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5 Bare Essentials to Consider When Retiring from SCE

Retirement can seem like the most exciting thing in the world — and the most overwhelming. On one hand, you finally get to spend your time on your terms. Maybe that’s traveling the world. Maybe it’s spending more time with your grandkids. Or maybe it’s just spending quiet evenings at home. 

Still, there’s that lingering question: “How does this all work?” So much goes into planning for retirement, as well as managing your money appropriately once you get to that point. It can be unnerving to consider how you’ll manage the nuances of your retirement plan, navigate Social Security benefits, and ensure you have the money you need to support your lifestyle in retirement. 

At Warren Street Wealth Advisors, we hear these concerns from clients often. In response, we’ve developed a specialty focus on retirement planning for Southern California Edison employees. After helping hundreds of SCE retirees navigate this crucial time, we know your retirement packages and employee benefits programs inside and out. Below are the top five bare essentials you need to know to retire from SCE.

1. Take your final distribution when you want.

It’s a common misconception that you are forced to take your final distribution at retirement, but that’s not the case. You can wait until Jan. 1, request your final distribution, and then take a direct payment to avoid penalties using the “55 Rule” if you are 55 years or older. This will also allow you to defer the income tax due until the following year’s tax return.

2. Understand that it’s possible to retire penalty-free between age 55 and 59 ½.

Here’s a scenario we see all the time: you’re 57. You want to retire. You don’t want to wait until 59 ½ 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 the money out of your IRA before 59 ½. So are you stuck? Nope.

There are a lot of moving parts to this process, but we can take advantage of IRS rules like 72(t) distributions or the previously mentioned “55 Rule” to ensure our clients do everything possible to avoid paying penalties.

3. Take advantage of your medical subsidy.

Did you know that you are eligible for a retiree medical subsidy? The most common subsidies are 50% and 85%. When you retire, Edison will pay either 50% or 85% of your current medical insurance premium as a “continuation benefit” in retirement. Simply put, what you pay today is what you’ll pay in retirement. Of course, this is as long as you reach your required benefit milestone. (Unsure what your benefit is? Call EIX Benefits at 866-693-4947 to ask what benefit you have and at what age you’ll receive it.)

4. Weigh your Social Security options.

There is all kinds of information out there about what to do with your Social Security. Let us boil it all down: you don’t have to take it at 62! When we build a financial plan for a client, we calculate all options for optimizing Social Security. It’s ultimately your decision, but we suggest weighing your options before committing to collecting the 25-30% reduced benefit at age 62.

5. Use your 401(k) efficiently.

Your 401(k) can be an immensely powerful tool if you understand how to max it out and diversify your investments. In most cases, this is the point at which you’ll want to hire a professional team to help. One tool that can help you is the Charles Schwab Personal Choice Retirement Account (PCRA) option included in your 401(k) plan. The PCRA option lets you purchase investments on your own or hire a professional advisor to do it for you. This is made available through your Tier 3 option. 

These are just a few of the tips and resources we offer SCE employees. For a deeper dive into strategies you can take to help you maximize your money in retirement, download our full SCE Retirement Handbook here.

Want to chat further? Feel free to reach out. We’ve worked with hundreds of employees with your exact plan and are glad to point you in the right direction.

Cary Facer

Founder and Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

The Retirement Handbook

The Retirement Handbook  (click to download)

Retirement is coming soon, and you should be excited. However, you might have so many questions and concerns about retirement that you’re more nervous than anything else.

We get it.

At Warren Street Wealth Advisors, we’ve helped countless people, from families to business owners, plan for their retirement and reach their financial goals. We put together this Retirement Handbook to help you on your way to a successful retirement.


 

1. Have a Plan

Nothing else on this list matters if you don’t have a personalized financial plan.

Having a plan not only lays out the destination, but it shows you the steps you need to take along the way. It’s your roadmap to a successful retirement.

2. No Seriously, Have a Plan

Having a plan is half the battle. 

You can be tax savvy and an investment genius, but if you don’t have a plan for retirement or any financial goal, chances are you’ll miss the mark.

3. Say “Goodbye” to Debt

Excess debt is the biggest destroyer of retirement dreams. 

If you have excess debt, then formulate a plan to eliminate it as soon as possible. It’s not the end of the world, but it might be time to roll up your sleeves and get to work.

Imagine how rewarding it will be once you have freed yourself from excess debt.

4. Budget it Out

Targeting your annual expenses is key to understanding if you have enough money to retire.

It’s no fun to build a budget. We get it.

However, knowing where your money is going on a monthly basis may help you identify where you can save. Get rid of the stuff you hate and keep more of the things you love. Love your bowling league? Keep it. Hate your cable or phone bill? Shop it around or eliminate it all together.

Not sure where to start with your budget? No problem. Download our retirement toolkit and utilize the Budget Template to help get you started.

5. Build Up 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.

Having cash available can help you through some of these hard times. Maybe the car breaks down or you need to find a new job. Having six months of cash on hand in a savings account can help out and keep you prepared for life’s ups and downs.

6. Save ’til it Hurts.

401(k). 403(b). 457(b). IRA. SEP. Simple. Deferred Comp. Roth.

Max it out.

Are you putting money aside for the long term? Does your employer have a 401(k) program? Do you have a personal investment account you contribute to?

Whatever it is, make sure you continue to think long-term for that beautiful retirement you’ve been dreaming of.

7. Wait Until Full Retirement Age to Take Social Security

There are all kinds of articles out there about what to do about your Social Security. Let us boil it all down: you don’t have to take it at 62!

When we build a financial plan, we calculate all options for optimizing Social Security, no matter how many times we do it, one thing becomes clear every time: it’s usually best to wait until your full retirement age to take Social Security.

There is also plenty of evidence to support wait until age 70 too as the 32% increase in benefit can be worth the wait. It’s ultimately your decision, and we suggest weighing your options before committing to collecting a 25-30% reduced benefit at age 62.

8. Have a Plan

Yep. Said it again.

If you’re not sure where to start with your financial plan, that’s OK. We can help.


 

Contact Us

Schedule a free consultation to talk through your finances and take the first step toward building a confident retirement.

Warren Street Wealth Advisors LLC. is a Registered Investment Advisor. The information posted here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

The Retirement Handbook: Southern California Edison Edition

The Retirement Handbook: Southern California Edison Edition

Retirement is just around the corner, and you should be excited. But some of us have many questions and concerns about retirement causing us to feel more nervous than anything else.

We understand these feelings.

At Warren Street Wealth Advisors, we’ve helped hundreds of Southern California Edison retirees navigate this crucial time. In the process, we’ve learned about SCE’s retirement and employee benefits programs inside and out. We’ve put together our Southern California Edison Retirement Handbook as a guide for you.


1. Have a Plan

Nothing else on this list matters if you don’t have a personalized financial plan.

A personalized financial plan is the roadmap to your comfortable retirement. You can know your benefits inside-out and be clever about taxes and investments, but if you don’t have a roadmap for navigating your retirement, you’ll never feel confident along the way.

2. Seriously, Have a Plan

Having a plan is essential for any major life transition, and navigating your retirement with wisdom and confidence is certainly part of a major life transition!

OK, let’s move on…

3. Plan to Retire Around October

If you are grandfathered into the old SCE pension formula, then you should plan to retire around October. This will allow you to choose which year’s plan rate provides you with the better benefit (Learn more HERE).

It’s important to know that you have a choice, review your options, then decide whether to retire on December 1st or January 1st – whichever projection pays the higher benefit.

If you are not grandfathered, retiring at the end of the year is still a great idea, especially if you need to take a large distribution pre-59 ½.

You are not forced to take your final distribution at retirement. You can wait until January 1st, request your final distribution, and then take a direct payment to avoid penalties using the “55 rule” if you are 55 years or older. This will also allow you to defer the income tax to the following year’s tax return.

This might seem complicated, but it’s a normal process for our clients who retired early.

4. Retire After 55 But Before 59 1/2 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 59 ½ 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 the money out of your IRA before 59 ½. So are you stuck? Nope.

There are a lot of moving parts to this process, but we can take advantage of IRS rules like 72(t) distributions or the previously mentioned “55 rule” to ensure our clients do everything possible to avoid paying penalties.

5. Take Advantage of Your Medical Subsidy

Did you know that you are eligible for a retiree medical subsidy? The most common subsidies are 50% and 85%. When you retire, Edison will pay either 50% or 85% of your current medical insurance premium as a “continuation benefit” in retirement. Simply put, what you pay today is what you’ll pay in retirement. Of course, this is as long as you reach your required benefit milestone.

Unsure what your benefit is? You can call EIX Benefits to ask what benefit you have and at what age you’ll receive it. Call 866-693-4947.

Medical expenses are a huge cost for retirees, knowing what portion is covered by your employer is critical to planning a successful retirement.

6. Say “Goodbye” to Credit Card Debt

If you have credit card debt, then it’s time for a plan, a budget, and some hard work.

Debt can be intimidating, but you can pay it off! One of our favorite things is a client freeing themselves from the stress of mounting credit card debt. You may just need some help and a plan.

7. If Eligible, Plan for Your Sick Time Payout

Your sick time payout can be a significant amount and can be a boost into retirement, especially if you’re retiring early. You can run a pension projection online that will include a calculation of your accrued sick time payout . This will provide  you more clarity about how much money you’ll start with when you retire, and it could help bridge the gap to 59 ½.

8. Build and Keep a Budget

We get it: it’s no fun to build a budget, but it’s the first step to discovering what retirement will look like.

Get rid of the stuff you don’t use and keep what makes you happy! Not sure where to start? No problem, use our Retirement Tool Kit to make it easy.

9. 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. Need $4,000/month to live? Then have around $24,000 in savings & checking. Now, you’re prepared for the ups and downs that life can throw at us at any age.

10. Weigh All Your Options on Social Security

There is a lot of information out there about what to do with Social Security. Let me boil it all down: you don’t have to take it at 62! When we build a financial plan for a client, we calculate all options for optimizing Social Security.

It’s ultimately your decision, we suggest weighing your options before committing to collecting the 25-30% reduced benefit at age 62.

11. Invest for Retirement

Max out your 401(k). Diversify your investments. Consider hiring a pro.

Make sure your investments are retirement ready. Do you have too much cash? Too much of a single stock? If you have ESOP shares, are you getting the most tax efficiency with them?

If you’re unsure, then having a team on your side can help you get the most out of your plan and make sure your investments match your goals and objectives.

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.


Contact Us

Schedule a free consultation to talk through your finances and take the first step toward building a confident retirement.

Warren Street Wealth Advisors LLC. is a Registered Investment Advisor. The information posted here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.