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"I love my home, but I'm worried about those stairs in ten years." This concern is one I hear regularly from Washington public employees approaching retirement. It's a valid concern—our homes that served us well during our working years may present challenges as we age. What many Washington state and local government employees don't realize, however, is that their unique benefits package provides significant advantages when planning to age in place. Here's what public servants in Washington need to know about staying in the home you love. The Financial Reality of Long-Term Care Let's start with some sobering numbers: The average cost of assisted living in Washington now exceeds $6,000 per month, with nursing homes over $12,000 monthly [1]. That translates to more than $70,000 per year just for basic care. But here's the advantage Washington public employees have: Your pension through DRS provides guaranteed lifetime income with cost-of-living adjustments. Whether you're covered under PERS, TRS, LEOFF, PSERS, or another plan, this stable foundation—combined with your DCP savings and PEBB retiree healthcare benefits—creates a financial advantage many private sector workers simply don't have. This guaranteed income stream can make it financially feasible to invest in home modifications rather than being forced to consider institutional care options. The Pacific Northwest Challenge Our region presents unique aging-in-place challenges. Between our rain, occasional snow, and hilly terrain, standard home modification advice doesn't always apply in Washington. Here are modifications that address our specific regional challenges: The Outside-In Strategy An effective approach begins with adapting your home's exterior to our unique climate:
Inside Modifications for Northwest Homes Beyond the standard grab bars and lever handles, consider these adaptations particularly relevant to homes in our region:
The Washington Public Employee Benefit Advantage Here's something many financial advisors miss: Your position as a public employee in Washington provides several unique advantages when funding home modifications:
A Three-Phase Implementation Strategy For Washington public employees planning to age in place, this phased approach can be particularly effective: Phase 1: Pre-Retirement (1-3 years before)
Phase 2: Early Retirement (Years 1-3)
Phase 3: Ongoing Enhancements
Room-by-Room Priorities Bathroom Safety Bathrooms present the highest fall risk in homes. Consider these modifications particularly important:
Kitchen Accessibility Create a kitchen that remains functional as mobility and strength changes occur:
Bedroom Considerations Make your bedroom work for the long term:
Smart Technology Solutions The technology landscape for aging in place has evolved significantly. Consider these options:
Your Action Plan: Next Steps
With thoughtful planning, you can create a home environment that supports your independence and quality of life throughout retirement, while protecting your hard-earned benefits from being drained by institutional care costs. Sources [1] Genworth Cost of Care Survey, 2025 [2] National Association of Home Builders Aging-in-Place Remodeling Report [3] AARP Home Modification Guidelines [4] Washington State Housing Finance Commission Senior Programs Guide [5] Smart Home Technology for Aging in Place Study, 2025 [6] CDC Home Safety for Older Adults Report [7] Universal Design Living Laboratory Research Study [8] National Institute on Aging Housing Report, 2025 -Seth Deal
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After decades of serving the people of Washington in state or local government, retirement is finally on the horizon. The question many public employees face at this stage is deceptively complex: What should you do with your investments as retirement approaches? Should you play it safe? Stay aggressive? Find middle ground? Let's explore what makes sense for Washington public employees. The Risk Paradox for Government Employees The conventional wisdom suggests becoming more conservative as retirement approaches. But here's a critical insight that's often overlooked: being too cautious with your investments can be just as problematic as being too aggressive. Why? Your retirement could last 30 years or more, and your money needs to keep working throughout that time in order to keep pace with inflation The Washington Public Employee Advantage As a Washington state or local government employee, you have a significant advantage that many private-sector workers don't: your defined benefit pension through the Department of Retirement Systems (DRS). Whether you're in PERS, TRS, LEOFF, or another plan, this guaranteed income creates more flexibility than you might realize when managing investment risk [1]. This pension foundation changes the entire risk equation for you. Understanding Your Complete Risk Picture Think of managing risk like adjusting the temperature in your home. Getting it right requires balancing multiple factors: 1. Risk Tolerance: Your Emotional Comfort Level This is your psychological ability to handle market volatility—that feeling in your stomach when headlines announce market drops. While important, your comfort level shouldn't be the only factor driving your decisions [2]. 2. Risk Capacity: What Your Financial Situation Can Handle Here's where your pension makes a crucial difference. With guaranteed monthly income that includes cost-of-living adjustments, you likely have greater capacity to weather market fluctuations in your other investments than someone without a pension [1]. 3. Risk Requirement: Your Need for Growth Even with periodic cost-of-living adjustments, inflation can erode your purchasing power over time. Your investments need to help combat this reality throughout a potentially long retirement. The "War Chest" Strategy for Public Employees Here's a practical approach that can help balance security and growth: create what I like to call a "War Chest." This strategy is particularly effective for government employees with pensions [3]. Start by setting aside five years of expenses beyond what your pension and Social Security will cover:
Making It Work with Real Numbers Let's say you've calculated that you'll need $2,000 per month beyond your pension and Social Security. Here's how to build your War Chest:
Your Washington Deferred Compensation Program (DCP) and other investment accounts offer tools to implement this strategy [1]:
Remember that your pension provides a strong financial foundation—a monthly income stream that many Americans don't have. This means you can focus on using your supplemental savings (DCP, IRAs, and other investments) to maintain your lifestyle and keep pace with inflation [2]. What many financial advisors miss is how this pension foundation should influence your investment approach. The traditional risk models often fail to properly account for the value and security of a government pension. Next Steps for Washington Public Employees
Your career serving the public in Washington state has provided you with valuable retirement benefits. Now is the time to optimize how these benefits work together to support your retirement goals. Sources: [1] Washington State Investment Board (2025). "Long-term Investment Strategy Report" [2] Journal of Pension Economics and Finance (2025). "Risk Management in Public Sector Retirement" [3] Financial Planning Association (2025). "Retirement Income Strategies for Public Employees" -Seth DealAs Washington state employees approach retirement, one of the most crucial decisions you'll face is where to live during your retirement years. While your DRS pension and DCP savings provide a strong financial foundation, careful planning for your housing needs can help ensure you maintain independence and quality of life throughout retirement. With the average cost of assisted living in Washington state continuing to rise sharply, investing in home modifications that allow you to age in place can protect your retirement savings while keeping you in the comfort of familiar surroundings. Understanding Your Financial Advantage as a State Employee Washington state employees have unique advantages when planning for retirement housing needs. Your defined benefit pension through DRS provides guaranteed lifetime income that increases with regular cost-of-living adjustments (COLAs). This stable income stream, combined with your DCP savings and PEBB retiree healthcare benefits, creates a strong foundation for funding home modifications while maintaining your desired lifestyle [1]. Unlike many private sector employees who must rely solely on 401(k) savings, your guaranteed pension income can provide the financial security needed to make long-term housing decisions with confidence. Additionally, your PEBB retiree benefits may help cover certain medical equipment needs that complement your home modifications. Planning for the Pacific Northwest Lifestyle Creating Safe Exterior Access The Pacific Northwest's unique climate and terrain present specific challenges when modifying your home. Washington has a diverse climate and terrain and depending on where you are in the State, your needs may be different. Our region's rain, occasional snow, and hilly terrain require thoughtful planning for exterior accessibility. Consider these key modifications:
Your home's interior should adapt to changing needs while maintaining comfort and functionality:
Strategic Use of Your Benefits Package Your position as a public employee provides several unique advantages when planning for home modifications:
Consider implementing modifications in phases to align with your retirement timeline and benefit availability: Phase 1 (Pre-retirement):
Modern home technology can significantly enhance safety and convenience while aging in place:
Bathroom Safety Priorities Bathrooms present the highest fall risk in homes. Consider these essential modifications:
Create a kitchen that remains functional as mobility and strength changes occur:
Create a safe and comfortable sleeping environment:
Sources [1] PEBB Retiree Benefits Guide, 2024 [2] National Association of Home Builders Aging-in-Place Remodeling Report [3] AARP Home Modification Guidelines [4] Washington State Housing Finance Commission Senior Programs Guide [5] Smart Home Technology for Aging in Place Study, 2024 [6] CDC Home Safety for Older Adults Report [7] Universal Design Living Laboratory Research Study [8] National Institute on Aging Housing Report, 2024 -Seth DealAs a CPA and financial advisor serving Washington State and local government employees, I've seen how proper estate planning protects the benefits earned through years of public service. The Foundation: Essential Estate Documents for Washington State Employees 1. Last Will and Testament: Your Core Protection Washington's status as a community property state significantly impacts your estate planning [1]. Your will must specifically address: - Distribution of pension benefits - Deferred Compensation Program (DCP) accounts - Other retirement and investment accounts - Real property and personal belongings Critical Note: Beneficiary designations override your will—this is where professional guidance becomes invaluable. 2. Powers of Attorney: Your Financial Safety Net Washington State has specific requirements, including: - Financial Power of Attorney (protects your pension and DCP accounts) - Healthcare Power of Attorney (especially crucial given Washington's Death with Dignity Act) [3] 3. Healthcare Directives Washington recognizes both: - Living Wills (Healthcare Directives) - Mental Health Advance Directives (unique to Washington State) [2] 4. HIPAA Authorization This authorization is essential for allowing your designated representatives to access medical information. How a Financial Advisor Strengthens Your Estate Plan: - Coordinates with your estate planning attorney to ensure proper handling of state benefits - Holds you accountable to get these documents completed - Reviews and updates beneficiary designations across all accounts regularly - Identifies gaps in your estate plan that could affect your family - Ensures your estate plan aligns with your broader financial strategy - Provides expertise on pension and DCP distribution options - Creates a comprehensive inventory of assets for your estate planning attorney - Helps you understand the tax implications of various estate planning strategies - Reviews your estate plan annually to maintain consistency with life changes Beyond the Basics: Strategic Planning Tools Consider these powerful options: - Community Property Agreements: These agreements can simplify property transfers between spouses and potentially reduce probate costs by automatically transferring community property to the surviving spouse upon death. - Revocable Living Trusts: These trusts help your estate avoid probate, maintain privacy, and provide flexibility in managing assets during your lifetime. Unlike a will, these trusts keep your estate details private and can reduce administration costs. - Special Needs Trusts: These specialized trusts allow you to provide for a disabled dependent without jeopardizing their eligibility for government benefits. They can be funded with life insurance, pension survivor benefits, or other assets. - Educational Trusts: These trusts set aside specific assets for educational expenses, allowing you to create a lasting legacy for children or grandchildren while maintaining control over how and when the funds are used for education. Each of these tools can be valuable additions to your basic estate plan, depending on your specific circumstances. Essential Review Points Review your estate plan when: - Your employment status changes - You receive promotions or salary increases affecting benefits - State laws regarding public employee benefits change - Family circumstances shift - You acquire new assets or debt Your Action Plan 1. Review current employee benefits and available resources 2. Check all beneficiary designations on state retirement accounts 3. Ensure your documents comply with Washington State laws 4. Partner with a financial advisor familiar with state benefits 5. Store documents securely and inform designated representatives Remember: While online templates exist, Washington State employees have complex benefits packages that warrant professional guidance. Working with both a financial advisor and an attorney ensures your estate plan fully protects your state benefits and aligns with your broader financial goals. You've dedicated your career to public service. Let's ensure your legacy receives the same level of care you've shown our community. Sources: [1] https://app.leg.wa.gov/rcw/default.aspx?cite=26.16.030 [2] https://app.leg.wa.gov/rcw/default.aspx?cite=71.32 [3] https://app.leg.wa.gov/rcw/default.aspx?cite=70.245&full=true -Seth DealDon’t get me wrong, I care about your financial plan. But what is more important to me is that you have a plan for finding purpose when you retire. You can be financially secure and looking forward to your retirement, but if you don’t know what you’re retiring to, you will feel lost. Above all things, I care more about my clients having purpose and living a fulfilled life after their careers have ended. Understanding the Initial Challenges The transition from a structured government career to retirement often brings unexpected emotional hurdles. Many retirees experience a temporary sense of disorientation, loss of identity, and uncertainty about their new role in life [4]. This "Retirement Syndrome" affects approximately one in three retirees, causing feelings of disconnection and concerns about how to spend their newfound time meaningfully [3]. Redefining Your Identity Self-Assessment Take time to reflect on your values, skills, and interests beyond your government role. Consider what truly energizes you and brings you joy [2]. This period of introspection helps create a foundation for your next chapter. Transferable Skills Your years in public service have equipped you with valuable skills that can be redirected toward new pursuits. Leadership abilities, problem-solving skills, and organizational expertise remain valuable assets in retirement [1]. Creating Structure and Purpose Establish a Daily Routine While freedom from schedules might seem appealing, maintaining some structure helps prevent feeling adrift. Create a flexible routine that balances activities, social connections, and personal growth [7]. Set New Goals Develop clear objectives for your retirement years. These might include: - Learning new skills - Contributing to community projects - Pursuing long-delayed interests - Maintaining physical and mental wellness Pathways to Purpose Mentoring and Consulting Consider sharing your government expertise by mentoring younger professionals or consulting part-time. Your experience is invaluable to others [5]. Volunteer Opportunities Many retirees find fulfillment in giving back to their communities. Local organizations often need volunteers with government experience for: - Board positions - Grant writing - Program development - Administrative support [5] Maintaining Professional Connections Stay Connected Join retirement associations and maintain relationships with former colleagues. These connections can lead to meaningful opportunities and provide ongoing social support [1]. Professional Development Consider taking courses or attending workshops to stay current with developments in your field of expertise. Many retirees find satisfaction in continuing their professional education even after retirement [9]. Exploring New Interests Creative Pursuits Retirement offers time to explore creative interests you may have postponed during your career. Consider: - Writing memoirs or blogs - Learning photography - Taking up painting or crafts - Learning a musical instrument [6] Physical Activities Maintaining physical health is crucial for a fulfilling retirement. Consider activities like: - Golf or pickleball leagues - Hiking - Walking groups - Yoga or tai chi classes - Community garden participation [9] Finding Balance Remember that transitioning to retirement is a process, not an event. It's normal to take time to adjust and discover what works best for you. The key is remaining open to new experiences while honoring the valuable contributions you've made during your government career. Looking Forward Your government career was just one chapter in your life story. Now you can write the next one. Focus on activities that align with your values and bring personal satisfaction. Whether through volunteering, mentoring, learning, or creating, your skills and experience can continue to make a meaningful impact in new and fulfilling ways [8]. The most successful retirees often combine multiple activities to create a rich, purposeful life. By staying active, engaged, and connected to your community, you can build a retirement that's as rewarding as your years of public service. Sources [1]https://stwserve.com/planning-for-life-after-retirement-transitioning-from-a-federal-career-to-private-or-volunteer-work/ [2] https://valnelson.com/career-transitions/finding-your-purpose-in-retirement/ [3] https://sixtyandme.com/meaning-and-purpose-in-retirement/ [4] https://greatergoodhealth.com/patients/how-to-find-purpose-in-retirement/ [5] https://www.harmonyhomehealth.com/meaningful-activities-for-older-adults-that-promote-purpose-and-value/ [6] https://bluemoonseniorcounseling.com/hobbies-for-seniors-finding-passion-in-retirement/ [7] https://www.marinerwealthadvisors.com/insights/5-tips-for-planning-a-purpose-based-retirement/ [8] https://safemoney.com/blog/retirement-emotions-finding-purpose-confidence-security/ [9] https://www.actsretirement.org/resources-advice/retirement-life/what-to-do-in-retirement/ -Seth DealAs a former city employee, I understand the unique challenges of planning for retirement in public service. These to-dos will help you navigate the crucial final two years before retirement. For State and Local government employees approaching retirement, particularly those in the Department of Retirement Systems (DRS), the final two years are crucial for ensuring a smooth transition. Having worked with cities, fire districts, and other municipalities, I've seen how proper planning can make all the difference. Remember: This should be customized to your specific situation and employer requirements! It may not include everything that you need to consider for your unique situation. 24-22 Months Before Retirement Month 24
Month 23
Month 22
21-19 Months Before Retirement Month 21
Month 20
Month 19
18-16 Months Before Retirement Month 18
Month 17
Month 16
15-13 Months Before Retirement Month 15
Month 14
Month 13
12-6 Months Before Retirement Month 12
Month 9
Month 6
Final 5 Months Month 5
Month 3
Month 1
Important Considerations for Washington State Employees
Next Steps Working with a financial advisor who understands Washington State retirement systems can help ensure you haven't overlooked any critical steps in your countdown to retirement. Sources [1] https://www.drs.wa.gov/life/retire/ [2] https://www.drs.wa.gov/life/retire/seminar/ [3] https://calculators.everfi.net/index.html#/lifestyle?nodeId=5836&accu=DRSWR&isChild=true [4] https://www.insurance.wa.gov/when-can-i-sign-medicare -Seth DealDid you know that choosing the wrong time to take Social Security could cost you thousands? As a Washington State employee, you have a unique advantage – your PERS, LEOFF, TRS, or SERS pension gives you more flexibility in this crucial decision than most Americans have. Let me share a quick story. Recently I met with a prospective client, a long-time PERS 2 member working at the Department of Ecology. She was planning to take Social Security at 62, the earliest possible age. After we looked at her numbers together, she realized waiting until 70 would give her an extra $1,000 every month for life [2]. That's an extra $12,000 per year – money that could fund her grandkids' college funds or those dream vacations she'd been putting off. As your fellow Washingtonian and financial advisor specializing in DRS retirement planning, I'm here to help you make this critical decision. Let's break down everything you need to know about Social Security timing. Why Your DRS Pension Changes Everything Here's what makes your situation special: Unlike most Americans, you have a guaranteed pension. This pension can be your bridge to larger Social Security payments later. Many of my DRS clients use their pension to delay Social Security, letting those benefits grow by 8% each year after full retirement age [2]. Think of it this way: Your pension is like having a reliable Toyota that gets you where you need to go, while Social Security can be your luxury car upgrade. Your Three Main Options (With Real Numbers) Let's look at what this means in dollars and cents. Say your full retirement age benefit would be $2,000 monthly. Here's how the numbers shake out [2]:
Here's a strategy I often recommend to my Washington State clients: Use your DRS pension as your primary income source while letting your Social Security grow. Many of my clients find they can live comfortably on their pension plus some savings, allowing their Social Security to increase by that valuable 8% per year [2]. Healthcare Timing Matters Too Here's something many advisors miss: While you can start Social Security at 62, Medicare doesn't kick in until 65 [2]. As a state employee, you have access to PEBB benefits after retirement, which could influence your timing decision. We need to factor in your healthcare coverage when planning your Social Security start date [3]. Health care expenses in retirement are one of the largest expenses that you will face in retirement. Will Social Security Be There for You? I hear this concern frequently. Recent surveys show that 72% of adults worry about the system running out of funding in their lifetime [4]. Here's the truth: Even in the worst-case scenario, if absolutely nothing is done to fix the system, Social Security would still pay about 79% of promised benefits [5]. Plus, as a state employee with a pension, you're better protected than most Americans against any potential changes. Making Your Best Choice Here's your action plan:
Your DRS pension gives you options that most Americans don't have. Use this advantage! Don't just follow what your coworkers are doing – your situation is unique. Remember my prospective client from the beginning? She decided to use her PERS pension as her bridge to age 70, maximizing her Social Security benefit. Want to know exactly what this means for your situation? Let's talk about your specific numbers and create a plan that maximizes both your pension and Social Security benefits. Sources: [1] https://www.ssa.gov/benefits/retirement/planner/agereduction.html [2] https://www.fidelity.com/viewpoints/retirement/social-security-at-62 [3] https://www.ssa.gov/pubs/EN-05-10147.pdf [4] https://news.nationwide.com/adults-believe-social-security-system-needs-to-change/ [5] https://www.gao.gov/blog/there-are-options-reforming-social-security-action-needed-now -Seth DealAs a former city employee turned financial advisor, I've seen firsthand how healthcare costs can catch retirees off guard. I’ve learned that successful retirement planning requires a deep understanding of healthcare costs and coverage options. Don’t let your retirement be derailed by unexpected medical expenses. The Reality of Healthcare Costs in Retirement Recent data shows that a 65-year-old retiring today should expect to spend approximately $165,000 in healthcare costs throughout retirement [8]. This figure can be particularly concerning for Washington State public employees transitioning from active service to retirement. The Washington State Advantage One unique aspect of being a Washington State public employee is access to the Public Employee Benefits Board (PEBB) program. While private sector employees often face uncertainty about post-retirement healthcare options, Washington public servants have a structured system designed to provide continued coverage. However, understanding how to maximize these benefits requires careful planning and consideration. Understanding Your PEBB Benefits: The Foundation of Your Healthcare Security Eligibility Requirements To qualify for Public Employees Benefits Board (PEBB) retiree coverage, you must:
The transition from active employment to retirement requires careful timing. I recommend starting your planning process at least 12 months before your intended retirement date. This gives you ample time to:
The cost often takes soon to be retirees off guard. Let’s spend some time going over the 2025 healthcare plan options. If you’re going to retire in 2026, the costs will likely be higher than this. Non-Medicare Coverage Single subscriber monthly premiums for popular plans:
Monthly premiums for 2025:
When selecting your coverage, consider:
When you reach 65, your coverage structure undergoes significant changes:
Missing Medicare enrollment deadlines can result in permanent penalties. Key dates to remember:
Washington State has implemented WA Cares, providing qualifying residents with up to $36,500 (adjusted for inflation) for long-term care costs, funded by a 0.58% payroll tax [5]. This program can be a supplement to your retirement healthcare planning. However, this is just a fraction of long-term care costs, additional planning must be done to ensure you’re covered if you need long-term care. Supplemental Long-Term Care Considerations Consider whether you need additional long-term care coverage based on:
Beyond Basic Coverage: Emergency Planning Having seen the impact of unexpected medical expenses – I cannot stress enough the importance of building an emergency medical fund. While PEBB provides excellent coverage, having additional savings can provide peace of mind and financial flexibility. Building Your Healthcare Emergency Fund Consider setting aside funds for:
Action Steps for a Secure Healthcare Future
Let's address some frequent misunderstandings I've encountered while advising public employees: Myth: "PEBB coverage automatically continues into retirement." Reality: You must actively enroll within 60 days of your employer-paid coverage ending. Myth: "Medicare replaces PEBB coverage at age 65." Reality: Medicare and PEBB work together, with Medicare becoming primary and PEBB secondary. Myth: "Healthcare costs are fixed in retirement." Reality: Costs typically increase with age, and premiums adjust annually. Proactive Planning Makes the Difference One of the most valuable lessons I’ve learned is that early planning leads to better outcomes. Those who start planning their healthcare coverage early often have more options and fewer surprises in retirement. Looking Ahead Healthcare planning for retirement is complex, but as Washington State public employees, you have access to valuable benefits and resources. The key is understanding and optimizing these benefits while building additional financial safeguards. Get Started Today Ready to take control of your retirement healthcare planning? Here are your next steps:
Sources: [1] https://www.hca.wa.gov/assets/pebb/51-0275-retiree-premiums-2025.pdf [2] https://www.hca.wa.gov/assets/pebb/51-0275-retiree-premiums-2024.pdf [3] https://wssra.org/view/download.php/about-wrssa/retirement-planning/retirement-planning-guide [4] https://www.hca.wa.gov/employee-retiree-benefits/retirees/medical-plans-and-benefits [5] https://wacaresfund.wa.gov/how-it-works [6] https://wssra.org/view/download.php/misc-downloads/retirement-planning-guide [7] https://hr.uw.edu/benefits/retirement-plans/nearing-retirement/insurance-during-retirement/ [8]https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2024-retiree-health-care-cost-estimate-as-americans-seek-clarity-arou/s/7322cc17-0b90-46c4-ba49-38d6e91c3961 [9] https://kingcounty.gov/en/legacy/audience/employees/benefits/retirement [10] https://www.plansponsor.com/health-care-retirement-will-cost-average-315000/ -Seth DealI’ve been having conversations with lots of public sector employees lately. One of the biggest concerns that I have been hearing is they are not sure if their pension will be enough for the retirement they’ve envisioned. If this resonates with you, you’re not alone. According to the National Institute on Retirement Security, 55% of Americans are concerned about their ability to achieve a secure retirement [1]. As a former city employee who now helps state and local government employees plan for retirement, I am on a mission to help Washington State public employees become aware of what the gaps are and how to fill them. Understanding the Gap Your pension provides a solid foundation for retirement, however, many are surprised that it’s not enough to fully meet your retirement needs. Based on my experience, if you worked a full career in public service, your pension will only replace 50-60% of pre-retirement income. Let me share a hypothetical story….Sarah, a PERS 2 member, assumed her 25 years of service credit would provide a comfortable retirement. After getting her DRS benefit estimate, she was shocked to discover her pension would only provide about $4,250 a month – ½ of her current income. This gap is what I call the “pension comfort disconnect,” and it’s more common than you might think. This gap becomes particularly significant when considering factors unique to Washington State. Consider the cost differences between living in Spokane and Seattle. The cost of living in Seattle is over 30% higher in Seattle than in Spokane [2]. Common Misconceptions There are a number of additional misconceptions that I’ve encountered that can lead to inadequate retirement preparation. 1.“Healthcare costs are fully covered in retirement” While some agencies offer retiree healthcare benefits, many don’t, and Medicare doesn’t begin until age 65. You will need to purchase a policy through PEBB, SEBB, or the healthcare marketplace. Even if your organization does offer some sort of health care benefit it will be more expense in retirement than during your working years. The Fidelity Retiree Health Care Cost Estimate shows that a 65-year-old retiring in 2024 will spend on average $165,000 in healthcare and medical expenses in retirement [3]. Long-term care costs in Olympia average $171,550 for a private room in a nursing home [4]. These health care numbers are staggering, and you need to be prepared for any situation. 2.“I can’t save additional money for retirement while contributing to my pension” You should consider and can use other supplemental retirement savings vehicles. Here’s a list of some common options available:
The PERS 2 employee contribution rate is 6.36%. The LEOFF 2 employee contribution rate is 8.53%. In my experience, the most successful and prepared retirees are saving at least an additional 15% beyond their pension savings. Bridging the Gap: Action Steps Here are concrete steps that you can take to strengthen your retirement planning: 1.Maximize Your Deferred Compensation Contributions You can contribute both pre-tax and post-tax (Roth) contributions to DCP. Once you separate from your employer, you can withdraw these funds penalty free before 59.5. There are very few other qualified retirement plans that have this flexibility. If you contributed on a pre-tax basis, your withdrawals will still be subject to ordinary income tax. Some agencies offer matching contributions, so be sure to take full advantage of employer matches. Consider increasing your contributions by 1% each year and if you're contributing on a percentage basis already, each time you get a pay increase, your contributions will increase. 2.Understand Your Pension Formula DRS has a benefit estimator through your online account that can be used to estimate your pension benefit. For PERS 2 members, your benefit calculation is 2% x service credit years x average final compensation [5]. Be sure to check the specific calculation for your plan. As you approach retirement, consider how overtime or additional duties to increase your final compensation calculation. Plan for the survivor benefit option that best fits your family’s needs. 3.Build Multiple Income Streams Contributing to a Roth IRA and a taxable brokerage account gives you different buckets of money to pull from in retirement. Think about part-time work or consulting opportunities in retirement. 4.Create a Healthcare Strategy As you approach retirement, research health care bridge options if you’re retiring before Medicare eligibility. Long-term care costs are skyrocketing and you need to be prepared for them through either long-term care insurance or through specific savings. Consider utilizing a HSA if you’re eligible. 5.Plan for Tax Efficiency Your pension is taxed at ordinary income rates. As you’re saving for retirement, consider strategically locating investments across accounts with different tax treatments. Local Context Matters Washington State's diverse geography creates unique retirement planning considerations. Housing costs, tax implications, and lifestyle expectations can vary dramatically based on where you live. A retirement income that might be comfortable in Spokane could feel tight in Seattle. Recent data from the Washington State Office of Financial Management highlights these regional differences [6]:
These variations can significantly impact your retirement planning strategy. The Impact of Career Choices Your career path within public service can significantly affect your retirement outcomes. Based on my experience working with various municipalities, here are some considerations:
Planning a secure retirement demands careful planning and the right strategy. Whether you’re just starting your public service career or nearing retirement, now is the time to assess your retirement strategy and identify any gaps that need attention. Sources [1] https://www.prnewswire.com/news-releases/83-percent-of-americans-believe-all-workers-should-have-a-pension-new-national-institute-on-retirement-security-report-finds-302070695.html [2] https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&city1=Spokane%2C+WA&country2=United+States&city2=Seattle%2C+WA [3] https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2024-retiree-health-care-cost-estimate-as-americans-seek-clarity-arou/s/7322cc17-0b90-46c4-ba49-38d6e91c3961 [4] https://www.genworth.com/aging-and-you/finances/cost-of-care [5] https://www.drs.wa.gov/plan/pers2/ [6] https://ofm.wa.gov/washington-data-research/statewide-data/washington-trends/economic-trends/median-home-price -Seth DealYou've worked hard, saved diligently, and now you're enjoying your well-earned retirement. But even in retirement, life can throw curveballs. An unexpected home repair, a sudden medical expense, or even a once-in-a-lifetime opportunity can strain your carefully planned budget. That's where an emergency fund comes in. As a financial advisor, building a war chest containing an emergency fund and high-quality short duration bonds in a diversified investment portfolio is something I help my clients with on a regular basis. Let's explore why you need an emergency fund and how to build and maintain it effectively. Why You Need an Emergency Fund in Retirement You might be thinking, "I'm retired. I've already saved. Why do I need an emergency fund?" Here's why:
How Much Should You Have in Your Retirement Emergency Fund? While working, the general rule of thumb is 3-6 months of expenses in an emergency fund. In retirement, you might want to take a different approach: General Guidelines: For those near retirement or in retirement, having approximately 7 years of expenses in high quality, short duration bonds in your investment portfolio will provide a war chest to draw upon. The exact dollar amount that you have saved up is going to be very dependent on your unique situation. Example:
Factors to Consider:
Building Your Emergency Fund: Strategies for Retirees If you're starting from scratch or looking to boost your emergency savings, here are some strategies: 1. Start Small, But Start Now Even small, regular contributions can add up over time. Action Step: Set up an automatic transfer of $50 or $100 per month to your emergency fund. 2. Reassess Your Budget Look for areas where you can trim expenses to redirect money to your emergency fund. Pro Tip: Review subscriptions and memberships. You might find services you no longer use or need. 3. Consider Part-Time Work A part-time job can provide extra income to build your emergency fund while keeping you active and engaged. Idea: Look for flexible, enjoyable work that aligns with your interests and skills. 4. Use Windfalls Wisely Dedicate a portion of any windfalls – like tax refunds or inheritances – to your emergency fund. Rule of Thumb: Consider allocating 50% of windfalls to your emergency fund until you reach your goal. 5. Optimize Your Retirement Account Withdrawals If you're taking required minimum distributions (RMDs), consider setting aside a portion for your emergency fund. Strategy: If your RMD is more than you need for expenses, direct the excess to your taxable brokerage account. Where to Keep Your Emergency Fund Your emergency fund should be easily accessible but not so accessible that you're tempted to dip into it for non-emergencies. Good Options:
Once you've built your emergency fund, maintaining it is crucial. Here's how: 1. Regular Reviews Review your emergency fund at least annually to ensure it still meets your needs. Checklist:
If you dip into your emergency fund, make a plan to replenish it. Strategy: Temporarily reduce discretionary spending or consider taking a larger distribution from retirement accounts (if feasible, but keep in mind tax consequences) to rebuild your fund. 3. Adjust for Inflation The purchasing power of your emergency fund can erode over time due to inflation. Action Step: Increase your emergency fund balance by 2-3% annually to keep pace with inflation. 4. Balance with Other Financial Goals While important, your emergency fund shouldn't come at the expense of other financial priorities. Consider: Balance building your emergency fund with other goals like charitable giving or legacy planning. Tapping Your Emergency Fund: When and How Knowing when to use your emergency fund is as important as having one. Here are some guidelines: Appropriate Uses:
As a Washington state retiree, you have some unique factors to consider:
Ready to build or optimize your retirement emergency fund? Here's your action plan:
Sources:
-Seth Deal |
AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
March 2025
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