Depending on the person, retirement can be a source of excitement — or anxiety.
That's because the logistics of retiring — for example, figuring out health care in retirement — can quickly complicate anyone's dreams of a tropical beach-side lifestyle.
You can help your members prepare for their retirement and health care needs by providing them with resources for achieving better financial health. Here's how to encourage members to budget, make the most of their union retirement benefits and start planning for the future now.
5 Ways to Help Members Prepare for Retirement
Members may have financial goals but lack the financial know-how to reach them. To get them thinking about and planning for retirement, make these fundamental financial skills the cornerstone of your financial education efforts.
A retirement budget. Experts estimate that retirees will need 70% to 90% of their preretirement income to maintain their current standard of living in retirement. Encourage members to make a basic retirement plan that covers their planned retirement date, estimated expenses in retirement, intended lifestyle and existing savings or retirement accounts. Direct them to online calculators for a sense of what they'll need.
Ongoing saving. As members near retirement, they may be tempted to stop putting funds into their retirement accounts. In reality, they should continue to save and make catch-up contributions, if possible.
Retirement plan distributions. Depending on the structure of the defined benefit or defined contribution plan your members have (and any personal accounts they hold), retirees may face penalties if they begin withdrawing funds before a certain age. Some funds also have required minimum distributions once a retiree reaches a certain age. Help your future retirees understand what they can withdraw, when they can do so and how to make retirement savings last.
Social Security. Let your members know how to apply for benefits, the penalty for taking early disbursements and what a payout might look like.
Regular financial reviews. Both before and after retirement, encourage your members to conduct regular check-ins on their budget, savings and plans so that they can make adjustments as needed.
Health Care in Retirement
Make sure your members don't forget to plan for one of the most overlooked aspects of retirement: health care.
It's a common misconception that Medicare will cover all of a retiree's health care expenses. In reality, Medicare covers only about two-thirds of a persons' need. A healthy 65-year-old couple will need about $280,000 for health care in retirement. This accounts for Medicare parts A, B and D premiums and other out-of-pocket expenses, but it doesn't include long-term care, most dental procedures or nonprescription medications.
Members may not be comfortable navigating health care coverage in retirement, so help them review their options. Tell them:
- Whether they can continue with the existing health insurance plan after retiring, as well as what changes might apply
- Whether the Consolidated Omnibus Budget Reconciliation Act, or COBRA, could act as a temporary option, and how much it might cost
- What Medicare covers
- What gap and supplemental plans are available (along with the enrollment windows)
- How to find private health insurance if they're retiring before 65
Also offer information on health savings accounts, if members have access to one, and encourage participation. These accounts have a triple tax advantage — contributions come in pretax, grow tax-free and are withdrawn tax-free. Retirees can draw from this fund to cover medical expenses.
Communicating Retirement Information Effectively
While some members may be counting down the days to retirement, it can be a sensitive subject for others. You don't want to appear as if you're trying to force a member out of their job or the union. However, it's reasonable for you to offer information on retirement planning via your website, email, newsletters and at in-person meetings.
Consider giving all employees — regardless of age — the opportunity to assemble to discuss retirement planning and voice their questions. Although the meeting can be geared toward those nearing retirement, even your younger members will benefit from learning more about how to feel financially secure in their post-working years.
If possible, partner with your members' retirement plan provider to find out what resources are already available. Your provider may have staff who can offer members personalized assistance.
Encouraging your members to plan ahead — and then arming them with the information and resources to maximize their efforts — will put them on the path to an anxiety-free retirement. Let members know that they're under no obligation to retire on a specific date (in fact, federal law protects most employees from such age discrimination), but that you're ready at any point to help them tackle their retirement and health care needs to put them in the best position possible for leaving the workforce.
Heather Kerrigan started her career in journalism at Governing magazine, reporting on state and local politics and policy. She frequently covers retirement issues for a variety of publications and is the author of the book Retire Rich With Your 401(k) Plan. She holds a bachelor's degree in journalism from The George Washington University.