half. You’re kind of stuck. You might want to look around, they’re hiring down somewhere.”
Micah Shilanski: Yeah, you might want to go back to work for the feds, then retire at 50 and this is the big thing on the nuance of these benefits, right? And you and I chat about this from time. You have these different rules that are there about saying, “Oh, okay. If you’re a law enforcement and you retire, you can access your money at 50.” Okay. Well that’s a concept. That’s not the rule. You really got to dive into understanding what that rule is and how to apply it.
Yeah. It makes it so big. I was talking to a client today. It’s slightly different, but about gifting. They were always told they could only gift $15,000 a year, but they never realized that was $15,000 a year per person. So if you want to give to your kids. Or if your kids are married, that’s 30,000. Well, if you and your wife are married and you want to give to your kids as well, well, guess what? That’s 30 for you and that’s 30 for them. Now it’s 60,000 that we can give. So it’s the application of these rules are really important to look into whether it’s as simple as gifting or as complex as retirement distributions.
Tammy Flanagan: That’s right. Yep. Always something extra to know. You don’t know what you don’t know. We say that all the time.
Micah Shilanski: Perfect. Well Tammy, the other one to watch out for and I guess this is like almost immediately right after retirement, is just the opium booklet because-
Tammy Flanagan: The blue book.
Micah Shilanski: The blue book, the important book that you get, and we talked about this a little bit last time, the year of retirement. But when you get that, there’s also some things we need to think about. Like when can you make changes to survivor benefits or what happens if you get remarried or married for the first time in retirement? How do those things come together?
Tammy Flanagan: Yeah. Whenever you’re electing what kind of a retirement you want, when you’re filling out that application, there’s very limited changes you can make. That’s a permanent election. When you say, “I’m providing my spouse maximum survivor benefit,” and you change your mind later on. There’s no going back. That’s what you’ve elected.
Now there are a few exceptions. So within 30 days of your retirement date, you can change … drop the survivor benefit, add it, increase it, you can do all of that. However, after that you have 18 months. During that time, let’s say … and I’ve seen this happen twice, unfortunately. So let’s say you waive the survivor benefit. I’m the spouse. I said, “I don’t need it. I’ve got my own retirement. We have plenty of money. Let’s keep all of it unreduced.”
So I waived my right to the survivor benefit and then six months into retirement, my spouse who just retired six months ago gets diagnosed terminal and the doctor says, “It’s not years, it’s months, maybe weeks.” So now we waived that survivor benefit and he got to be retired less than a year. What do we do? Is there any recourse? And there is. Within 18 months, you can restore that survivor benefit. But the penalty is almost one fourth of the retirement itself. So if that retirement was $40,000, the penalty is almost 10,000.
Micah Shilanski: Wow.
Tammy Flanagan: Yeah, so that’s why you don’t want to look at that lightly. But in a situation like I just described, you’d do that in a heartbeat. So there is that 18 month window.
Micah Shilanski: Would they pick up the full survivor benefits if the federal retiree died?
Tammy Flanagan: They can.
Micah Shilanski: Okay. So in this example, if the retirement was 40 grand a year, I’m just going to over simplify this. If the return was 40 grand a year, they could get 20,000 a year for the rest of the survivor’s life, right?
Tammy Flanagan: Right. So you can see in the long … even in the short run, it’s well worth it in that case. But for most of us, hopefully, we both live our life expectancies, long and healthy. So you want to make that election based on the future, but before you retire. So there’s like I said, very limited …
Now, on the other hand, let’s say that your spouse did pass away and you’re the retiree. So you no longer have a spouse to worry about as far as a survivor benefit. So at that point, you want to restore your retirement, take away that reduction, and you can do that. Notify OPM, send them a copy of the death certificate and get your retirement put back to the full amount.
Now, later in life, you may find somebody to marry again. So if you marry after retirement or as the regulations say, “If you acquire a spouse after you retire,” it’s written like that in the book, you’ll have a two-year test drive, is what I call it, because OPM will then give you two years from the date of marriage and I always say, “To determine if they’re worthy of this benefit,” because at that point it’s not required.
You just married them. They weren’t married to you during your career. So they have no spousal entitlement. So it’s totally up to you to decide if you want to provide that survivor protection. A lot of people will do a partial just to make sure they can keep on the health plan if you die first. So you can do a partial or full and you’ll have two years.
But like you were telling me before we started today with your client, that they had to go back and pay for that back to the date of retirement, or if they had lost a spouse, it would have been back to the date their first spouse passed away. So it’s a pricey election, but again, very valuable to that surviving spouse in many cases.
Micah Shilanski: Yeah. It can be really … and on a planning point, one of the things I always talk about with my clients that want to remarry in the retirement side is, “Great, the new spouse needs to pay for that.” That’s a really good way, just cashflow wise, to figure it out. This is the cost. How important does the new spouse think it is? Perfect. That’s what they need to come up with in order to make you whole for giving up that money.
Tammy Flanagan: Yep. Or they can pay the mortgage and you’ll pay for their survivor benefit.
Micah Shilanski: Sure, right? Whatever those dollars equal out to, absolutely.
Tammy Flanagan: Yeah because it’s expensive. It’s more than a 10% reduction to their retirement benefit.
Micah Shilanski: Absolutely. Yep. All right. Some other things that we really need to be thinking about here is keeping your address up to date. Now you may think that this is trivial. You may think, “Oh my gosh, Micah, Tammy, what are you guys talking about? This is like, 055 stuff, keeping your address up to date.” But you would be dumbfounded how many people do not do this with everything when they move and this can create some real problems. Can’t it, Tammy?
Tammy Flanagan: Oh yeah. It can create huge issues. So we were just talking about the big penalty if you don’t do required distributions. Well, let’s say you’re 72 and you didn’t know about that, TSP will send you a letter, but what if you didn’t change your address? The letter goes back return to sender. So you never find out, but the IRS gets reported the fact that you didn’t take your required distribution. So you’re going to have some trouble if you’re not paying those or taking those payments out. So that’s just one example.
OPM sends mail out, TSP sends mail, even social security may send you a letter from time to time. So you want to make sure you’re there and able to receive that mail because it could be something that has a deadline or something that could cost you money if you don’t act on it. So yeah, it sounds like a trivial thing, but it’s very important and you want to do that with all three of those main agencies, both TSP, OPM, and social security if you move.
Micah Shilanski: I would add to that, anywhere you have money, anywhere you have dollars at, whether it’s a custodian like Schwab or Vanguard, whether it’s a bank like Wells Fargo or wherever you have a dollar sign, making sure those are up to date. Even if … this is also important, maybe you’re traveling a lot. Someone needs to be checking your mail because even though you have set up for everything electronic, that doesn’t really mean everything is electronic.
Sometimes custodians will mail you something they want your physical response to and if you don’t respond to that, they can close accounts. They could restrict your account so you can’t do distributions anymore and they shut things off. So this is really important about keeping these things up to date.
Tammy Flanagan: Yeah. That made me think of something real quick too, is that it goes both ways because, for us, for tax time, we had some of our accounts that we’ve flipped all electronic notifications and we forgot that we need to check that for our tax papers at the end of the year, because they didn’t mail it.
We had to go on there and look and almost forgot about it. But that would have been another issue, tax wise. So if you have clicked that box that said, “I want everything electronically,” make sure you know that those important documents are going to be sent electronically as well.
Micah Shilanski: You bet. One other thing, and then we’ve got to move on to a couple others because it’s getting close to action time, is one of the other reasons to do this is this word called escheatment. Basically, what happens is escheatment. It’s a kind of funny sounding word that’s out there. But if you have an account that goes dormant. So if you move and you don’t change your address because you have online access and then all of a sudden an account goes dormant, you lose access to it. That account can get reported up to the state as an abandoned fund.
Well. Lost property, abandoned fund states collect, and now several states are becoming very proactive in this abandoned accounts. If you leave your account in abandoned status for over a year, or over two years, the state will seize the money. That means you are permanently forfeiting your account and the state is now taking that money.
By the way, if this happens to your IRA, you still get to pay the taxes on this money. So this is not a pleasant scenario in any way possible. So another reason to make sure anywhere that you have an account, that it stays active, you have a current address, you know what’s going on with your money, and Tammy, this leads to the next one about not just you knowing what’s going on with your money, but what about your spouse?
Tammy Flanagan: Yeah. Yeah. I mean, it’s nice to think that there’s two of us and we’re always going to be together forever and ever, but at some point in time, it’s very likely that there’s going to be one of us. When that happens, that leaves that surviving spouse in a lurch. Like where are the passwords? Where are the accounts? Who do I call? Where do I send the death certificate?
So you can do your spouse a huge favor by putting that all together for them and keep it up to date. That’s the hard part. You can put it together and then you have to update it every time something changes, but make sure they know how to get into your Facebook account, make sure they know how to get into your bank account. Those are things that they can be locked out of and the banks don’t want to just hand that information over easily. So it’s going to take some time if they don’t have the correct access to that information. So that’s real important as well.
Micah Shilanski: And Tammy, now is the time of the year that we’re telling clients to do it, tax time. Now we suggest to do it around tax time, we’ve got to marry it to something that we’re going to remember. But in tax time, just as you said, guess what? You’re getting all of these documents.
You got to go online and get this statement and get that statement. You’re getting everything and it’s a great time to sit down with all that information compiled, pull out your notebooks and say, “Hey, do we have everything updated? Do we have all these financial institutions?” Because it’s all right in front of you because the IRS makes us do it right? So that way, use that opportunity to get this up to date and let your spouse know where it is, or a trusted contact.
That’s one of the things we’re seeing come out on a lot of accounts now, whether it’s insurance policies and sometimes some custodial accounts, if all of a sudden, if you’re not responding to things, who can they reach out to? And I really liked that insurance companies are big in pushing trusted contacts, especially as we get into retirement years because they’re like, “Look, if you don’t make your premium payment, your insurance is canceled.”
This is the way insurance works and insurance companies were getting a bad rap because something would happen to someone, whether it’s dementia or Alzheimer’s, they wouldn’t pay their bills, their insurance would lapse, six months, a year later, they’d pass away and there’s no insurance and that’s an unfortunate situation.
So they’ve created something because of that called trusted contacts, really encourage you to put someone on there that’s outside of your immediate household. So that way, if you quit paying your insurance bills, if you get delinquency notice, anything else comes up, who can they reach out to and say, “Hey, we haven’t heard from Micah in a while. He’s not making his payments. You might want to figure out what’s going on.”
Tammy Flanagan: Yep. The Federal Long Term Care plan does that too. So when you set up a long term care insurance, you name somebody just in case and it’s for that very reason. Yeah.
Micah Shilanski: Yeah. All right. Well, we’ve talked about a lot of things and of course, Tammy, this podcast is not just about entertainment, it’s about action items as well. So we want to give you, our listeners, some great action items, things that you can go and do and implement. I’m just going to take that one right there as number one. First thing, Tammy, our listeners should go out and get trusted contacts on accounts. I think this is really powerful.
Tammy Flanagan: And at the same time, put together that notebook or that file on your computer. But I think even something in paper, in a three ring binder might even be easier to access because again, we can’t get into the computer if you have that file locked up on your computer. It’s just like putting your will in a safety deposit box. How do we get to it? So put these things in a place where they can be accessed.
I think another thing I would tack on to my action item would be to make sure your beneficiary designations are up to date.
Micah Shilanski: Yes.
Tammy Flanagan: We I see this all the time where somebody gets married or they go through a divorce and they never update those beneficiaries. So it’s very important to do.
Micah Shilanski: Absolutely. Last action I’m going to give is at the very beginning, we started talking about ages that you should think about. There’s nothing that’s going to remind you unless you’re working with a great financial planner, or potentially a CPA, that’s going to remind you about these ages. So take your calendar out, mark these ages and things you need to do.
I like to be thinking about them 12 months in advance. Why? It gives us plenty of time to think about it. If we talk about Medicare a year in advance, we’ve got time to noodle on it. What do we want to do? What do we not want to do? It gives us time to look at open season. What are the options inside of there? If you wait to the deadline, sometimes we don’t always make the best decisions. So a year out I would block it on your calendar plus when the event needs to happen.
Tammy Flanagan: That’s right. Yeah. I think those are all great things for people to do and I know we’ve done it, I’m sure you’ve done it at home too. It’s just things that just are very practical and common sense that can really save a lot of heartache at the end of the day.
So yep, retirement is enjoyable. It’s fun. It’s everything people dream about, but you have to do that background work and just get it done, put it aside and go back and enjoy yourself.
Micah Shilanski: I love it. Well, this podcast is brought to you, of course, by Tammy and I coming together, and what you could do to help pay for this a little bit is share the podcast. I know we talked about it before, but if you would share this with a friend, share this with a coworker, our listenership has been growing because of you guys sharing this podcast and we really, really appreciate it.
We also love your comments. We’re getting a lot of comments and feedbacks about future episodes. Please keep those coming. You can email us at [email protected] and we can get that information, and until next time, happy planning.
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