All right, welcome everyone. Thanks for joining us today to our webinar presented by Alliant Retirement and Investment Services in partnership with Alliant Credit Union. We’ll we will have a live Q&A session uh at the end of the presentation. Please submit your questions regarding today’s topic which is social security, Medicare and your retirement or about Alliant Retirement and Investment Services in the chat or the Q&A. The presentation is recorded and a link will be provided later by email for on demand viewing. Our speaker today is Tom Davia of Alliant Retirement and Investment Services. Tom is one of our financial consultants. He’s based in Chicago uh in the Chicago area. He holds the certified financial planner designation and has over 27 years of experience in the financial services industry, including nine years with Alliant. During the Q&A session, we’re going to launch a poll uh asking if you’d like an appointment with Tom. We encourage everyone to answer the poll uh so we can learn what’s helpful to you as members and continue to bring financial education to you. Please be sure to adjust your volume to an appropriate level as settings vary by user. Now, let’s start our presentation. Social Security, Medicare, and Your Retirement.
Hello everyone. Thank you for joining me today. My name is Tom Davia. I’m a financial consultant here at Alliant Retirement and Investment Services. Today, we’re going to be talking about Social Security, Medicare, and your retirement. We’re going to be talking about how Social Security and Medicare programs work. uh discussing some important issues facing both programs and a few effective strategies for supplementing these retirement benefits. If you’ve been concerned about Social Security and Medicare being reduced or eliminated, you’re not alone. Both programs have been in the news quite a bit lately and there’s some talks of insolveny, tax hikes, increased eligibility ages, all that’s uh created a lot of confusion around these programs. So, we’re here today to kind of walk you through that and answer some of your questions.
Some educational resources for you. Our team here at Alliant Retirement and Investment Services is focused on helping you understand the ins and outs of investing and saving for retirement and much more. So take a look at our website if you get a chance. It is a aris.allcreditun.com.
There you can see the list of our weekly webinars, our podcast which I’m the co-host of, and our financial blog and resources available to you as well.
So, how can we help you? We are a full services financial planning organization here at the credit union, a fiduciary firm. We can help you with retirement planning, we can help you with your investments, life events, and generational planning. So whether you have questions about today’s topic, social security, your 401k plans, current investments, if you’d like to do an investment review, or if you had any major life events, it’s a good time to check in on your financial plan and make sure it is structured correctly to meet your goals.
All right, today’s agenda. We’re going to begin today’s seminar with a quick look at the changing face of retirement. We’ll review the structure of both social security benefits and Medicare. We’ll talk a little bit about uh metag gap insurance and health savings account. And finally, we’ll talk about some effective strategies for meeting your financial and medical needs during retirement as well, just so you don’t have to solely rely on Social Security and Medicare.
First of all, we start by talking about the changing face of retirement. Planning for retirement now is more important than ever. Things look different today than they did for previous generations. planning for retirement. We have people living longer uh longevity concerns. We have careers that are less linear than they were in the past. And really the responsibility of funding retirement has shifted towards the individual instead of the company offering the traditional pension plan. So it’s more on the individual at this point. Retirement in the future can cost significantly more. We all hear about inflation in the news. We have inflation concerns as costs continue to rise, health care expenses, longer lifespans. Really, what all that means is you need to plan for your money to last 20 or 30 or even more years. So, help is available, right? That’s why we’re here. We’re doing these meetings to let you know we have a financial planning services of the credit union available to you. So, help is available. We have professional guidance to help you figure all this out. And really when you have these conversations, timing matters. The earlier you start planning, the more options you typically have. And today’s topic, understanding Social Security and Medicare benefits is even more important now as you make your planning efforts. Social Security and Medicare are key pieces of the retirement puzzle, but they’re often misunderstood. and knowing when to claim benefits, how those payments are calculated, and how the Medicare coverage works. This can all have a significant impact on your retirement and your income and your health care costs.
Okay, let’s first start and talk about social security.
Social Security is really a general term that describes a number of related programs. So, Social Security can cover retirement benefits, disability benefits, family and survivor benefit programs as well. It’s really designed to supplement private savings and retirement plans. And in 2024, 68 million Americans received Social Security benefits. But when you look at the numbers, Social Security benefits typically represent about 30% of income of retirees. And that’s according to the Social Security Administration.
So how does Social Security work? Well, it is mandatory funding. So you probably see your contributions coming out of your payubs either as social security taxes or FICA taxes. So it’s mandatory funding that comes out of our paychecks and the tax proceeds they go into a special trust fund that’s established exclusively to pay social security and Medicare benefits and some administrative expenses. Now to receive benefits uh you depend on your full retirement age. So some people full retirement age may be 66 and a few months. Most of us it’s turned into age 67 but you do have the ability to take what they call reduced benefits as early as age 62. So your benefit amount depends on your earnings work history. So it’s based on the highest 35 years of earnings. And you can see that calculation in your social security statement if you haven’t looked that up before. It’s available within your online account at ssa.gov.
Now, if you are receiving if you wait past your full retirement age, you could receive up to an 8% increase per year in benefits if you postponed your benefits.
Now, here are some of the issues that you might be hearing in the news about social security and the payments of the benefits. So, we have the retiring baby boomer generation right now, which is causing a lot more payments out of the system than money is being received. People are living longer than was originally calculated in life expecties. So, more money again is coming out of the system than being paid in. we have fewer workers paying into the system. It’s a pay as you go system. So all the taxes collected in a specific month would be paid out the next month. So fewer workers have less money coming into the system. And you put that all together and it’s estimated by the year 2035, Social Security would exhaust the trust fund and may not be able to meet all of its obligations as promised to all retirees. It’s currently estimated that if nothing changes that there would be a 20% reduction in social security benefits across the board by the year 2035.
Now there are some proposals on the table for improving the situation and not running out of money in 2035. So a few options here on the table raising the retirement age as I mentioned some of us it’s 66 in a few months it’s been raised to 67 there’s some discussion about raising the retirement age to age 70 or starting incrementally to bring it up to age 70 there’s also talk of means testing what that means is cutting benefits for wealthier seniors there’s also the cost of living increase every year so Social Security each year will give you a cost of living adjustment based on inflation. There’s some talks of reducing that a bit not to make it as much of an increase each year. There’s also talk about investing trust fund dollars in the stock market and possibly diverting some of the payroll taxes to private accounts which would then have some stock market exposure to it. Withstanding the market crisis of 2008 2009, stocks historically have performed better better than any other type of investment. Although past performance can be no guarantee of future results.
Next, we’re going to talk about Medicare. All right. Medicare is a federal government program that helps older and some disabled Americans obtain and pay for medical care. It’s administrated by the US Department of Health and Human Services, and it’s the nation’s largest health insurance program, which covered more than 66 million Americans in 2024. Now, Medicare is really broken down into two parts. Part A, hospital insurance. Part B, medical insurance. Part A, hospital insurance, covers most of the costs of a stay in the hospital, as well as some follow-up costs after time in the hospital. Part A pays some other outpatient medical services, including some home health care, but it does not cover the cost of prescription drugs. And under most circumstances, you do not have to pay a premium for part A. Part B, a little different. Part B is medical insurance. This optional coverage is intended to help pay doctor’s bills for treatments in or out of the hospital. It also covers many other medical expenses you incur when you are not in the hospital, such as the costs of medical equipment and tests. If you elect Part B, a monthly premium is automatically deducted from your Social Security check.
You have two options for Medicare coverage. The original Medicare plan and Medicare Advantage, a managed care plan. Each of these programs have their pros and cons. The original Medicare plan, you pay your Part B monthly premium and then you pay additional services as you use them. In 2025, the standard monthly premium was $185. Additionally, Medicare PartB deductible was $257 in 2025. If your modified adjusted gross income uh from 2 years ago is above a certain amount, you may pay more for Part B. Now, Medicare Advantage plans, it’s an optional program through private insurance companies. They provide HMO type coverage. To determine which program is right for you or for your needs, you can call Medicare 1 800 Medicare which is 633-4227 or you can also log on to www.medare.gov.
There are also some other options to consider. Metagap insurance and health savings accounts. We’ll take a look at each one of these health savings accounts. So, we have the creation of tax-free health savings accounts for anyone under age 65 who is enrolled in a high deductible medical plan. That’s defined as one with a deductible of at least $1,650 for an individual or $3,300 for families. And these amounts are adjusted for inflation. The contributions are taxdeductible. The maximum contribution to an HSA plan in 2025 was $4,300 for an individual and $8,550 for a family. There’s also a $1,000 catch-up contribution for individuals between the ages of 55 and 64. So much like a retirement account or an IRA, health savings accounts allow for account holders to select a variety of investments that can suit their time horizon or risk uh tolerance. Also, the account balance can be maintained from one year to the next. Now, distributions for qualified medical costs are tax-free, but non-qualified, right? if they don’t qualify for medical cost. Non-qualified withdrawals are taxed as income and may be subject to a 10% penalty.
Medigap insurance. If you choose the original Medicare plan, you might also be interested in receiving Medicare supplemental insurance or metagap insurance. The term metagap comes from the notion that these insurance policies will cover the gaps in Medicare payments. Metagap doesn’t fill in all the gaps, but it may help. So before you buy a metagap insurance policy, consider not only the services that are covered, but also the amount of benefits and the monthly costs of the policy. Also pay attention to how much premiums may rise in years to come. You may want to also compare Medigap with Medicare Advantage. For more information on Metagap insurance, you can again call 1800 Medicare. That is 1 800633-4227.
Okay. Now, we’re going to shift gears a little bit. We are going to be talking about planning for retirement and preparing for your financial well-being. Now, up to this point, we spent most of our time learning why you shouldn’t count on Social Security and Medicare to cover all of your needs during retirement. Now, let’s talk a little bit about what you can do to ensure a comfortable retirement for yourself. Now, fortunately, today we have more choices than ever, which we’ll discuss in a moment. But with these choices, however, more responsibility. It’s up to you to determine whether you should contribute to a retirement plan, how much to save, and what investment choices to choose. So, regardless of your age, investing for retirement should be among your top financial priorities. However, one of the greatest challenges for most people is realizing the need for a retirement investing program. According to financial experts, you’ll need 70% or more of your final working year’s salary each year during retirement.
Okay. Now, here’s some retirement savings vehicles you might be familiar with, right? Traditional 401ks, 403bs, IRA. So, we’ve established, right, since social security was never meant to be the sole means of support in retirement, you have other options for retirement savings. There’s several tax advantage investment options for retirement savings. Like I mentioned here, 401ks, 403bs, 403bs generally cover nonprofit and healthcare organizations, and IRA are your individual retirement accounts. Now, when you look at these, there’s two types of 401ks and 403bs. You have the traditional and you have the Roth plans. Traditional plans offer tax benefits. Contributions are taken out of your paycheck before income taxes are assessed. That’s kind of pre-tax. You pay taxes on a lower amount. Now, what’s more, earnings on your traditional 401k or 403b, they can potentially grow and compound without losing some of that growth to taxes each year. So, they grow tax deferred. Now, Roth plans are a little bit different. Roth plans feature after tax contributions, so you pay the taxes on it today, but qualified distributions are taxfree. Roth 401ks and 403bs, they’re really available based on the uh discretion of the employer. So, you need to ask your benefits administrator if your company offers this type of savings options. In addition, uh many other employers uh offer a match portion for these plans, which may potentially be the easiest money you’ll ever receive. If your employer matches a portion of your 401k contributions at a rate of 50 cents on the dollar, that’s an automatic 50% return on the part of the money that you’ve been investing. If your employer offers a 401k or similar plan, take advantage of it. Also, try to contribute the maximum to the plan. Remember that early withdrawals before age 59 and a half might be subject to an additional 10% penalty tax as well. Expanding on the IAS or individual retirement accounts. This is another important way to save for retirement through a traditional or a Roth IRA and they offer significant tax benefits as well. Again, with a traditional IRA, your investment is potentially taxdeductible when you make the contribution depending on your income level. And like a traditional 401k plan, earnings can grow and compound tax deferred. A Roth IRA doesn’t allow for deductible contributions. But however, earnings grow tax deferred and the big payoff comes in at the end at retirement when you could tap into Roth assets. you could tap into the earnings without paying federal income taxes provided you’re at least 59 and a half or older and held the account for 5 years. And just like the 401k plans, most early withdrawals from IAS are subject to a tax penalty. So because of the complexities involved with these retirement savings vehicles, you might want to consider using the services of a qualified financial professional to help you make your investment decisions.
Just a few final thoughts for you to keep in mind today. We’ve covered the state of Social Security and Medicare, possibly the two most important issues facing current and future retirees. We also reviewed the importance of planning for retirement and taking advantage of those investment options available to you. The next step, right, next step is yours. Perhaps you make an appointment with one of us here to sort out the wide range of choices available to you. You may also want to contact the Social Security Administration to obtain your estimate of benefits. Make sure they’re tracking your benefits correctly for you as well. Whatever your situation, keep the following in mind. Again, don’t expect Social Security and Medicare to cover all of your retirement costs, and you need to stay up with the Social Security and Medicare benefits and plan wisely. One last point to consider, you could spend more than a third of your lifetime in retirement planning for your retirement so you don’t have to rely solely on uncertain futures. Social Security and Medicare planning is time well spent.
Again, here at Alliance Retirement and Investment Services, we’re here to help you. Again, we can help answer some of the questions you might have on today’s presentation. Social Security, Medicare planning. Uh we can help you make some of the investment choices in those retirement plans, consider retirement income options for you, review investment accounts, discuss life events with you, uh and also help you out with your estate planning, beneficiaries, or generational planning as well. I’d like to thank you for joining me today in discussing these important topics. This is my contact information. Uh my phone number, uh email address, and the QR code will take you right to my calendar link if you’d like to set up a time to talk a little bit more about your specific situation or creating your personal comprehensive financial plan. Thank you for joining me today.
Sorry, my video is not coming back on. There we are. Okay. Thank you so much. Thanks, Tom, for that great presentation. Let’s go ahead and get started with our Q&A session. And if you have any questions for Tom, you can put them in the chat or the Q&A and um we’ll try to get to that. If we’re not able to answer it in the time that we have, we’ll be sure to follow up with you on it. All right. Our first question is, does Social Security estimate the amount increased um that the increases monthly before full retirement age or does it update less often, once in 6 months, uh after you’ve reach reach the full retirement age? Okay. Thank you, Brooke. Uh I hopefully understand this question. And I think I’m going to hopefully answer it correctly for you. Some of these questions are your um your questions, your thoughts maybe need to be answered on an individual basis. We can go into your specific situation. I believe the question is regarding your social security benefits, how it’s calculated over time. And I think that really falls back to your uh statement of benefits that you can access on ssa.gov. What they’re going to do on that statement is they’re going to look at your past earnings history and then they’re going to project into the future thinking you’re along the same path of continuing the same type of earnings. So they’re going to show you estimates of benefits starting at age 62 and every year till you’re 70. So there’s going to be some assumptions in there that you continue to work. There’s going to be inflation assumptions in there as well, but really that’s going to be an annual statement that they’re going to provide to you. So if you look at it on an annual basis, you want to make sure that the numbers are correct. Maybe a few years ago, make sure that the income you earned is actually reflected in there. Again, the highest 35 years of earnings. So you just want to make sure there’s no zeros in there when it should be an earnings year just to make sure those benefits are correct. But yeah, it’s going to do forward projections for you and be available on an annual basis. Great. Great. Question from Candy. I’m turning 66, but I haven’t signed up for Medicare because I’m still covered by my husband’s work plan. When should I sign up? Okay, so Medicare, you have three things you’re watching there. Uh, one is called the initial enrollment period, which Candy you’ve missed. That is going to be initial enrollment period 3 months before your 65th birthday. The month of your 65th birthday, 3 months after your 65th birthday. So, for some of you out there, the initial enrollment period might be important to you, but uh Candy, you’ve gone beyond the initial enrollment period, which is fine because you’re still covered by your husband’s group plan. And then we define a group plan is a uh a plan having company having over uh 20 employees. So, what you’re going to do is you are going to go into the next phase, which would be at some point in time your special enrollment period. And that really means a qualifying event. If your husband leaves his job, that’s a qualifying event. There’s an eight-month window where you could then sign up or you both can sign up for Medicare. No penalties, no problems for that. There is an 8-month kind of window there. But with those eight months, you really want to make sure you coordinate benefits. So, one plan stops, Medicare begins in the next month because if there’s a gap, Medicare is supposed to be covering that. So, you might have a lot of out- of- pocket expenses. So, make sure you coordinate the special enrollment period. If by chance you miss everything, the third category is called the general enrollment period. You’ve missed your initial, you missed your special period. You go into the general. If you go into the general, there’s some problems that might be involved. There might be a penalty if you don’t sign up in a in a timely manner. So, in your situation, you really want to keep an eye on that special enrollment period when your husband stops working. Excellent. Excellent. This next one I’m going to um I’m just going to summarize a little bit. I do not qualify for social security and I must fund my own retirement. Um I I don’t qualify for Medicaid as I have investments. Um and I don’t have enough to live on after this deduction. How can I maximize my spending income?
Okay. So I I just took some notes as you were talking there, Brooke. Um the one focused on there’s a few things going on and this might be one of the situations that’s kind of best addressed on a uh a personal basis. Sure. The one I really kind of took away from is the very last comment I think you said I I don’t have enough to live on. Right. Right. One of the things we do here at the credit union, we are a fullervice financial planning firm. So we do do financial planning. We do take a look at a comprehensive personal situation like this to try to help you navigate through all these bullet points or all these facts that you kind of you gave us today. But we want to find out what the best course of action is for your situation. So when we run a financial plan, we want to make sure that it has the longevity concern that you do have enough to live on that it’s going to last a long period of time for you. So we need to gather some more facts to really help you out personally. But in a situation like that, when I end on that last note, not enough to live on, we have to look at some ways to either maybe keep you working for a longer bit, get you involved in some more retirement savings. Um, look at your budget, maybe look at some areas to reduce some of the spending so everything kind of works out for you, not only today, but 5 years down the road, 10 years down the road, 20 years down the road as well. So, I’d give a little plug for our financial planning services. I think that can help you, but I also think that conversation could be helped a little bit more on a one-to-one basis if you have some time to talk with me. Excellent. Great. Thank you. Is there a deadline for the distribution of the um um of medical costs? Let’s see. For the distribution um for HSA. HSA. Okay, there we go. HSA. Yeah, that’s a good one. Uh HSA is one of my favorite investments. HSA is like a Roth IRA account, which I mentioned in the presentation, not taxed on the front side, not taxed on the back side. Uh, the only thing you need to have it not taxed on the backside is a receipt. You need some out-of- pocket medical expenses. It’s a great question. I bring this up all the time to my clients. If you have a receipt, that receipt never expires. So, there is no deadline. So you can continue saving in your HSA account. You can continue to contribute to it. Most plans will have the option if your balance gets above a certain level, you can have an investment component. So it can really grow tax-free like a Roth account. But then along all those times, along all those years, you can save all your receipts. They do not expire. So in retirement, if medical expenses really kind of spike up, you can go to that file cabinet. You can pick a receipt from 5 years ago, 10 years ago, 15 years ago. You really grab some old receipts, uh uh submit them to the HSA and get that taxfree distribution. Great question. No expiration on HSA. Got it. Got it. I’m just We have a lot of good questions coming in. So I’m taking taking them down and seeing what we can do and how we can talk about it. Um, what does it cost for estate planning?
Great question. Um, like a lot of answers in my profession, I’m going to say it depends. Right. Right. It depends. So, uh, I’m here in Illinois. Um, I’m at the quarter headquarters of the credit union. So, in the Chicago area, Chicago area, I do have some estate planning attorney contacts that we work with. You really do uh kind of take a look at what your needs are. First of all, um general answer to that is a will, a trust, power of attorney, healthc care directives. You get kind of the full estate planning package. Um some clients will debate, you know, back and forth, do I need a trust? Do I need the added expense of doing something like that? So, kind of individual conversation. So, if you go to an estate planning attorney, so I can help with estate planning, but I can’t prepare documents. But if you go to an attorney, you’re going to have some attorneys fees to get all those documents put into place. Um, it could get costly, could be in the neighborhood, depending on your state, your city, could be a few thousand or so to get all that put together. There’s also online resources. There’s some uh lowerc cost options available online to prepare some of those basic documents for you. Um, personal situation, personal budget, how you want to attack everything. Some clients will say, “As long as I’m going through the process of getting this done, I want to make sure this is done absolutely correct, tees are uh crossed, eyes dotted, that kind of thing.” So, if uh anything comes into play down the road, I I know that everything’s taken care of in in good uh good order. So, it’s important to have those documents in place. There’s going to be a cost, maybe less online, maybe more with an attorney, and it’s just kind of determining what documents are appropriate for your situation. Excellent. Good. Good. I just remind everyone that um we put up a poll asking if you want to have an appointment with Tom. Um we would love to have an answer either way. Um just so that we uh it’s how we track engagement so we can let you know uh we can continue doing these pieces um uh and provide this education to you. So, all right. Going back to the HSA conversation, Ken, and I think um maybe we can just expand on this a little bit, but can you talk about HS HSAs being used in retirement and during retirement? Yeah, a couple ways to do that. Um, so again, I’m going to relate it. It is not, but I’m going to relate it to a Roth. So, it’s going to be taxfree for you. So, you make taxfree distributions. Brooke, when you say retirement, to me, I always think of like retirement income, things like that, right? Yeah, I agree. As retirement income, we can also talk about it as uh retirement medical expenses. So, I saw a couple questions. We’re probably going to get to this, but uh there was a couple questions in there about uh under age under 65 medical plans. They’re going to be expensive, but if you’re working on your retirement and your retirement plan is under age 65, you’re not going to have the Medicare coverage that we’ve been talking about. So, you have to go out of pocket. It’s going to get expensive. So, an HSA, as you pay for that, if you built up a nice balance in the HSA, you could offset some of those under 65 healthcare cost with the HSA with those current receipts or past receipts. If you’re in retirement, you’re doing income planning. We talk about diversifying your assets between stocks and bonds and all these different things. But we also talk about in financial planning, diversifying your investments by tax treatment. You have some pre-tax money in a 401k. You have to pay the taxes on it. You have some after tax money either with a Roth or the HSA. Again, if you have old HSA qualified receipts, you could use that as part of the income distribution. just depending on what the balance is in the HSA. You could even put it at the tail end long-term planning in a plan and say I am somewhat worried based on my family history about long-term care planning needs. This can be used as part of that as well. So, a lot of functionality to the HSA just got to curtail it to uh what we what we mean by retirement. Yep. Okay. Got it. Got it. Are some of the services you’ve mentioned free to alliant clients or are some of them fee based? Can you talk a little bit about that? Yeah, I’m going to answer that where it depends. It depends. Um, so it just does everything we do here uh consultations, financial planning, discussions, answering questions, all this no cost, no obligation service of your membership of the credit union. So if we meet with you, if we talk with you, if we go into, you know, if it requires a financial plan, all that is getting us to understand your situation better and make any recommendations to you, no charge, right? We’re going to do that for you if you’re a member of the credit union. But I will say, uh, I’m also a registered investment adviser. So, as we go through that process and that journey together, I may make some recommendations to you investment wise to help you reach those goals. maybe lower volatility in the market, growing and protecting your assets, distributing your income to you. So, there’s a lot we can talk about. So, if we go into an investment relationship, I always say some investments do have a fee, some investments don’t have a fee. Uh we’re completely transparent with a fee structure, but once we get into investments, we’ll have those conversations and let you know exactly what uh what you might be looking at. Okay. question on uh Medicare. Is metagap coverage the same as original Medicare part B? Medigap uh we’re going to be a little bit different. Uh original, right? The original plan, original plan is going to have your part A hospital, part B doctor. Um original is going to allow you to choose your doctors. Uh it’s going to be a little bit more flexible. You don’t need as much referrals. uh predictable costs. Original plans are good. If you also travel state to state, it’s going to have more flexibility because you don’t have as much uh doctor referrals needed for something like that. I believe uh Brookwood advantage if we get into advantage plans, I think that’s really kind of the comparison there. Uh advantage plans going to be just a little bit different. Maybe lower upfront cost, lower monthly premium. Um, but you got to get into the referral system, into the network. So, if you have a network you’re comfortable with, if you don’t travel a lot, um, you know, you might want to look at one of those, uh, advantage plans. Yep. Okay. Um,
all right. Let’s see. Good questions coming in. Uh, question. Is there anything parents can do for their children at birth, when they’re a teenager, college age? What can um what can we do to kind of set our kids up for success? Yes. So, uh my kids, right, they are 26 and 24. And I was always frustrated in school because nobody teaches finance. Nobody teaches investing. Nobody teaches stocks. Nobody teaches the power of compounding which these kids have on their side. Right? Birth. I don’t know. I talked about retirement. So we got 40 years, 50, 60 years. Power of compounding is incredible for children. First thing I’m going to mention just came out Trump accounts. $1,000 from the government to sign up. It’s an index fund. You go in the S&P 500. You can add up to $5,500 per year in the plan. It’s really not accessible until they’re 18. Some ordinary income tax issues when they’re 18 out of those Trump accounts. Could tell you more about that if you have interest in it. That’s the new thing everybody talks about. Separate from that birth. The first thing I think of is 529 college savings programs. It’s a great way to tuck money away. It’s a great way to have friends and family, presents, gifts. goes right into the 529. Not taxable. Not taxable for higher education distributions. If their birth rate, they got 18 years grows over a period of time. But it just seems like, you know, with college planning, which we could talk about as well, it’s just everything’s not enough. The inflation rate on college expending has been so much. So, it’s good to start early, save as much as you can. The problem with the 529 plans is really based on college. Some clients will say to me, I don’t know if my grandkids are going to college. I don’t want to tie them down into that. So, our third category for kids, plain old, separate, just investment account, right? They’re young. They’re not age of majority. They can’t own an investment account, but you could have a custodian on the account, usually a parent or grandparent. You’re in an investment account. You can invest in anything you want. You could have a stock. If they really love Disney World, you could have Disney stock. If they buy that Apple stuff, they could have Apple. It could have mutual funds. They’re uh children, so they’ll have some preferential tax treatment on this along the way. Now, the good thing is with an investment account, it grows, right? But they could take it out whenever they want to. The custodian will uh uh do that for them before they’re the age of majority. You could use it for a car. You can use it for a house. You could use it for retirement. You could use it for college. You could leave it alone and let it grow. But it will have preferential tax treatment down the road if they take the money out. Capital gains rates of 15% which is better than ordinary income rates of going through the marginal tax bracket. So only three ways to uh to help kids out. But help kids out in my view is just have these conversations with them. Get them involved in investing. Let them know the power of compounding over time. I’m answering this question a long one because this one is important to me too. Yeah, if you have kids or grandkids that work, they have any kind of summer employment, anything like that, they are eligible for a Roth IRA. So, you might want to look at it and say, I’m going to gift some money into a Roth IRA for my child or grandchild. Limitations, you can only, you know, put in 7,500 per year if they make that much. But all of a sudden now we’re talking about this retirement account growing for 30 or 40 years. The numbers get astronomical. But that’s a a good way to help them out. I call it again gift gift of a lifetime. That’s great. Great. Good financial opportunities or educational opportunities. Help the children. Yes. Yes. Um real quick, there’s been a couple questions about um a replay of the presentation. So couple options there. We will be sending out an email uh later today that has a link to the presentation so you’re able to view it again. Um Tom’s information will also be in that uh email so you’ll be able to reach out to him directly to ask any questions that you have or get some clarifications. If the couple of you that um have had questions that um uh Tom said he needs to dig in to a little bit more with you, please feel free to reach out. go ahead and you can put yes to an appointment um and we will we’ll prioritize those folks and and uh make sure to reach out to them. So, couple of ways to to get those um to to um view the material again. One, um let’s see, this one I like. Is it true that a person can retire at 67 and turn around and get a full-time job with no limit on income received and still receive by full Social Security benefits? Yes, I think that’s I think a lot of people have that question because I what you know can I can I have both if I how does that work? The uh the big thing there is 67. Mhm. So at 67 you are full retirement age. So you will not have what they call the earnings offset which means if you’re younger than 67 if you’re working they may reduce your benefits because you’re making too much money. So key there is 67. So, if you’re working and you’re receiving social security benefits, it’s fine. But what you have to consider is when you work and you get your paycheck, you’re still going to have that little line item deduction FICA tax. So, you’re still going to be paying into the system. You’re going to be receiving a benefit from the system. And then when you get the benefit payment from the system, that’s going to be taxable to you as well. So, you’re being taxed when you get paid and you’re being taxed when you get paid. So you might have a double taxation going on with something like that. So you just have to watch the uh the taxes. Now it’s based on the highest 35 years of earnings. So in 35 years if you have a couple non- workinging years, zero years, lower years while you’re working, you could still increase your benefits. So that double taxation may work to your benefit, but if you never replace a lower year, you’re paying taxes when you get paid and you’re paying taxes when you get your social security benefits. So, we could kind of uh, you know, walk you through that. Take a look at the ideal times to start your benefits. One thing I would mention is if you wait from 67 to 70, benefits max out at 70. What you’re doing is you’re receiving what they call your deferred credits. Basically, that means it’s guaranteed your payments are guaranteed to grow go up 8% per year every year you wait beyond 67. Not only that, Brooke, wait, there’s more. It goes goes up by inflation as well. So inflation, just call it 2%. So 8% guaranteed, cost of living adjustment 2%. So your payments could be going up 10% per year for every year that you potentially uh defer from 67 to 70. I’m in the investment world. I’ve been in the investment world for 20ome 28 years. I have no investment that will guarantee an 8% return. So, we really want to kind of dig in there a little bit and say, you know, number one, financial need. Do I need it? Number two, can I can I take advantage of those deferred credits? Good. All right. Do you have recommended options for self-employed retirement savings? Is there anything that Alliant offers? Yes. So, um, typically if you’re with a company, you get the 401k. If uh you don’t have a 401k, you have access to an IRA. And an IRA typically if you’re over 50, you get $8,600 that you could put into an IRA. If you’re self-employed, you get the SE IRA. SE IRA is for self-employed individuals. Higher limits, right? You don’t have the 401k, you’re self-employed, but they’re going to give you much higher limits than a typical IRA. So, we have different ways we could take that conversation. And there’s different plans available depending on your situation, your company, your employees, things like that. The easiest answer is a self-employed SE IRA. Way higher uh contribution amounts than a typical IRA. We can help you through that. Um number one, when you get an IRA, whether it’s a traditional IRA, Roth IRA, a SE IRA, any kind of IRA, a lot of people when I ask them, I say, “Well, what’s your IRA invested in?” They’re like, “I don’t know. It’s an IRA. It’s an IRA. So you can have an IRA. You can have an IRA in anything except collectibles. No baseball cards, no wine, no art, things like that. But an IRA can be invested in anything else. Savings account IRA, stock IRA, mutual fund IRA, portfol. So you really want to look at those IAS whether it’s through self-employment, whether it’s a Roth and really kind of maximizing your growth potential. It’s going to be based on your goals, based on your time horizon. Uh, typically we see Roth IAS at the longer end of a financial plan just because they grow taxfree. So, we want to have a little bit more of a lean in that asset class just because it all grows tax-free. So, good question. Many ways to take it, but uh yeah, look at a SE IRA. Okay, good. Good. Um, how do you verify that social security has all your contributions correctly? Go to ssa.gov. Go to uh log in there. I think this system they use now is called my gov. Govt govt ID. Yes. Set up your user ID. Set up your password. Uh first thing you’re doing that for is to make sure no nefarious actors go in there and steal your identification and mess with your social security benefits. So you want to secure the account, number one. Number two, you want to go in there and look at your current statement of benefits, and that’s where you’re going to verify employment income. So, they’re going to show you all your employment income. They’re going to summarize some of the years. They might, if it’s a long time ago, lump them together in 5-year increments. It’s going to look like you made a lot of money 20 years ago, but they’re going to up that for inflation. But, you just want to keep checking on that periodically just to make sure it looks okay. Make sure they didn’t miss any years. You don’t want any zeros there when you’re actually working. If you see anything like that, you want to report it as soon as possible. Contact uh Social Security, let them know, hey, there’s a uh disparity here. We need to get that corrected. That goes through the uh financial planning process, right? So, you don’t want to retire uh on Monday and work on your financial plan and your retirement on Tuesday. If there’s an issue like that, it’s social security. It’s the government. It may take a long time to fix something like that. That’s why I always tell my kids, proper preparation prevents poor performance. We want to do the proper preparation, right? We want to set this up for you ahead of time. We’ll check into that. One of the first questions I ask when we do a financial plan is, do you have your statement of benefits from Social Security so we know what the numbers are? Third part of logging into that account, again, I said it before, it’ll show you your age 62 amount, 63, 64, full retirement age, and projections all the way to uh to age 70 as well. So, a lot of good reasons to get uh logged in. Yep. Speaking of consultation, what is the cost of a consultation with you? No cost, no obligation service. Happy to talk with you. Um, some people I talk to uh they have questions, financial concerns, financial questions, investment questions. Um, some people don’t require a full financial plan, comprehensive meeting that’s available to you if uh if appropriate. But, uh, we’re here to help. We always say a credit union is defined as members helping members. I’m a member. Brook’s a member. you’re a member. So, uh, we’d like to help you out with these topics. That’s why we do these presentations, just to let you know we exist. We have a financial firm here. Um, I always say we’re the best kept secret at the credit union. So, can’t help everybody. Brooke, I think we’re 900,000 members deep in this credit union. Close to a million. We do these meetings just to to get the word out that you have some resources here. So whether it’s a simple question, you need clarification, whether it’s some uh advanced planning, we’re here to help. Excellent. All right, we have time for one more question. Um we have a several questions around HSA. So um I think that’s something that we’ll we’ll we’ll take back and and and Tom have you and Brandon work out um answering some of those questions. But um this last one is what is the best way to take money out from the traditional 401k at retirement age?
What was it? The big question. Oh, is it? Sorry, I don’t I don’t I don’t like to end with a softball. You’re ending on a 20-minute answer. Uh best go. I’m sorry. Could you repeat? Best way to take money out of a 401k at uh best way to take money out from the traditional 401k at retirement age. Okay, retirement age is going to be a question mark there. So, we don’t know exactly. We’re not going to define that. So, here’s the problem with traditional 401k or traditional IRA, right? It’s always taxable. It’s always going to be taxable whenever you take the money out. it’s going to compound over time. It’s going to get bigger and you’re going to have bigger amounts that are all going to be taxable to you. So, we do estate planning, we do tax planning, we do all these wonderful things, but when it comes down to traditional IRA pre-tax, traditional uh 401k pre-tax, all that pre-tax money, there’s not a lot of fancy things that can be done. And what happens is you either have to take the money out and pay the taxes or you have to do a Roth conversion. Roth conversion, you pay the taxes, goes into the Roth, never have to pay the taxes again. A lot of wonderful points about that. There’s also a third category down the road for some people. You can actually, if you’re over age 70, you can do a uh charitable distribution directly from your IRA. So no matter what you do, you have to pay the taxes on this money. So to the question, what’s the best way to take money out at retirement age? So it depends again on your accounts, right? We want to do this in a tax efficient manner because you have to pay taxes on it. So is your best course of action doing some of those Roth conversions before retirement age. Is it best to do the Roth conversions and kind of delay taking money out of the traditional IRA? So there’s going to be a lot of options on the table for you to do that. different totally different way to answer that. I’m going to throw everything I said out the window and I’m going to say at retirement age, right? Things are different. It’s easy when you’re saving money, right? You just save in the 401k. Market goes up, market goes down, you’re adding to everything’s easy on the front side. On the back side, right, we have all those things we talked about today. Medical expenses, longevity, taxation, children, like all these things you have to consider. So when you start withdrawing funds, you have to say where do I withdraw my funds from? A good way to approach this is what we affectionately call the bucket strategy or segmenting some of those traditional 401k assets. What I mean by that is one bucket short-term nothing to do with the market. It’s there. It’s available to you. You can distribute. It doesn’t matter if the market goes down 20%. It’ll eventually catch itself up. But your bucket number one is safe, secure, and distributing to you. Bucket number two, an investment account, a lower volatility investment account. There’s greater growth potential, but if the market goes down, it doesn’t really hurt you in that situation. Long-term bucket, let it grow. Market cycles go up and down, but it’s the best performing asset class in history to have some market exposure. So, over time, what happens is as you’re making withdrawals, if you need to replenish bucket number one, right? Markets are doing great. They’re up. I’m going to take some from three. I’m gonna replenish number one so I can continuously keep this cycle and not have to sell my investments in a down market. So, that’s one way to take a look at it. But again, not a 20-minute answer, but there’s a lot that No, you did. You did great. Put it all in there. And of course, everybody add to that, everybody’s different. Everybody’s putting together their retirement with different with well, different buckets and and things. So, a consultation is always going to going to help get you to the right place. So, yes. Yes. And I always say if you’re somewhat thinking about retirement, approaching retirement age, uh it is worth the journey to explore those Roth conversions I mentioned. And I just say that because so many members of the credit union, they’ll come to me when they’re approaching required distribution age 73, 75. And unfortunately, a lot of people, it gets to be too late. they’ve lost the power of compounding in that Roth conversion story. So again, that’s something that we offer. We can model Roth conversions and see if it can help you. Excellent. Well, thank you, Tom. Thank you so much. This is the end of our Q&A and and our session today. If you have any additional questions, uh or you’d like to schedule some time with Tom, all that information is going to be in the email that you’ll get after um later today along with the link to the presentation. If you’re not currently an Alliant member, visit alliancreditun.com to learn how you can support your family uh with a gift of membership. You can view our savings rates and helocks there, too. Have a great day and thank you everyone. Thanks, everyone. Have a good afternoon.