It’s January 1, and my retirement countdown app says “5 months and 29 days”! Now that it’s 2025, it really seems close.
I have a bunch of financial tasks of my winter quarter sabbatical/pre-retirement list and have already taken care of the first two:
- Increase (double) contributions to my tax-deferred accounts (403B/457). With over-50 catch-up contributions, in 2025, I can contribute $31,000 max to each account, or $62,000 total. Since I’ll only be working for six of the 12 months, this allows me to take full advantage of the IRS limits for 2025, and that will help us come tax time next year. I had to double check what the limits are because my contributions can’t exceed my income for those six months, but I should be fine. Now, that’s a lot of upfront money, and our cash flow will tighten for six months, but we can tighten our spending and/or backfill from savings for that period if need be.
- Change my investment allocation for my retirement accounts. I’ve been using target date funds (Vanguard for my rollover IRA and Fidelity for my current work accounts) for years and had them all set for 2025, the year I planned to retire. But because we’ll be living on pension and eventually Social Security income, and because tax/retirement laws have changed, I won’t need to make Required Minimum Distributions until I turn 75, in 2035. So I’ve changed my target date funds to 2035. I may reconsider the whole plan investment in the coming months, but for now, 2025 seems too conservative when I won’t likely be touching the money for years.
- Research Schwab (where my rollover IRA is), Fidelity, and Vanguard and decide where I want my IRA to live. I will roll my current Fidelity accounts into an IRA somewhere for simplification.
- Make initial Medicare choices. I turn 65 on August 1. My husband will turn 65 in May. We are currently covered by his retirement plan from the state of California (CalPERS), and that will become secondary coverage once Medicare kicks in. I attended a CalPERS webinar about this in 2024, and I know that we can choose between traditional Medicare and Medicare Advantage plans. I’ve read enough here to know that we want traditional Medicare.
- Update my “last instructions” documents. I have pretty well developed versions of these, but they need work. That will happen during this winter sabbatical period.
- Look into “final arrangements” plans and consider getting on a waiting list for the local CCRC. There are actually two in town, but the one we want has a pretty long list. I’ve read enough here to know that sooner is better in this regard. Also, going through my mother-in-law’s move to memory care in 2024 and then her death in August has made me acutely aware of how stressful it can be to not plan ahead for these things.
I’m sure I will add more to the list, but all of the above happen in the next 5 months and 29 days, it will be time well spent. I also plan to spend time thinking and researching other things (weight training gym, local volunteer options, etc.), but the above is my initial financial to-do list.
Congratulations, Dana, from Chris. I think your list has a lot of common sense.
Thanks, Chris!
For #3, if you want to buy T-bills in your IRA, Fidelity’s auto roll option works better than Schwab’s. There’s no weeklong delay where your money is earning piddly bank interest.
Interesting. I’ll keep that in mind! I had a similar experience last week while switching target date funds. The Fidelity ones were instantaneous. The Schwab IRA took days.
Dr. Lefty – congrats for retiring (soon) and for assembling such a well thought-out menu for “what to do next”.
Congratulations on your upcoming retirement!
Enjoy spending your well-deserved extra time doing what YOU want to do … instead of what your boss wants you to do.
Congrats, Dana, on the upcoming retirement. Assuming the courses you taught were as thoughtfully planned as your retirement, your students are really going to miss you!
I joined Medicare two years ago and found the local SHIP program to be helpful. The program provided a mandatory “Medicare 101” session followed by a much more useful private consultation.
Since you have already decided on traditional Medicare, the guidebook, Choosing a Medigap Policy 2024 is a great starting point. Medicare sends the print version upon enrollment in Medicare; if you are like me, by then you’ll already have a plan. Looking back, the guidebook and the list of Medigap policies and rates compiled by my state’s bureau of insurance were all the info I ever needed. California appears to have a comparison tool, too.
Thanks so much for this—really helpful!
A worthwhile list. Congratulations!
Congratulations! Sounds like you have things well organized. Glad to read that you’re planning to get on a CCRC waiting list sooner rather than later – you can always change your mind but the list is unlikely to get shorter. Also, can I put in another plug for “Medicare for Dummies”, even though you’re already avoiding Medicare Advantage.
I second Cathy’s recommendation of Medicare for Dummies. Patricia Barry’s book is a very clear and concise compendium of all the information and decisions you have to make.
I will get it and read it. Thanks! I actually benefited from a couple of the “Dummies” books back when I had just inherited some money from my grandfather’s trust and knew nothing about personal finance or investing.
(It reminds me of when I found myself expecting our first child, and my immediate reaction was “I need to get a book! I don’t know how to do this!”)
I second Cathy’s advice to get on a CCRC waiting list. My wife and I were fortunate to to have only had a wait a little less than one year for our apartment (we made our deposit in Dec 2022), which was in large part due to the fact that it was still under construction when we reserved our spot. Now that it has been open for a year, the waiting list has mushroomed and it is estimated that the wait could be several years.
You write that you will retire about June 30, your husband will be age 65 in May and you will be age 65 8/1/2025 and that your current health insurance for both of you is from your husband’s employment.
It is unclear to me how you plan for your medical insurance coverage for the month of July 2025. Perhaps your husband is continuing to work past his 2025 birthday and the CalPERS medical insurance will continue to be primary coverage for you for the gap month of July.
Two major issues that my wife and I had when changing to medicare was 1. buying COBRA insurance (big after tax cost to us) during my younger wife’s gap period and 2. as I was well over age 65 when I signed up for Medicare I had to stop my HSA contributions six months before my Part B was effective as the government Part A can be retroactive up to 6 months (or back to your husband’s birthday, whichever is the shorter period of time) before the part B starting date.
See https://www.medicareinteractive.org/get-answers/coordinating-medicare-with-other-types-of-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare
Also, I have not found dental insurance with comparable coverage as was available through my former employer. If you have any dental issues you may want to address them sooner rather than later.
Happy retirement.
I was unclear. My husband is already retired from the state of CA and works in the private sector. He was fully vested in retiree health care, and it covers both of us. When he turns 65, Medicare will take over as his primary insurer, and CalPERS will become his secondary coverage. But I’ll still be covered as I have been until I turn 65, and then the same deal with Medicare will kick in for me.
I could select coverage from my own employer as well, but his retiree coverage is a better deal.
I’m a retired federal employee and my wife is also covered on my retirement medical plan. However, in my case if I die first she can only stay on the medical plan if she has a survivor pension benefit from me. She does, so it’s not a problem for us. I only mention it as it seems like a rather arbitrary and frankly odd requirement. I have no idea if CALPERS has any such requirement, but thought I’d mention it as an example of why you might want to confirm your ability to stay on his medical plan if he were to predecease you before you pass up coverage from your own plan. It’s probably not a problem for you, but I thought I’d mention it in the spirit of “better safe than sorry”. Best wishes on your upcoming retirement.
Agree about dental insurance. In fact I’ve stopped bothering with it. It’s gotten so bad some dentists are now offering a version of insurance themselves.
It must be so nice to have a long planning horizon leading up to your start!
Two suggestions:
We have between 1-2 years of expenses in Federal money market fund at Vanguard as our credit union’s interest rate is puny. When the credit card bill comes in each month transfer enough to have 2K left over in the checking account for minor expenses.
Thanks, David! Because I’m one of the fortunate who will receive a pension, I’m not going to need to tap those accounts for immediate cash flow. My next big decision is whether to take Social Security at 67 (my full retirement age) or max it out at 70. We do have a chunk of cash savings that should help us avoid needing to get into the retirement accounts before we start taking SS.
We are definitely eyeing Roth conversions in the next few years, but not until my husband retires (he’s not retiring when I do in July). While he’s still working, it doesn’t make sense in terms of our tax bracket. But once his income drops from the picture, we should have a window to do some conversions, which will indeed be helpful with estate planning.
Great suggestions. I would add a third suggestion that I have found useful – establish a substantial home equity line of credit while you are still employed.
We actually just did that a couple months ago! All set. ✅
I second this recommendation.
Dana, this sounds like a well-thought out plan. With regard to #1, one thing you’ve probably already thought of is the impact of front loading your retirement plan contributions on any employer contributions. Some plans can have nuanced rules that require the employee to work the full year to receive the full match. We ran into this when our plan was changed due to a sale of our division. I wrote about this almost 5 years ago. Happy New Year.
Thanks, Rick. I don’t get any employer match on my deferred compensation plans because I’m already in their separate pension system (to which they do contribute). In any case, that won’t be an issue with the 403B/457. (It would be a consideration for my husband, though, who works for a private employer and does get a match.)
A clarification: With some plans, the employer match is contributed pay period by pay period. If you front-load your contributions, you may miss part of the employer match, whether you work for the company the entire year or not.
My employer waited until year-end to address front-loaded contributions. I retired at the end of June 2020. I had front-loaded my contributions to reach my maximum contribution in May, but didn’t get my entire match at that time due to how the company contributed their match. Then, at the end of January 2021, I received a “catch-up” contribution.
That’s usually called a “true-up.”
That should be called “screwing the employee”. My wife’s company did the same annually. It’s designed for the company’s benefit as they can put the money aside and get the return rather than the employee getting the benefit of the return from an immediate match.
Randy, that’s correct. The issue was we somehow lost the “true-up” when our division was sold and our plan transferred to the new entity. It was a surprise and the source of some angst within the employee base.
A few years ago I started using a workaround for this when working the whole year–a sort of barbell plan where I front-load at 50% of gross pay for 5-6 months, then cut back to the minimum (6% in our case) to get the full employer match. Then jack it back up the last two paychecks of the year. This captured the full employer match without a true-up. Now that my wife has a mega backdoor Roth in her plan we don’t need these shenanigans.
Randy – thanks, you’re right. That’s what they called it. It’s been several years, so I’ve forgotten the correct term.
But by front loading her contributions she’ll still get the income reduction for taxes. So there’s still a benefit in making additional contributions.
Jonathan, you are correct. Thanks for the clarification.