FAQs for Banner Health Employees Nearing Retirement
As you near retirement, you probably have questions about how to prepare for the next phase of your life. The decisions you make in the years leading up to retirement can significantly impact your financial security for decades to come.
At TrueWealth Financial Partners, we've helped plenty of people just like you. In this guide, we’re going to answer some of the most common questions about retiring from Banner Health.
Banner Health 401(k) Questions
When can I start withdrawing from my Banner Health 401(k) without penalties?
You can generally withdraw from your 401(k) without the 10% early withdrawal penalty starting at age 59½. However, if you're still employed by Banner Health and leave the company in or after the year you turn 55, you may be eligible for penalty-free withdrawals under the rule of 55.
What are my distribution options when I retire from Banner Health?
When you leave Banner Health, you have several options:
Leave your 401(k) with Fidelity (if the balance meets minimums)
Roll it over to an IRA
Roll it into a new employer's plan
Take a distribution (possibly subject to taxes and potential penalties)
Each option has different advantages depending on your situation. A fiduciary financial advisor can help you make the right choice for your case.
Do I have to start taking money out of my 401(k) at a certain age?
If you’ve made pre-tax contributions to your 401(k), you will have to start taking required minimum distributions (RMDs) from your Banner Health 401(k) by April 1 of the year following the year you turn 73. However, if you're still working at Banner Health past age 73, you can delay RMDs from your current employer's plan until you retire.
Roth (after-tax) funds are not subject to RMDs.
How much will I be required to withdraw each year?
Your RMD is calculated by dividing your account balance on December 31 of the previous year by a life expectancy factor from IRS tables.
Can I take more than the required minimum?
Yes, you can always withdraw more than the required minimum. However, be mindful of the tax implications, as larger withdrawals could push you into higher tax brackets and potentially affect your Medicare premiums or Social Security taxation.
What happens if I forget to take my RMD?
If you don't take your full RMD by the deadline, you'll face an IRS penalty of 25% of the amount not withdrawn (reduced to 10% if corrected quickly). This is one of the steepest penalties in the tax code, so it's crucial to stay on top of your RMD requirements.
Tax Planning Questions
How will my Banner Health 401(k) withdrawals be taxed in retirement?
Withdrawals from your traditional (pre-tax) 401(k) contributions will be taxed as ordinary income at your current tax rate.
Roth 401(k) contributions will grow tax-free, and you can make qualified withdrawals tax-free as long as the account has been open for at least five years and you're over 59½.
Should I roll my 401(k) to an IRA when I retire?
Rolling to an IRA often provides more investment options and potentially lower fees, but you'll lose the ability to delay RMDs if you continue working past 73. You’ll want to consider your specific situation, including investment options, fees, and future employment plans, when making this choice. Your financial advisor can help you make the right call.
How can I minimize taxes on my retirement withdrawals?
There are a number of strategies you can use to reduce your taxes. Common options include:
Tax bracket management (withdrawing amounts that keep you in lower brackets)
Making Roth conversions during lower-income years
Using different account types strategically to manage your tax burden
What about state taxes on my retirement income?
This depends on where you live in retirement. Some states don't tax retirement income, while others do. If you're considering relocating, state tax treatment of retirement income should be a factor in your decision.
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Health Savings Account (HSA) Questions
What happens to my Banner Health HSA when I retire?
Your HSA remains yours forever. You can take it with you if you leave Banner Health. After age 65, you can withdraw HSA funds for any purpose without penalty (though you'll pay ordinary income tax on non-medical withdrawals).
Should I use my HSA to pay for current medical expenses or save it for retirement?
If you can afford to pay medical expenses out of pocket, consider preserving your HSA for retirement. It's often called the "ultimate retirement account" because of its triple tax advantages and lack of required minimum distributions.
Can I still contribute to my HSA after I retire?
You can, but only if you're enrolled in an HSA-eligible high-deductible health plan. If you enroll in Medicare, you can no longer contribute to an HSA, though you can still use existing funds.
Healthcare and Medicare Questions
When should I enroll in Medicare?
You should enroll in Medicare within eight months of leaving Banner Health if you're 65 or older to avoid late enrollment penalties. If you're still working past 65, you may be able to delay Medicare Part B enrollment while maintaining Banner Health coverage.
How will Medicare affect my Banner Health benefits?
Once you enroll in Medicare, you'll no longer be eligible to contribute to an HSA. You'll need to coordinate Medicare with any retiree health benefits Banner Health may offer.
What about long-term care insurance?
Consider whether you need long-term care insurance while you're still healthy and employed. Long-term care costs can quickly deplete retirement savings, and insurance becomes more expensive (or unavailable) as you age.
Social Security Questions
When should I start taking Social Security?
You can start as early as 62 (with reduced benefits) or delay until age 70 (for maximum benefits). The optimal timing depends on your health, other income sources, and life expectancy. Each year you delay past full retirement age increases your benefit by about 8%.
How will Social Security affect my taxes?
Depending on your total retirement income, up to 85% of your Social Security benefits may be taxable. This is another reason to plan your withdrawal strategy carefully across different account types.
Can I work part-time and still collect Social Security?
Yes, but if you're under full retirement age, your benefits may be reduced if you earn above certain thresholds. After full retirement age, you can earn any amount without affecting your Social Security benefits.
Legacy Pension Plans
I think I may have a Banner Health pension. How do I find out?
If you started with Samaritan, Lutheran, or Banner prior to 1992, contact Principal Life Insurance Company at 800-247-7011 to ask about a pension.
If you started at Sun Health prior to 2008, contact the Fidelity Retirement Service Center at 800-941-8043.
What are my options if I have a pension benefit?
Pension options typically include: a single life annuity (higher monthly payment for your lifetime only) or a joint and survivor annuity (lower monthly payment that continues for your spouse's lifetime). Consider your health, your spouse's financial needs, and other income sources when deciding.
Investment and Portfolio Questions
How should I adjust my investments as I approach retirement?
Many financial advisors suggest gradually becoming more conservative as you near retirement, but you'll likely need some growth investments since retirement could last 20–30 years. Consider your risk tolerance, time horizon, and income needs.
Should I keep all my money in Banner Health stock?
If you have Banner Health stock in your 401(k), consider diversifying to reduce concentration risk. While Banner Health may be a good company, having too much of your retirement savings in any single stock can be risky.
What's a safe withdrawal rate in retirement?
The traditional “4% rule” suggests withdrawing 4% of your portfolio in the first year of retirement, then adjusting for inflation each year. However, current market conditions and low interest rates may require more flexible approaches.
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Estate Planning Questions
Do I need to update my beneficiaries before retiring?
Yes, your 401(k) and other retirement accounts can be passed on to your heirs, so keep beneficiary designations current. Review and update beneficiaries for all accounts, especially after major life events.
What happens to my retirement accounts if I die?
The rules depend on who inherits your accounts. Spouses have the most flexibility, while non-spouse beneficiaries generally must withdraw inherited retirement accounts within 10 years under current rules.
Should I consider charitable giving strategies?
Retirement plan assets can come with significant taxes when left to loved ones. Consider naming Banner Health Foundation or other charities as beneficiaries for part of your retirement accounts to provide tax benefits.
Timing and Transition Questions
Should I retire all at once or gradually reduce my hours?
This depends on Banner Health's policies, your financial readiness, and personal preferences. Some employees benefit from a gradual transition, while others prefer a clean break.
How much money do I need to retire comfortably?
Financial professionals recommend saving enough to replace 75%–80% of your pre-retirement income to maintain your lifestyle in retirement. However, your specific needs may be higher or lower depending on your circumstances.
What if I'm not financially ready to retire when I want to?
Consider working a few more years, reducing expenses, or exploring part-time work options. Even an extra year or two of working can significantly improve your retirement security.
Getting Professional Help
When should I start planning for retirement?
Ideally, start serious retirement planning at least 5 to 10 years before your intended retirement date. This gives you time to make adjustments and optimize your strategy.
Do I need a financial advisor for retirement planning?
While not required, many retirees benefit from professional guidance, especially given the complexity of tax planning, healthcare decisions, and investment management in retirement.
What should I look for in a retirement planning advisor?
Look for a financial advisor who:
Is licensed as a fee-only fiduciary advisor
Understands Banner Health's specific retirement plans
Offers comprehensive retirement planning services
Can help coordinate all aspects of your retirement strategy, especially tax optimization and distributions
Get Help from the TrueWealth Team!
As a Banner Health employee, you have access to excellent retirement benefits, including a generous 401(k) match and valuable HSA options. Making the most of these benefits will help ensure you're financially prepared for the years ahead.
At TrueWealth Financial Partners, we specialize in helping healthcare professionals like you prepare for retirement. Our fee-only fiduciary advisors can help you develop a financial strategy tailored to your unique goals and circumstances.
Schedule a free consultation today, and we’ll be happy to help you take the next step toward a better retirement.
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