1. What will be the net spendable income I receive after all taxes are paid during my retirement?
A: Your net spendable income after taxes will depend on the amount of your pension, Social Security and other sources in retirement. KPERS and Social Security are subject to federal taxes. KPERS is not subject to state taxes as long as you continue to reside in Kansas. Your Social Security income will be subject to federal taxes depending on the total amount of your household income. If your gross income is less than $75,000 in the state of Kansas, your Social Security income will not be subject to state taxes based on today’s tax laws. Remember your KPERS pension does not count toward your gross income. Please consult with your tax professional regarding your specific tax liability in retirement.
2. Have I left enough time to properly research and educate myself on all my irrevocable options?
A: The earlier the better, when it comes to planning for retirement. If you know you are going to retire in the next 2 to 3 years, it is recommended you begin your financial plan, fact finding, and pension analysis today. There are many factors to consider and you may need the years before retirement to plan accordingly. However, if you did not plan ahead and are retiring within the year it is helpful to start the planning process in the Fall. Many of our clients will turn their paperwork into KPERS in early April to be ready for a June / July 1st retirement date. It is not too late to get help until you have submitted your paperwork to KPERS but earlier is better.
3. Will I have enough income from KPERS and Social Security if I live longer than the average?
A: One of the biggest worries many of our clients have is will I have enough income if I live longer than expected. With the right planning you can create a financial plan that will consider the cost of living increases you may face. One key to consider regarding KPERS is that they do not show a Cost of Living Increase. What you will receive at age 60 from KPERS will probably be the same at age 75. Social Security currently has a cost of living increase, but will it keep up if you only have KEPRS and Social Security? If you have 85 points with KPERS and have Social Security, together they should replace your pre-retirement net income as a teacher / administrator, but the Cost of Living will catch up to you. You need to have other investments to use to keep up with the cost of living increases. Most of our clients do not touch their IRA’s or annuities until they are required to at age 70 1/2. A thorough fact finding, a pension analysis, and a financial plan can help keep you up with the cost of living increases.
4. Shouldn’t I take the Social Security at age 62?
A: If you are wondering whether you should take your Social Security at age 62, please ask yourself the following questions:
1. Do I need the income?
2. Do I have other sources of income that I can tap into? For instance do I have a 403(b), annuity, IRA, or other types of saving accounts?
3. How good is my health and what type of life expectancy do I have at this point?
4. Do I have 85 points and will I receive the full pension? If you have the full pension, maybe you can delay Social Security for a while. If you can delay taking your Social Security, there is a guaranteed return you can receive on your Social Security, but only if you delay it.
There should be a thorough fact-finding, pension analysis, and a financial plan created before you decide to take your Social Security at age 62. Visit with someone who has the knowledge and expertise to lead you.
5. Will I have enough KPERS, Social Security, and money saved to retire without any real worry about running out of money?
A: The worry of running out of money during retirement is everyone’s fear. It’s a fear that can be calmed if you do the work. You need to plan. We cannot answer definitively because we do not know what you have in investments, the size of your pension, your Social Security, your tax rate, the amount of debt, and your budget. Together, we can address all these items and produce a plan for your retirement. Our advice? No educator should retire without doing the research.