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Planning Ahead in Retirement

PRE-65 Concerns

Retirement can be a wonderful and enjoyable time of your life – if you’ve addressed or have plans to address certain issues.  This section of Retirement Resources presents some areas that warrant some thoughtful attention so that your retirement plans stay on track and in good order.

  • What will your daily, weekly, and monthly schedule look like?
    • As you ease into the retirement lifestyle, make intentional plans, either daily or weekly.
      • Establish a routine that will give your days structure.
      • Wake up at the same time daily and create a to-do list over breakfast or coffee.
    • What activities will you be involved in?
      • The freedom of retirement allows you to make many choices that are not regulated by the school bell. You will be able to:
        • Keep up with – or start new – hobbies
        • Maintain your social life with friends and relatives
        • Join – or become more active with – clubs that relate to your interests or hobbies
        • Schedule time for both exercising and for relaxation
      • Employment after retirement
        • While you are receiving a retirement annuity, certain restrictions apply regarding employment you may accept, the types of positions in which you may be employed, and the number of days and hours you may work.
        • Refer to the latest version of the TRS handbook or contact TRS for current information.
  • Which of your current expenses will be gone or be reduced in retirement?
    • Commuting expenses
    • Active teacher association dues
    • Professional liability insurance premiums
    • Dry cleaning and laundry services
    • Classroom supplies
    • School lunches and drinks
  • What new expenses will come with your retirement?
    • Your entertainment budget may increase as you socialize and travel more
    • New sports, hobbies, or other activities may have costs associated with them
    • You may need to pay for services and coverages that were previously covered by your employer
  • Prepare a battle plan for inflation in retirement by:
    • Reviewing
      • How inflation affects the purchasing power of your retirement income
      • Your retirement spending patterns and monthly budget
      • Cash reserves or retirement savings as income sources
    • Researching
      • Logistics of relocating
      • Impact of downsizing
    • Reconsidering
      • Employment in retirement
      • Undertaking major expenses
    • Retirement savings accounts
      • What actions are needed to access funds?
      • Do you need to rollover, move, or consolidate 403(b) accounts?
      • Are the retirement accounts invested so that you are protected against market risk?
      • Strategize a plan for use of accumulated retirement savings
        • Know when you can access the funds without IRS or investment company penalties.
        • Will you need a regular distribution from the accounts and when should that begin?
    • Making your money last
        • A retirement pension means you’ll always have monthly retirement income, but you may have to dip into your retirement savings to
          • Manage shortfalls due to rising prices
          • Counteract the effects of inflation
          • Cover unexpected expenses
          • Make large purchases
        • Your savings and pension income may be supplemented or sustained by
          • Working in retirement
          • Reviewing expenses and following a monthly budget
          • Protecting your savings from high-risk investments
          • Exploring the costs and benefits of
            • Long term care insurance
              • Long term care coverage may also be included as riders on life insurance and annuity policies
            • Supplemental insurance products
              • Plans pay for specific health events or treatments in addition to traditional medical insurance
  • Medicare Part A and Part B premiums depend on your Social Security eligibility
    • In general, Medicare Part A (Hospital Insurance) is available premium-free for those with 40 credits because of the FICA tax on their earnings.
    • Those without a qualifying work history may still get Medicare coverage by paying the monthly premiums themselves.
      • These individuals must enroll in both Medicare Part A and Part B (Medical Insurance) and pay premiums for both coverages.
    • Individuals who have earned less than 40 credits may still get Medicare Part A, but on a pro-rated premium based on the number of credits earned.
      • Those able to continue working can accumulate the 40 credits and no longer have to pay the Part A monthly premium.
    • Pre-65/Pre-Medicare insurance options available
      • TRS benefit recipients who enroll in the Teachers’ Retirement Insurance Program (TRIP) receive health, prescription, and behavioral health coverage.
        • Dependent beneficiaries can be enrolled in the program at an additional cost and will have the same health plan as the benefit recipient.
        • Monthly premiums are based on the type of coverage selected, the benefit recipient’s permanent residence, and the recipient’s age.
        • TRIP MyBenefits Website
        • TRIP premium and accessibility information summary
        • Additional insurance plans and coverages are made available to retirees through the Illinois Retired Teachers Association (IRTA)
          • Dental and vision plans
          • Long term, short term, and home health care
          • Cancer, heart, and stroke plans
          • Emergency medical transportation coverage
        • As you approach age 65, you become eligible to participate in the initial Medicare enrollment process
          • Initial Medicare Enrollment Period
            • 7-month window for initial enrollment
              • 3 months before 65th birthday month
              • 65th birthday month
              • 3 months after 65th birthday month
            • It is important that you complete your enrollment during the initial enrollment time period because Medicare charges late-enrollment penalties.
          • Medicare enrollment options
            • By phone or in person at a Social Security office
            • Online at Medicare.gov

What are new coverage gaps in retirement?

It’s important to review where coverage gaps may exist after employment and before being eligible for Medicare.

  • Some coverage gaps may be more pronounced in pre-65 time if you lost certain coverages at retirement that you have not sourced to put in place own your own and may be amplified by major medical issues or diagnoses
  • Review your pre-65 insurance coverages for items such as:
    • Cancer/Heart/Stroke/Accident/Hospital Indemnity supplemental plans
    • Long Term Care insurance
    • Life insurance
    • Existing personal coverage compared to policies lost at retirement
    • Emergency Medical Transportation Coverage plan
      •  

Your pre-65 years are also a good time to be thinking ahead to your post-65 coverages, after signing up for Medicare.

  • You may discover gaps at this time due to changes in the Medicare program from year to year or because as you age you may be encountering additional health issues requiring more medical attention.
  • Review your health status and family medical history as you forecast and plan for post-65 insurance coverage and protection in regards to
    • Cancer/Heart/Stroke/Accident/Hospital Indemnity supplemental plans
    • Long Term Care insurance
    • Life insurance
      • Existing personal coverage compared to policies lost at retirement
    • Emergency Medical Transportation Coverage plan

Consider coverages reflecting your lifestyle, health, and future plans.Many insurance plans and policies factor in age and health factors to the policy pricing.  When we are younger, we are usually healthier, often making it easier to qualify for and less expensive to obtain coverage.  Waiting to purchase additional protection could end up being more costly in multiple ways.

    • Long-term or short term care
    • Home health care
    • Cancer/Heart/Stroke/Accident/Hospital Indemnity
    • Life insurance
    • Current coverages and policy type
    • Current needs to be covered
    • Estate and legacy plans
    • Emergency medical transportation coverage
  • Health care expenses can be unpredictable and costly
    • Severe or ongoing health challenges may threaten financial security and drain retirement savings
  • Consider insurance premiums and out-of-pocket expenses differently
    • Premiums are relatively stable and can be budgeted on a month-to-month basis
    • Out-of-pocket expenses vary and large outlays are usually associated with major health events.
  • Assess your situation and health factors and research coverage plans that may help with unexpected or expensive health issues.
  • Prepare a plan for any ongoing financial responsibilities you may have – or expect to have – in retirement.
    • Confirm your retirement income sources
      • Monthly income from TRS, Social Security, or other sources
      • Evaluate your non-pension retirement savings value and liquidity
    • Review current ongoing responsibilities and their anticipated duration, such as
      • Providing insurance or other benefits for your children
      • Paying or assisting with payments for your children’s or grandchildren’s education
      • Providing care for a special-needs relatives or elderly parents
    • List possible or anticipated future financial responsibilities, such as
      • Elder care for aging parents
      • Elder care for yourself or your spouse
      • Financial support for children or grandchildren

Prepare an ICOD – In Case of Death or Disaster – folder of important personal business information and documents.

  • Take the time to be prepared and organized by creating your ICOD folder around the major areas impacted by death or disaster
    • Identification documents
    • Life event documentation
    • Essential estate documents
    • Banking information
    • Life insurance policies and retirement account information
    • Assets and liabilities documentation
    • Household expenses, memberships, and subscriptions information
    • Email and social media account information
    • Key contacts list
  • The ICOD Checklist identifies the major areas most often impacted by death or disaster. Download this checklist as a guide to create your own ICOD folder: 
    • Consider, and prepare for, situations where there may be family members dependent on your income for their living expenses after your death.

Download ICOD Checklist

Social Security Eligibility

Why It Matters

Knowing your Social Security eligibility status matters for retirement.  Even if you worked in a state where school districts didn’t pay into the Social Security system, it’s important to know where you stand in terms of Social Security eligibility.  You can then make an informed decision on an action plan to become eligible or understand what Social Security benefits will not be available to you in retirement.

  • Social Security benefits eligibility is based on earning Social Security credits working in a job and paying Social Security taxes.
  • The Social Security Administration cannot pay benefits if individuals have not earned enough credits.
  • Individuals need 40 credits to be eligible for Social Security retirement benefits.
  • Social Security credits are based on the earnings amount of qualifying employment.
  • Check your Social Security eligibility online with a mySocialSecurity
  • After checking your Social Security eligibility (see above), do you have less than 40 credits?
    • How many credits do you need to earn to have 40 credits?
      • You can earn credits while you are working in the TRS system and after you retire, with a maximum of 4 credits per year, based on qualifying earnings.
        • In 2023, one (1) credit was valued at $1,640 of earnings, up to the maximum of four (4) credits per year.
      • Social security credits may be earned up to the point an individual applies for Social Security benefits.
    • Other important reasons to consider earning the 40 credits needed for Social Security eligibility
      • If you are eligible for a Social Security retirement benefit based on your own credits, you may be eligible for increased benefits because of your current or former spouse’s Social Security benefit
        • The spousal benefit might be as much as half of your current or former spouse’s “primary insurance amount,” depending on their age at retirement
        • Your Medicare Part A and Part B premiums will be impacted based on the number of Social Security credits you’ve earned, as explained below.
  • In general, Medicare Part A (Hospital Insurance) is available premium-free for those with 40 credits because of the FICA tax on their earnings.
  • Those without a qualifying work history may still get Medicare coverage by paying the monthly premiums themselves.
    • These individuals must enroll in both Medicare Part A and Part B (Medical Insurance) and pay premiums for both coverages.
  • Individuals who have earned less than 40 credits may still get Medicare Part A, but on a pro-rated premium based on the number of credits earned.
    • Those able to continue working can accumulate the 40 credits and no longer must pay the Part A monthly premium.
    • When to apply for benefits.
      • Apply for your monthly Social Security retirement benefit any time between age 62 and 70.
    • Payments are calculated based on qualifying life-time earnings.
    • Benefits amounts will be higher the longer you wait to apply, up until age 70.
    • https://www.ssa.gov/prepare/plan-retirement
    • Your Benefits in regard to your spouse
      • If you are eligible for a Social Security retirement benefit based on your own credits you may be eligible for increased benefits because of your current or former spouse’s Social Security benefit.
        • The increased benefit amount would be based on your current or former spouse’s earnings if they were the higher Social Security wage earner
        • Your spousal benefit might be as much as half of your current or former spouse’s “primary insurance amount,” depending on their age at retirement
        • Your Social Security retirement benefits may also be reduced by WEP/GPO
      • Windfall Elimination Provision (WEP)
        • WEP can affect how Social Security calculates your retirement benefit if you worked for an employer who didn’t withhold Social Security taxes from your salary.
        • This is a provision implemented by the SSA; it is not a function of your TRS system.
      • Government Pension Offset (GPO)
        • GPO adjusts the Social Security spousal or widow(er) benefits for people who receive “non-covered pensions”, such as a pension paid by an employer that did not withhold Social Security taxes from your salary. GPO reduces the Social Security spousal or widow(er) benefits based on your pension payments.
        • This offset is implemented by the SSA; it is not a function of your TRS system.
  • If you are eligible for Social Security retirement benefits, you can start receiving them as early as age 62.
    • If you start receiving benefits early, your benefits will be reduced a small percent for each month before your full retirement age.
    • Find out your full retirement age, which is when you become eligible for unreduced Social Security retirement benefits.
    • If you are eligible for a Social Security retirement benefit based on your own credits and earnings, and your spouse is also eligible for a Social Security retirement benefit:
      • You may be eligible for an increased benefit based on your spouse’s earnings if they were the higher Social Security wage earner
      • Your spousal benefit might be as much as half of your spouse’s “primary insurance amount,” depending on their age at retirement
      • Contact the Social Security by phone, online, or at a local office for more information
    • Your Social Security retirement benefits may also be reduced by WEP/GPO

Trusted Sources for Advice & Information

Retiring can be a simple process if you take the time to plan ahead.  Beyond knowing the retirement process, the timelines to follow, and the pension plan benefits available, you’re going to have questions and concerns about other aspects of this new stage of your life.  Begin now and build a network to rely on to assist you with these issues. 

  • It is important that retirees have a safe and trusted place to get expert, professional, and unbiased guidance to ensure social and financial well-being.
    • With the rise of the spread of misinformation, there are rumors, myths, and lore that may be circulated about topics important to you – such as retirement issues. It’s important when making impactful life decisions that you are acting on factual information that is correct for you – not what someone else may have been told based on their specific situation.
    • There are organizations and groups that provide education, resources, and tools to help you prevent financial fraud and protect yourself from scams.
  • IRTA can serve as a guide and trusted resource in many issues you might confront in retirement.
    • The Illinois Retired Teachers Association (IRTA) is constantly looking after your largest asset – your retirement pension and health care – and your IRTA membership keeps you informed on the issues so you can focus on enjoying your retirement.
    • The association also partners with organizations that understand your state retirement system, the IRTA member benefits available, and can review your situation annually or at specific retirement milestones.
  • IRTA is constantly protecting and fighting for your retirement pension and health care benefits, as well as
    • Providing individual counseling on the retirement process before, during, and after you complete the retirement process
    • Partnering with other organizations, like AMBA, that provide IRTA members with benefits, services, and discounts needed in retirement
    • Connecting retirees with local units allowing for continued involvement in the schools and community
  • IRTA membership is a small investment that provides great returns on the quality of life for you and other retired teachers.
    • There is strength in numbers – and the more IRTA members there are, the louder the voice representing retirees and their pension and health care benefits.
    • Take a moment and join today:

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