I saw a headline today stating “Most People Don’t Understand Life Expectancy Data”…which means they don’t understand the fundamental aspect of retirement planning. A 20-year retirement is drastically different than a 30-year retirement.
So let’s answer: how long will you live?
As of 2020, the average American male lives for 74.5 years, and the average American female lives for 80.2 years. But wait! There’s more.
Imagine you’re 55 years old and planning your retirement. How long should plan for? If you’re male, about 20 years, right? The average death age (74.5) minus your current age (55) yields 20 years. For females, the answer would be 25 years.
Nope! That’s the wrong approach!
Because the average death ages – 74.5 and 80.2 years old – account for all deaths at all ages, including all the unfortunate deaths occurring before age 55. Once you’ve hit age 55, you’ve already avoided those premature deaths. Meaning your most likely age of death will be above average!
We can look at the Social Security Administration’s actuarial data to see this truth in action.
The average 55-year-old male will live another 24 years, to age 79. That’s 5 years beyond the average of all males.
The average 55-year-old female will live another 28 years, to age 83. That’s 3 years beyond the average of all females.
Maybe you haven’t planned much and now you’re sitting down at 65 years old to figure out your retirement. You have, on average, 17 years (male) and 20 years (female) left to live. That’s 82 years old for males and 85 years old for females.
Every year matters in retirement planning. The difference between dying at 74 and 79 and 82 is huge.
Not only that, but you might live longer than average. For example, a 55-year old American male has the following death age probabilities:
Age 75: 64%
Age 80: 48%
Age 85: 30%
Age 90: 13%
13% is nothing to ignore! That’s a 1-in-8 chance.
In short, don’t look at the average life expectancy of all people. Instead, look at the average life expectancy of people your age. Then bake in some conservatism on top, because there’s 50% chance you’ll live longer than average.
It’s a simple – but vital – financial planning tip.
Thank you for reading! If you enjoyed this article, join 6000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
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If you prefer to listen, check out The Best Interest Podcast.
What Medicare Assignment Is and How It Impacts You
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If a doctor or other healthcare provider accepts a Medicare assignment for a particular service, a patient covered by Medicare will likely have to pay less out of pocket for that service. Accepting Medicare assignment means the healthcare provider has agreed to charge no more than the amount Medicare approved for that service. It also means the doctor agreed to bill Medicare rather than charging you directly. Providers who don’t accept assignments can charge 15% more and require immediate payment from the patient. A financial advisor can help you develop a financial strategy to pay for your healthcare.
Medicare Assignment Basics
Medicare is the government-sponsored national healthcare plan for about 63 million Americans over age 65. Original Medicare is the fee-for-service plan that includes Medicare Part A, which covers hospital costs. And it also includes Medicare Part B, which pays for other healthcare services, including doctor’s office visits.
Almost all doctors accept patients covered by Medicare. And almost all doctors who take Medicare patients accept Medicare assignments. Doctors who accept Medicare assignments are also known as assignment providers, participating providers and Medicare-enrolled providers.
A Medicare assignment provider agrees to charge no more than the Medicare-approved price for a specific service. The doctor or other provider also agrees to bill Medicare directly, rather than charging the patient on the day of service. This means that if you go to a Medicare-participating provider, you won’t usually have to pay anything at the time of service. And you will likely pay less out-of-pocket when all is said and done.
While Medicare assignment is relevant to people covered by Original Medicare, it doesn’t affect people covered by Medicare Advantage plans. These plans have their own rules.
How Medicare Assignment Affects Your Cost
Doctors and other providers who don’t accept Medicare may charge as much as 15% more than the Medicare-approved amount. The exact percentage varies by state. If you go to a non-accepting provider, you may have to pay the extra over the Medicare-approved amount, plus the 20% share of the cost Medicare passes on to all Medicare-insured patients.
For example, consider a visit to an occupational therapist who charges $120 for a treatment session. The Medicare-approved cost of the service is $100.
If the therapist accepts the Medicare assignment, they will charge you $100 and bill Medicare. After Medicare pays $100, you’ll owe 20%, or $20 for coinsurance. That’s if you have already met your Part B deductible. If not, Medicare may not pay anything, up to the amount of the deductible, and you may be responsible for the entire bill.
If the therapist does not accept Medicare assignment, they may charge 15% more than the Medicare-approved amount, or $115. Plus they may ask you to pay the entire amount. If that happens, you have to file with Medicare to get reimbursement.
Whether you or the provider sends the invoice to Medicare, Medicare will pay only 80% of the approved amount, or $80. Your out-of-pocket costs in this case will be $120 minus $80, or $35 instead of $20.
Finding Medicare Assignment Providers
Nearly all healthcare providers accept Medicare assignments. One way to check is to use Medicare’s online tool. You can filter these searches for, among other things, whether the provider accepts Medicare assignments.
You can also ask the provider whether they accept Medicare when you visit. In addition, you may also request information in advance detailing how much they’ll bill Medicare for the service and how much you’ll be expected to pay at the time of the visit.
Bottom Line
Medicare assignment means a doctor or other healthcare provider will charge no more than the Medicare-approved amount for a particular service. This usually means lower out-of-pocket costs for patients who are covered by Medicare. It also means the provider will bill Medicare rather than expecting the patient to pay the full amount at the time of service. Nearly all doctors accept Medicare assignments. But to be sure, you can check Medicare’s provider search tool for more information or ask before your next doctor’s visit.
Healthcare Tips
Consider discussing how you plan to pay for your healthcare with a financial advisor. Finding such an expert doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area. And you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Healthcare costs can be a significant issue for retirees. How big an issue? Median out-of-pocket retiree healthcare costs for 2018 came to $4,311, according to one study. That means after Medicare or other insurance paid everything it would pay, the retiree had to come up with that much in cash to pay for healthcare in that one year alone. That’s why having a plan to pay for healthcare is an important part of retirement planning.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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If you receive Social Security Disability Insurance (SSDI) payments, you might be wondering if you can supplement them with some money from your retirement accounts, such as a 401(k). While withdrawing from your retirement funds won’t usually impact your disability insurance, increasing your income can have tax implications. Here are the biggest considerations when withdrawing from a 401(k) while on SSDI.
If you want professional help navigating financial issues, consider enlisting the help of a financial advisor.
SSDI Basics
If you qualify for SSDI, the Social Security Administration will pay you a set amount per month. To qualify for SSDI, you need to have a disability that doesn’t allow you to work or engage in “substantial gainful activity.”
A disability isn’t all you need to qualify for SSDI: The Social Security Administration also determines your SSDI eligibility and payment amounts based on your employment. Like other Social Security programs, you must meet certain standards for workplace participation, including having worked long enough and recently enough to qualify.
While SSDI is a safety net for many disabled workers, the payments aren’t large. The average monthly Social Security benefit payment for disabled workers in January 2023 was $1,483, according to the Social Security Administration’s 2023 COLA Fact Sheet.
How Do Retirement Withdrawals Affect SSDI?
According to the Social Security Administration, there are only two things that would cause your SSDI payments to stop: you are able to go back to work at a level they consider “substantial,” or your condition improves and they determine you no longer have a disability. SSDI is not impacted by unearned income — that is, money that doesn’t come from you working a job — so withdrawals from a 401(k) plan will not affect your benefits.
But there are tax implications that come along with 401(k) disbursements. If you were previously living off of only SSDI, you likely didn’t owe taxes as your income would fall below $25,000. If 401(k) withdrawals or any other form of unearned income put you above the limit, you’ll need to pay income tax.
One note: While there’s usually a 10% penalty for withdrawing from your 401(k) before the age of 59 ½, you can withdraw early if you have a qualifying disability. However, the IRS defines disability differently than the Social Security Administration does. The Social Security Administration defines a disability primarily as a medical condition that prevents you from working. On the other hand, for the IRS to allow you to withdraw from your 401(k) plan early, the disability must be “total and permanent.”
Another interesting note: Once you reach the age of 65, your SSDI benefits will cease and automatically convert to retirement benefits.
How SSDI Taxes Work
While SSDI on its own won’t trigger taxes, there is a relatively low threshold at which your benefits may be taxable. Let’s take a look at how that works.
The IRS determines whether you have to pay taxes on your benefits based on a base amount. The base amount is determined by adding up one half of your Social Security benefits and 100% of all of your other income. In 2023, the base amount at which taxes kick in is $25,000 if you’re single, head of household, qualifying surviving spouse or married filing separately and having lived apart from your spouse for the whole tax year. It’s $32,000 if you’re married filing jointly with your spouse. And if you’re married filing separately but have lived with your spouse at any point during the tax year, the limit is $0.
As an example, let’s say you’re a taxpayer filing your taxes as a single person. You receive an SSDI payment of $1,400 each month and withdraw about $1,400 from your 401(k) plan each month using the IRS’ disability exception. You have no other income outside of these two sources. Half of your annual Social Security benefits would be $8,400. If you add that to the $16,800 you’re withdrawing from your 401(k) for the year, you’re taxable income comes to $25,200—just over the IRS limit—so you’ll need to pay taxes. On the other hand, if you were living solely on your SSDI income, you wouldn’t owe taxes.
There’s another way in which getting retirement income can affect your Social Security payments. If you receive a pension from a government job but did not pay Social Security taxes while you had the job, your Social Security spouse, widow, or widower benefits will be reduced by two-thirds of the amount of your government pension. This offset is known as the government pension offset.
The Bottom Line
Drawing on your retirement savings, such as a 401(k), won’t impact your SSDI payments. However, if your yearly income, of which 401(k) money can be a part, is more than a set threshold, you may owe taxes on part or all of that income.
Retirement Tips
For help navigating retirement planning or tax issues, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Social Security benefits depend on your work and income history. Estimate your payments with our Social Security calculator.
With a thriving oil industry and bustling tourist population, Alaska is a great place to live and work. As with most states, you’ll find a combination of banking options in Alaska, from national banks to local banks and credit unions.
But finding the right bank can take time. The list below combines local banks, online banks, national banks, and credit unions.
10 Best Banks in Alaska
Alaska bank customers look for a variety of features in a bank. You’ll want to keep costs low while maximizing your earnings, but convenience is also a factor. Here are 10 of the best banks and credit unions in Alaska.
1. First National Bank Alaska
For more than a century, First National Bank Alaska has served the state’s consumers. The first branch was in Anchorage, but today there are branches and ATMs across the state, including Kodiak, Fairbanks, and Wasilla.
First National Bank Alaska has multiple checking options, including teen and military accounts. Direct Deposit Checking comes with a $7 monthly service fee that can be waived with qualifying direct deposits.
Fees:
$0-$7 monthly maintenance fee depending on account
$33 per-item fee for overdrafts
Balance requirements:
No minimum opening balance
No minimum daily balance with Direct Deposit Account
ATMs:
Fee-free access at First National Bank Alaska ATMs
Interest on balance:
0.10% APY on select checking
0.08% to 0.25% APY on savings
Additional perks:
Free checkbook
Health Savings Account available
2. Northrim Bank
Northrim Bank takes a unique approach to its checking setup. You’ll get one checking account that automatically adjusts as your balance changes. Northrim is a community-based bank with branches only in Alaska.
If your paycheck is automatically deposited to your account, you’ll qualify for a fee-free account that earns money. South Central Alaskan account holders can earn up to 0.11% APY on checking account funds, but check your own region for current rates.
Fees:
$0-$12 maintenance fee, depending on tier
$29 per-item fee for overdrafts
Balance requirements:
Minimum opening balance: $100
No minimum daily balance
ATMs:
Fee-free ATM access at First National Bank Alaska ATMs
Up to $10 in out-of-network costs reimbursed monthly
Interest on balance:
Up to 0.11% APY in South Central region on checking
Up to 0.75% APY in South Central region on savings
Additional perks:
Highest tier account waives all out-of-network ATM costs and incoming wire transfer charges
Easy-to-use mobile app makes online banking a breeze
3. Global Credit Union
Formerly Alaska Federal Credit Union, Global Credit Union offers two tiers of checking: Core Checking and Latitude Checking. There are branches throughout North America, so if you regularly travel to the U.S., this might be the best option.
Like many credit unions, Global Credit Union offers competitive rates as a benefit to members. Unlike other credit unions, though, membership is fairly open. You’ll need to pay $5 and be a resident of Alaska, Washington, Idaho, California’s San Bernardino County, or Arizona’s Maricopa County to qualify.
Fees:
No monthly maintenance
$25 fee for balances that fall below a $25.01 deficit
$5 membership fee
Balance requirements:
No minimum opening balance
No minimum daily balance
ATMs:
Fee-free use of Global Credit Union ATMs
Fee-free withdrawals at 55,000 Allpoint locations
Interest on balance:
No APY on checking
0.10% APY on savings
Additional perks:
Competitive rates on auto loans
Mobile tools to help with managing finances
4. Denali State Bank
Fairbanks residents interested in a local bank should check out Denali State Bank. Most of Denali’s branches are in Fairbanks, but you’ll have online banking through the mobile app, as well as refunds on up to $25 monthly ATM withdrawals.
The best thing about Denali State Bank is its rates. Choose Free Kasasa Cash Checking and you’ll earn 2.00% APY on your money. Denali’s savings accounts earn up to 0.50% APY.
Fees:
No maintenance fee
$30 NSF fee per occurrence
Balance requirements:
$100 minimum to open
No minimum daily balance
ATMs:
Up to $25 fee refund per month
Interest on balance:
Up to 2.00% APY on checking
Up to 0.50% APY on savings
Additional perks:
ATM fee refund of up to $25 monthly
Cash-back checking option available
5. Chime
While many local bank options offer online services, Chime is an online-only service. You’ll have everything you need in the app, from mobile check deposits to bill pay.
Chime uses two services for cash withdrawal: the AllPoint and MoneyPass networks, with more than 60,000 locations across the country. If you need to add cash to your account, you can do that at more than 8,500 participating Walgreens locations for free.
Fees:
No maintenance fee
No overdraft fee
Balance requirements:
No opening deposit required
No minimum daily balance
$200 minimum qualifying deposits per month required
ATMs:
Fee-free at more than 60,000 ATMs in the AllPoint and MoneyPass networks
Interest on balance:
Up to 2.00% APY on savings
Additional perks:
Round Ups help you build savings automatically
Access to paycheck up to two days early
6. GO2Bank
Mobile banking customers may find Go2Bank provides a great Alaska banking experience. There are no branches, but you’ll get cash withdrawals at 55,000 AllPoint ATMs.
What makes Go2Bank stand out is its security features. You’ll get popular services like fraud alerts and a debit card lock feature. If you’re working to rebuild your credit, you may also be interested in GO2Bank’s secured Visa.
Fees:
No maintenance fee
$15 overdraft fee (avoid by resolving overdraft within 24 hours)
Balance requirements:
No opening deposit required
No minimum daily balance
ATMs:
Fee-free at more than 55,000 ATMs in the AllPoint network
Interest on balance:
Up to 4.50% APY on savings
Additional perks:
Secured Visa allows you to build credit
Access to paycheck up to two days early
7. Wells Fargo
With branches from Barrow to Anchorage, AK, Wells Fargo might be the best bank if you’re looking for a large, corporate financial institution. Currently, Wells Fargo is offering a $300 opening bonus.
One downside to Wells Fargo is the monthly maintenance costs. You can avoid those costs by maintaining a $500 balance or having $500 or more in qualifying income each month.
Fees:
$10-$35 monthly (waived with minimum balance)
$35 overdraft fee
Balance requirements:
$25 opening deposit required
$500 minimum daily balance to waive service fee
ATMs:
Fee-free at more 12,000 ATMs across the globe
Out-of-network waivers available with some accounts
Interest on balance:
Up to 0.26% APY on savings (higher rates available for large balances)
Additional perks:
$300 bonus for opening an account
Teen and student checking account options
8. Matanuska Valley Federal Credit Union
If you can maintain a checking balance of at least $2,000, consider Matanuska Valley Federal Credit Union, a not-for-profit cooperative that welcomes members across Alaska and in Hawaii. Matanuska Valley offers checking and savings accounts, as well as life insurance and accounts for small businesses.
If you regularly deal with cash, though, MVFCU might not be the right fit. You’ll be limited to MVFCU ATMs, which are only in Alaska and Hawaii. But MVFCU does have a feature called Live ATMs, which enhances your customer service options.
Fees:
No monthly fee
$18 overdraft fee
Balance requirements:
No minimum balance required
ATMs:
Fee-free at locations across Alaska
Interest on balance:
Up to 4.32% APY on savings depending on balance
Additional perks:
Live ATMs offer enhanced services
Enhanced savings vehicles like Christmas clubs and New Child accounts
9. First Bank of Alaska
Small businesses might want to take a look at First Bank of Alaska as a great place to park their money. You’ll get 150 free monthly transactions, along with fee-free checking as long as you’re maintaining a $2,500 balance.
But First Bank isn’t just for business accounts. You can also get low-cost personal checking. There are three accounts to serve customers, along with a teen account. They come with maintenance costs, but they can be waived if you keep a minimum balance and set up direct deposit.
Fees:
$4-$10 (waived with minimum balance)
Balance requirements:
$2,500 minimum balance plus direct deposits to avoid fee
$1-$200 opening balance depending on account
ATMs:
Fee-free at locations across Alaska
Interest on balance:
Up to 0.12% APY on checking
Up to 0.15% APY on business checking
Up to 0.20% APY on savings
Additional perks:
Variety of checking account options
Great rates for businesses
10. Northern Skies Federal Credit Union
All Alaska residents are eligible for membership in Northern Skies Federal Credit Union. You’ll get savings rates above the national average and flexible overdraft fees.
Northern Skies FCU offers two checking account options, each with its own benefits. You’ll also earn dividends, which can help you with your retirement planning.
Fees:
$5 (waived with minimum balance)
Balance requirements:
$100 minimum balance or direct deposits to avoid fee
$5 opening balance
ATMs:
30,000 fee-free ATMs worldwide
Interest on balance:
Up to 5.00% APY on checking
Up to 0.10% APY on savings
Additional perks:
Competitive rates on loans
Credit union tools help with managing personal and business assets
The best bank puts its residents first, providing convenient tools like online banking and mobile apps. But it’s also important to look into features that will help you save money. Compare offerings across multiple banks and find the right bank to fit your own needs.
How to Choose the Best Alaskan Bank
Before you start searching for a bank account, there are some things to consider.
Minimum balance: Consider if a bank requires you to maintain a certain balance in your account or if they allow a zero balance. This can affect your flexibility in managing your money.
Opening deposit: Determine the initial deposit required to open an account, as some banks may require a larger sum to get started.
Fees: Be aware of any monthly maintenance fees associated with checking accounts, and understand the minimum balance requirements to avoid these charges.
Mobile banking: Whether you go with an online bank or a brick-and-mortar bank with a branch down the street, conveniences like mobile check deposit can save time.
Interest rates: Compare the annual percentage yield (APY) offered by different banks on checking and savings accounts to maximize your potential earnings.
Cash accessibility: Ensure that your chosen bank provides convenient options for depositing and withdrawing cash when necessary.
Extras: Consider if a bank offers additional services, such as wealth management, investment options, or certificates of deposit (CDs), to meet your future financial needs.
This guest post from Mike is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success â or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.
Traveling to exotic new places is a passion of mine. My wife reminisces fondly over a dinner conversation we had about nine years ago while we were still dating. I emphatically told her, âI am going to show you the world.â Sure, she probably took it as a pick-up line, but little did we know that those words would become prophetic for us.
At the time, I was a federal employee living in San Diego, California, working within the Department of Defense as a civil servant (non-military) employee. Over the next four years, we wed and my wife gave birth to our first child. Prior to marriage, we made the decision that having my wife stay at home with the kids was important to us. Anyone who has spent some time and money in San Diego knows that the city’s cost of living makes choosing to be a single-income family difficult. As our family grew and our costs increased, we decided to consider looking for a more affordable place to live.
Welcome to another Ask GFC! If you have a question that you want answered you can ask it here. If your questions get featured on GFC TV or the GFC Podcast, you are the lucky recipient of a copy of my best selling book, Soldier of Finance, and a $50 Amazon gift card. So what […]
The post Ask GFC 008 – Roth IRA, 401(k), HSA – Which Do You Max Out First? appeared first on Good Financial Cents®.
Table of Contents Benefits of Working During Retirement Phased Retirement Types of Employment Recommended Jobs for Seniors Resources for Seniors Retirement looks different for everyone. Some people dream of playing golf and visiting their grandchildren, while others see it as an opportunity to learn new skills and travel more. No matter your vision for retirement,
The post The Complete Guide to Independent Work for Seniors and Retirees appeared first on MintLife Blog.
When a friend of mine changed jobs recently, she discovered she had half a dozen old 401(k)s trailing her from her past jobs. She wanted to get on top of her financial planning, but wasn’t sure what to do with all those old investments. she asked me for advice.
Truth is, I wasn’t sure either. I cashed out my one 401(k) to buy a house several years ago. I know that was a dumb move in the larger financial story of my life. Saving early for retirement is one of the best ways to build wealth. I can’t undo it now, though, and I’ve been so focused on paying off debts I haven’t thought much about retirement planning for years.
As my debt burden shrinks, it’s time to start thinking about my own investment strategy. So I looked into my friend’s question: What should she do with those old 401Ks?
Welcome to another Ask GFC! If you have a question that you want answered you can ask it here. If your questions get featured on GFC TV or the GFC Podcast, you are the lucky recipient of a copy of my best selling book, Soldier of Finance, and a $50 Amazon gift card. […]
The post Ask GFC 023 – Fitting an HSA into Your Budget appeared first on Good Financial Cents®.
Many retirees go to nursing homes as their needs increase, creating a dilemma for protecting their wealth. A revocable trust places your wealth in a tax-protected vehicle you can control until you die. But, unfortunately, it wonât protect assets from ⦠Continue reading â
The post Does a Revocable Trust Protect Assets From a Nursing Home? appeared first on SmartAsset Blog.