10 retirement ‘surprises’ to plan for
Look well ahead to get the most bang for your buck
You’ve got your retirement all planned out, and you decide to take the plunge. Then an unexpected surprise happens.
It could be a leaky roof, health care bills or the vagaries of the financial markets. Whatever their source, retirement surprises can cost you real money. Here are 10 tips that OPERS members planning to retire should think about before calling it a career:
- Get the timing right: Retiring too early can cost you hundreds of dollars a month in pension benefits, health care costs and Social Security benefits (if you receive them). Consider carefully the tradeoff of working an additional year or two vs. retiring. You might be surprised how much more you can receive in retirement. Do your research on the OPERS website and schedule an appointment with an OPERS retirement counselor before you decide to stop working.
- Health care coverage gaps: Beyond planning for health care coverage in retirement, realize what is and isn’t covered. For instance, Medicare typically doesn’t cover routine eye exams, hearing aids or dental care. Medicare.gov has a helpful page on what is not covered by Parts A and B.
- Paying the mortgage: Many people retire while still owing money on their home mortgage. That’s OK, as long as you budget for it.
- Maintaining your home: Before retiring, complete an inventory of the major mechanicals and appliances in your home. Are you going to need a new roof soon? How about your furnace? How long will it last? You likely will need cash reserves to maintain your home in retirement.
- Social Security benefits: If you have time in the private-sector paying into Social Security, you should contact the Social Security Administration well in advance of your retirement date to see what your Social Security benefit will be. If you have fewer than 30 years paying into that system, you will be subject to a lower benefit because of the Windfall Elimination Provision. Also, you’ll need to know the implications on your Social Security check if you plan to retire early.
- Inflation: The Social Security Administration says that men and women reaching age 65 today can expect to live, on average, about another two decades. Over that span, inflation will eat away at your monthly income. If you have a cost of living adjustment, such as the one OPERS provides, remember that it is a simple COLA, based only on the initial benefit.
- Support for loved ones: Supporting children and grandchildren in retirement is becoming more common, with children living at home longer. Either factor that in when you retire, or learn to say “no.”
- Making too-safe investments: Many financial advisors say that when you retire you should scale back your investments to near zero and “live off the interest.” That’s very difficult to do for many, though. So it makes sense to talk with an investment professional about continuing to produce returns on your portfolio even as you are counting on it for income.
- Being a fraud victim: It can’t happen to you, right? Paying for goods or services that you never receive? But there are always people trying to separate retirees from their money. The U.S. Attorney General’s office has the Financial Fraud Enforcement Task Force to thwart criminals. And the National Council on Aging produces a list of ways to avoid being swindled. It’s a good idea to check out these types of resources.
- Aging (with grace): Moving from a working career to retirement means getting older. Do you have plans for when you might need assistance with everyday tasks? We hope that for many it’s a long-range item. But it merits consideration.
Michael Pramik
Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.
My husband retired in 2010 and our biggest “surprise” was in 2013 when OPERS stopped offering the three levels of health insurance and we could no longer buy the Basic plan. Everyone had to buy the most expensive plan and our monthly cost of insurance increased by $400 a month. SURPRISE!!!!
The next surprise was that the spousal allowance was to be eliminated.
Outside of these two expensive changes the rest of retirement has been wonderful. We do appreciate the OPERS pension and yes, we do realize changes had to be made to the OPERS Health Insurance plan to keep it working best for the retirees.
Now that The AHC (Obamacare) is being dismantled and most of the Mandates will be gone is it in the future for the OPERS to return to a Health Insurance with out a middleman to take a cut….. I found a Humana Plan with Dental. Vision, and Orthopedic care included for NO MONTHLY COST…..
William,
It is important to understand how the Cadillac Tax does – and does not – impact our health care plans. For those over 65 and on Medicare, changes to federal law would generally not impact our Connector model, assuming that no major changes are made to the competitive Medicare marketplace.
Our offerings for those under 65 are impacted by the Cadillac Tax. No one is sure yet what changes will be made to the Affordable Care Act or when those changes will go into effect. Right now, there is not a robust open market for this segment of our population, although we would hope that one develops.
Julie, Ohio PERS
I got a booklet about next years prescription plan and see it is going up! Will we be getting info on The Health Medicare Plan also? Will we have options to change if we wish?
Thank you,
Sally,
Open enrollment runs from Oct. 15-Dec. 7 this year. We are just sending out open enrollment kits. Everyone will have the opportunity to change plans if they wish.
–Ohio PERS
Glad to see you pointing out The Windfall Elimination. My employer or no one bothered to tell me. I had worked 20 years on SS and 15 in PERS. At the time of retirement,I was planning on Social Security plus PERS.
Was i surprised when Social Security turned out to be a low lower than I expected. I immediately called our county commissioners and asked why weren’t people told at hiring ? I ran into a friend recently that went to work at JFS this past year and she knew nothing of it .
You need to go on line and use SS’s Calculator. OIt is pretty accurate.
Dorothea,
Thanks for the note. We are keeping our eye on WEP legislation and doing what we can to support an improved way to calculate the WEP.
–Ohio PERS
About that legislation — The TX Congressman (his name is in the OP&F Bulletin, where I read of this, but I don’t have it handy) is “postponing consideration of H R 711.” See OP&F,Fall Members Bulletin, page 3, top of the page. JA
Because I am an OP&F survivor, I know some local people…..my local contact for this says that this is probably dead. I don’t want to identify him. You can probably check it out with your contacts, Michael Thanks.
JA,
Yes, that’s correct. That particular piece of legislation is postponed for now.
–Ohio PERS
How is the monthly deduction of pension benefits calculated if one takes a PLOP? Is it based on age at retirement? For example, if person A retires at age 55 with 30 years and takes a maximum PLOP and Person B retires with 30 years but is 65 years old and takes the maximum PLOP does the reduction amount of monthly pension benefits get prorated downward based on life expectancy? Thank you!
Ron,
The partial lump sum option payment is based in part on your age when you receive it. Take a look at our printed information on the PLOP, then give us a call at 800-222-7377 if you still have questions or would like an estimate.
–Ohio PERS
What is WEP? What is PLOP? Your overuse of undefined acronyms is making me feel stupid and frustrated.
Janet,
As stated in the blog, the Windfall Elimination Provision, or “WEP,” reduces the Social Security benefit for people who also have worked for an employer that didn’t withhold Social Security taxes from their salaries.
The partial lump sum option payment, or “PLOP,” is a way to receive a lump sum of money when you retire, in addition to a monthly benefit.
–Ohio PERS
Michael, I did the Plop which was nice. Paid off some other obligations, etc. Just remember on April 15th the tax you will owe. The reduction wasn’t that severe!
I am the spouse of a deceased retired employee. Will I continue to get the retirement like it was set up before he passed away?
Ruth,
Yes, that’s the way it’s designed to work. But please call us at 800-222-7377 to discuss your individual case.
–Ohio PERS
how much of a difference is reduced benefits, compared to full benefits? I can retire at 29.7yrs. with reduced benefits, or stay another 1.5yrs or so and get full benefits.
Beth,
We suggest that you use our Benefit Estimator to determine your pension benefit under different scenarios. Log in to your online account, and under Tools and Resources you’ll see a link for the estimator. Or, give us a call at 800-222-7377.
–Ohio PERS
Michael,
OPERS calculations may be reduced for early retirement if she is under 65 with less than 30 years credit.
Mark,
Yes, absolutely. Unreduced benefits require at least 30 years of service credit, or at least age 65 with five or more years of service credit.
–Ohio PERS
–Ohio PERS
I checked mine at age 56 with 29.5 years credit and it would have been 4k less a year for being 6 months short of 30 years.
How sad that OPERs decided to balance its budget on the backs of surviving spouses. My husband worked hard for 28 years before dying suddenly. I had to retire to help kids out, but did so after I was sure I could afford it. One year into retirement I have a rise in health care to $800 or more a month (as long as I am healthy). I am sure my husband rolled over in his grave when I received the letter from OPERS saying that I might qualify for government assistance! I know I cried….
Just a suggestion to make your monthly HRA Account easier to operate. I just filed out a reoccurring form for Medicare “B”, Vision, dental and my spouse’s medicare “B”. Rather than mess around filing little receipts, this is a breeze. This alone will exceed my account which anything not paid will carry over. I did this last year and never filed a claim all year. The money was in my checking account every 2nd of the month. I never had to call once. You might remember I suggested this last year. I know, I am waiting for accurate “B” price.
OPERS is not the way to go. Keep working. you will not suffer as much. They can’t keep it straight who I am and I have not retired ,yet!!!
Surprise!! I think we are on our way with OPERS.
http://www.cleveland.com/nation/index.ssf/2017/01/iron_workers_pension_cuts_are.html#incart_river_home_pop
Re. James Radziewicz’s posting about Cleveland iron workers getting their pensions cut – well, that made me break out in a cold sweat. I too worry about OPERS leaning in that direction. We are told over and over again that our health care is not guaranteed but our pension is (well, a pension is guaranteed, but is the “dollar amount”of our pension guaranteed??). After all, OPERS changed COLA on newer retirees or those not yet retired — it is now based on the CPI not the standard 3% / year as it used to be. It would be nice if OPERS Board would consider reinstating the 3% COLA policy? That’s what the OPERS folks told me I would get when I selected OPERS — 3% COLA each year. Oh wait a minute, I was also told that I would receive health care after working so many years for the State. Consider this — everyone else out there, who does not have a defined pension plan, is very excited about the return on their investments; however, we in OPERS are worried about what the organization may take away from us next.
Regarding the Social Security WEP. It just amazes me that the federal government can take money from Social Security that is not theirs to use. The working people of the US are the ones who paid into this account and the government borrows and never repays it. No wonder SS is going broke. Someone needs to be repaying monies to SS that were not theirs to use in the first place. I have my 40 quarters in but work under OPERS. When I and many others in the same situation retire under OPERS it is not fair that we don’t get our full SS in which we paid into.