With Open Enrollment around the corner, consider this your opportunity to fine-tune your financial protection, support your family’s well-being, and make strategic decisions for the year ahead. Here’s how you can make informed decisions that will benefit you and your family.
· Know Your Dates: Know when Open Enrollment starts and ends for you. By starting earlier, it gives you more time to make decisions and not feel rushed.
· Do Your Homework: Know what you have and determine if any changes need to be made.
Active Workers: What is your current coverage? Is it sufficient?
Determine what you need going forward in life insurance, disability insurance, and medical coverage.
Understand how much you have versus what you need.
· Short-Term & Long-Term Disability – we see clients who assume they have this coverage but don't, or they have one but not the other. Double check.
· Life Insurance – The $ amounts are important. Don't forget to consider your survivor benefits from the Ohio pensions or Social Security.
Evaluate your contributions to your employer's retirement plan. Ensure you're maximizing the benefits available.
Are you getting the full employer match?
· What percentage are you contributing?
· Can you increase the amount you're saving?
Evaluate Health Coverage: Your health is your greatest asset Take the time to assess your current health plan, consider your future needs, and explore options to ensure comprehensive coverage.
· Consider using an HSA plan. This will lower your taxable income. Not a use-it-or-lose-it plan.
· Or use an FSA – This will lower your taxable income; however, this is a use-it-or-lose-it plan.
Explore Extra Perks: Pay attention to the additional benefits your employer offers, like wellness, educational assistance, and legal services.
If you are unsure what is best for your situation, please get in touch with us so that we can help you choose the best options for you and your family.
Retirees: Ensure you're maximizing the benefits available. We are here to assist you in determining the right options for your personal situation.
Do you have the right health care plan/coverage?
· Consider your premiums, deductibles, and out-of-pocket costs.
· Please be sure to look for plans that have your doctors in-network.
· Please look for discounts your plan offers for local exercise and nutritional programs.
Medicare Coverage: For retirees eligible for Medicare, review and understand your current Medicare coverage. Assess if your needs have changed and consider whether adjustments or additional coverage, such as Medicare Advantage or Medicare Supplement plans, are necessary.
Prescription Drug Plans (Part D or Retirement System): Evaluate your prescription drug needs and ensure your current Part D plan and pension prescription coverage align with your medications. Plans can change, and finding the most cost-effective prescription option is crucial. The Ohio pensions cover your prescriptions, so you do not need to sign up for additional Part D.
Medicare Advantage Plans: If you have a Medicare Advantage plan, review its coverage, costs, and network. Please ensure your preferred healthcare providers are still included in the plan's network.
Supplemental Health Insurance: If you are an STRS, OPERS, or OP&F, you have a supplemental option through the pension systems. If not, consider whether you need supplemental health insurance beyond Medicare, mainly if coverage gaps exist. Call Suzanne McClain @ 614-488-1834.
Health Savings Accounts (HSAs): If you have an HSA, understand how to use it in retirement. HSAs offer tax advantages for qualified medical expenses, making them a valuable tool for managing healthcare costs.
Sandy Funderburgh – OP&F Retiree
Meet Sandy Funderburgh, who retired from the Springfield Police Division after 28+ years of service in September of 2024. Sandy started her career with the Greene County Sheriff’s Office. She spent most of her career serving the community of Springfield having served in a variety of roles over the years such as:
· Safe Street Task Force
· Dare Officer
· School Resource Officer
· Field Training Officer
Sandy finished her career as a detective where she specialized in working with crimes against juveniles, sex crimes, and missing persons.
She was the fitness specialist for the department and was one of the founding members of the Critical Incident Stress Management (CISM) Team. She has been volunteering for the Special Olympics Tour Run for her entire career and was the Southwest District leader for the torch run, along with having the opportunity to be the selected law enforcement torchbearer for the Summer Games in Seattle.
Although Sandy is retiring as an Officer, she will continue her service with the Ohio Department of Public Safety as a First Responder Physical Wellness Administrator. Earlier this year, Sandy decided to open her own gym in Springfield, BB Fitness 937, to provide group fitness through coaching and fostering an environment where people can focus on living a healthier lifestyle.
Sandy and her husband, Jim both love to stay busy and be productive and plan on continuing to work for the foreseeable future.
When asked, what tips would you consider before going into retirement, Sandy said, “plan ahead and get into deferred comp early, and work with someone you trust and has your best interests in mind.”
Congrats Sandy! We are looking forward to seeing the impact you will make in your new challenge!
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1. Current vs. Future Tax Bracket
Same Tax Bracket in Retirement: Since you expect to be in the same 24% tax bracket during retirement, the immediate tax advantage of converting to a Roth IRA is reduced. You're not avoiding a higher tax rate later. However, the Roth still offers tax-free growth, which can be beneficial over the long term.
2. Tax-Free Growth and Withdrawal
Tax-Free Growth: A Roth IRA allows your investments to grow tax-free, and withdrawals in retirement are tax-free as well. Even though you’re in the same tax bracket now and in retirement, a Roth IRA could still be appealing if you expect significant investment growth, as it locks in today’s taxes and avoids future taxes on larger gains.
Required Minimum Distributions (RMDs): Roth IRAs do not have RMDs, unlike traditional IRAs, which require you to start taking withdrawals at age 73. If you prefer to keep growing your investments tax-free beyond retirement, a Roth could give you that flexibility.
3. Legacy Planning for Your Children
Tax-Efficient Inheritance: A Roth IRA can be passed on to your children tax-free, which might be especially valuable if you want to leave a financial legacy. Under the current SECURE Act, inherited Roth IRAs must be emptied within 10 years, but distributions won’t be taxed, providing a benefit to your kids when they inherit the account.
Time Horizon: At age 40, you have several decades for the Roth IRA to grow tax-free before needing to make withdrawals. The longer the money stays in the Roth, the more attractive the tax-free growth becomes, making a conversion worthwhile even in the same tax bracket.
4. Flexibility for the Future
Tax Diversification: By converting some of your savings to a Roth IRA, you create tax flexibility in retirement. You’ll have the option to withdraw from either a Roth (tax-free) or a traditional account (taxed), depending on your tax situation. This can help manage your tax bill in retirement, particularly if unexpected expenses arise or tax laws change.
5. Paying the Conversion Taxes
Ability to Pay Taxes Now: If you have enough cash outside of the IRA to pay the taxes on the conversion, this could make the Roth conversion more attractive. Paying taxes now preserves more funds in the Roth for tax-free growth. If paying taxes from the IRA itself, the conversion may be less beneficial because it reduces the amount left in the Roth to grow.
6. Future Legislation
Possible Tax Increases: While you expect to remain in the same tax bracket, future changes in tax law could raise rates, making a Roth IRA conversion at today’s rates more beneficial. It’s difficult to predict future tax policy, but locking in current rates could provide security against potential tax hikes.
Ultimately, a mix of traditional and Roth accounts could offer tax flexibility in retirement.
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Deciding whether to convert to a Roth IRA as a retiree involves considering a few key factors:
a. Current vs. Future Tax Bracket: Since you’re in the 24% tax bracket now, converting means paying taxes on the conversion at this rate. If you expect your tax rate to remain the same or increase in the future (or if your children will inherit the IRA in a higher tax bracket), a Roth conversion could make sense to lock in taxes at today’s rates.
b. Legacy Planning: A Roth IRA can be advantageous if you plan to leave assets to your children. Roth IRAs are inherited tax-free (though they will have to withdraw the funds within 10 years due to the SECURE Act). This can reduce the tax burden on them when compared toa traditional IRA, which requires taxes on distributions.
c. No Required Minimum Distributions (RMDs):Unlike traditional IRAs, Roth IRAs do not require RMDs during your lifetime. If you don't need the income and prefer to let your investments grow tax-free for as long as possible, converting to a Roth can allow for greater growth potential without forced withdrawals.
d. Paying the Taxes: Consider whether you can pay the taxes on the conversion with funds outside of the IRA. Using non-IRA money to cover the taxes can preserve the value of the converted Roth IRA and allow it to grow tax-free.
e. Time Horizon: The longer the funds remain in the Roth, the more opportunity they must grow tax-free.
WHEN YOU WOULDN’T CONSIDER A CONVERSION
When It May Not Make Sense:
1. If you're in a high tax bracket (e.g., 32% or above).
2. If you anticipate a short time horizon to benefit from tax-free growth.
3. If your children are in a lower tax bracket and can inherit a traditional IRA more efficiently.
4. If converting would push you into a much higher tax bracket this year.
Much like your healthcare portal AdviceWorks allows you to quickly view all your financial accounts in one place, share important information and measure your progress in real time– all from a single login. AdviceWorks lets you securely share documents with us at your discretion. Which means goodbye cumbersome emails, faxes and postage.
https://www.ceterainvestorcenter.com/adviceworks-crs1
Morgan Housel discusses how the most impactful financial growth happens quietly and gradually in this short 8-minuteepisode.
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