The repeal of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) penalties means some retired fire fighters and emergency medical workers will receive extra money in their pockets each month. In fact, some already have.
The amount each person is entitled to will vary. Some may see only a small increase, while others could experience a boost of more than $1,000 per month. Regardless of the amount, now is a good time for retirees to revisit their financial plans.
While every person’s situation is unique and should be considered in context, the IAFF Financial Corporation’s Allan Westcott offers a few tips to help you get started:
Create a New Budget
Put together a budget based on your new income. Start by tracking your finances to determine where your money goes each month. Then, make savings and spending goals for your money.
IAFF-FC financial partner Nationwide offers this worksheet for further guidance on developing a budget.
Focus on Debt
If you’re still paying a mortgage, credit card bills, or other debts, consider using the extra money you receive from the repeal to pay those off sooner. Once you are debt-free, the extra dollars can be put into savings or to help with other expenses.
More tips on reducing debt faster can be found here.
Review Impact on Other Benefits
Medicare Part B and D premiums are based on income. Higher Social Security benefits could result in higher premiums, and retirees may no longer be eligible for other income-based programs because they have too much income.
Social Security Cannot Be Deposited into Your IRA
If you have active retirement accounts, check the deposit rules. You cannot, for example, deposit Social Security payments into an IRA. While you can continue contributing to an IRA after you begin collecting Social Security benefits, those contributions must come from other sources of earned income, such as a part-time job.
Consider Delaying Benefits Until Full Retirement Age
You can begin receiving reduced benefits as early as age 62, with the wage earner receiving only 70% of the full amount. Full benefits begin at age 67. The Social Security Administration provides a helpful chart here, showing monthly benefits between the ages of 62 and 67.
Married IAFF Members May Be Eligible for Spousal Benefits
If your Social Security benefit is small, you may also be entitled to spousal benefits. However, you must be at least 62 years old, and your spouse must be drawing benefits before you can apply. Calculate your spousal benefits here.
The IAFF-FC Wealth Management Program might be a good planning option
The IAFF-FC also offers a wealth management program. This program is a partnership with MassMutual firms across the country to help members with financial strategies based on changes in income and plans for the future.
The above is not a solicitation to make any investments and is provided for informational purposes only. The IAFF is not a registered broker dealer or a registered investment advisor. All specific financial products and services are offered either through IAFF-FC investments, LLC, a registered broker dealer, member of FINRA (finra.org), member of SIPC (spic.org), or through IAFF-FC Advisors, LLC, a registered investment advisor, both herein being affiliated with IAFF Financial Corporation. For more information, visit www.iaff-fc.com.
