For many people, the traditional picture is fairly straightforward: work hard, save diligently, retire sometime in your 60s, and then spend the rest of your life enjoying the freedom you've earned. Perhaps that means traveling, spending more time with family, pursuing hobbies, or simply enjoying a slower pace of life.

It's a familiar vision, and for many people, it's still a wonderful goal.

But what if retirement didn't have to be an all-or-nothing decision? What if you could enjoy some of that freedom earlier in life, gradually reduce your workload, or even pursue a different career without jeopardizing your financial future?

I recently came across an interesting discussion from financial planning educator Michael Kitces' organization about five different approaches to retirement. It reinforced something I believe is important: retirement planning isn't simply about accumulating enough money to stop working. It's about creating the financial flexibility to live the life you want, both now and in the future.

Let's explore these five approaches and what they might mean for you.

1. Traditional Retirement: Work Now, Retire Later

This is the retirement model most of us grew up expecting. You work full-time until a certain age, often somewhere between 62 and 67, and then leave the workforce completely.

For much of the 20th century, this approach was supported by employer pensions and Social Security. Today, with traditional pensions becoming less common, individuals generally shoulder more responsibility for funding retirement through 401(k)s, IRAs, and personal savings.

Traditional retirement certainly has advantages. It allows you to maximize your working years, continue saving, and potentially delay Social Security to receive a larger monthly benefit.

However, it also comes with a trade-off: you're postponing much of your freedom until later in life.

One important consideration is the difference between lifespan and healthspan. Lifespan refers to how long you live, while healthspan refers to how many of those years you enjoy relatively good health.

You might live well into your 90s, but your ability to hike, travel extensively, or pursue physically demanding activities may change considerably over time.

Something to consider: Are there experiences you're postponing until retirement that you might be better able to enjoy today?

2. Financial Independence: Making Work Optional

Financial independence means accumulating enough savings and investments that you no longer need employment income to support your lifestyle.

The important distinction is that financial independence doesn't necessarily mean you stop working. It means you have the choice.

Imagine reaching age 55 and discovering that your investments, future Social Security benefits, and other resources are sufficient to support your expected expenses for the rest of your life.

You might decide to retire immediately. But you could just as easily continue working because you enjoy your career, transition to a less demanding position, or devote more time to volunteer activities.

This approach is sometimes associated with the FIRE movement, which stands for Financial Independence, Retire Early.

Of course, achieving financial independence early generally requires substantial savings, disciplined spending, or both. Retiring at 50 rather than 65 could mean your investments need to support you for 40 years or longer.

That's a long time to account for inflation, market downturns, healthcare costs, and unexpected expenses.

The important takeaway: Financial independence isn't necessarily about retiring as early as possible. It's about reaching a point where your financial circumstances give you greater control over how you spend your time.

3. Sabbaticals: Enjoying Mini-Retirements Along the Way

Here's an approach that challenges conventional thinking: instead of saving all your retirement years for the end of your career, why not enjoy some extended breaks along the way?

A sabbatical is an extended period away from work, perhaps three months, six months, or even a year.

Imagine taking six months off at age 45 to travel internationally, spend time with your children, care for aging parents, or pursue a personal interest.

Then you return to work, continue building your career, and perhaps take another extended break several years later.

The appeal is obvious. You get to enjoy meaningful experiences while you're younger and potentially healthier.

Financially, sabbaticals may be more attainable than early retirement because you're funding a relatively short period without employment income rather than several decades.

However, careful planning is essential.

You'll need sufficient accessible savings to cover expenses without disrupting your long-term retirement investments. You'll also need to consider health insurance, lost retirement contributions, and whether taking time away could affect your future earnings or career opportunities.

For some people, an employer may offer paid or unpaid sabbaticals. Others may need to negotiate time away or plan for a career transition.

Something to consider: If you could take six months away from work sometime during the next five years, how would you spend that time? And what would it take financially to make that possible?

4. Coast FIRE: You've Saved Enough to Ease Off the Gas

This approach has an unusual name, but the underlying concept is quite practical.

Coast FIRE means you've already accumulated enough retirement savings that, assuming reasonable investment growth, your existing investments are projected to grow sufficiently to support your retirement at a future age.

In other words, you may no longer need to make additional retirement contributions.

Let's say you're 50 years old and have saved diligently throughout your career. After reviewing your financial projections, you determine that your existing investments could grow enough to support your desired retirement lifestyle beginning at age 67.

You still need income to pay your current living expenses, but you may no longer need to earn enough to continue saving aggressively for retirement.

That could open some interesting possibilities.

Perhaps you could move into a lower-paying but more rewarding career. Maybe you could stop pursuing promotions that require longer hours or more travel. Or you might simply enjoy greater flexibility in your current job.

There's an important caution, however. Investment growth isn't guaranteed, and assumptions about future returns, inflation, and spending can change.

A plan that looks comfortable today might need adjustments after a prolonged market downturn or unexpected increase in living expenses.

The important takeaway: Sometimes the reward for years of disciplined saving isn't necessarily retiring early. It's having the freedom to make different career and lifestyle choices while you're still working.

5. Semi-Retirement: Gradually Transitioning Into Your Next Chapter

Of the five approaches, semi-retirement may be one of the most practical and appealing for people approaching traditional retirement age.

Rather than moving abruptly from a 40-hour workweek to no work at all, you gradually reduce your hours or responsibilities.

For example, someone might leave a demanding full-time position at 60 but continue consulting or working part-time until age 70.

This arrangement offers several advantages.

First, continued earnings reduce the amount you need to withdraw from your retirement savings. That can be especially valuable during periods when investment markets are struggling.

Second, additional income may allow you to delay claiming Social Security, potentially increasing your monthly benefit.

Third, semi-retirement provides an opportunity to gradually adjust to life outside full-time employment.

This last point is often overlooked.

For many people, work provides much more than a paycheck. It creates structure, social connections, intellectual stimulation, and a sense of purpose.

Moving suddenly from a busy professional life to an entirely open calendar can be more challenging than expected.

Semi-retirement gives you time to develop new routines, explore interests, and discover what a fulfilling retirement actually looks like.

The challenge is ensuring that part-time employment is realistic. Health concerns, layoffs, or changing business conditions could force you to stop working earlier than planned.

Something to consider: Would you prefer to stop working completely at 65, or might you enjoy working two or three days a week for several additional years while having more time for yourself?

What All Five Approaches Have in Common

Although these retirement paths look different, they share an important principle: the goal of financial planning is to create choices, not simply accumulate the largest possible investment portfolio.

Before making a major retirement or career decision, several questions deserve careful attention:

•    Your spending: How much income will you realistically need, and which expenses could you adjust if circumstances change?

•    Your investments: Can your savings support your plans through market downturns, inflation, and potentially decades of retirement?

•    Healthcare: If you leave employer-sponsored coverage before Medicare eligibility at 65, how will you obtain and pay for insurance?

•    Social Security and taxes: How might changes in employment income affect when you claim benefits, which accounts you withdraw from, and opportunities for tax planning?

•    Your lifestyle: What will give your days meaning, enjoyment, and purpose when work becomes less central to your life?

These questions are especially important because retirement decisions don't always unfold exactly as planned. Health issues, family responsibilities, or unexpected employment changes can alter even the most carefully developed strategy.

That's why I believe retirement planning should involve exploring different scenarios rather than relying on a single retirement date and set of assumptions.

A Final Thought: Retirement Is About More Than Money

Perhaps the most valuable lesson from these five approaches is that retirement doesn't have to be a single event that happens on your 65th birthday.

It can be a gradual transition, a series of meaningful breaks, an opportunity to pursue different work, or simply the freedom to decide when and how much you want to work.

And these approaches aren't mutually exclusive. You might take a sabbatical in your 40s, transition to a less demanding career in your 50s, and eventually semi-retire in your 60s.

The right approach depends on your financial circumstances, health, family priorities, and what brings meaning to your life.

Ultimately, the purpose of saving and investing isn't simply to have enough money someday. It's to give yourself the freedom to enjoy life along the way.

If you've been thinking about retirement—or wondering whether you could make changes to your work and lifestyle sooner than expected—I'd welcome the opportunity to explore those possibilities with you. Sometimes a few adjustments to your financial plan can reveal options you hadn't previously considered.

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Source: This article draws on concepts discussed in the August 4, 2026, Five Types of Retirement educational presentation from Kitces.com, along with additional insights from Attune Financial Planning.

Disclosure: The information presented is based on sources believed to be reliable and is provided by Attune Financial Planning for general educational and informational purposes only. It is not intended as personalized financial, investment, tax, or legal advice. Please consult with your financial, tax, or estate planning professional regarding your individual circumstances before making financial decisions.

And while Medicare provides valuable healthcare benefits, it's not necessarily free, nor does it cover everything.

What makes Medicare particularly challenging is that some decisions you make when first enrolling can affect your healthcare choices and costs for years to come. A seemingly inexpensive plan today might not provide the flexibility you want later in retirement.

The good news is that with a little advance planning, many of the most common Medicare mistakes can be avoided. Here are some important considerations to help you make informed decisions about your healthcare in retirement.

1. Start Planning Before You Turn 65

One of the biggest Medicare mistakes is waiting until the last minute.

Most Americans become eligible for Medicare at age 65. Your initial enrollment period generally begins three months before the month you turn 65 and continues for three months afterward.

If you're already receiving Social Security benefits, you'll generally be enrolled automatically in Medicare Parts A and B. Otherwise, you'll need to enroll yourself.

However, turning 65 doesn't necessarily mean you must leave your employer's health insurance.

If you or your spouse are still working and covered under an employer health plan, you may be able to delay Medicare without penalties. The rules depend largely on the size of the employer and the type of coverage.

For example, if the employer has 20 or more employees, you can generally delay Part B while covered through current employment. Different rules typically apply to smaller employers.

Key takeaway: Begin reviewing your Medicare options at least three to six months before turning 65. If you're planning to retire before 65, start even earlier—ideally six to eighteen months before retirement—to evaluate your health insurance options.

2. Don't Assume COBRA Allows You to Delay Medicare

This is a particularly costly mistake.

Suppose you retire at age 66 and your former employer offers to pay for 18 months of COBRA coverage. That sounds like a wonderful benefit, and you might reasonably assume you can postpone Medicare until COBRA ends.

Unfortunately, that's generally not how Medicare works.

COBRA coverage is not treated the same as health insurance through current employment. Once your employment ends, you generally have an eight-month special enrollment period to sign up for Medicare Part B without a late-enrollment penalty.

Waiting until COBRA expires could leave you facing penalties or a gap in coverage.

Key takeaway: If you're retiring after age 65, coordinate your Medicare enrollment with the end of your employment—not simply the expiration of COBRA benefits.

3. Understand the Two Main Medicare Coverage Options

Once enrolled in Medicare, you'll generally choose between two approaches to healthcare coverage.

Original Medicare with Supplemental Insurance

Original Medicare includes Part A (hospital insurance) and Part B (medical insurance). Many retirees add a Medicare Supplement policy, also called Medigap, and a separate Part D prescription drug plan.

The biggest advantage is flexibility.

You can generally visit any doctor or hospital nationwide that accepts Medicare, without needing referrals or worrying about a particular insurance company's provider network.

Supplemental insurance helps pay expenses that Original Medicare doesn't fully cover, including certain deductibles and coinsurance.

The trade-off is higher monthly premiums, particularly when you combine Medicare Part B, Medigap, and prescription drug coverage.

Medicare Advantage

Medicare Advantage, also called Part C, is an alternative offered through private insurance companies.

These plans generally combine hospital, medical, and often prescription drug coverage into one package. Some also include dental, vision, or hearing benefits.

Many Medicare Advantage plans advertise premiums as low as $0, although you must generally continue paying your Medicare Part B premium.

The trade-off is that these plans typically operate through provider networks and may require referrals or prior authorization for certain services.

You'll also have copayments and other out-of-pocket expenses, subject to the plan's applicable annual medical spending limit.

Key takeaway: Don't select a Medicare plan based solely on its monthly premium. Consider your preferred doctors, medical conditions, travel habits, and how much flexibility you want as you age.

4. Your Initial Medicare Decision Can Have Long-Term Consequences

Here's something many retirees don't realize: switching between Medicare Advantage and Original Medicare with a supplemental policy isn't always straightforward.

When you first enroll in Medicare Part B at age 65 or older, you generally have a six-month Medigap enrollment window during which insurers cannot deny coverage because of your health.

However, if you initially choose Medicare Advantage and later decide you want a Medigap policy, you may need to answer medical questions and qualify for coverage.

Depending on your health, an insurer could deny your application.

There are exceptions, including certain federal protections and state-specific enrollment rights. California, for example, has a Medicare Supplement birthday rule that allows qualifying policyholders to change to certain comparable or less comprehensive Medigap policies without medical underwriting.

But these protections don't necessarily allow someone to move freely from Medicare Advantage into Medigap.

Key takeaway: Think beyond your healthcare needs today. Consider whether you'll want greater access to specialists, hospitals, or medical services ten or fifteen years into retirement.

5. Medicare Costs More Than Many People Expect

Many retirees are surprised to learn that Medicare isn't free.

Although Part A is premium-free for most people with sufficient work history, Part B requires a monthly premium.

In 2026, the standard Medicare Part B premium is $202.90 per person per month.

For a married couple, that's approximately $4,870 annually before adding supplemental insurance, prescription drug coverage, or other healthcare expenses.

Higher-income retirees may pay considerably more through a surcharge known as IRMA—Income-Related Monthly Adjustment Amount.

IRMA is generally based on your tax return from two years earlier.

For example, your 2026 Medicare premiums are generally determined using your 2024 income.

This becomes especially important for people approaching retirement who receive bonuses, exercise stock options, realize substantial capital gains, or make large Roth IRA conversions.

The good news is that if your income drops because of retirement or certain other qualifying life events, you may be able to request a reduction in your IRMA surcharge using Social Security Form SSA-44.

Key takeaway: Medicare premiums should be part of your retirement tax planning. Decisions made before retirement can influence your healthcare costs several years later.

6. Be Careful with Health Savings Accounts

If you're still working after age 65 and contributing to a Health Savings Account (HSA), Medicare enrollment requires special attention.

Once you're enrolled in Medicare, you generally can no longer contribute to an HSA, even if you're still covered by a qualifying high-deductible employer health plan.

An additional complication is that Medicare Part A coverage can sometimes be retroactive for up to six months when you enroll after age 65.

That means HSA contributions made during those retroactive months could become excess contributions, potentially creating tax consequences.

Key takeaway: If you plan to work beyond 65 and continue funding an HSA, coordinate your Medicare enrollment and HSA contributions carefully. Don't forget to account for contributions made by your employer.

7. Review Your Prescription Drug Coverage Every Year

Prescription drug coverage is another area where a little attention can save substantial money.

Under changes introduced by the Inflation Reduction Act, Medicare Part D now limits annual out-of-pocket spending on covered prescription drugs.

For 2026, that limit is $2,100.

This is particularly valuable for retirees who require expensive medications.

However, not every medication is necessarily covered by every plan. Each prescription drug plan maintains its own list of covered medications, known as a formulary.

Additionally, prescriptions purchased outside your Part D coverage—for example, using certain discount programs—generally don't count toward the annual Part D spending limit.

Plans can also change their premiums, deductibles, covered medications, and preferred pharmacies from year to year.

Key takeaway: Review your prescription drug plan during Medicare's annual Open Enrollment Period, October 15 through December 7. Even if your medications haven't changed, your plan's coverage and costs may have.

8. Plan for Healthcare Costs Medicare Doesn't Cover

Medicare provides substantial protection against medical expenses, but it doesn't cover everything.

Original Medicare generally doesn't cover routine dental care, eyeglasses, hearing aids, or most long-term custodial care.

That last point is particularly important.

If you eventually need assistance with everyday activities such as bathing, dressing, eating, or living safely at home, Medicare generally won't pay for ongoing custodial care.

These expenses can become significant, particularly for retirees who require extended home care, assisted living, or nursing home services.

Key takeaway: Your retirement financial plan should account for healthcare expenses beyond Medicare premiums, including the possibility of long-term care needs.

9. Make Medicare Part of Your Overall Retirement Plan

Medicare decisions shouldn't be made in isolation.

Your retirement date, investment withdrawals, tax strategy, Social Security benefits, and healthcare coverage are all interconnected.

For example, retiring before age 65 may require several years of private health insurance through an employer, COBRA, or the Affordable Care Act marketplace.

The cost of that coverage—and whether you qualify for premium assistance—can depend heavily on your retirement income.

Similarly, Roth conversions or large investment withdrawals may affect future Medicare premiums.

Even the timing of retirement can influence whether you're eligible to delay Medicare enrollment or qualify for a reduction in income-related surcharges.

These are good reasons to evaluate healthcare decisions alongside your broader financial plan rather than treating Medicare as a separate issue.

Final Thoughts: Plan Ahead and Keep Your Options Open

Medicare doesn't have to be overwhelming, but it does require thoughtful planning.

For some retirees, Medicare Advantage offers affordable, convenient coverage that fits their healthcare needs. Others may prefer the greater provider flexibility and more predictable medical cost-sharing available through Original Medicare and a supplemental policy.

Neither approach is universally better.

What matters is choosing coverage that fits your health, financial circumstances, and personal preferences—not just today, but throughout retirement.

The most important advice is simple: Start early, understand your choices, and avoid making Medicare decisions based solely on the lowest advertised premium.

As with most aspects of retirement planning, a little preparation today can help prevent expensive surprises tomorrow.

If you're approaching Medicare eligibility, considering retirement, or simply wondering whether your current coverage still makes sense, I'm happy to help you think through how these decisions fit into your overall financial plan.

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Source: This article draws on concepts discussed in the June 24, 2026, "Avoiding Medicare Mistakes in Retirement" educational presentation, along with additional financial planning insights from Attune Financial Planning.

Disclaimer: This article is provided for general educational and informational purposes and is not intended as individualized financial, insurance, tax, or legal advice. Medicare rules, premiums, coverage options, and enrollment rights may change and vary by individual circumstances and state. Consult Medicare, Social Security, a licensed Medicare insurance professional, or your financial and tax advisors before making decisions.

This article provides you with six ways to approach retirement healthcare with confidence. By understanding your habits, preparing realistically for expenses, and making informed decisions about insurance and long-term care, you can build a secure foundation for your next chapter.

1. Start With Your Personal Healthcare Mindset

One of the most overlooked aspects of healthcare planning is recognizing your own healthcare usage patterns. Some people naturally seek care more frequently—scheduling regular visits with specialists, therapists, chiropractors, or alternative providers. Others delay care until symptoms become pressing. Neither approach is right or wrong, but each approach leads to different financial expectations in retirement.

Questions to reflect on:

• Are you proactive about checkups and preventive care?
•  Do you regularly use specialty services like physical therapy, acupuncture, or mental-health counseling?
•  Have you historically postponed or avoided seeing the doctor?
• Do you manage chronic conditions requiring ongoing monitoring?

Understanding your patterns helps you forecast your true healthcare needs—and identify where additional coverage or budgeting may be necessary.

If you will be retiring in the very near future, be sure to complete any major dental or vision procedures before leaving an employer plan. Group coverage usually provides significantly better benefits than individual policies.

2. Plan Your Transition from Employer Coverage to Retirement Coverage

Most retirees move through several types of insurance coverage as they transition away from full-time work. Knowing what to expect at each step helps prevent coverage gaps, unnecessary expenses, and stressful surprises.

COBRA: A Valuable—but Expensive—Bridge

Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to keep your employer’s plan for up to 18 months after retirement. This option can be especially helpful if:

• You retire around age 63½ and need coverage until Medicare begins
•  You want to maintain access to specific providers or treatments
•  You have already met your deductible for the year
•  You expect high healthcare usage in the near term

Keep in mind: COBRA premiums are significantly higher than what you paid as an employee because the employer subsidy disappears. It is critical to budget for this major increase in cost.

Affordable Care Act (ACA) Marketplace Plans for Pre-Medicare Retirees

If you retire before age 65, the Affordable Care Act Marketplace becomes your primary option. Your premium depends on your Modified Adjusted Gross Income (MAGI), making tax planning essential for affordability.

Strategies include:

• Managing withdrawals and conversions to stay within subsidy-friendly income ranges
•  Comparing plans annually, as deductibles, networks, and out-of-pocket caps change
•  Evaluating whether a Bronze, Silver, or Gold plan aligns with your expected usage

Understanding Medicare at Age 65

At 65, Medicare becomes the foundation of your healthcare coverage. The most important decision you will make is choosing between Traditional Medicare + Medigap or Medicare Advantage.

Traditional Medicare paired with a Medigap supplement typically offers:

• Broad provider choice
•  Lower prior-authorization requirements
• Predictable and capped out-of-pocket costs

Medicare Advantage plans often appear more affordable upfront but may include:

• Narrower networks
•  Strict pre-authorization requirements
• Higher out-of-pocket expenses in serious health years

For retirees who prioritize the flexibility of choice and predictable costs, Traditional Medicare with Medigap is often the more reliable approach.

3. Account for Realistic Healthcare Costs—Not Just Premiums

Healthcare spending in retirement is rarely limited to insurance premiums. Some of the largest expenses fall outside what Medicare covers.

Dental, Vision, and Hearing Are Not Covered

Retirees are often surprised to learn that Original Medicare (Parts A & B) does not cover routine dental, vision, or hearing services. These gaps can become expensive in retirement—crowns, hearing aids, and cataract-related eyewear for example, can amount to hundreds of dollars or more and must be paid out of pocket. Medicare Advantage (Part C), on the other hand, often advertises “extra benefits” that include these services—but there are limitations and the fine print matters.  As a result,  retirees can be better served by having an dedicated savings set aside for dental, vision, and hearing care rather than just relying on standalone policies.

Take Advantage of Health Savings Accounts (HSA)

HSAs allow you to set aside funds that can be used for Medicare premiums, long-term care expenses, and high medical bills later in life. If you have an HSA before retirement, it can serve as an important long-term tool because:

• Contributions are tax-deductible
•  Growth is tax-free
•  Withdrawals for qualified medical expenses are tax-free
•  After age 65, non-medical withdrawals are penalty-free (but taxable)

Use “Care Bunching” to Reduce Long-Term Costs

If you know you will meet your deductible during a particular year (perhaps due to surgery or a major procedure), it may be advantageous to complete other care that you may be considering putting off to the following year —such as physical therapy, dermatology visits, or evaluations—during that same year. This strategy can significantly reduce costs by concentrating services into one deductible period.

4. Include Housing and Long-Term Care in Your Healthcare Strategy

Healthcare decisions do not occur in isolation. Where and how you live can strongly influence your long-term health, independence, and overall expenses.

Evaluate Whether Your Home Is Aging-Friendly

Some questions to consider:

• Are bathrooms accessible and safe?
•  Are there stairs that could become challenging?
•  Would grab bars, better lighting, or flooring updates help prevent falls?
• Will your current layout support future mobility changes?

A home safety assessment conducted by an occupational therapist can identify potential improvements long before they are needed.

Explore Assisted Living or Continuing Care Communities Early

If you prefer a community-based environment later in life, begin exploring options now.  Many desirable communities have multi-year waitlists, and early planning allows you to secure a spot without pressure.

Do not Overlook Long-Term Care Needs

Long-term care refers to the ongoing support you may need when age, illness, or cognitive decline makes it difficult to manage everyday tasks independently. It can take place at home or in assisted-living and nursing facilities and is focused on helping you maintain safety, dignity, and quality of life as your needs increase.  Long-term care planning (whether through insurance, hybrid products, or self-funding) should consider:

• Family health history
•  Expected longevity
•  Housing preferences
•  Asset protection considerations
• Likelihood of needing memory care or extended support

Including long-term care in your retirement strategy now helps reduce the emotional and financial burden later.

5. Understand the Tax Impact of Retirement Healthcare

Taxes play a significant role in your healthcare costs, especially during the transition into Medicare.  Consider the following healthcare tax issues:

Before age 65: ACA Subsidies and Income Planning

ACA subsidies depend on your Modified Adjusted Gross Income (MAGI). Careful planning around Social Security timing, Roth conversions, IRA withdrawals, and Capital gains can help keep premiums lower.

After age 65: Medicare IRMAA

Higher-income retirees may pay surcharges on Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA).

Since IRMAA looks at income from two years prior, planning is crucial. If your income has recently decreased—due to retirement, divorce, or the loss of a spouse—you may qualify to request a lower IRMAA tier.

6. Revisit Your Plan Annually and Stay Engaged in Your Healthcare

Retirement healthcare planning is not a one-time exercise. Life, health status, and insurance landscapes all change over time.  Therefore, each year review your:

• Medicare Part D drug coverage
•  Medigap rates and coverage
•  ACA plans (if under 65)
•  Expected out-of-pocket expenses
•  Total income and its effect on premiums
• Your support system and decision-making preferences

Staying engaged with your providers, understanding your medications, and asking clear questions can dramatically improve both health outcomes and financial efficiency.

Final Thoughts

Healthcare is one of the most important—and most complex—areas of retirement planning.  But with the right mindset and proactive strategy, you can navigate the transition with clarity and confidence. Understanding your healthcare habits, comparing insurance options carefully, planning for long-term care, and reviewing your plan every year ensures you remain protected throughout retirement.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

In September 2025, the IRS issued final guidance confirming the 2026 start date (following a two-year delay). For 2026, retirement plans can follow a reasonable and good-faith approach as they transition to the new rules, but most plans will still need to enforce the Roth-only catch-up requirement starting that year. Formal compliance with all technical regulations begins for plan years starting after December 31, 2026.

What is a Roth Plan?

Before we begin, let’s start by defining what a Roth Plan is.  A Roth plan is a type of retirement account, such as a Roth IRA or Roth 401(k), that allows you to contribute money you have already paid taxes on, and then enjoy tax-free growth and tax-free withdrawals in retirement. Unlike traditional retirement accounts, you do not get a tax deduction up front, but the trade-off is that all future qualified withdrawals—both contributions and investment earnings—can be taken out tax-free as long as you meet basic rules, such as being at least age 59½ and having the account open for at least five years. Roth plans are especially appealing to people who expect to be in a higher tax bracket later in life, since they allow you to lock in today’s tax rate and avoid taxes on your retirement income down the road.

How this new rule impact Employees vs. Self-Employed individuals

Regular employees (W-2)

If your prior-year W-2 Box 5 from your current employer exceeds $145,000 then your 401(k)/403(b) catch-up must be a Roth beginning in 2026. If your plan does not offer a Roth option, you cannot make catch-up contributions until the plan adds a Roth feature (plans may still allow catch-ups for those below the threshold).

If you are below the income threshold then you can keep making catch-ups pre-tax or Roth, based on your plan’s options. 

Self-employed individuals (solo 401(k), partners)

If you do not receive W-2 wages from the plan sponsor (e.g., a sole proprietor with only net earnings from self-employment), the Roth-only catch-up does not apply—you may still make pre-tax catch-ups (or Roth, if your plan allows).

If you operate as an S-corporation and pay yourself W-2 wages, the rule can apply if your Box 5 wages exceed $145,000—your catch-up must be a Roth in 2026.

The September IRS ruling—what exactly changed?

In September 2025, Treasury and the IRS published final regulations that:

• Confirmed the mandatory Roth-only treatment for high earners’ catch-ups begins in 2026.
•  Clarified how to measure wages (use W-2 Box 5 from the plan sponsor; allowed certain aggregation in limited circumstances), and added correction and de minimis relief (e.g., small pre-tax amounts that should have been Roth may not require correction).
• Explained that for 2026, plans may operate under a reasonable, good-faith interpretation of the statute/proposed rules; but full regulatory compliance generally applies for taxable years beginning after December 31, 2026.

“Super” catch-ups for ages 60–63

SECURE 2.0 also adds an enhanced catch-up for participants age 60–63 (150% of the standard age-50 catch-up for that year). That feature continues, but if you are over the wage threshold in the prior year, those enhanced catch-ups must also be Roth in 2026.

Planning Considerations for 2025 and 2026

For employees

• Track your 2025 W-2 Box 5. If you’ll be over the indexed threshold, set your 2026 catch-up to Roth (and confirm your plan offers Roth).
• Confirm payroll readiness. Some recordkeepers will auto-switch catch-ups to Roth for affected employees; others require an employee election.
• Be mindful of the tax trade-offs. Roth catch-ups mean tax now, tax-free later—which can be attractive if you expect higher future tax rates or desire more tax-diversified retirement income.

For self-employed individuals

• No W-2 wages?  The Roth-only mandate doesn’t apply—you can keep using pre-tax catch-ups (or Roth) in your solo 401(k).
• S-Corp owners: If your 2025 W-2 wages from your S-Corp will exceed the threshold, plan on Roth catch-ups in 2026.
• Cash-flow & estimated taxes. Roth catch-ups do not reduce current-year taxable wages—adjust Federal withholding and quarterly tax payment estimates accordingly.

In Summary

The Roth-only catch-up requirement is one of the most meaningful retirement plan changes to come out of SECURE 2.0, and it will affect many high-earning workers beginning in 2026. While the rule adds a layer of complexity—especially for employers and payroll systems—it also creates a tax advantaged opportunity. For many, shifting catch-up dollars to Roth can strengthen long-term tax diversification, reduce uncertainty around future tax brackets, and provide more flexibility in retirement income planning.

With hat said, the impact will differ depending on your situation. Employees who cross the wage threshold of $145,000 will want to prepare for higher current-year taxes, while self-employed individuals may experience little to no change.  Plan sponsors and recordkeepers also have work to do to ensure Roth features are available and properly administered before the deadline.

As 2026 approaches, the best course of action is to stay informed, review your withholding and savings strategy, and confirm that your retirement plan elections align with your goals.  If thoughtfully planned for, this change can be more than just a compliance hurdle—it can be a valuable tool for building tax-efficient income in retirement.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

Increased 401(k) Catch-Up Contributions for Ages 60-63

One of the most notable changes under SECURE 2.0 is the increase in catch-up contributions for individuals aged 60 to 63. Starting in 2025, these individuals will be allowed to make catch-up contributions that are significantly higher than the current limits. The new limit will be the greater of $10,000 or 150% of the regular catch-up contribution amount for that year, adjusted for inflation. This change acknowledges that individuals in this age bracket may need to accelerate their retirement savings as they approach retirement age, providing them with a valuable opportunity to boost their retirement funds.

Changes to 401(k) Catch-Up Contributions for Higher Earners

Beginning in 2026, catch-up contributions for employees who earn more than $145,000 (adjusted for inflation) in the previous year will need to be made on a Roth (after-tax) basis. This means that while the contributions will be taxed in the year they are made, the qualified distributions will be tax-free. The downside for high earners will be an increase in taxable income but the upside will be tax-free growth and withdrawals for in the future. 

Initially, the rule was set to begin in 2024.  However, after intense feedback from plan sponsors and administrators who voiced their strong concerns about needing more time to adjust to the new requirements and update their systems accordingly, the IRS pushed back the new rule until 2026. This transition period is intended to facilitate a smoother implementation process and ensure compliance.

Additionally, the IRS clarified that during this transition period, employees will still be able to make catch-up contributions on a pre-tax basis if permitted by their plans. Employers who do not currently offer Roth contributions are not required to implement them until 2026.

Automatic Enrollment and Escalation

To encourage more workers to participate in retirement savings plans, SECURE 2.0 mandates automatic enrollment for new 401(k) and 403(b) plans established after December 31, 2024. New companies in business for less than three years and businesses with 10 or fewer workers are excluded from this requirement. 

Under this provision, eligible employees will be automatically enrolled with a contribution rate of at least 3% of their salary, which will increase annually by 1% until it reaches at least 10%, but not more than 15%.  Employees have the option to opt out, but the automatic enrollment and escalation are designed to encourage individuals toward saving more for retirement.

Increased RMD Age

The age at which individuals must make Required Minimum Distributions (RMDs) from their qualified accounts has been increased under SECURE 2.0. Starting in 2023, the age for RMDs increased from 72 to 73, and then to 75 starting in 2033. This change allows individuals to keep their retirement savings invested for a longer period, potentially benefiting from additional growth. 

Emergency Savings Accounts

Recognizing the importance of financial security beyond retirement, SECURE 2.0 introduces a provision for pension-linked emergency savings accounts (PLESA). Starting in 2024, employers can offer these accounts to non-highly compensated employees, providing a dedicated space for emergency savings within the retirement plan. Starting in 2024, SECURE 2.0 allows employers to offer participants an emergency savings account as part of their retirement (regular 401k) plan. Participants can be automatically enrolled at up to 3% of their pay — with the ability to opt out — and after-tax (Roth) contributions are capped at $2,500. 

Contributions to emergency savings accounts must be eligible for the same matching contributions that apply for elective deferrals, but the employer matching contributions are made to the retirement plan instead of the emergency savings account.

Another provision allows a participant to make tax-free withdrawals for any reason.  However, Participants can only make one penalty-free withdrawal from their 401(k) account of up to $1,000 per year for "unforeseeable or immediate financial needs relating to personal or family emergency expenses." The withdrawal may be repaid within three years and only one withdrawal per three-year repayment period is permitted if the first withdrawal has not been repaid.

Conclusion

The changes introduced by SECURE 2.0 have significant implications for retirement planning. For individuals nearing retirement age, the increased catch-up contributions offer a valuable opportunity to enhance their retirement savings.  However, the shift to Roth treatment for high earners' catch-up contributions will require a careful evaluation of the impact this change will have on an individual's tax structure.  High-income individuals must weigh the benefits of tax-free withdrawals against the immediate tax impact of Roth contributions.

Automatic enrollment and escalation are likely to increase participation rates in 401(k) plans, particularly among younger people and those who might otherwise not contribute.  Employers will need to update their plan designs to comply with these new requirements, ensuring that employees are informed and supported throughout the process.

The extended RMD age provides greater flexibility in retirement planning, allowing retirees to keep their funds invested longer. This change may influence decisions about when to retire and how to manage income streams in retirement. Financial advisors will play a more significant role in helping clients navigate these new timelines and optimize their withdrawal strategies.

The introduction of emergency savings accounts acknowledges that financial security extends beyond retirement. By offering a separate account for emergencies, SECURE 2.0 aims to reduce the likelihood of early withdrawals from retirement savings, thereby preserving those funds for future retirement needs. Employees should be encouraged to take advantage of these accounts to build a financial cushion for unexpected expenses.

Before You Retire

Your monthly Social Security Benefit amount is calculated based on the number of years you have worked and the taxes you have paid into the Social Security Benefits program. Social Security counts the years you have paid taxes as “credits” for years that you have worked. For example, if you were born in 1929 or afterward, you must have 40 credits to receive Social Security benefits when you retire. This is equal to about 10 years of work.

Your benefit amount is also calculated by the number of credits you have earned during your working years. Fortunately, the Social Security Administration has made it easier for you to verify your expected benefits by setting up an online account. It is worth double-checking your earnings annually to catch errors, if any, and factor in your expected benefits as you strategize for retirement.

What Age Should You Claim?

Social Security benefits can be claimed as early as age 62 or as late as age 70. Your Full Retirement Age (FRA) depends on the year you were born, typically ranging from 65 to 67. Here is a breakdown of the three common milestones to consider:

Early Claiming (Age 62)

While tempting, claiming benefits at 62 comes with a catch. Your benefits will be permanently reduced, often by around 25-30%, compared to what you would receive at your FRA. If you need immediate income and have no other financial options, this might be a consideration.

Full Retirement Age (FRA)

Claiming at your FRA ensures you receive your full, unreduced benefits. This is the baseline age to compare other options against.  The full retirement age is calculated based on the year you were born. For example, for those born between 1943 and 1954, the full retirement age was 66.  Anyone born between 1955 and 1959 has a normal retirement age between 66 and 67 – that is, 66 plus a certain number of months. For instance, if you were born in 1958, your FRA is 66 and eight months.  If your birth year is 1960 or after, your normal retirement age is 67.

Delayed Claiming (Age 70)

By waiting until age 70 to claim benefits, you can earn delayed retirement credits. These credits increase your benefit amount by about 8% per year past your FRA. This can be a strategic move for those who have the financial means to delay, as it leads to higher monthly benefits for life.

Factors That Can Impact Your Claiming Decision

Health and Longevity

If you are in good health and have a family history of living a long life then waiting until age 70 might be more appealing, as you could receive higher benefits over a longer retirement period. 

Financial Needs

You should also consider your financial situation.  Do you have other sources of income or will still work past age 62 or 65?  If so, then you should consider delaying until age 70.  On the other hand if you are retiring at your FRA or earlier and are on a fixed income then you may want to consider claiming early to cover your basic living expenses.

Personal Preferences

If you value the certainty, flexibility and freedom that comes with taking benefits early then claiming at 62 or at FRA might be suited for you.  If the largest possible benefit is a priority than waiting until age 70 might be a better path for you.

A Few Claiming Examples

Early Retiree

Jane retired at 62. She has no other sources of income and wants to enjoy her retirement years while she is still active and healthy. Claiming early makes sense for Jane, even though her benefits will be reduced. The immediate financial relief outweighs the reduction in benefits over time.

Financially Confident

John has a healthy retirement savings and pension. He decides to wait until 70 to maximize his Social Security benefits. This strategy aligns with his plan for a comfortable and secure late retirement, as he expects a longer lifespan due to his family history.

Claiming Strategically

Jack and Diane are a married couple. Diane, the higher earner, plans to delay her benefits until 70. In the meantime, Jack, the lower income earner claims a spousal benefit at his Full Retirement Age while continuing to work part-time. This strategy allows them to enjoy some income while still optimizing their future benefits.

Choose Your Unique Path

The best age to take Social Security benefits is a decision that should be tailored to your unique circumstances, goals, and priorities.  Balancing financial, health, and spousal considerations should guide your claiming decision. Remember that everyone’s situation is different, and there is no single correct path to choose. To make an informed decision, consider consulting with a Certified Financial Planner who can provide personalized guidance based on your specific financial situation and retirement aspirations. Ultimately, the goal is to create a retirement plan that is in harmony with your vision of financial security and fulfillment.

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What are Health Savings Accounts (HSA)?

An HSA type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.

While you can use the funds in an HSA at any time to pay for qualified medical expenses, it is important to note that you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP).  For plan year 2023, this means that with this type of health plan, your insurance company will not cover the cost of any coverage until you have paid the first $1,500 if you are single or $3,000 if you are a family.

For 2023, if you have an HDHP, you can contribute up to $3,850 for self-only coverage and up to $7,750 for family coverage into an HSA. HSA funds roll over year to year if you do not spend them. An HSA may earn interest or other earnings, which are not taxable.

After the age of 65, HSA funds operates just like an Individual Retirement Account (IRA) and the funds can be used for any type of expense penalty free.

Advantages of Health Savings Accounts (HSAs)

1.    Tax Advantages: 

One of the significant benefits of HSAs is the potential to receive a triple tax advantage. Contributions made to an HSA are tax-deductible (regardless of income level), reducing your taxable income. In addition, the earnings on the account grow tax-free, and qualified withdrawals for medical expenses are also tax-free. This triple tax advantage can result in substantial savings, which makes HSAs an attractive option for you if you are seeking to minimize your tax burden.

2.    Savings and Investment Growth: 

HSAs allow individuals with another way to save money for retirement. Unlike other healthcare accounts, such as Flexible Spending Accounts (FSAs), HSAs do not have a use-it-or-lose-it policy. Any unused funds in your HSA can be carried over from year to year, allowing your savings to grow. Furthermore, many HSA providers offer a wide assortment of investment options (like an IRA), which can potentially increase the value of your account over the long term.

3.    Flexibility in Spending: 

HSA provides flexibility in how the funds are spent. You can use the money in your HSA to pay for many types of qualified medical expenses, including deductibles, copayments, prescription medications, dental and vision care, certain alternative therapies, etc.  After the age of 65, the money in your HSA account is treated like an IRA and the money in the account can be used for any purpose whatsoever.

4.    No Required Minimum Distributions (RMDs):

Unlike an IRA where it is mandatory that distributions be taken starting at age 73, there is no such requirement for an HSA.  You can keep the funds in your HSA as long as you like and only withdraw the funds when you need it for medical or other reasons.  If there are funds in the account upon death, the HSA can be passed to your beneficiary.  They than can use the funds in the HSA for their own healthcare needs.

5.    You Can Take It With You: 

HSAs are not tied to a specific employer, meaning you can keep your HSA even if you change jobs or retire. This portability allows you to continue contributing to your account and using the funds for qualified medical expenses.

Disadvantages of Health Savings Accounts (HSAs)

1.    High-Deductible Health Plan (HDHP) Requirement: 

To open an HSA, you must have a qualifying high-deductible health insurance plan (HDHP). HDHPs typically have higher deductibles and out-of-pocket expenses compared to traditional health insurance plans. This requirement may be a disadvantage for you if you anticipate significant healthcare expenses or prefer lower out-of-pocket costs throughout the year.

2.    Limited Contribution Limits: 

HSAs have annual contribution limits set by the IRS. While these limits are adjusted each year, they may not be sufficient for you if you currently have significant healthcare needs or anticipate significant healthcare needs in the future. In 2023, the annual contribution limit for an individual with self-only coverage is $3,650, and for those with family coverage, it is $7,300. If your annual medical expenses exceed the amount of your contributions , you may find these limits restrictive.

3.    Withdrawal Penalties: 

While HSAs offer tax advantages, non-qualified withdrawals from the account may be subject to taxes and penalties. If you withdraw funds for non-medical expenses before the age of 65, you will be subject to income tax on the withdrawn amount, plus a 20% penalty. This penalty can discourage you from using HSA funds for non-medical purposes, which limits the flexibility of the account.

4.    Limited Accessibility: 

While HSAs can provide significant benefits for managing healthcare costs, not everyone has access to them. To open an HSA, you must have an HDHP, which may not be available through your employer or may not be the best option for your specific healthcare needs. Lack of accessibility can be a significant drawback for if you would otherwise benefit from the tax advantages and flexibility of an HSA.

Should You Participate in an HSA?

Health Savings Accounts (HSAs) offers individuals and families a unique financial tool for managing healthcare expenses and saving for retirement.  With tax advantages, potential investment growth, and flexibility in spending, HSAs can provide significant benefits.  However, there are potential downsides. The requirement of having an HDHP, limited contribution limits, withdrawal penalties, and limited accessibility are things that should be considered when evaluating whether an HSA is the right choice for you.

It is vital that you carefully assess your healthcare needs, financial goals, and available options before choosing to participate in an HSA.  A financial advisor like myself or your healthcare professional can provide you with  helpful guidance. By carefully considering the advantages and disadvantages, you can make an informed decision and determine whether an HSA is in alignment with your overall healthcare and financial strategy.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

New Distribution Rules

The Required Minimum Distribution (RMD) age will rise to 73 in 2023.  Then, ten years from now, those turning 73 in 2033 will have their RMD age increased again to age 75.  By far, one of the most critical changes of this new law was increasing the age at which owners of retirement accounts must begin taking required minimum distributions (RMDs).   If you have already turned 72, you must continue taking distributions. But if you are turning 72 this year, you can wait to take distributions until you turn 73 in 2024.  Keep in mind that the age in which you can begin taking distributions from your retirement accounts have not changed which is 59½ years old.

Access to funds. Plan participants can use retirement funds in an emergency without penalty or fees.  For example, starting in 2024, an employee can get up to $1,000 from a retirement account for personal or family emergencies without having to incur a 10% early withdrawal penalty. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse.

Reduced penalty.  Starting in 2023, if you miss an RMD for some reason, the penalty tax drops down from 50% to 25%.   In addition, if you fix the mistake promptly and make your RMD, the penalty may drop to 10%.

New Accumulation Rules

Catch-Up Contributions. Starting January 1, 2025, people aged 60 through 63 can make catch-up contributions of up to $10,000 annually to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain restrictions to individuals earning more than $145,000 annually.

Automatic Enrollment. Beginning in 2025, the Secure Act requires employers to enroll employees into workplace plans automatically. However, employees can choose to opt-out of their company sponsored retirement plan.

Student Loan Matching. In 2024, companies can match employee student loan payments with retirement contributions.   Historically, high student loan debt has made it difficult to save for retirement.  The rule change offers workers an extra incentive to save for retirement while paying off student loans.

Revised Roth Rules

529 to a Roth. Starting in 2024, pending certain conditions, people can roll a 529 education savings plan into a Roth IRA.  This change will be beneficial to parents whose child gets a scholarship, goes to a less expensive school, or doesn't go to college.  Prior to the new law, parents who wanted to utilize the unused 529 plan money for retirement would incur a 10% penalty fee.  With the change in the law, this money can now be repurposed for retirement without penalty. However, the Act limits 529 to Roth rollovers to a maximum of $35,000 per beneficiary over their lifetime and rollovers are subject to the annual Roth IRA contribution limit.  In order to qualify for this tax and penalty free rollover, the 529 plan must have been open for 15 years.  In addition, contributions or earnings made in the 529 plan for the previous five years are not eligible for the rollover.

SIMPLE and SEP. From 2023 onward, employers can make Roth contributions to Savings Incentive Match Plans for Employees or Simplified Employee Pensions.

Roth 401(k)s and Roth 403(b)s. The new legislation aligns the rules for Roth 401(k)s and Roth 403(b)s with Roth Individual Retirement Account (IRA) rules. From 2024, the legislation no longer requires minimum distributions from Roth Accounts in employer retirement plans.

More Highlights

Support for Small Businesses. In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100% from 50% for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan.

Qualified Charitable Distributions (QCD).  Prior to the new law, individuals 70½ or older were limited to a maximum annual QCD donation of $100,000 from their IRA to a qualified charitable organization.  From 2024 onward, the maximum donation amount will be adjusted for inflation. The limit applies on an individual basis, so for a married couple, each person age 70½ and older can make a QCD as long as it remains under the limit.  Also, starting in 2023, individuals have a one-time opportunity to direct up to $50,000 of their QCD into a Charitable Remainder Trust (CRUT), a Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity.

Consider your Own Retirement Plan

As a result of this new law, the rules around retirement savings and distributions will evolve of the next few years. The provisions are complex so be sure to connect with a financial professional to understand how Secure Act 2.0 will impact your individual situation.

Keep in mind that retirement rules can change without notice and there is no guarantee that the treatment of specific rules will remain the same. This article is intended to give you a broad overview of SECURE 2.0 and is not a substitute for individual professional financial and tax advice.

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This content is developed from sources believed to be providing accurate information and provided by Attune Financial Planning.  It may not be used for the purpose of avoiding any federal tax penalties.  Please consult legal or tax professionals for specific information regarding your individual situation.  The opinions expressed and material provided are for general information only.

Biggest COLA Increase in Decades?

While many predicted a bump of as much as 6.1% given recent movement in the Consumer Price Index (CPI), the announced 5.9% increase is still substantial. Some fear that rising consumer prices may dilute the impact of the increase with inflation currently running at more than 5 percent. While this remains to be seen, Social Security beneficiaries will no doubt welcome the largest adjustment in many years.¹

How You Will Be Notified

According to the Social Security Administration, Social Security and SSI beneficiaries are usually notified about their new benefit amount by mail starting in early December. However, if you’ve set up your SSA online account, you will also be able to view your COLA notice online through your “My Social Security” account.¹ 

Next Steps?

If this increase surprises or concerns you, it's always a good idea to seek guidance from your financial professional about changes to any of your sources of retirement income.

#1  What are the two Types of IRAs you can contribute to?

Traditional IRA

 Contributions might be tax deductible and your investment returns are not taxed until you withdraw the money in retirement.  Withdrawals are taxed as ordinary income.

Roth IRA 

Contributions are not tax deductible as they are made “after-tax”.  Your investment returns grow tax free.  Withdrawals are made tax-free.

#2  What are the requirements to contribute to an IRA?

 For both a traditional and Roth IRA you must have earned income in order to contribute into an IRA.  Earned income includes wages from salary, commissions, bonuses, tips, and self-employment income.

For a Roth IRA, the amount of your contribution is phased out when your adjusted gross income is between $124,000 and $139,000 if you are single or $196,000 and $206,000 if you are married.

If you are married and your spouse did not have any earned income in 2020, they can make a "spousal" IRA contribution in their own IRA as long as you, the working spouse, meet the income requirements.

#3  How much can you contribute into an IRA?

You can contribute up to the lessor of your earned income or $6,000 in 2020.  This amount can be spread out between a Roth and a traditional IRA but your total contributions in your IRAs cannot exceed the lessor of your earned income or maximum limit of $6,000.

If you are 50 years or older, you are able to make an additional “catch-up” contribution of $1,000.

#4    When is your traditional IRA contribution tax deductible?

If you (and your spouse if you are married) are not covered by an employer sponsored retirement plan (e.g. 401K, 403b Plan), your IRA contribution is fully tax deductible.

If you are married and you are not covered by an employer sponsored retirement plan but your spouse is, then your tax deduction decreases when your adjusted gross income is between $196,000 and $206,000.

If you are single and you are covered by an employer sponsored retirement plan then your tax deduction decreases when your adjusted gross income is between $65,000 to 75,000. 

If you are married and both of you are covered by an employer sponsored retirement plan then your tax deduction decreases when your adjusted gross income is between $104,000 and $124,000 if you are married.

#5  When is the deadline to make an IRA contribution?

You have until the Federal tax filing deadline to make a contribution for the current tax year.  This year, the tax filing deadline is May 17th.  This means you have until this date to make a contribution for the 2020 tax year.

#6   Which IRA is better for you?

If your goal is to reduce your taxes today and you qualify to make a tax deductible contribution into a traditional IRA, then a traditional IRA might be a better choice for you.

If your goal is to have tax-free income in retirement and you qualify to make a Roth IRA contribution, then a Roth IRA might be a better choice for you.

You don’t necessarily have to choose one or the other.  You can contribute to a Roth IRA and a Traditional IRA as long as you meet the income requirements and your total combined contribution does not exceed the maximum limit of $6,000 or $7,000 if you are over 50.

Contributing to an IRA is a great way to save for retirement. The good news is that you have until May 17th to make a contribution for the 2020 tax year.  If you are feeling flush with cash due to your stimulus payments, you can put your extra money to good use by putting money away in an IRA.

Here is a useful calculator that will help you determine how much you can contribute into an IRA:  IRA Eligibility Calculator

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.

Section 2202 of the act, titled “Special Rules For Use of Retirement Funds,” now allows those affected by COVID-19 to withdraw up to $100,000 penalty-free from their 401(k) or IRA.¹ 

What does it mean to be "impacted by COVID-19?" Congress defines this broadly to include those who:

• Have been diagnosed with COVID-19;
• Have a spouse or dependent who has been diagnosed with COVID-19;
• Experience adverse financial consequences as a result of being quarantined, furloughed, being laid off, or having work hours reduced because of the disease;
• Are unable to work because they lack childcare as a result of the disease;
• Own a business that has closed or operate under reduced hours because of the disease; or
• Meet some other reason that the IRS decides to say it is OK.

This new option to withdraw from your 401(k) or IRA is on the table, but should you consider taking it? Below we’ll discuss what you need to know about this change and what to consider before making a decision.

Penalty-Free Access to Retirement Savings

Traditionally, there has been a 10 percent penalty for withdrawing funds from a 401(k) or IRA account before reaching the age of 59 ½. But through changes passed in the CARES Act, this penalty will be waived for individuals who choose to tap into their retirement savings accounts and withdraw up to $100,000 to cover financial burdens caused by the COVID-19 pandemic.¹

If you choose to withdraw, you will have the option to spread the tax liability of this additional income over the next three years, and you will have three years to return savings (up to the full amount withdrawn) back into the account.¹

Increase in 401(k) Loan Limits

Aside from withdrawing altogether from your retirement savings account, some plan sponsors offer the option of taking out a loan on your 401(k) or IRA. In the past, there have been limits on how much you can withdraw. According to the IRS, the maximum amount was previously “(1) the greater of $10,000 or 50% of your vested account balance, or (2) $50,000, whichever is less.”² 

In light of recent events, the CARES Act has adjusted this loan limit to a maximum amount of 100 percent of your vested account balance, or $100,000, whichever is less.¹ This option will be available for individuals for 180 days after the CARES Act is enacted. Additionally, anyone owing a 401(k) loan repayment before December 31, 2020, can delay their repayment for up to one year.¹

While the amount one can withdraw in a loan has doubled, it’s important to remember the IRS has not changed its rules on loan repayment. According to the IRS, “Repayment of the loan must occur within 5 years, and payments must be made in substantially equal payments that include principal and interest and that are paid at least quarterly.”² That means that if you choose to take this option, you need to be prepared to pay the full amount back in substantial installments each year.

Considerations About Withdrawing From Your Retirement Savings

As is true for any other circumstance, the decision to withdraw from your retirement savings account early should never be taken lightly. Depending on your timeline toward retirement, $100,000 accruing compounding interest over the next couple of years could yield significant growth. In fact, the younger you are, the greater the dent you’re putting on your future retirement funds - if you choose to withdraw from your 401(k) or IRA without paying it back.

As you address the need for money now, remember to consider your need for money in the future. Is creating a significant reduction in your future retirement income the best option for addressing your present financial hardships, or would it be better to pursue alternative options - such as a personal loan, HELOC or tapping into your emergency savings?

Before making a big financial decision like this, it’s important to work together with your financial advisor. He or she can help you understand the long-term impact a decision like this can make on your financial future.

On the financial side, investors everywhere are experiencing the market volatility and economic turmoil of a bear market. While some may have time to “ride out the storm,” retirees and soon-to-be retirees across the country are worried about what all of this means for their retirement.

Below we’re discussing the impact COVID-19 may have on your plans for retirement, as well as recent legislation passed in America that’s designed to bring some economic relief to retirees.

401(k)s & IRAs

On March 11, 2020, we officially entered a bear market. And as we continue to endure this pandemic, the market continues to experience volatility. Even after the pandemic passes, there’s no guarantee the market will bounce back quickly - no one can know for sure what will happen in the coming months. Businesses are shutting their doors, investors are worried, and overall financial confidence is low.

For retirees, this market volatility likely has made some sort of impact on your retirement accounts. Depending on the makeup of your portfolio, the level of impact could vary. But if retirement is already here or right around the corner, this downward trending market could lessen the value of your available funds.

Some pre-retirees may have the option to put off retirement until the market stabilizes, others may not. In an attempt to help retirees and pre-retirees facing financial difficulties, the government has passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act - which can impact your 401(k), IRA or other retirement accounts.

The CARES Act Impact on 401(k)s and IRAs

Here are some ways in which the CARES Act has created financial savings or relief opportunities for those nearing or in retirement.

Waiving Required Minimum Distributions

In Section 2203 titled, “Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts,” those who are typically required to take minimum distributions from their retirement savings accounts will not be required to do so for the remainder of 2020.²

If you originally planned to take withdrawals from your accounts this year because you were required to do so, you now have the opportunity to leave that money where it is. This gives retirees a chance to let their money grow a little longer and, hopefully, gain back some value lost during the COVID-19 pandemic.  

Of course, if you still need to withdraw from your accounts, you can. But for those who were only planning on withdrawing because they had to, this change offers retirees the opportunity to reduce their tax bill come tax season.

Penalty-Free 401(k) and IRA Withdrawals

As established in Section 2202 of the CARES Act, you have the option to withdraw up to $100,000 from your 401(k), 403(b) or IRA account.² This opportunity is open to anyone who has been impacted directly by the COVID-19 pandemic.

Examples of qualifying impacted individuals include:

• Someone who has contracted the virus
• Those caring for an immediate family member who has the virus
•  Anyone experiencing financial distress due to being furloughed or laid off during the pandemic
• Business owners who needed to cease operation or reduce hours
• Any additional circumstance in which the IRS deems acceptable²

With this change in policy, the typical 10 percent early-withdrawal penalty has been waived for qualifying individuals (based on the list above) who choose to withdraw before the age of 59 ½. In addition, you have the option to spread the tax liability of this additional income over the next three years. 

Other types of retirement plans, such as money purchase pension plans or defined benefit and cash balance plans, are not discussed in the CARES Act in regards to penalty-free early withdrawals. Therefore, as of April 21, the penalty-free early withdrawal option does not apply to these types of plans.

Withdrawing any amount early from your retirement plan is a decision that shouldn’t be taken lightly, as you are taking income away from your future retirement. If you are in a situation in which you are considering this option, it’s wise to speak first with your financial advisor, as they may be able to present other options.

Tax Deadline Extended

On March 21, 2020, the IRS and Treasury Department announced an extension for tax filing and payments. This means that Americans have until July 15, 2020 to file their federal tax return.³ How does this affect your retirement? Because you now have three extra months to contribute money to your 401(k) or IRA. This means that if you’d neglected to contribute as much as you wanted to your retirement accounts, you have some extra time to do so. Plus, contributing now can help lower your tax obligation for the 2019 tax season come July 15.   

What About Social Security?

COVID-19, as of mid-April, has had no impact on current Social Security benefits. If you’re already utilizing them or planning to claim Social Security in the near future, there has been no change and you can proceed as planned.

Planning for and navigating retirement income is already a challenge in itself. With the extra stress and confusion brought on by the COVID-19 pandemic, now more than ever you need to have a good grasp on your options. After reviewing the changes in legislation outlined above, it may be best to reach out to your financial advisor. He or she can offer you peace of mind in knowing your retirement will remain on track and help determine how these changes may have affected your retirement on an individual level.

That sounds like a lot of money to save and can seem like an even more daunting task given the high cost of living especially in the San Francisco Bay Area.  According to the same 2019 TD Ameritrade Study, housing costs were the number one reason why Millennials are behind in saving for retirement. For Gen Xer’s, inadequate income was the number one reason why they were behind.  Next to the high cost of living, needing to pay down debt was a big reason why people have not saved enough for retirement.

Given these hurdles, how will you be able to save the $1 to $1.5 million estimated amount necessary to retire comfortably?  Below are my 10 Tips that will help you save for your retirement nest egg:

1.  Make saving for retirement a priority

Commit to investing the necessary financial resources to your retirement.

2.  Understand your “why” of retirement

Visualize what your retirement will look like and focus on that picture.  For some that is a positive image – a nice house, annual vacation, giving back, etc.  For other that is a negative image – not wanting to struggle to make ends meet, not being able to live comfortably, not being able to do the things you want.   Whatever that picture is, use it to remind you why saving for retirement is important.

3.  Make saving for retirement a family affair

 Talk about your thoughts, concerns, and dreams for retirement with your life partner.  If you have been unsuccessful with saving for the future, talk about why that is and figure out way on how you both can improve your savings habit.  Agree to commit to saving for retirement and discover your shared vision for retirement.  Saving for retirement is easier when it is done together.

4.  Start saving as early as possible

 The earlier you start, the easier it will be to reach your retirement goal. Make saving for retirement a lifestyle choice.  Assuming an 8% annual rate of return, If you start saving for retirement at age 25, you will need to save $286 per month in order to have $1 million by the time you are 65.  If you wait until you are 35, you will need to save $671 per month.  If you wait until you are 45, that monthly savings amount grows to $1,698 per month!

5.  Have a “saver’s” mentality

 Pay yourself first before anything else. Paying yourself first can be done by making automatic payroll contributions into your 401K plan.  You can also make automatic deposits from your bank account into an IRA.

6.  Take Advantage of Retirement Savings Opportunities

  If you participate in your company’s 401K Plan and they have a matching program, save up to that company match.  For example if your company matches 100% of the first 5% of 401K contribution, then contribute 5% of your annual salary.  You will effectively be saving 10% into your 401K annually. If you can save more into your 401K plan, strive to save up to the maximum allowable annual contribution.  For 2020, that amount is $19,500.  If you are at least 50 years old, take advantage of the additional catch-up provision.  For 2020, that amount is $6,500.  If your company does not have a 401K plan, or you are a non-working spouse, you can invest money in an Individual Retirement Account (IRA).  For 2020, You can invest a maximum annual amount of $6,000 or $7,000 if you are 50 years old or older.

7.  Maintain your current standard of living

 This can be achieved by investing your annual pay increases and bonuses.   This will help you live within your means and helps prevent the feeling of “making more but feeling poor”.  This strategy will also help you to eventually save the maximum allowable amount into your 401K plan.  Again, that is $19,500 in 2020 plus an additional $6,500 if you are 50 or older.

8.  Have a budget and stick to it

Focusing on “paying yourself” first and maximizing your retirement savings means knowing that you will have to cut back on certain expenses to make that strategy work.

9.  Don’t cash out your 401K

 If you leave a company don't cash out your 401K savings.  If you do, you will have to start saving from scratch.  Instead move that money into a Rollover IRA or Re-invest it into your new company’s 401k plan.  

10.  Reward yourself

 When you have met a milestone goal be sure to reward yourself.  For example, tell yourself that you will save 10% of your salary in 2020 and if you meet that goal you will take a nice weekend trip.   This will give you incentive to reach your goal and will keep you motivated throughout the year.

Saving for retirement can be difficult especially if you live in an area where the cost of living is high, you have inadequate income, or have debts to pay off.  However, if you follow these tips and make retirement savings a priority, you will have a higher probability of successfully reaching your retirement savings goal.

HAVE  MORE QUESTIONS ABOUT HOW TO SAVE FOR RETIREMENT?

CONTACT ME TODAY

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

This ambitious bill offers several adjustments to our current laws surrounding saving and preparing for retirement. The SECURE Act will adjust the age caps on traditional IRAs, increase access to tax-advantaged retirement savings accounts and provide more part-time workers with the opportunity to participate in an employer-sponsored 401(k) plan, . Below are the most prominent changes of this new act and how they may affect your own retirement.

Traditional IRA Contributions can be made beyond age 70½  

Prior to 2020, individuals were no longer eligible to contribute to their traditional IRA once they reached age 70½ even if they were still working.  Starting in 2020, The SECURE act has eliminated the previous age cap, allowing people to continue contributing to their IRA for as long as they continue working.  This change is great news for seniors who continue to work well beyond the traditional retirement age and still wish to save money in their IRA.

Lifetime "Stretch" Provision for Inherited IRA's eliminated

Under the new act, beneficiaries who have inherited a retirement account will be required to withdraw the amount in its entirety within 10 years of receiving the account. Prior to 2020, inheritors were given the opportunity to withdraw the amount over their life expectancy.   This was a great estate planning tool as people who had a substantial amounts within an IRA could leave it to their young heirs.  The young heir in turn, upon receiving the Inherited IRA could slowly withdraw the balance based on their life time.  Thereby allowing the IRA further opportunity to grow.  Starting in 2020, the inherited IRA must be withdrawn completely within 10 years of receiving the IRA.  This change can significantly impact the tax obligation of the recipient depending on the size of the Inherited IRA.   However, there are certain groups of people who are exempt from this rule:

• Spouses of the deceased
• Beneficiaries who are disabled or chronically ill
• Certain minors (those children of the original retirement account owner). But only until they reach the age of majority. 
• Individuals who are not more than 10 years younger than the decedent

Required Minimum Distribution Age For Retirement Accounts Increased

Prior to 2020, when someone reached age 70½, they were required to begin withdrawing money from their retirement accounts.   Starting in 2020, the minimum required minimum distribution age is 72.  Therefore, if you are turning 70½ in 2020, you can now wait until the year you turn 72 before taking your first retirement plan distribution.  The advantage to this change is that it will allow your retirement accounts to grow for an additional year and a half.  The new law does not impact the age when you can voluntarily begin withdrawing from your retirement account.  That age remains 59½.

Roth Conversion Are More Advantageous

The elimination of the "Stretch" Provision and the increase in the required minimum distribution age has made Roth Conversions more advantageous.  People who have large amounts in an IRA that they wish to give some or all to an heir, can slowly convert that IRA into a Roth IRA.  You can continue this strategy for an additional 1½ years because the required minimum distribution age has been increased from 70½ to 72.  The benefit to the Roth IRA holder is that there is no required distribution age limit.  They can withdraw money as they wish or leave the money in the Roth IRA for their heirs.    Amounts converted from a traditional IRA into a Roth IRA is taxable in the year converted.  However, any distribution is tax-free.  Heirs who receive the Roth IRA, are not limited to the new 10 Year distribution rule and can keep the money in the Roth IRA as long as they wish.  Plus, any money withdrawn is also tax-free.

Penalty-Free Withdrawals For Qualified Births & Adoptions

Section 113 of the SECURE act introduces a new exception for those who seek early distributions. You may now withdraw from your retirement accounts penalty-free for "Qualified Births or Adoptions." New parents, whether through birth or adoption, are allowed to withdraw up to $5,000 from their individual retirement accounts. In order to make a penalty-free withdrawal, new parents must do so within one year of the birth or adoption.¹

Notably, the exception applies on an individual basis. Meaning, if both of a child’s parents have available retirement assets, each can make a Qualified Birth or Adoption Distribution of up to $5,000 for each child born/adopted.

401(k) Eligibility Requirement For Part-Time Workers Reduced

Before the SECURE Act, employees were required to work 1,000+ hours per year for an employer in order to be eligible to participate in a 401(k). Recognizing the importance for all workers to participate in employer-provided retirement plans, additional provisions were included int he SECURE Act to help employers encourage their employees to increase contributions and to let (some) part-time employees participate when they were previously ineligible to do so.

In order to be eligible, part-time employees will have to have worked 500+ hours per year for an employer (which averages out to 9.6 hours a week) for the past three consecutive years. In addition, the employee must be 21 years of age or older by the end of those three years.¹

These changes for part-time workers apply to plan years beginning in 2021, but the SECURE Act does not require an employer to start ‘counting’ 500-hour years for the purposes of this new rule until 2021. That means that the earliest an employee would be eligible to participate in a 401(k) plan as a result of this change will be in 2024.

What Is Wellness?

According to the Global Wellness Day organization, wellness is “a good or satisfactory condition of existence; a state characterized by health, happiness, and prosperity.”¹ The idea of wellness stems farther than physical health, as it is meant to encompass every aspect of your quality of life - mental health, social well-being and physical state. And while developing a retirement plan can help to make sure your financial wellness is covered, it’s up to you to take care of the rest.

Addressing Wellness in Retirement

We’ve broken the biggest areas of wellness down into three categories: mental health, social well-being and your physical state. Below are the reasons why each area of wellness is important in retirement and what you can do to maintain or improve on them. 

Mental Wellness

The temptation to turn your brain off during retirement can be a big one. Considering you’ve spent decades problem solving for 40+ hours a week, the idea of relaxing and unwinding in front of the television or along a sandy shoreline can be extra appealing. But in order to stay mentally well and ward off cognitive decline, it’s important to incorporate mental exercises into your daily retirement routine. Staying sharp and keeping an active mind in retirement can help you to enjoy your retirement for longer. 

One possible way of keeping your mental health in check? Consider taking on a new job in retirement, even just as a part-time position. According to the American Psychological Association, a 2009 study revealed that those who were working in retirement had levels of well-being in both health and overall satisfaction that were on par with those who were younger and not yet retired. And beyond satisfaction, working in retirement has proved in some cases to effectively ward off cognitive decline and diseases. A study of nearly half a million retiree-aged participants showed that for every additional year worked, the risk of dementia was reduced by 3.2 percent.²  

Other activities to help your mind stay sharp in retirement could include:

• Picking up a new instrument
• Learning a new language
• Journaling
• Reading books
• Doing puzzles & games
• Social Wellness

Isolation and loneliness are growing issues in Americans, especially in older adults. And entering into retirement is a transitionary time in which one’s social well-being may become compromised. Leaving a job means leaving coworkers you see every day, and if you choose to move to a retirement destination, you may be leaving all other neighbors, community friends and even family behind.

Isolation can leave you feeling completely detached from your friends and family, both physically and psychologically. It’s something more than 8 million adults over the age of 50 experience, and prolonged isolation can have the same impact on your health as smoking 15 cigarettes a day.³   

The good news is, there are plenty of ways to find social fulfillment in retirement, they just require some effort and initiative on your part. These could include:

• Volunteering in your community
• Finding a roommate
• Taking or teaching classes
• Pursue a hobby or passion that takes you outside of the home
• Physical Wellness

You’ve heard the phrase “use it or lose it,” and this saying definitely rings true when it comes to maintaining your physical wellness in retirement. Older adults are already at a bit of a disadvantage physically. As our bodies grow older, we’re facing physical changes such as slowing metabolisms, weakening immune systems and loss of muscle mass (to name a few). But just like your mental health, you may be tempted to enter a state of permanent relaxation in retirement. However, it’s important to take care of yourself physically. Doing so can help prevent both physical and cognitive decline, both of which can dramatically reduce your overall well-being. Some ways to stay physically well in retirement include:

• Joining an exercise class
• Garden and maintain your yard
• Adopting a dog
• Enjoying walks around your neighborhood
• Creating (and sticking to) an exercise routine

When you put a special focus on maintaining your overall wellness in retirement, it can be some of the greatest years of your life. And while you can work with a professional to ensure your financial well-being is cared for, it’s up to you to make sure the rest is following suit as you head toward retirement.

What Is FIRE?

FIRE stands for “Financial Independence, Retire Early.” This program, inspired by Vicki Robin’s book “Your Money or Your Life,” is built on the premise of saving more money month-to-month than traditional retirement planning and utilizing low-fee investment options to be able to afford retirement earlier than the traditional age. 

The “financial independence” portion of FIRE is considered to be about 25 times your yearly expenses. For example, if you decided you’d need $50,000 a year to live off of in retirement, you would need to save 50,000 x 25, or $1.25 million to be considered financially independent. Once that number has been met, you’d be able to retire and enjoy a life of financial freedom, withdrawing about three or four percent from your nest egg each year.

Top Considerations Before Joining the FIRE Movement

Retiring in your 30’s may sound too good to be true. In fact, the whole FIRE movement and premise of retiring early can sound like more of a daydream than reality. And for some, it may be just that. But for others who are able or willing to embrace the lifestyle, financial independence early in life can be possible. Here are a few important considerations to make before deciding if the FIRE program may be right for you.

Consideration #1: You’ll Need to Spend Wisely

The big factors of the FIRE program are income, expenses and time. The idea being, the bigger the gap between income and expenses, the less time it will take you to reach financial independence. And while it may sound extreme, depending on your timeline and desired income level in retirement, you could be looking to save more than half of your income to put toward an early retirement. This is something that would need to be calculated individually, as it is based on your income level and current expenses. However, living a frugal lifestyle now is almost always a universal requirement of the FIRE program and other early retirement seekers.

Consideration #2: FIRE Followers Don’t Embrace Traditional Retirement

For those looking to retire early using the FIRE method, “retirement” doesn’t mean sitting around and doing nothing. FIRE followers are typically more focused on the first part of the acronym, “financial independence” than they are on retiring early. That means that they’re likely to still work in retirement, or pursue a passion project they were previously unable to due to the confines of a full-time job. 

Consideration #3: You’ll Want a “Why”

Like other financial goals, it can be hard to find the motivation to skip dinners out or splurging on a new outfit. When you have a nondescript idea of retiring early, there’s little motivation to skip out on some enjoyment today for the possibility of an early retirement a decade down the line. 

Instead, those who have embraced the FIRE method often put a “why” to their savings programs, and it’s important to get as specific as possible. Simply wanting to quit a job you hate doesn’t bring much motivation or a promise for future fulfillment. If that’s the case, you may be better off exploring a new career path. Instead, you may want to find financial independence in order to achieve your travel bucket list, or you may want to pursue music or art full time. Or, perhaps you’ve always wanted to have your own business. Whatever it is, define your “why” and let it guide you in making positive progress toward your financial independence.

The FIRE program is an appealing method of reaching retirement early on in life and allows for its followers to find the flexibility in doing what they love. It does, however, take self-discipline and the ability to spend less today in order to save for tomorrow. If you’re considering the FIRE method, it may be wise to work with a financial professional who can help you understand your current spending habits and what you’ll need in order to find financial independence for an early retirement.

Why was the SECURE Act created?

A March 2019 Bankrate survey found that more than one in five working Americans aren’t saving for financial milestones such as retirement.   Another Bankrate survey conducted in May 2019 found that one of the biggest regrets Americans have is not saving for retirement.  The Federal Reserve conducted a recent survey as well and the results showed that 25% of working adults have no savings or pensions at all.

One of the contributing factors to these statistics is that the opportunity to invest in retirement accounts is not available to all workers.  According to the Bureau of Labor and Statistics, only fifty-eight percent of workers in private sector jobs have access to a retirement savings plan.  In addition, only 35 percent of people who work less than 35 hours each week have access to a 401(k) or pension plan at work.  Still another statistic shows that only 46 percent of workers at companies with 100 employees or less had access to a 401(k) plan.

By lifting the age limit on investing in individual retirement accounts, providing more avenues for small businesses to offer retirement plans to their employees, and allowing part-time workers access to 401(k) accounts, the SECURE Act hopes it can help more workers save more for retirement.

What is in the Bill?

Here are some of the main provisions included in the SECURE Act:

1. Repeal the maximum age for traditional IRA contributions, which is currently 70½
2. Increase the required minimum distribution age for retirement accounts to 72 (up from 70½)
3. Allow long-term part-time workers to participate in 401(k) plans
4. Allow more annuities to be offered in 401(k) plans
5. Parents can withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses
6. Parents can withdraw up to $10,000 from 529 plans to repay student loans
7. Increase Small Employer Access to Retirement Plans
8. Tax Credit for Automatic Enrollment
9. Removal of “Stretch” Inherited IRA Provisions

How does it Impact You?

In a recent CNBC Make It interview, Chad Parks, founder and CEO of Ubiquity Retirement + Savings says, “This is a stepping stone to try to solve that looming retirement crisis.”  Parks also says that by making it easier and cheaper for small businesses to offer 401(k) plans, if the bill becomes law, “millions more people, hypothetically, should have access to the ability to save at work.” Part-time employees stand to benefit greatly if the Secure Act passes. “Any employee who has worked for you for at least three years and at least 500 hours a year is now able to participate in your retirement plan,” says Parks.

What’s Next?

The bill is being sent to the Senate for debate and approval.   Lawmakers could vote for it or against it, remove provisions, or make changes to some of its provisions.  The Senate also has its own version of SECURE that is being developed within its own finance committee: The Retirement Enhancement and Savings Act (RESA) but the two Bills are very similar.  If the Senate approves SECURE Act, it will then go to the President's desk for final approval and signature.   Whether or not this can happen in 2019 or at all, remains to be seen.  

This can be a lot of information to take in and can get confusing at times. Don't worry, I'm here to help! If you have any questions at all, please feel free to email me or give me a call. 

Get in Touch

This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

The process of deciding which investment to choose from can be straight forward if you understand the concepts of asset classes (cash, bonds, stocks), active vs passive index mutual funds, time horizon, investment risk, asset allocation, and portfolio re-balancing.   The reaction that people have when presented with these concepts ranges from irritation to utter confusion.  While there are customer service personnel available to help you make your decision, you have to take time out of your day to speak with them and hope they don’t add to your confusion.

Knowing that employees have been experiencing negative emotions around saving for retirement, investment companies created an investment product to make the decision easy for the employee.  This is called the Target Date Fund.   Some companies even make this the default investment option.  The only information you need to know is the year you expect to retire.  For example, if you are 37 years old and you want to retire in 30 years you could choose the Target Retirement 2050 fund.

This sounds simple enough but what exactly is a target date fund?  A target date fund is a basket of mutual funds that holds a mix of stocks, bonds, cash, and other investments.  The assumption that the Target Date Fund makes is that if you have a long time to go until you retire, the more investment risk you can afford to take and vice versa.  Therefore, the longer you have until retirement the more stocks will be held in that target date fund.  As you move closer to retirement, the number of stocks are reduced and the number of bonds are increased.  The investments within the target date fund is designed to grow substantially, especially in your early years of savings and taper off and become more conservative as you get closer to retirement.

As you can see, Target Date Funds can be a simple choice.  However, it is important to distinguish between simple versus safe.   Some people think that Target Date Funds are safe investments because they are simple.  On the contrary.  Target date funds should be considered risky investments when they are invested at a young age. For example, the Vanguard Target Retirement 2050 Fund invests 90% in stocks.   It can even be risky at later ages as well.  If you are retiring in 10 years, you could choose the Vanguard Target Retirement 2030 Fund.  Now, you would think the fund would be relatively safe because you are retiring in 10 years.  However, the fund invests almost 70% of it’s investments in stocks.  

It is important to make sure that the investments that you are making matches your investment risk tolerance (how much money you can lose and still sleep at night).  If you were retiring in 10 years, would you be comfortable with 70% of your investments in stocks especially knowing it could potentially lose 30% if another crisis like the great recession happened?  Chances are you would not be comfortable with that.

So, while a Target Date Fund is a simple choice to make, it might not necessarily be the best choice if your tolerance for risk is much lower than the risk being taken by the target date fund.  In that case, while more difficult, it is better to choose individual mutual funds that matches your appetite for investment risk.

This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

Fact #2: According to a recent Walls Street Journal article, 40% of households headed by people aged 55 through 70 lack sufficient resources to maintain their living standard in retirement.  In addition households with 401(k) investments and at least one employed person aged 55 through 64 had a median of only $135,000 saved for retirement. ²

Hopefully, you have saved more than the average American. But if you have neglected to invest in your retirement and you are still working, there is always time to build up your retirement account. 

1. Don't Put It off Any Longer

Many people who reach their late 40's or 50's without adequate savings in the bank fear that it is too late to do anything to make a real difference, so they decide to do nothing at all. But avoiding action is the worst decision. Instead of letting fear paralyze you, let it become a powerful motivating force to get up and start doing something about the situation.

If your employer sponsors a retirement plan like a 401K, begin contributing right away.  Remember starting this year, those under 50 years old can contribute up to $18,500 per year in pre-tax dollars and those older than 50 can make up to a $24,500 contribution.  If your employer does not sponsor a retirement plan, you can invest instead in a Traditional or Roth Individual Retirement account (IRA).  The maximum amount you can contribute is $5,500 a year if you are below the age of 50 and $6,500 annually if you are over the age of 50.  There are tax benefits to investing in a traditional or Roth IRA as well.  Please consult with your tax advisor to see if you qualify.

2. Reduce Your Expenses Now

One way to improve your lifestyle significantly during retirement is to cut back on your expenses while you are still working. Lowering your monthly spending now can give you the additional money necessary to invest in your 401(k) and take advantage of your company's matching opportunities. 

Besides giving you extra money to invest, learning to live on less helps you prepare financially and psychologically for retirement. Many retirees find it takes time to adjust to living on a lower income and they often make costly financial mistakes early on. Experiment with your budget now, so you still have the safety net of a steady income if your calculations are off. 

One of the biggest expenses most people is their home. If you are considering downsizing to a smaller home once you retire, and live in an area of the Country where lower priced quality homes are available, then this could be a viable option to reduce expenses. Selling your home and moving into a less expensive option as early as possible will allow you to invest the proceeds from the sale of your home in your retirement fund. 

3. Sometimes Waiting as Long as Possible Is a Good Thing

You may have had dreams of walking out of your office on your 65th birthday, but it rarely makes economic sense. If possible, try to put off retirement for as long as possible. Working as few as four years longer can substantially increase the quality of your lifestyle. Besides allowing you to save a significant portion of your earnings, the longer you can delay taking your Social Security benefits, the more you will receive each month. 

Saving for retirement is complex and can be confusing. However, if you are in your 40's and 50's and have not saved sufficiently for retirement, now is the time to begin saving.  It is not too late to get your retirement savings on track.

^{1 https://www.gao.gov/products/GAO-15-419}

^{2 https://www.wsj.com/articles/a-generation-of-americans-is-entering-old-age-the-least-prepared-in-decades-1529676033}

_{This content is developed from sources believed to be providing accurate information.   It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

As many parents start ramping up their retirement planning efforts, their kids are also preparing for an important next step in life: higher education. It may seem overwhelming to manage both at once, but it’s important to face some very hard decisions. If you’re thinking about tapping into your retirement accounts, ask yourself a few questions:

• Is this a sacrifice I can afford to make?
• Are there other ways to get the money we need?
• How much is my kid willing to contribute?

It’s no secret – college is very expensive, whether your kid attends a university close to home or in another state.  According to the College Board, the average cost of tuition at four-year private universities is up to $33,480. After room and board, you could possibly spend about $45,000 a year or more. Although in-state universities may be cheaper, the expense is still great.

Putting a plan in place

One of the first things to do after evaluating the costs of tuition is to consult with a financial planner who can help you assess your goals, look at your current retirement plan, and provide objective, realistic advice on whether or not your finances can meet your expectations. Many families consider tapping into retirement savings to fund their children's higher education as this seems like a logical source of funds, but that may not be the best alternative.

While evaluating your financial standing, you may realize your retirement savings can’t withstand such an expensive hit and you need to look at other options. Now is the time to draw your children into the conversation and make decisions as a family.

Avoiding the guilt trap

Parents always want the best for their children, and our modern society even shames parents that are not able to put their kids through school, or willing to sacrifice their own retirement. As the cost of college continues to rise, your kids should take a vested interest in their education and be willing to contribute. Think about this – what if you paid for a very expensive college and your child decided they no longer wanted to go to college anymore?  You’ve wasted precious retirement dollars that you may not be able to replace.

Millennials have reshaped the notion of college and tend to make their own rules. Having a stake in their own future will be meaningful, helping to take some of the burden off of you. Being practical about the situation and empowering your child to make a commitment to their education teaches responsibility and guidance for the future.

Working with a financial planner can help set goals and offer solutions where everyone can have a vested interest in paying for college, and you won’t compromise your retirement. In today’s economy, being strategic and attempting to avoid touching your retirement is a good way to go.

 _{The information in this material is not intended as investment, tax, or legal advice.  The opinions expressed and material provided are for general information only.}

• Taxable compensation is required to make Traditional IRA contributions.  An individual can contribute 100% of their taxable compensation up to the contribution limit.  Taxable compensation is generally defined as income from wages, salaries, tips or other taxable employee pay.  It does not include interest or dividend income, retirement income, social security, unemployment, child support or alimony.
  
  
• Contributions to a Traditional IRA end at age 70.5.
  
  
• The IRA contribution limit does not apply to rollovers and transfers.  

Depending on your marital status, income level, and if you have a retirement plan at your place of employment, your IRA Contribution may be fully or partially tax deductible.