12 Keys To Retiring From SCE With Confidence
Retirement is coming soon, and you know you should be excited. But some of us have so many questions and concerns about retirement that we’re more nervous than anything else.
We understand.
At Warren Street Wealth Advisors, we’ve helped hundreds of Southern California Edison retirees navigate this crucial but confusing time. In the process, we’ve learned SCE’s retirement programs and employee benefits inside and out. So we put together a list of our top 12 keys to retiring from SCE confidently and stress-free.
1. Have A Plan
Nothing else in this post matters if you don’t have a personalized financial plan. We believe this so strongly that building a personalized financial plan is the first thing we do with every one of our clients.
A personalized financial plan is the roadmap to your comfortable, stress-free retirement. You can know your benefits inside-out and be clever about taxes and investments. But if you don’t have a map for navigating your retirement, you’ll never feel confident along the way.
And if you don’t have a map, who knows where you’ll end up?
2. Seriously: Have A Plan
I wrote that twice because I wanted to be certain you see how important this is.
Having a plan is essential for any major life decision, and navigating your retirement with wisdom and confidence is certainly part of a major life decision!
Plus, if you’re confused about any of the information below, then setting up a plan with a CERTIFIED FINANCIAL PLANNER™ (like our very own Justin D. Rucci, CFP®) is the easiest way to walk through all of it in terms you’ll understand. Perhaps your next step is to contact us schedule a free consultation and talk about how you can get started.
OK, let’s move on…
3. Plan to Retire Around October
If you are grandfathered into the old SCE pension plan formula and are interested in the lump sum option then you should plan to retire around October. This will allow you to choose which interest rate you want for your grandfathered formula. You can choose whichever gives you the larger lump sum payout: the current year or the next one during this small window of time (learn more HERE).
The main takeaways are to know that you have a choice, weigh the benefits, then decide to retire on December 1st or January 1st–whichever projection pays the higher lump sum benefit.
4. Retire After 55 But Before 59½ Without Paying Penalties
Here’s a scenario we see all the time: you’re 57. You want to retire. You don’t want to wait until you’re 59½ to do it. But you know that there’s a 10% federal tax penalty and a 2.5% California state tax penalty if you take money out of your 401k before then. So are you stuck?
Nope.
This is what you do: use a 72t Distribution, the “Age 55” IRS Rule, or a combination of the two, to keep you from paying penalties. Very simply, these rules allow you to access a portion of your 401k penalty-free that can sustain you until you get to age 59 1/2.
There are a lot of moving parts here, but at WSWA, we use these rules to make certain that none of our clients pay penalties. Ever.
5. Take Advantage of Your Medical Subsidy
Did you know that you’re eligible for retiree medical subsidy? Call HR and ask them how much you get. 50% or 85% are the most common. This means that when you retire, Edison will pay 50-85% of your retiree medical insurance premium. This is one new cost you’ll have in retirement that you’ll want to budget for.
6. Say “Goodbye” To Credit Card Debt
If you have significant credit card debt, then it’s time for a plan (there it is again!), a budget, and some hard work.
Credit card debt can be intimidating, but you can pay it off! At WSWA, one of our favorite things to see is a client freeing himself or herself from the stress of mounting credit card debt. You may just need some help and a plan.
7. Plan For Your Sick Time Payout
Sick time payout can help you tremendously, especially if you’re not yet 59½. You can run a pension projection online and it will include a calculation of your accrued sick time payout value. That gives you more clarity about how much money you’ll start with when you retire.
8. Build Up 6 Months Worth Of Emergency Savings
We’re always optimistic about the future, but sometimes life takes surprising and difficult turns. Wise financial planning means being prepared for those situations.
We recommend that you save at least 6 months worth of living expenses in case of an emergency. So if you need $4,000/month to live, then have around $24,000 saved in savings and checking. That way, you’re prepared for all of the ups and downs that can happen.
9. Build And Keep A Budget
We get it: it’s no fun to build a budget. But writing down all your income and expenses will help you identify where you can save.
Building a budget doesn’t mean eliminating all of your fun, either. Get rid of the stuff you don’t use, but keep what makes you happy! Do shop your auto insurance around for a better rate. Do call your phone company and cut your bill in half. But don’t quit your bowling league if you love to bowl and bowling makes you happy.
Not sure where to start with your budget? No problem. Use our free budget builder to make it easy.
10. Wait Until Full Retirement Age To Take Social Security
There is all kinds of information out there about what to do about your social security. Let me boil it all down to one simple point for you: you don’t have to take it at 62! When we build a financial plan for a client, we use a tool that calculates all options for optimizing social security. And no matter how many times we do it and how many ways we look at it, one thing becomes clear every time: it’s usually best to wait until your full retirement age (66-67) to take social security.
There is also plenty of evidence to support waiting until age 70 too as the 32% increase in benefit can prove worth the wait. These decisions are typically based around your health at age 62 when deciding to collect or to continue to defer. It’s ultimately your decision, and we suggest weighing your options before committing to collecting the 25% reduced benefit at age 62.
11. Use Your 401k Efficiently
Max it out. Diversify your investments. Hire a pro (like us!) if you don’t love following the markets. Take advantage of the Tier 3 option (it’s called your “Personal Choice Retirement Account”) with Charles Schwab.
Plus, hiring a pro means you’ll have more time for bowling.
12. Have A Plan
You didn’t think this was going to end without one more reminder, did you?
If you’re not sure where to start with your financial plan, that’s OK: we can help. Schedule a free consultation to talk through your finances and take the first step toward building a plan.
You can retire comfortably and confidently. Take the first step to get the help you need today.
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If you have any other questions, we’d love to help. Give us a call today at 714-876-6200 or email us at info@warrenstreetwealth.com. For more helpful financial advice, sign up for our mailing list below!
