Plan for Life Surprises: Retirement Strategies Unveiled

Retirement is a time for relaxation and enjoyment, but what happens when life's unexpected events disrupt your plans?

In this episode, April Schoen guides you through crucial strategies to financially prepare for unexpected retirement events.

In this episode, you’ll discover:

• The real-life impact of health-related surprises and how to plan for them.

• Why diversifying income sources is essential for retirement stability.

• How to leverage whole life insurance for financial flexibility.

• Strategies to handle family and life changes without derailing your financial plans.

• The importance of estate planning in securing your financial future.

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hi everyone, and welcome to another episode of The Secure Retirement Method. My name is April Schoen, and I'm a financial advisor with over a decade of experience of helping clients not just get to retirement, but through retirement. And over the years, I've helped hundreds and hundreds of clients ensure that they reach their goals so that they can enjoy their retirement with confidence. 

And I'm excited to walk you through an important topic today on how do we plan for those unexpected events in retirement? Retirement is supposed to be a time of financial security, of enjoyment, but these unexpected surprises that we know are going to come at us, right? Because life always loves to throw us some curveballs, can really impact our plans. 

So today we're going to talk about some strategies about how you can be financially prepared for those. And why does this matter? Well, retirement is full of unknowns, and you may not realize how much an unexpected event can really impact your finances. Let me share with you a real life example. 

My business partner lost his right leg a few years ago due to a blood clot, and this completely changed his financial situation. For one he was out of work that year for over four months. He immediately had to renovate his home because it now needed to be wheelchair accessible. He needed to buy a new vehicle that could accommodate his wheelchair. And now he has the reality that he's likely going to face these increased costs for care later in life. 

And it happened like that. And this really highlights the importance of planning for the unexpected. So my question for you is, what would happen if a major life event occurred tomorrow. Would your retirement plan hold up? As we go through today, I want to talk about some of these common, unexpected retirement events and how we can prepare for them. 

So the most common ones that we see, health related issues, financial market fluctuations, family and life changes, housing adjustments, unexpected expenses. And while we can't predict the future, we can prepare for it. So let's break down these common unexpected retirement life events and talk about some solutions about how you can prepare for them. 

One of the biggest concerns, I feel like we all have, is having some sort of health related event. But especially when we get into retirement. Now, many people assume that Medicare is going to cover everything, but that's not accurate. There's a lot that Medicare does not cover, so let's talk about that for a second. 

Medicare does not cover for extended care or custodial care. So extended care would be like covering for chronic conditions where you may need more assistance. I want you to think like stroke, memory care, mobility issues. Medicare doesn't pay for that. Or what about custodial care? This is when we need help with those daily living activities like bathing, dressing, eating. Medicare doesn't pay for that either. This could be care that we receive at home. This could be care that we receive in a facility. So we've got to make sure that we have a plan for those. 

So the first thing you want to do is you want to make sure that you do have the right Medicare coverage. Because there are things that Medicare pays for, so you want to make sure you have the right Medicare plan so that you're not paying more out of pocket than you need to. So that's the first thing that we want to make sure that you do have the right Medicare plan. Another option of how you prepare to pay for these expenses is to use an HSA. 

So an HSA is a health savings account. You may or may not be eligible for one. This is going to depend on what sort of health insurance plan you have while you're working. But essentially, you're able to plan for and save for future medical expenses on a tax advantage basis. So you can put money in the HSA today that's tax deferred. You don't pay any taxes on the money you put in today, it grows tax free. 

And then if you use it for qualified medical expenses, it comes out tax free. It's really one of the only truly tax free assets that we have. So building money in an HSA while you're working is one solution for helping cover these health related or extended care costs. And then we also want to make sure that we're like reserving for this. That we're reserving assets for future care. 

So when we think about that, it could be investment accounts, retirement accounts, cash reserves. Making sure that we've got multiple buckets we can tap into if we need it or if we want it. And one thing that is often overlooked is the idea of using whole life insurance in your plan. So I want you to consider how this could help you. Because it's going to help you provide this additional financial flexibility. 

So first of all, the death benefit acts as a safety net. This is going to allow you to spend down your other assets. Think about those investment accounts, those retirement accounts. You can spend those down for care without worrying about one, you running out of money, or two, leaving a spouse without resources. And then also, in these types of policies, there's going to be cash value that's going to be accessible, that has tax advantaged resources available to you that you can use for anything. 

You could use it to supplement your income in retirement, but you could also use it for medical expenses, care needs, or emergencies. And then, depending on availability, there are certain riders that you can have that can provide additional coverage to help offset the cost of care that's going to reduce the strain on your other assets. 

So one of my clients several years ago was retired, and he needed some major dental work done. It's going to be about $10,000 in dental work. That's also something that Medicare doesn't cover, is dental, hearing and vision. And so we looked at all the different options for him, and he actually took money out of his life insurance policy to pay for the dental work. So that's one example of how you can use these other assets to pay for care. 

One of the other risks that we face is having these financial market fluctuations. The stock market downturns can really impact our retirement income, if not planned for properly. There's something called sequence of return risk, and this risk occurs when the stock market is down and we're pulling money out of our portfolio. This can significantly reduce the longevity of our portfolio. How long is our money going to last? 

Because if you withdraw money from your investments when the market is down, you've now locked in your losses, and this can cause you to deplete your assets faster than you expected. So one of the things that you want to do to offset these market fluctuations is to diversify your income sources. We don't want all of our income coming from market driven assets, right? We don't want all of our income coming from just investments and retirement accounts. 

We want to have guaranteed streams of income. Think Social Security, pensions, annuities. These are income streams that are guaranteed for the rest of your life, and they're not dependent on the market. So important for your financial plan. You're also then going to have discretionary income. So can we diversify our discretionary income? Investments, retirement accounts, part time work, real estate. 

How can we also diversify even our discretionary income? So outside of diversifying our income, we also want to maintain some reserves in stable assets. So the idea here is that we want to have a two, maybe three years of expenses set aside that is in something that's going to not be as volatile and be, you know, susceptible, susceptible, if I could say it right, easier, easy for me to say, and it's not going to be impacted by the market. 

So what are some examples for that? Well, obviously you could use cash, you could use whole life insurance that has the cash value components. You could use bonds, other conservative investments. But you really just want to make sure that you've got some assets you can tap into if and when the market is down. So I had a client in 2022 and you may remember the S&P was down 20% in 2022. 

And so a client needed a new roof. And you know, before 2022 when the market started to go down, he had planned to take money from his investment account to cover the roof. But here we are, the market's down, and so he really didn't want to tap into his investments at that time. So instead, he used some of his cash reserves to pay for the roof, and then when the market recovered, he then took the money out of his investment account to pay himself back. 

So this is why we want to have those liquid buckets and assets on our balance sheet to tap into.

What about if we have, like, family and life changes? Think about those, like unexpected curve balls. Honestly, this is something that no one really wants to think about, but it's a reality. Most couples are going to face a time when they lose a spouse during retirement. And losing a spouse is not just an emotional challenge, but it's also a financial one.

So we have to plan for this. This is the reality that many of us are going to face. So a couple questions you want to ask. How will your income change if one of you passes away? You're going to see changes to your Social Security. Will you have changes to a pension payout? If you do have an annuity, is it a joint annuity or a single income annuity?

So really understanding how your income is going to change when one of you passes away, and then this way you could have a clear plan for how you're going to handle that. So you want to discuss these plans together. When we're doing our work for clients, we look at both situations. What if the husband passes away first, what's that income going to look like for the wife? And then what if the wife passes away first? What's that income gonna look like for the husband? 

So you want to look at both options. The other thing that's happening more and more is this caregiving responsibilities. Many people find themselves caring for a spouse, an aging parent, a child. An adult child. And this can impact your retirement plans. This can mean that you've got to spend more money. That could be to help those people, help your parents, help a child. 

It could be traveling, could be living arrangements. It could also mean that you've had to retire early. So I'm thinking about a client of mine a few years ago, she retired early to take care of her mother. She retired probably about two, two and a half years earlier than she was originally planning to, and that had some significant financial impacts on her. 

So we really want to, and that may not be something we can totally forecast and foresee for the future, but we really want to make sure that we are thinking about those things and have some essential plans for it. And my next point here on having some estate planning. This may not necessarily always be like we think of it as, directly financial, but it will help in these situations when you may lose a spouse or a parent or something along those lines. 

And this is a big thing that we're focused on this year with our clients, is making sure that they've got those estate planning documents executed. Beneficiaries are in place like everything is, is where it needs to be, because this is really going to help your family so that they don't have these unnecessary legal fees or having these other financial difficulties. And there's definitely more I can go into that. 

But for the sake of time, I'm not going to go into too much detail there today. But just know, as part of this, you also want to make sure that you've got your estate planning documents taken care of, this is really going to help that financial stability, and it makes an already hard situation at least a little bit manageable. What about housing needs? 

So, where will you live in retirement? Housing is often overlooked in retirement planning, but it plays a major role in your financial security and in your quality of life. Your home today may not be the best fit for you, best fit for your needs as you age. So think about accessibility, maintenance costs, proximity to family or medical care. 

So there are a few things you want to think about. Do you plan to stay in your current home? Or will you need to move? If you're staying in your home suitable for aging in place? Or will it require modifications? If you're moving are you going to downsize? Are you going to relocate to be closer to family? Or are you going to move into a community that's designed for aging adults? So there's things that we want to think about on the housing front. 

So let's walk through this on some different options here. The first one is, if you want to age in place, and this is, I hear a lot from clients. I want to stay in my home as long as I'm able to. So for us to do that, think about some renovations that might need to happen for you to age in place. You know, consider installing ramps, widening doorways, upgrading bathrooms for accessibility. 

I've had clients in retirement that when they get to their required minimum distribution age, which today is age 73 when they have to start pulling money out of their retirement accounts, whether they need it or want it. That's the IRS regulations for your required minimum distributions. I've had clients use those to renovate their home. They didn't need it for their every day, monthly income. 

So they said, okay, we're getting this lump sum from our retirement accounts, and so we're going to use it to renovate the house so we can age in place. You know, other clients will look to do some of these things, like before they retire. So they look to handle a lot of these major home expenses before retirement, while they're still working and they have more discretionary income. 

So they think about replacing roofs, upgrading HVAC systems, and not necessarily with the house, but they also may think about buying a new vehicle. These are all these big expenses that we have in our lives. Some choose to relocate so they can be closer to children and grandchildren. You know, one of my clients a few years ago, as soon as they retire, they moved to Orlando to be near their grandson, so that was something that was really important to them. 

And we have lots of conversations throughout the year with clients that are looking to move to these continuing care retirement communities. These are communities that provide different levels of care as your needs change. So it might be, hey, I'm in independent living today, and then I need assisted living, and then I need either nursing care or memory care. And I can stay in this one place, and they can take care of all my needs. 

So thinking ahead about this, you know, long term stability is going to help you have a much smoother transition and prevent these like last minute stressful decisions. And even making better financial decisions. If you're not going to stay in your home, maybe you then don't need to do all of these renovations and updates, because you're not going to be there. So really thinking about where are you going to live in retirement? 

Now, these next unexpected expenses, I think of them like the wild cards, right? There's always going to be these unexpected expenses that pop up, because that's life, and they can happen out of nowhere, they can derail even the best financial plans. So what are some common ones? Well, first of all, think about major home repairs. Roof replacements, HVACs, system failures, floods, hurricanes. Some sort of like major home repair. Medical expenses, which we talked about earlier, right? Could be unplanned surgeries, hospital stays, expensive treatments. 

You might have to travel for treatment, and that's an additional cost. Family support. Are we having to support our parents, our siblings, our adult children, grandchildren? What are these like, financial supports for our family? Any sort of legal costs that may come up in retirement. So how are we going to handle these unexpected expenses? 

Because we know they're going to happen. Well, one is like first, and we always hear this, right is having an emergency fund. So think about that, like your bank savings. Having an emergency fund for these expenses. You know, think about using cash value life insurance, like I talked about earlier, where it's more of a tax efficient way to access funds when needed. You can use a HELOC or a home equity line of credit as a backup, right for these large expenses. 

Now that one you just want to be very strategic about. You really want to pay attention to interest rates. HELOCs were much more accessible and made more sense a few years ago, we had really low interest rates. But as those interest rates have gone up over the last few years, they haven't been as sustainable. So thinking about some of my clients, you know, a few years ago, they actually took a loan from their life insurance policy to renovate their kitchen. 

We talked through all the different options. Do we want to withdraw money? We have the option to do a loan? And they said, you know what, we want to pay ourselves back. We want to pay for the renovation. We don't necessarily want to just take it out of our assets, but we'd rather do a loan against the cash value. 

We know we're going to pay some interest, but we're gonna pay ourselves back for this, and then we don't have to go through the bank and get some type of personal loan. You know, another client had a HELOC, and at one point the interest rate was really great, and over the last few years, when interest rates have spiked, the HELOC interest rate got up to 9% and they really wanted to then pay that off because of the high interest. 

So we looked at some different options, and they actually had an investment account that was paying a fixed three and a half percent. At one point, that was really good. So what made sense for them to do is take money out of that investment that was paying a lower interest to pay off the HELOC at the higher interest. 

And then another one of my clients recently retired, and they wanted to go ahead and buy a new car. That way, hey, I'm going into retirement. I've had my last car for over 10 years. I plan to have this one for over 10 years. I want to go ahead and buy a car. And they use, you know, a combination of things like put a big down payment on the car. 

They use some final payouts that they received at work in the form of cash to put money down and then they also did take some money out of their investment account that's done really well to put a large down payment on the car, and then they're working to pay that off as quickly as possible. 

So you know, preparing for these unexpected expenses in retirement allows you to have financial security and really make sure that these surprises don't disrupt your long term plans. So it's important for us to be flexible and adaptable. These surprises are inevitable, but really that financial flexibility is going to allow us to adapt without stress. If our financial plan is too rigid, it's going to leave us vulnerable when these unexpected events occur. 

So having financial flexibility matters. You know, the ability to adjust spending withdrawals based on market conditions, the ability to access multiple income streams to not have so much reliance on the market. To have liquidity to cover these unexpected expenses without disrupting our long term investments. So again, what are some of these key strategies for us to have this flexibility? Well, you know, it's diversifying your income. 

Ensuring you've got a mix of guaranteed income and discretionary income. It's maintaining liquid savings for that emergency fund. Keeping assets liquid accessible is going to help cover those short term surprises. Think about using a bucket strategy, where we've got short term, mid term, long term assets that provide structure for funds that we can access based on when we need them. Work on having tax efficient withdrawals. 

So if we're withdrawing money from different buckets, we can then start to try to control and minimize how much we're paying on taxes, which means more money that we get to keep in our pocket, more money we get to keep on our balance sheets. So flexibility is not just about having money, it's about having options when life throws surprises your way. 

And the more adaptable your financial plan is, then the more confidence that you're going to fill. So you know, today, we've really kind of talked about how planning for these unexpected events in retirement is essential, and having the right strategies in place can give you a feeling of security. So one of the best things that you can do, too, to kind of stay ahead of some of these things, is like what you're doing here today is listening to podcasts and webinars and continuing to learn and plan. 

So we have a series of webinars coming up over the next few months. We really plan on doing like one webinar per month on a wide range of topics, mostly centered around retirement planning. And so if you'd like to know more about our webinars, and if you'd like to be on our mailing list, our email list, to receive these exclusive notifications when our webinars are going to be, then you can go to our website to sign up. So you can go to curryschoenfinancial.com/events again, that is curryschoenfinancial.com/events. 

You can just put in your name and email, and we'll make sure that you're on our email list so you know about all the future events that we have coming up, as well as you'll get notified when we have new podcasts and new webinars. So thanks again for joining us today. You know planning really ensures that smooth transition into retirement, it's really going to smooth even your experience in retirement. So I encourage you, as you're thinking about these today, let's get financially prepared for the unexpected. Bye now. See you next time.

Voiceover: This promotional information is not approved or endorsed by the Florida Retirement System or the Division of Retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the Division of Retirement. This material is intended for general public use. By providing this content, Park Avenue Securities, LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities, LLC. Address, 1700 Summit Lake Drive Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities products and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7588186.1. Expires, February 2027.

Key Tax Tips Every FRS Member Should Know

Taxes might be daunting, but mastering them can mean thousands more for your golden years!

In this essential episode, April Schoen dives deep into tax strategies specifically designed for Florida Retirement System (FRS) members. Discover how expert tax planning could unlock more wealth and flexibility than you ever imagined for your retirement.

You’ll discover:

• Why tax planning is the key to more after-tax income in your retirement.

• How different types of accounts—tax-deferred, taxable, and tax-free—impact your taxes.

• Real-life case studies showing the transformative power of Roth conversions.

• The surprising impact of Medicare premiums and how your income influences them.

• Secrets to leveraging cash value life insurance for tax-free withdrawals and loans.

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Welcome back to The Secure Retirement Method. My name is April Schoen, and I am a financial advisor that has helped hundreds of clients over the last 10 years get not only just to retirement but through retirement. And I've really been helping individuals and families achieve their financial goals by making sure that they can enjoy their retirement the way they want to, with confidence. 

And today, we're going to be tackling an important topic for FRS members, and that's going to be about tax planning. Now listen, I know taxes do not sound very fun, do not sound very exciting, but this is super important. And the reason that it's important is because if you get tax planning done right, it can mean more income in retirement. 

What I mean by that is having your income come from different types of accounts, like tax-deferred, taxable, tax-free, you can actually have more control over your taxes, pay less, which is going to mean that you're going to have more money in your pocket for you to spend and enjoy in retirement. Who doesn't want that? And as an FRS member, you face very unique challenges because you have a lot of taxable income coming in from your pension, Social Security, DROP payouts, deferred comp. 

So the key is really to build tax-free and partially taxable buckets along the way, to give yourself more flexibility. And that's what we're going to talk about today. So let's dive in. So here's what we're going to cover today. We're going to talk about why tax planning matters for FRS members. We're going to discuss why this is so important for you and why this is going to make a big impact. Understanding the tax landscape. 

I'm going to walk you through the different types of accounts and how they're taxed. Common tax challenges for FRS members, we're going to explore the unique challenges that you face. Tax diversification strategies. I'm going to share some actual strategies to help you manage your taxes effectively. Case studies. We're going to look at some real examples and how tax planning has made a big difference for others. 

And then finally, I'm going to summarize what I've learned, what you've learned, and share how you could take action. So why tax planning matters. Tax planning is a critical part of your overall financial planning strategy. It really impacts your financial future, and here's why. First, effective tax planning leads to more after-tax income in retirement, which means more money you get to enjoy. It's going to give you more control over your taxes. 

So instead of letting the tax tail wag the economic dog, you're going to have a proactive plan. You're going to know exactly when you're going to take income from which accounts. You're going to know how that's going to impact you, not just in the short term, but also in the long term. It's going to help you have less taxes. Means more income in your pocket for you to spend in retirement. 

And as a reminder, I said earlier, as an FRS member, you face a lot of challenges, you're going to have high taxable income from pensions DROP payouts, and deferred comp. And so the goal, really, the goal of tax planning, is to build tax-free and partially taxable income sources so you can minimize taxes and maximize retirement income. 

So let's start by understanding the tax landscape. Let's talk about the three different types of accounts and how they impact your taxes. So the first account we're going to talk about is tax deferred. These are by far the most common accounts we see used for retirement planning. Again, it's the most common. Doesn't mean it's the most effective, it doesn't mean it's the best. It's just the one that we see used as often. And these types of accounts are like your traditional retirement accounts. IRAs, 401Ks, 457 plans, 403Bs. 

And these types of accounts, how they work is you put money in today that you have not paid taxes on, so you get, like a tax break today, if you will. But then these and these accounts grow tax-deferred, so you're not you don't pay taxes while they're growing. But when you do go to take money out in the future, in retirement, that money comes back to you. Every dollar that comes out is taxable at your highest marginal income rate. 

So think about this for a second. I've got my Social Security, I've got my pension, so I've already got, like, a baseline for retirement income, and all of that is taxable income. And then I start taking money out of deferred comp, or I start taking money out of my DROP, and now that gets added on top of Social Security, that gets added on top of my pension, and that's going to start to push me into higher tax brackets, and that means I'm going to be paying more in taxes. 

So those are those tax-deferred vehicles. Now you also have taxable or partially taxable. A lot of times we think of these as brokerage accounts, but I want you to think like a non-retirement account. These are probably ones they're going to like, hold up stocks and bonds, cash, CDs, that kind of thing. And you're going to make taxes on dividends, interest, capital gains. But capital gains are taxed at a more favorable rate. 

So I was just talking with a client of mine the other day, and we were talking about this very same thing, about where she should be saving money. Should she be saving money in her IRA, her retirement account, and then versus a taxable account, or partially taxable account, and looking at the tax brackets, and then difference in income. Now she already has this, again, this baseline of retirement income because of she's getting her pension. 

Her husband has passed away, but she's getting her husband's pension and she has Social Security coming in. So when we were looking at the differences between taxable and non-taxable accounts, the difference was pretty drastic. It actually like, took her from like a 24% bracket to a 15% bracket when we looked at accounts that were more that tax-deferred and are taxed as ordinary income versus assets that are going to have that long-term capital gains rate. 

So again, big difference for our 24% tax rate to 15% tax rate. And that's really why we're talking about how important this is today. That's a great example why it's so important for us to look at this. The other types of accounts that you have are tax-free accounts. This could be like Roth IRAs, cash-value life insurance, municipal bonds. And what happens with these accounts is we pay tax today. 

We put money in these accounts, they grow tax-deferred, so you don't pay taxes while they're growing. And then when you go to take out taxes, income in the future, rather, it all comes back to you tax-free. And again, if we have high income already coming in from other sources in retirement, it's important that we have some diversification and so that we're building these taxable tax-free buckets so that we've got more control over our taxes in retirement.

Now, some of the common challenges that we see from a tax perspective for FRS members is having that high taxable income from pensions, DROP, and deferred comp. Again, this already can push you into higher tax brackets, and then when we've got higher taxes, guess what also happens? Our Medicare premiums go up. A lot of people don't know that, but there's something called an IRMA income charge. It's called the income related monthly adjusted amount. 

And basically what that means is, the more income that you make, the higher your Medicare premiums are. So it's not just the tax that I paid today, but it's how is it going to have this impact, also on Medicare? Social Security taxation. Depending how much taxable income you have, is going to determine how much of your Social Security benefit is considered taxable income. 

Again, this is why it's so important. And also lack of flexibility. When most of your income comes in from taxable accounts, it's hard to control your tax bracket in retirement. Especially when we start thinking about required minimum distributions. Those are where those tax-deferred accounts, I think IRAs deferred comp, 403B something along those lines. And those accounts, you have to start pulling money out of them when you're 73 according to today's tax law, whether you want to or not. 

So I can't tell you how many clients I have that get into retirement. They've got Social Security, they've got their pensions, and that's enough to satisfy their income in retirement. They get to 73 now they have to start pulling money out of their retirement accounts, even if they don't need it. Pay all that tax. Pushes them up into a higher tax bracket. It increases their Medicare premiums. 

And so because they don't have the flexibility, because all of their money has been in those pre-tax, tax-deferred retirement vehicles. Where, if we've got some more flexibility, maybe you don't even have required minimum distributions at all. Maybe you've got more control over when you tap into your retirement accounts and when you don't. 

So let's go through and talk about some tax diversification strategies, and how can you start to diversify your income sources to manage those taxes. Well, the first thing that you can do is you can look at a Roth conversion. So a Roth conversion is when you take pre-tax retirement accounts and you convert that to a Roth IRA. So you convert funds from tax-deferred accounts to Roth, and this is going to reduce those future RMDs. 

This is going to provide tax-free income later as well. I'm going to talk more about Roth conversions in a few minutes. Having a taxable account bucket. Again, using these taxable accounts allows you to take advantage of lower capital gains rates. Again, back to my client that I talked about earlier, looking at where she currently was and thinking about ok, in a 24% bracket, do I want money coming out at a 24% tax bracket or 15? That's a big jump. 

So looking at another reason that she can do that is because she has taxable accounts. Because she has a non-retirement account that she's built and saved over the years. You could also have cash value life insurance, where you can, if done properly, take tax-free loans and withdrawals. So diversifying your income across all these sources gives you more control over your taxable income in retirement. 

So I love when I'm working with a client and we actually have all three of these buckets, tax-deferred, taxable, and tax-free, because we have different levers that we can pull. And we can say, hey, we really want to stay and, you know, in this tax bracket. And we only want to fill the bucket up so far, to take money, maybe out of our taxable accounts, and then we want to start really diversifying, to take out as tax-free or partially taxable, so that we have that diversity there. 

So that we're proactively, we're intentionally working on our taxable income. I want to have the most income in retirement. I just want to make sure that I'm doing it in the most tax-efficient way possible. So let's go through, I want to talk about too, I want to give you some ideas, some case studies, and I want to look at some real-life examples. So the first thing I want to look at is a Roth conversion. So client retires at 62 and they've got retirement income coming in from their pension and their Social Security and their pension and Social Security is enough income to support their lifestyle in retirement. 

And we'll go through how we work with clients. We do what's called a retirement rehearsal. This is where we take a look at all your retirement income sources. We fast forward you to retirement, say, hey, what is this income really going to look like in retirement? And we look at income, we look at taxes, we look at expenses and lifestyle to see, do we have a surplus? Do we have a deficit? Do we need to bridge the gap for income? What's going to be the best choices and options for each individual client? 

So in this case, taking their pension, taking their Social Security, and they went through and did a spending plan for retirement, not a budget. I'm not a believer in a budget, but I do like having a spending plan so that we're being intentional and know we want to spend our money. And so they're in a great position because that pension and Social Security is going to be enough for their lifestyle. 

So this means what they've got in their DROP and in their deferred comp, they can let grow for the future. And they've got about $250,000 between DROP and deferred comp. And remember, they're 62 so based on current tax law, they can let that grow until 73, but we know at 73 they have to start taking money out of that for RMDs, required minimum distributions. So what we did is we helped them convert these accounts to a Roth but we didn't just do it all at once. 

We did a phased Roth conversion, where we did about $50,000 per year, obviously, that last year was a little bit more, but about $50,000 per year, so that we could spread it out and not have too big of a tax hit all at one time. And what happened with this as a result is one, we were able to convert all of their pre-tax to a Roth. Again, doing it over five years, so that we reduced the taxable income, but then the impact for them is no required minimum distributions. So now it gets to grow tax-free. 

They're not paying any taxes while it's growing. They're not going to be forced to start taking money out of it at 73. So they can pick and choose when they start to take income from this account. When they do take income, it's all going to come back to them tax-free, because it's now in the Roth, and guess what? What if they don't need it? What if with their pension and their social securities and their COLAs, what if they're just fine and they don't actually tap into it? Well, now what happens is this account goes to their kids tax-free. 

So it's part of their legacy plan. Not only does it help them, but it also contributes to their legacy plan. What's also going to happen is they're now going to have reduced taxable income over their lifetime. Now, honestly, they've got higher taxes in these years when we're converting it, but we have a plan for how to pay for the taxes, but they're going to have reduced taxable income over their lifetime. 

So that's going to save on taxes, and it's going to save on Medicare premiums. So it's going to have significant savings on taxes, Medicare premiums. It gives them more control and more flexibility with their retirement plan.

Now another example I want to give is for cash value life insurance because this can also provide tax-free income and retirement for income or unexpected expenses. So I want to give you just a couple of examples. So one of my clients, they did a kitchen remodel a few years ago, and what they decided to do was to do a loan from their cash value life insurance. They said, April, we want to have a way to pay for the renovations, but we want to pay ourselves back. 

We plan to pay ourselves back. So we just want to do a loan, and then we're going to do a payment plan to get that paid off. And again, that's a loan. So it comes to them, tax-free. Another client of mine had some major dental work done. It wasn't quite $10,000 but it was pretty substantial, close to $10,000 and we looked at several different options for where to take the money from, from the dental work. 

We looked at the cash value, and said, hey, do we want to do a loan? Do we want to do a withdrawal? And he wanted to do a withdrawal. He said, you know, April, I spent my whole life paying off debt and getting out of debt. I don't want to have a loan. I don't want to go back in debt at this stage of my life. 

So we just did a withdrawal from his life insurance policy, and it reduced his death benefit slightly, but it wasn't a huge reduction. But that money came back to him tax-free, and he was able to pay for that dental work. So great examples of using that cash value for things that they needed or they wanted when they were in retirement. I also have clients who have used the cash value to just increase their income in retirement. 

They get to retirement or at some point and say, I don't really need the death benefit as much anymore, or it's not as important to me as it once was. Instead, what's important to me now is living the life that I want to live. And so we look at structuring the cash value where it comes back to them as tax-free as possible, not all tax-free, but as tax efficient as we can structure it. 

But have that income start coming back to them out of this policy to increase their income, but also do it in a tax efficient way. And so what happens with that is we can then have, like very little to no tax impact. We get to keep our retirement funds, we get to keep our investments, our retirement accounts, without having to disrupt our plans. 

And then we also get to continue to have that financial flexibility, because we have these different buckets that we can tap into when and if we need it. And again, that's why it's just again, so important, of why we don't want to have everything in those tax-deferred vehicles, because even if we're in retirement it can still feel like they're locked up in prison because of the taxes. 

Can't tell you how many people tell me that they don't want to pull money out because of the tax that they have to pay when they need money for something. Maybe they need to buy a new car, put a new roof on the house. They want to take a trip and pay for it for their family. Or there are all these things that we need to do and want to do in our lives. 

And I mean, tell you, from my experience, having all that money in the retirement accounts, it it makes you not want to tap into it because of the taxes. So being able to have a plan for these other things in a more tax-efficient way is only going to help you in retirement. So as we've gone through today, we've talked about a couple of different things. We talked about tax diversification, how that helps you have more after-tax income in retirement, which means more money in your pocket. 

And we've also talked about the importance of balancing income sources from taxable, tax-deferred, and tax-free sources. So if you're ready to take this next step in your retirement planning, you're curious, like, hey, I'm not sure where I stand or what should I be focused on next, especially as it relates to looking at these different types of accounts, I would recommend that you schedule a time for a complimentary consultation with me. 

This is where we're gonna review your current situation. We'll talk about some of the strategies that we've talked about today to see where you are and see what's gonna make the most sense for you. And the best way to do that is you can schedule a consultation. You can go to our website, which is curryschoenfinancial.com. Again, that's curryschoenfinancial.com to book an appointment.

I also encourage you to join our upcoming webinar on tax diversification for more insights. We're going to be going into all of this in more detail, so if you don't have that on the calendar, just send us an email and we'll make sure that you're all signed up for the webinar. Thanks for joining me today. Tax planning is really a powerful tool to help you maximize your income and enjoy retirement. So let's work together to make it happen so you can enjoy the retirement you deserve. Bye now. See you next time.

Voiceover: This promotional information is not approved or endorsed by the Florida Retirement System or the Division of Retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the Division of Retirement. This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities, LLC. Address, 1700 Summit Lake Drive Suite 200. Tallahassee, Florida, 32317. Phone number, 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America New York, New York. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian. 

7492364.1, expires January 2027.

Set Smart Financial Goals for 2025 Success

In this episode, April Schoen dives deep into the secrets of setting meaningful financial goals for the new year to guide you towards a secure and prosperous 2025.

In this episode, you’ll discover…

• The pivotal role of the SMART framework in financial planning

• Unique strategies for building a robust emergency fund

• Methods to maximize your retirement contributions effectively

• Insights into tackling high-interest debt with precision

• Practical tips for creating a balanced investment portfolio

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hello and welcome to The Secure Retirement Method. I'm one of your hosts April Schoen and I'm so excited that you're here with me today because this is truly one of my favorite times of the year. I'm sitting here recording this today on January 2. So Happy New Year to you all. And, you know, there's just something so refreshing about a clean slate. This chance for us to look back on the last year and think about like, what went really well last year. What are some things that we want to change? And then also plan for the future. 

And I love this time of year because it's really a chance for us to dream a little bit, for my fellow dreamers out there. Think about the person that I want to become and then the life that I want to create. Now, my husband loves to make fun of me this time of year, because, listen, I am a planner and journal junkie, so usually, starting in December is when I really start thinking about the new year, and I might get a new planner, some new journals, and so it's quite a little joke for us at home. 

But it is truly because I really feel like this is a great time for us to start again, or continue on. Maybe it's not all about starting over. Maybe it's last year went so well, and we want to build on that coming into the new year. Now for me, I've already set some goals for this year, so I'm going to share those with you today. One goal is I want to read one professional development book a month. 

Now you may not know this about me, but I love to read but I love to read fiction books. I totally can geek out, nerd out on some fiction books, especially in the fantasy, sci-fi realm. And because I love to read fiction books, I actually find it hard to read those personal development books. So it's something that I have to be intentional about I have to set time aside daily or weekly to make sure that I'm getting that done. 

So that's definitely one of my goals is to read one personal development book each month. I used to do this and got away from it last year, so it's something I'm going to bring back in 2025. One of the other things I'm going to work on is having some intentional time with my two boys. Now, my boys are eight and 11, and my goal for this year is to spend some one on one time with them each month. 

And that might sound like something really simple, but for me, what I find is that if I don't again, schedule that out or set time aside for that, guess what? It's not going to happen. I'm going to get to April or May and say, you know what? I wanted to do this. I wanted to set time aside every single month for that, and it just hasn't happened. So I love having this as one of my goals, and then also the same time going to my calendar to think through when am I going to do that. 

Another goal that we have financially for this year is to save 20% of our income. So I'm going to talk more later about financial goals. Obviously, that's going to be the big part of what we're talking about today is going to be on more like financial goals, and one of mine is to make sure that we're saving 20% of our income. So I'm gonna talk more about that and how to get to that place, and where are you at and how to look at those things. 

And then we also want to replace the floors in our house. So those are just some of the goals that we've had this year. And I want to talk about how you can create these meaningful financial goals for the new year. We're going to talk about how to, how do you reflect on last year? I want to make sure you're celebrating your progress because that's one thing I find people don't do enough of. And let's look at for some areas that we can improve. 

And then I'm going to share some tips, like, how do you set some goals? And then, like, sticking to a plan, creating a plan to achieve those. So before we dive into setting new goals, I want you to take a minute and look back at 2024. So first of all, did you set any goals for 2024? And how did they go? Personally, I like to keep a list of my goals each year. And actually, I keep them on the Notes app on my phone. This way I can review them throughout the year. It's not something I want to set in January, and then not think about again until December, right? 

So I want to make sure these are front and center of my mind, and then I'm looking at these throughout the year. And it's a great way to see your progress. I love being able to check them off. Putting a little X or a checkmark next to them when they're done. And then I can also see what other areas that I need to work on. So if you haven't done that, make sure you've got them written down somewhere visible that's going to be easy for you to refer to. 

I also encourage you to celebrate your wins. Even if they're small, they're worth celebrating. So let's think about some wins you had last year. Did you pay off a credit card? Did you save for a major purchase? Did you invest in your future? Give yourself some credit for these things that you've done. It's important to acknowledge that process, no matter how small it feels in that moment. 

And then also think about, what were the challenges? What did not go as planned? Were there goals that you struggled with, that you didn't quite achieve? And think about why didn't you hit those goals. Maybe they were unrealistic? Maybe we just set these really big goals in January last year that just weren't achievable, or maybe we had some unexpected obstacles or did something pop up happen that was not on your radar that prevented you from hitting that goal? Or does our plan need to be tweaked one way or the other? 

So taking that time to reflect both on what went well and what struggles you had, this is going to help you set more achievable, smarter, better goals for 2025. So after you've reflected on last year, let's focus then on setting some goals for the year ahead. And a great way to do that is by making sure that you're using I love the SMART framework, if you're familiar with that, that's S, M, A, R T. 

The SMART framework, this is where you make goals that are specific, measurable, achievable, relevant, and time-bound. So I want to break that down, and I'm going to do that in just a minute, what that SMART framework looks like. But let me give you some ideas for some financial goals that you may want to consider. One you may want to work on building an emergency fund. 

So, like, if you don't have one already, an emergency fund where you have three to six months worth of expenses saved, then make that a priority. Set a specific goal. So first you got to figure out what your expenses are on a monthly basis, to know what you need for your emergency fund. But figure that out. How much do you need for your emergency fund? And then break that into monthly contributions that you can fit into your spending plan, which we're going to talk about in a little bit. 

So one goal might be building an emergency fund. You may want to maximize your retirement contributions. So increase how much you're putting into a 401k or an IRA so that you can take advantage of some tax benefits or employer matches. Aim for, I like to say, aim for saving a certain percentage of your income. We recommend clients save between 15 and 20% of their income. 

So another thing to look at is, hey, how much did I save last year? And not only how much did I save, but how much is that as a percentage of my income to know where I am in this, you know, 15 to 20% range. And then thinking about for the next year, how do I increase that? So I remember years ago, my husband and I, we were saving 10% of our income, and then we wanted to get to 20. And let me just tell you, that seems like a very big, daunting goal if you're saving 10 to get to 20, doubling your savings. 

And it just feels, you know, too big, right? It feels like you can't get there. So we did it in small increments. We started every year in January, increasing our savings by 1%, and then also when we got raises, we increased our savings then too. So we kind of got to 12, and then bumps it up to 15. Anyway, it took a few years for us to get to that 20% number, but now that's like a non-negotiable for us. 

And of course, things happen and life happens, and I can talk more about that if you guys want, but I think it's important for us to look at how much did we save, and then thinking about the next year, how much do we want to save? Do we want to increase our contributions? And like, where are we going to do that at? You might already be maxing out your retirement account, so we have to go look at some non-retirement account options. So increasing those retirement investment contributions. 

Eliminating debt. So think about if you've got credit cards, loan balances. Really focus on paying off those high-interest debts first. Interest rates are high right now, which is good for savings accounts, money markets, CDs, but it's not so great for debt. So you might have some credit cards or a home equity line of credit, or a personal something that maybe even had a low interest rate years ago, where now if you look at it, there's got some pretty high interest rates on them. So definitely look at your debt and work on eliminating that high-interest debt.

Another goal would be to diversify your investments. So look at your portfolio. And when I say your portfolio, I mean your overall portfolio, right? Your savings, your investments, your retirement accounts. Really think of everything all as like one big bucket, and look to see, is your portfolio heavily concentrated? And if it is, you're going to want to work on creating a balanced portfolio that aligns with your risk tolerance, that aligns with your goals. You may want to consider reallocating into some different asset classes. 

For example, my husband gets company stock, and so we are always just too heavily concentrated on this one company stock, his company stock. And so it's something that we have to work on to diversify, to make sure that we're not so heavily concentrated in that one company. So you want to look at, do I have any company-specific risk? Do I have any industry-specific risk? That might be tech companies right now. 

So we want to take a look at this through that lens of, how does everything work together in our retirement accounts and in our investments. Another goal you may have is to plan for a major purchase, right? So that might be a home renovation. Like I mentioned, we want to replace the floors in our home. That's obviously a big purchase, something that we have to work on, that we've been working on. It might be a family vacation, a new car. 

So we want to start thinking about then planning for these major purchases, setting a savings goal, and then a timeline to reach that. So now I want to go through and talk about, I'm going to break down these SMART goals. And again, that's Specific, Measurable, Achievable, Relevant, and Time-bound. And I want to use the example of, let's say that you wanted to save $15,000 by December. 

So the first thing we're gonna do is we're making that specific. Ao a specific goal, clearly defines what you want to achieve. So instead of just saying, hey, I wanna save more money next year, you say, I wanna save 15,000 by December for like, what's it for? Is it for your emergency fund? Is it for a big trip? Is it for a home renovation? Make sure it's clear and it's focused. The M is for measurable so break down your goal into smaller, trackable steps. So for $15,000, that's $1,250 per month. That's $1,250 per month, and so you could track that progress every month and see if you're on target. 

And then the A is for achievable. So this is like, is that achievable? Is saving $1250 a month realistic? You're going to want to look at your spending plan, which I'm going to talk about in a few minutes. But we have to figure out, is that achievable? If it's too tight, then we might have to adjust the amount or extend the timeline to make that goal more achievable and attainable. Relevant. The R is for relevant. Your goal should align with your values and priorities. 

So saving that $15,000 for an emergency fund. That might give you the peace of mind to have a fully funded emergency fund. Or it might be for that big trip, so it's going to help you create those lasting memories with your family. So I always think about, why? Why do we want to do that? What's our goal, and why is that important to us? So that's how you make it relevant. 

And then time-bound. That's the T is time-bound, so you want to set a deadline. This is going to create some urgency, some accountability. In this case, it's December. So having a specific timeline helps you stay focused and on track. So when we think about setting these goals, one, make sure that you're aligning them with your values. So whether it's financial security, family, travel, make your goals reflect what's important to you. 

Two, write them down. I know it sounds silly, right? We hear that all the time, but write them down. Studies show that writing down your goals makes you more likely to achieve them. And then keep them somewhere visible, where you can see them like in a journal or planner like I do. You could also keep them on your phone. Like I said, I have the Notes app on my phone, and I actually can go back and see goals for the last several years on my phone. 

And then number three is you're going to want to review these regularly. So schedule monthly or quarterly check-ins to track your progress and adjust as needed. Sometimes, depending on our financial situation, we've got to have regular reviews. Maybe it's even weekly check-ins or monthly check-ins, right? If there's something that we have to really stay on top of. That might be if you are struggling to stick with your spending plan, or you're struggling to pay off debt, that might be something that we need to review on a more regular basis. 

So we really just kind of figure out what's going to work for you. And like, when do you want to check your progress and make any sort of adjustments that you might need? But I'd recommend at least quarterly. Like, don't set a goal in January, and then don't look at it again to December. The likelihood of you hitting that is slim to none. So I would suggest doing like a quarterly check-in. 

So now that you've set some goals for the new year, the next step is to create a plan to achieve them. And this involves three key steps. Reviewing your current financial situation, creating a monthly spending plan, and then scheduling those regular check-ins to track your progress and make adjustments. So let's dive into each one. So before you can make a plan, you've got to know where are you today. 

So think of this as like creating a baseline. It's like a starting point on your financial roadmap. And when you do this, you're going to want to take a stock of your income. How much money is coming in each month? Think about your salary, side hustles, rental income, other sources. Expenses. What are you spending each month? So many of my clients, when we first meet, they don't know. 

I hear things like money just comes in the front door and goes out the back door. Or, hey, at this stage of our life, the kids are grown and the house is paid off, and we just, we don't have to pay attention to that. And that's okay, you don't need a budget. I'm gonna talk again about a spending plan in a few minutes, but you wanna at least have a rough idea. It doesn't have to be exact, down to the penny, but, like, we just need to have a rough idea about what we're spending each month. 

And we really want to break that down, if we can, into essentials, like, what are the bills, so to speak, savings and then discretionary spending. We want to know how much have we currently saved? What? How much have we? Do we have that emergency fund saved and set aside? How much are we putting towards retirement? How much are we putting towards other goals? You know, what are our investments? Are they aligned with our long-term goals? Do you have a diversified portfolio? 

Sometimes, or I should say, a lot of times, I meet with new clients who have an account that they haven't looked at in years, and it's just kind of been sitting there doing its thing. And that might be really good, that might be really bad. A lot of times, because the stock market has done so well in the last few years, these accounts, they're not in line with where we want to be. 

They're gonna be way more growth-focused and too concentrated on stocks than where we really want those accounts to be. And it's just because we haven't taken the time to look at them and rebalance. So definitely look at your investments and see are they aligned with your long-term goals. And so by reviewing these areas, you can identify gaps or opportunities. For example, maybe you're spending too much on discretionary items. Maybe you can increase your retirement contributions. 

So understanding where you are today is going to help you make those informed decisions for the future. Now, step two is to create a monthly spending plan. I like to think of this, you know, as a I like to think of the spending plan rather than a budget. Because a spending plan isn't meant to be restrictive like a budget is. It's about being intentional. It allows you to be intentional about how and where you want to spend your money. 

So it actually empowers you. And so here's how you build your spending plan. You're first going to start with your essentials. Cover your basic needs first. Housing, utilities, groceries, insurance. Then we also want to allocate for savings. You've always heard that that line of pay yourself first? Well, it's the same thing here. You want that to be a line item on your spending plan. So set aside each month. Whether that's that emergency fund, retirement, another financial goal like we mentioned earlier. 

Again, if the example is you want to save $15,000 this year, then your spending plan should allocate that $1,250 each month to savings. And then once essentials and savings are covered, then allocate funds for discretionary spending items. Dining out, entertainment, hobbies. Your spending plan can help you stay on track, but it's also again, while enjoying life, it's not about being restrictive. 

I always encourage you to include the fun things in your spending plan. And if you realize your plan is too tight, then you just need to adjust your goals or your spending to create balance. And again, always make sure that you include the fun things, whatever that is for you. Eating out, hobbies, entertainment. It's just not realistic to make it so restrictive that you can't stick to it.

And the third step that you want to do is you want to schedule some regular check-ins. So goals, they're not a set-it-and-forget-it kind of thing. Life happens. Things change is why these check-ins are so important. So I'd recommend at least setting a time every three months for you to revisit your goals and review your progress. So I would say put time on the calendar or a reminder. You need some way to know, like, hey, I need to check on my progress and ask yourself, am I on track to meet my goals? Do I need to adjust my spending plan or savings targets? Are there new priorities or challenges that I need to account for? 

And flexibility is key here. Don't be afraid to tweak your plan. Maybe you had an unexpected expense or an income change. Adjusting your plan isn't failure, it's just part of the process. And these regular check-ins are going to help you keep aligned with your objectives and help you make adjustments. It's really going to help you stay on course. So creating a plan to achieve your financial goals is all about intentionality. 

By reviewing your current financial picture, building a spending plan, scheduling regular check-ins, you're setting yourself up for success. And remember, progress is empowering. It puts you in control of your financial future. So before we wrap up, I want to recap what we've covered today. Reflect back on last year's wins and challenges. Take time to acknowledge your progress, identify areas where you can improve, celebrate even the small wins. It's super important. Understand your challenges so that you can set better goals for this next year. 

Set SMART goals for 2025. Use that SMART framework to create goals that are specific, measurable, achievable, relevant, and time-bound. Having clear and actionable goals makes it easier to stay focused and track your progress and then review your financial picture and create a plan for the year ahead. Start by assessing your income, your expenses, savings, investments, and then build a spending plan and regular check-ins to keep yourself on track. 

This is going to help you stay intentional about your financial decisions throughout the year, not just thinking about them here in January when we're all gung ho for the new year. So the start of this new year is really a great time for you to take control of your financial future. Remember, small, consistent steps today can lead to big results by the end of the year. Whether that's paying off debt, saving for a dream vacation, investing for retirement, the key is to start now and to stay committed. 

I know it can seem big and daunting sometimes, but remember, no matter where you're starting from, progress is what matters most. So if you're ready to make 2025 your best financial year yet, I'd love to help you get there. So whether that's creating a retirement plan, building wealth, tackling financial challenges. We are here to help and guide you. I'd recommend, if you're interested, to schedule a consultation with me or join one of our upcoming webinars for more tips and strategies. 

You can go to our website, which is curryschoenfinancial.com to get started, and don't wait. Here we are the new year still, so take that first step towards securing your financial future today. Thanks for tuning in to today's episode. I hope this episode inspired you to reflect, plan, and take action for your financial goals for the year ahead. If you found this helpful, please subscribe, share it with someone who can use a little motivation as we get started here in 2025. Here's to all your financial success. Take care, and I'll see you next time. Bye now

Voiceover: This promotional information is not approved or endorsed by the Florida Retirement System or the Division of Retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the Division of Retirement. This material is intended for general public use. By providing this content, Park Avenue Securities, LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific, individual, or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities, LLC. Address, 1700 Summit Lake Drive Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7492353.1, expires January 2027.

Navigating The DROP Program: Retirement Strategies and Financial Planning Explained

How can a simple program supercharge your retirement income strategy?

In this episode, April Schoen breaks down the intricacies of DROP, The Deferred Retirement Option Program, and its latest updates impacting your financial future.

In this episode, you’ll discover…

• The enticing benefits that make the DROP program a game-changer.

• Key eligibility changes in 2023 that could affect your retirement timeline.

• Various pension options within DROP and how they cater to different retirement goals.

• The significant pros and cons that you'll need to weigh before opting for DROP.

• Strategic ways to manage your DROP payout to maximize retirement benefits and minimize taxes.

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hello and welcome to another episode of The Secure Retirement podcast. I am one of your hosts, April Schoen, and today's episode is dedicated to understanding the DROP program, which is part of the Florida Retirement System. Now DROP stands for deferred retirement option program, and it's really a unique planning tool that's designed exclusively for FRS pension plan members who qualify for normal retirement. 

How the DROP program works is it offers a way for you to retire on paper while continuing to work in your position and continuing to earn your salary. And then what happens while you're in DROP is the state actually starts paying out your pension benefits, and they pay those into a dedicated retirement account that's just for you. 

And those pension payments, they go in every single month while you're in DROP, and it earns interest so that when you exit DROP, when you officially fully retire, now you start receiving the pension payments as income, and you also have a lump sum. Sometimes you'll call this like my DROP amount, or my DROP account. 

So we're going to talk about today is, what are some of those common questions we get about DROP. What is it? How does it work? I'm going to tell you about a client that I worked with recently who is deciding if he should go into DROP or not. And just really want to dive deep into this topic, because we get a lot of questions about this. 

So first, let me talk about some of the highlights of the decisions that you might be facing when it comes to DROP. So recently, I worked with a client, and he's at a crossroads. He's 55 and he's eligible to go into DROP, but he's considering his options. He could go into DROP now work five more years and then fully retire at 60. 

By going into DROP when he fully did retire, and he came out of DROP, his pension, monthly pension payments would be about $4200 a month. That's what he would get. And he'd also walk away with a significant DROP payout of almost $275000. Now, the other option choice that he has is to not enter DROP at all, just continue working those five more years. So he gets five more years of service credited, and this would increase his pension to about $5300 a month. 

So it's definitely higher than if he had gone into DROP, but he wouldn't have the lump sum. So why might he choose one option over the other? Well, let's, let's break down some of his choices. By going into DROP, he's gonna have this guaranteed lump sum when he fully retires, and he can use this to help him with other goals, and investments. It could provide immediate flexibility, and financial security in a way that just getting that higher pension payment might not. 

The pension is not liquid. It's not flexible. You can't go to the state and say, hey, could you send me an extra $10,000 this month because I need a new air conditioner, or I got to get my roof repaired. So the DROP account gives him flexibility by having access to this lump sum. 

And then it's going to give him more control over his choices because he's going to have lots of options about what to do with his DROP account, which is what we're going to talk about in a little bit. But he could roll it over into an IRA or another tax-deferred account, which is going to let him control how and when he uses those funds. He might choose to invest those for growth, create additional income streams, or even have it be part of the legacy that he leaves for his family. 

Also going into DROP gives him a structured retirement timeline. He knows, hey, for him, it was five years. I know that I'm going to be retiring at the end of five years. And hey, I'm going to have this pension, I'm going to have this lump sum. But for some, it's having this defined exit date that makes financial planning and future lifestyle choices so much easier. 

You've got that date circled on the calendar that you know is coming, and it gives you time for about five years or eight years, you can be in DROP to make changes. Sometimes I have clients who say, well, you know what, April, I want to make sure I have all my short-term debt paid off by the time I exit DROP. Or I want to build up my savings, or we want to go ahead and buy a car and have it paid off. 

We want to do some remodeling at the house before I step off into retirement, because we know there's this date in the future, and we've got time. We've got five to eight years for us to get some of these things done before we actually retire. And obviously, his pension is going to be lower with DROP, but he's going to have both this steady income and he's going have access to this lump sum, which is going to be helpful for large expenses or unexpected costs in retirement. 

And it can also help him do some other planning with some of his other assets. So let's talk about now, though, why would maybe he choose not to go into DROP? Well, first, by skipping DROP he's gonna significantly increase his pension. I mean, going from $4200 to $5300 a month, that's a big difference in guaranteed lifetime income. And for some who are focused on that stability, this could be something that's really important to them, especially if you're concerned about longevity or inflation. 

The higher pension is going to give him more discretionary spending ability without having to rely on the market or other income sources. And this could definitely be beneficial if he thinks that expenses are going to be higher in the future, or if he just wants to have more financial independence each month. Now, again, he's not going to have that lump sum, but maybe he's okay with that. Maybe he has other assets to offset that. 

He may not need a large, immediate payout. It could be that having those higher pension payments allows him to maximize his lifetime income, especially if he plans to say, hey, I'm going to live a really long time in retirement, and he wants to reduce how much he has to rely on other savings and investments. 

And then by not taking DROP, he doesn't have to worry about some of the tax impacts of DROP, which we're going to talk about in a little bit, about what you do with your DROP payout. And you really got to pay attention to the tax side. Obviously, with the DROP, you can roll it over into an IRA, but at some point, you have to start taking money out of that. 

So there's also some tax planning to consider. So you can see as going through this scenario, that it's a big decision. I mean, you're talking about changes in your monthly income. You're talking about, for him, specifically, you know, a DROP payout of over $250,000.

That's a lot of money for you to decide what you're going to do with it and are you going to go down that route, that path. So you can see how it's really important that you investigate and research both sides to see how it's going to impact your retirement. So now let's take a few steps back here and go through and talk about what is DROP and how does it work. 

Well, DROP is a voluntary program that lets you effectively retire again, the state considers you retired on paper when you go into DROP, but you defer your actual termination for up to eight years. So when you go into DROP, it used to be five, but they changed it. You can now be in DROP for eight years. So this means you continue to work in your same position. You're earning a salary, but at the same time, the state is starting to pay out your pension payments, but it's accumulating into a dedicated retirement account that's for you. 

So when you enter DROP you're considered retired for the purpose of the pension payments. So that means you stop earning those additional retirement service credits, and then your monthly pension benefits, they begin accumulating in a retirement account, rather than being paid out to you. 

So they're going to go in tax deferred. You don't pay any taxes while your money's accruing in the DROP. And this balance is going to grow both by how much is being paid in by your pension and then also the interest that it's earning. And since all of this is going to go in tax-deferred, you're only going to pay taxes when you start to take your DROP out. Either you could do a lump sum or as you're taking money out as income. 

And the beauty of the DROP program is that it kind of lets you have the best of both worlds. You get this financial security of I'm still going to have my pension, but I'm also now going to have this lump sum that I otherwise wouldn't have. Or I'm going to have it in addition to what I've saved in deferred comp, what I've saved maybe in other savings and investments. 

So it gives you some more flexibility and control and helps you maximize your retirement savings. That's going to help you transition into full retirement. So you may be wondering, okay, April, this all sounds pretty good so far. So how, how do I participate in DROP? How do I know if I'm eligible? 

Well, to participate in DROP, you need to be vested in the pension, and you have to be eligible for normal retirement age, which is going to be based on your years of service and your age. It also depends on when you started with the state because in 2011 they had made some big changes about what is a normal retirement age. So you gotta be of normal retirement age or have a certain number of years of service to go into DROP. 

Now, I mentioned a few minutes ago that in 2023 they made some big changes to DROP, and one of the things they did was they extended it from five years to eight years. Now it doesn't mean that you have to be in DROP for the full eight years. It just means that the longest that you could be in DROP would be up to eight years. They also increased the interest rate that you earn. 

It used to be 1.3% but now that's increased to 4%. Which is a huge increase in how much interest you're earning. So let's talk about what are some of those key decisions that you need to make about entering into DROP. So should you go into DROP? Here are some things you want to consider. You want to think about your personal financial goals. 

Is having that DROP payout, is that going to help you in retirement? Is that going to accommodate and compliment your retirement income goals that you have? How happy are you in your job? Are you comfortable with working in your same position for another eight years? Now, like I said, you don't have to work the full eight years. 

You could do two years or five years. It's really up to you, but that is one things that you want to consider is are you going to be okay continuing to work in that position for the duration of DROP? But there are a lot of people will look at those numbers, and it's a big jump as your account continues to accumulate that they want to hold out for the full five years, or they want to hold out for the full eight years. So take that into consideration. 

Also, your pension amount is going to be set, because once you go into DROP, they consider you retired, so you're not going to get any more service credits. So if we think about how the pension is calculated, and it's a formula of taking your highest five years of salary, and then also a formula of years of service. So when you go into DROP that stops. So think of it like your pension being frozen. 

I mean, you're still going to get a cost of living adjustment, though, that still happens even when you're in DROP, but you are locking in those years of service. Again, one of the benefits is that you're going to get this lump sum at the end in addition to your regular pension. I mean, I can't tell you how many clients that I've worked with that when they get to that part, they're exiting DROP, that their DROP account is the same amount of money that they have in their deferred comp. 

So think about that for a second. Here's this retirement account that they may be having saving in for most of their career, and it's the same amount of money that's in their DROP account. And at those times that was over that five-year time frame. So it's not a small amount of money we're talking about here. Now, again, we did talk about some of the negatives of limited pension growth. 

So again, your pension benefit is frozen, but you do get that cost of living adjustment every year. And then what if things change, and if you exit early, this might impact your lump sum. It's not might. It will impact your lump sum. So I'm thinking about a client of mine a few years ago who was in DROP, and she was three years in, and her mom had some major health issues, and she had to step away from work. 

She basically had to end her DROP at three years and instead of five. So her pension was much, excuse me, her DROP account was much lower, and then her pension is lower too because she didn't get all the cost of living adjustments. So that's definitely something that you want to consider. And then also remember that when you go into DROP is when you again retired on paper. 

So this is when you have to choose your pension option. So which pension option are you going to choose? Because that's when you make the decision, is when you go into DROP. And it's an irrevocable decision. So once you enter DROP, your pension option is locked in permanently. So this is so crucial for you to review your options and understand the impact of on your long-term income, for your spouse, and for your heirs. 

So let me just give you one. I'll kind of run through those four pension options so you can understand how they work. But option one is going to be what we call lifetime benefit only. That means the pension is going to be paid to you, the employee, for your lifetime, for as long as you're living, but the day you die, the pension dies with you. 

So option two is life to you, the employee. You get it for life, but it gives you a 10-year guaranteed period where if you pass away in those 10 years, a benefit is going to continue to your beneficiaries. Whoever that is. Could be a spouse, a child, but just know when you go into DROP is when that clock starts on that 10 years. So if you're in drop for eight years, and then you exit DROP, well, you only have two years left on this guarantee. 

Option three is joint with 100% to the survivor. So usually this is for spouses. So this says I get this pension for as long as I'm living, and the day I die, my husband gets it for the rest of his life, and he's gonna get the same amount of income. There are no changes for either one of us.

Now, option four, though, is where there's a lot of confusion. So I want to make sure I go through this one. Option four says that it is joint with two-thirds to the survivor. But what happens with the survivor benefit is it's when either spouse passes away. So let's say that I worked for the state, and it's my pension benefit, and I'm just gonna make the math easy here. And let's just say that my pension is $2000 a month. 

So what happens is, my husband and I get this pension the $2000 a month for as long as both of us are living. But when one of us passes away, that could be me, the employee who worked for the state, or it could be my husband, who didn't work for the state. Either one of us passes away, the pension gets reduced down to two-thirds. 

So now what happens is my $2,000 a month is now $1,320 a month. So it's a big drop, especially in those situations where it happens to be that the non-pension plan spouse passes away first. So make sure, when you're making these decisions that you're looking into all options, and really taking into consideration with everything else in your financial world, not just this one piece. So let's talk about here the pros and cons. 

I want to summarize some of these pros and cons we talked about going into DROP. So some of the benefits. This lump sum accumulation, you've got the potential for a significant payout upon retirement. You're going to have that steady income already from your pension, of course, but you're also going to have that lump sum in that tax-deferred account. So this is going to give you the opportunity to have flexibility, and control. 

Maybe it lets you plan for major expenses, and investment opportunities. Lots of more choices and liquidity, because you've got access to that lump sum. The negatives are that fixed pension benefit, because, again, you're going to lose those additional pension credits, those years of service while you're in DROP. 

But you do get your COLA, but it is going to impact your pension payout. And this may also help from some tax standpoints because you don't have the lump sum to worry about. Because then we don't have to worry about, what do we do with this drop amount and the retirement account, and how all that's going to impact you from a tax standpoint. Now let's say you're already in DROP. 

What happens when you exit? What happens when you leave DROP? Well, when you transition from DROP to full retirement, now you're going to start getting your pension payments as income, and this is when your DROP account is going to be accessible. This marks the transition from accumulating benefits in DROP to now you're receiving that pension payment directly, and you're going to have to decide, what do you do with your DROP payout? 

And there are only a few options. One, you can do a lump sum payment. So this allows you to take the total DROP balance at once. But remember that all of this has been in a tax-deferred account, so every dollar that you take out is going to be taxed at your highest marginal rate. That's why, for most people, that lump sum payout is not a good option. 

You can also roll it over into another tax-deferred account. That could be an IRA, that could be deferred comp. This is going to help you avoid those tax liabilities, and it's going to give you more control. Like we talked about earlier, where you can invest it for growth, you could invest it for income, you could have it be set up to go as a legacy. 

It's gonna give you flexibility, choices, and control about what you do with it. Some may choose to actually take that DROP payout and turn it into an annuity, so they've got additional guaranteed income. Now that is attractive for people who say, hey, I want more income, but I also want to have the liquidity that's available in some annuities. But taking that as a reminder, we've got to think about those tax implications, because taking that payout as a lump sum, it's going to be taxable, could push you into a higher tax bracket. 

And then rolling it over, defers those taxes until you withdraw, allowing you again to have more tax-deferred growth. And as of today, as I'm recording this in November of 2024 you can let those retirement account funds grow until you're 73. But at 73 you have to start taking money out of any pre-tax vehicles like IRAs, deferred comp, 403b's 401k's as for your required minimum distribution. 

So keep that in mind. So how do you decide what to do with your DROP payout? Well, first you want to think about your retirement timeline. When are you going to need to access those funds? Do I need income right away when I retire? Or am I going to let it grow for the future? What are my goals? Do I have any big financial needs coming up? Do I need to help pay for health care or travel or support family? Do I have savings or investments elsewhere? 

So rolling over that DROP might help you have greater control. Maybe it's something where you look at doing Roth conversions, for example. Lots of different options available to you. One of my clients recently retired and she's got her DROP account, and we're doing a couple things. One, she's gonna do some renovations to her house, but we looked at her options and decided it was gonna be best for her to wait until the next calendar year, because of taxes, to start taking money out of DROP. 

So what we did is we had the whole DROP balance go into an IRA, and then that way, she can control when she takes the money out and for what purpose. So for part of it, she's going to be using for renovations next year, and then the rest of it, we're going to let it continue to grow because she doesn't need income from the rest of it yet. 

She's got her pension, she has social security, she's got money accumulated in deferred comp, and so she's got other assets to tap into for income, so we're gonna let this account continue to grow. And she's 67 so she's got six years before she has to start taking money from it. This was a great opportunity for her to have that grow. 

So again, you want to think about what are those financial needs that you're going to have and consider those investment choices. Are you going to do a lump sum? Are you going to do a rollover? Are you going to look at an annuity? What investment options are you going to look at? And this is when you really want to work with an advisor. Because each option has very unique tax implications. It's going to impact your overall financial plan. 

So this is really when consulting that financial advisor, consulting that tax advisor is crucial to make the most informed decision. An advisor can really help you look at your income needs, look at tax planning, and legacy goals, not just one piece of the puzzle, but the whole thing. And they can help you look at both options. 

Like I was talking about with the client earlier, of hey, does it even make sense for him to go into DROP or not? And for him with these other financial assets, yes, going into DROP is going to be a very good decision for him. But it's not one size fits all. It's not a hey, everyone should always go into DROP or no, you should never go into DROP. 

It really does come down to your individual situation, and this is why it's so important that you work with an advisor, someone who can walk you through that and show you both sides. Now, some other kind of common questions that we get are, what happens if I leave early? So yeah, you can leave early from DROP but it's going to reduce how much accumulates in that DROP balance, and it's obviously going to impact how much you're getting in that pension payment, too. 

One thing is, you want to make sure that you coordinate this with your other retirement accounts. So again, think if you have old 401k's, or you have a 403b or 457 plan, how is this all going to work together? What about also social security, and where does that fit in? Sometimes we might find where someone uses DROP to actually bridge the gap for income so they can let their Social Security grow longer. 

We defer taking Social Security, and maybe we're using some of that DROP to bridge the gap for income. Or the opposite. You might look at it and say, hey, for a couple, we need to turn Social Security on for one and let the other one grow. So there's definitely some planning that you can do there. 

And then DROP does have some flexibility. Because, like I said, if your situation changes, like, maybe your health changes, or you've got a family member that has changes. Maybe there are changes in your position and job in your department. I had a client come in who said, you know what, I thought I was going to be in DROP for the full five years, but they're going to be implementing a new software system, and I don't want to do it again. 

I've already been through two major software changes, and I don't want to do this a third time. So she chose to leave DROP early and didn't hit her full five years. So we just want to understand how all that's going to work, and so that you can see what your options are. And of course, you want to take into consideration future healthcare needs. If that's going to just be part of your overall retirement plan. 

Healthcare costs can really impact your overall retirement income and expenses. And so you can see here that deciding to go into DROP or not is really an individualized choice. It's not a one size fits all. You think back to that client I mentioned earlier, and how important it is to really weigh those immediate financial gains against long-term benefits. And that's why it's so important to work with someone who can guide you through a personalized analysis and show you the impact of both choices. 

So don't just assume that going into DROP or delaying retirement is always the best. You really want a tailored approach that's going to help you make the most informed decision for your unique situation and goals. So if you're considering going into DROP, if you've got questions about how it fits into your retirement strategy, I'd recommend you reach out to our team, and let's explore these options together. 

So the best way to do that, I would say, would be to go check out our website, and we'll link it in the show notes. But it's curryschoenfinancial.com. You're gonna see access to all of our podcast episodes. There's a link to book a call. You can request our information package, and so just definitely some resources on the website. 

And like I said, links to to the podcast as well. But I just want to say thanks for joining me today as we're exploring this. I think it says a lot about you that you're taking the time to understand this important benefit. And we look forward to seeing you either on one of our webinars or a future podcast. Bye now.

Voiceover: This promotional information is not approved or endorsed by the Florida Retirement System or the Division of Retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the Division of Retirement. This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com, or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address, 1700 Summit Lake Drive Suite 200, Tallahassee, Florida, 32317. Phone number, 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7261910.1 Expires November 2026.

Pension vs. Investment: Which Should You Choose?

Retirement planning can be confusing and filled with misinformation. How can you ensure you're making the best choices for your future?

In this episode, John Curry and April Schoen, tackle the common questions and misconceptions about the Florida Retirement System (FRS) that many employees face.

You’ll discover…

• A surprising truth about why some employees might opt for the Investment Plan over the Pension Plan.

• The critical differences in vesting periods that could impact your retirement plans.

• Why understanding pension options is pivotal to avoid costly consequences.

• Essential steps for coordinating your pension, Social Security, and other financial resources.

• How to navigate the complexities of the DROP program for a more powerful retirement strategy.

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

John Curry: Hello, folks. This is John Curry. Welcome to another episode of The Secure Retirement podcast. I'm sitting here with April Schoen and we're going to have a little conversation about the Florida Retirement System here in a moment. But April I want to start off and share with folks why I've had a passion for working and serving the members of the Florida Retirement System. 

Back in 1983, I realized that there were really three groups of people in this community. You had the state workers, if you will, members of the Florida Retirement System. You had state employees, you had university system, and you had the business community. And I realized there had to be something in common, and it's retirement. It's planning for retirement. 

And I became so energized about that. Then I got to thinking about my grandfather and my father, the mistakes that they made. They did the best they could with what they had. Limited information. DROP was not around back then, but in some cases, they just got bad information. My grandfather retired. 

He took option one. When he died, less than five years into retirement, that money died with him. So my grandmother, for the rest of her life, she lived to be 95, all she had was Social Security coming in. So my dad and my uncle had to help her. My dad seeing that because he worked same place, Department of Transportation in Defuniak Springs, he said, I'm not making that mistake. So what he did, is he chose option three. 

So he had about 18% less income than he could have had with option one or two, and he had an income stream that he could count on for the rest of his life, and upon his death, know that his wife, my stepmother would get that income for the rest of her life. My dad retired at 62. He died at age 85. My grandmother lived to be 85. I mean my mother lived to be 85. 

So she benefited from that, but along the way, they both could have had more money with different planning. So which man did the planning properly? It's a matter of opinion. Some people say, you take the maximum and you take that chance. Other people, like my dad, said I'm not taking a chance on that money. I want to know it's there for me. I want to know it's there for my wife. 

And I think that is a good way to think about what do you decide to do with retirement. If you're in the Florida Retirement System, or in the pension or in the investment plan, when do you want to retire? And then we work around that. And I'd like you to jump and just talk a little bit about some of the questions that we get and our approach to doing retirement planning because it's pretty different than the average quote financial advisor.

April Schoen: Yeah. In today's episode, we're going to really, John, be going through and talking about, what are the most common questions that we get from clients about FRS benefits. There is a lot of confusion out there, a lot of information, and a lot of misinformation as well. And so we want to cover really, one of those that kind of most common questions that we get from clients about FRS retirement benefits. 

We had a new client in last week, and when I had first met with them, we talked about how we know a lot about the FRS benefits. And I made the joke, you know, you could poke me in the rib at two in the morning and ask me what are the four pension options out of the four Retirement System? And I could recite them to you. 

John: Absolutely. 

April: And he laughed. And then last week, when he was in, we were going through some things, and he had some misinformation about how something worked when it came to his DROP, so we were talking through it, and he goes, aha, I see. You do know a lot about the FRS retirement. 

And I said, yes, that's really what we've spent, I know John, for you, coming up on 50 years, and then really for me, working especially with state employees for the last 14, 14.5 years of learning those benefits. So what we like to do is just break down those common questions that we get from clients about FRS retirement benefits. And I think you're going to find this to be very useful for you, and something that you can refer back to when some of these questions come up.

John: And let me make a point here. We're not going to try to give you a dump truckload of information. We're going to keep it brief. And I would encourage you to either have a telephone call with us or come in and have a visit if you'd like to know more, but because we're going to try to give you a big chunk of information here, but we're going to keep it brief so we don't overload you.

April: That's right. That's right. So let's start with the first thing here. What are the differences between the pension and the investment plan? So the first thing I would say I encourage you to do, if you don't know which plan that you're in, you're going to want to double check that with your human resources department or the division of retirement to know for sure which plan that you're in. 

But the pension plan, this is a traditional defined benefit plan. So what does that mean? That means that when you get to retirement, you're going to receive a stream of guaranteed income from the state of Florida for the rest of your life. So that is the pension plan. It is a guaranteed income for you at retirement. And then what's the investment plan? 

Well, the investment plan is similar to a 401k. It's called a defined contribution plan. This is a retirement account that's in your name, where you contribute and the employer contributes for you. But you the employee bear the investment risk. You are responsible for determining how to have your investment plan invested, making sure that changes are made to that throughout your career as well. 

They're not going to automatically do it for you. You have to be proactive in making those investment changes. And you bear the investment risk, because when you get to retirement, yes, you are going to have whatever amount has accumulated in your investment plan, but it's going to be your responsibility for then what to do with that and how to structure it.

John: And the question becomes, can that person manage that money along the way in a way that they have a chunk of money to then create their own pension type income? Or do they just do withdrawals along the way? And that's risky. It's risky if the market is down.

April: Yeah, and contrasting that back with the pension plan, the state of Florida is bearing that investment risk. Yes, you are still contributing. You're required to put in 3% to either plan, but with the pension, the employer or the state of Florida is bearing that investment risk. Now there are vesting schedules on how long do you have to work for the state, have years of service, to be totally vested in these two plans. 

Meaning that you're going to receive 100% of the benefits. Well, with the pension plan, it depends on when you started working for the state. If you started working for the state before 2011 you vest in six years. Six years if you started working before 2011. 

But if you started after 2011 it's eight years, eight years for you to be totally vested in the pension. And then the investment plan is different. It's one year of service to be vested in the investment plan. Meaning that after one year, if you leave the state, you can take with you 100% of what you have in the investment plan, both what you put in and also the employer. 

So what we find is people who start with the state that aren't sure if they're going to be there for a long time, they may choose the investment plan initially because, oh, I don't know if I'm going to be here for eight years or longer, so I'm going to choose the investment plan so I have more flexibility.

John: Or in some cases, we know people who know up front they're not going to be there very long. I'm thinking of an attorney that we've worked with over the years where he knew going in initially he was not going to be there. But surprisingly, he changed his mind three years later and is still under the pension plan.

April: I was just having a conversation with a good friend of mine and my sister-in-law. They both work for the state in different agencies. One is with the Department of Health and one is with elder care, and he said, I'm a lifer. I'm what's known as a lifer. You know, I've been there 20 years, and I don't plan, I'm not going anywhere else, so I'm a lifer. I love that. 

So another question we get is, when can I start receiving my benefits? So normal retirement age under the pension plan is going to, again depend on, when did you start for the state. So you want to go back and see when did you start your years of service so that you can know exactly when your what they consider your normal retirement age to be. 

And that is going to be when you can start receiving 100% of your full pension benefit, is when you reach normal retirement age. Now if you again are under the pension and you retire prior to that early retirement age, then you're going to have some penalties. What they will do is you can still get your pension, but they're going to reduce it. 

So it's important to know when is your normal retirement age and take that into consideration about when you're going to start taking your pension. And then again, with your investment plan, there's not necessarily a magic age for that. It's going to be when you've been vested for one year, but then you also have to take in taxes into consideration. 

So with the investment plan, it may not be a plan description saying, oh, this is my normal retirement age, but it's going to also take into consideration taxes. So if you can take money out of your investment plan early, you may have tax penalties. So not a penalty from the state, but a penalty from the IRS. So it's important to keep those in mind too.

John: I think the best thing there April is to think in terms of an IRA. If you take it out before 59.5, same idea from the standpoint of people who are listing when we refer to a penalty, that's what we're talking about.

April: Absolutely. So let's talk a little bit too about what those normal retirement ages are so that everyone can have a good idea what that will look like for them. So if you started with the state prior to 2011 again, that's when a lot of changes were made in FRS benefits. So you may hear us reference that time frame a lot. 

But anyway, if you started before 2011, normal retirement age is age 62 or 30 years of service. So 62 or 30 years of service. If you started after July 2011, it's age 65 or 33 years of service. And again, that's going to determine your normal retirement age for the pension. Now, how are benefits calculated under the pension plan? 

So a couple things here. One, I would really encourage you to reach out to the Division of Retirement. They do a great job of putting together pension estimates for you, and you could ask them for various scenarios. They can show, I know we're going to get into DROP, but they can show if you go into DROP if you don't go into DROP, how long you worked. So they can do a really good job of helping you calculate this. 

But with a pension, the state of Florida has a formula that they use, and the formula is a combination of your years of service. So how many years of service do you have with the state? It's the average of your five highest compensation, like your salary, highest five, and then they have an accrual rate that they use based on your position type. 

So years of service, highest five, and then they have a multiplier that they use based on your class. Again, that's why we can do some rough estimates and calculations for clients, which we do. But it is also good to go straight to the Division of Retirement to get those estimates. 

And if we think about them, using your highest five years of service, that's why people will work longer in retirement, because when we get towards that end, this is when we're making the most money we've ever made. And it can make a huge difference in that pension. So one of our clients was, they've been working with us for a few years, and he just got a big promotion. 

And so this is going to now change their landscape. He was thinking he was going to go into DROP and retire earlier once he hit his 30 years of service, but now he's rethinking that based on this raise. Because now he knows, oh, now I want to get five years at this new position. And then one question we get a lot too, is, can I switch between the pension and the investment plan? 

And the answer is yes, you can do that once during your career. So if you're in the investment plan, you can, they call it buying into the pension. You can buy into the pension. This is something you're going to want to get a quote from the Division of Retirement, because one thing you have to know here is, do I have enough money in the investment plan to buy into the pension or not? 

And then the Division of Retirement can also give you an estimate if you switch from the pension plan to the investment plan, how much is that? What is that value that they would put into the investment plan for you? So John, let's talk about that for a minute. Why would someone switch from either the investment plan to the pension or from the pension to the investment plan?

John: I've thought about that a lot over the years, and the truth of the matter is, I've had very few people, I think, if I really think hard, I'm gonna say only three people. I may be wrong. Might be three or four that went from the pension plan to the investment plan. And it's rarely done. Because when you start looking at having the guaranteed streams of income, and can I take on that investment burden myself and match what the pension could give? 

Most people determine they can't do it. And in our case, we just show the numbers. This is what you have with a pension. Here's the calculation you got from the state, showing what would go into the investment account. What interest rate do you want to assume you can earn on your money? How do you want to invest? And that's a big choice. That's a big decision to make. 

But if I know for a fact that I'm going to be leaving early, then I may want to get that money in my lump sum, either cash out and pay the taxes, or I'm able to invest it. And maybe I'm going to be conservative and use a money market fund or treasuries, or maybe I want to go for the home run and invest it.

April: That's right. Yeah. You bring up a great point there. It's the state of Florida has a great pension. No doubt about it. Great pension.

John: One of the best in the country.

April: It's hard to match those pension numbers on the investment side. But I think where I see people that do that too is if they have poor health. 

John: Correct. 

April: So if they know, okay, I have poor health, my longevity, my lifespan doesn't look so good. My outlook here doesn't look great. Then they may want to switch to that investment plan so that there are proceeds left behind, not just for a spouse, but also kids.

John: Plus they may want to enjoy that money. Think about this for a moment. Most people by now who listen to our podcast know about my cancer diagnosis. Okay, well, if I know that I have a shorter life expectancy, which I now do, maybe I want to take a chunk of money and spend it. And I have. There are things that I'm doing. That money I'm going to spend and enjoy, and that's not on the table as far as legacy. The other legacy needs are taken care of. So I can see people doing that.

April: Absolutely. What about if they want to switch from the investment plan to the pension plan? Why would someone want to do that?

John: Because they want that guaranteed stream of income, but, but timing is critical, because you may not be able to afford it because of the cost. Because what they're going to do with this estimate, they will calculate how much money you've got to have in there and what the cost would be. And again, most people, when they look at it, go, I'm not doing that.

April: I know in 2022 when the market was down, we had several of these conversations quite frequently during that year because the market was down. But then people are seeing on their statement, okay, my investment, or logging in on their account, my investment plan is down. I don't like this market volatility, so I want to switch to the pension plan. 

And that's an emotional decision because of what we're seeing happen with the market. So we now want the guarantees. But then that's a tough time to make that switch, because now your account value is down in the investment plan, so you got such a bigger number that you may need to go into that.

John: And if you have money in retirement accounts, you could do that. But what if you don't? What's the buy-in going to be? What's it going to cost you? This is an interesting topic and I'm glad that you chose for us to cover this today because most people don't think about this until they're really close to retirement. 

Especially which option to choose. I love working with people in their 30s, they say, well, when should I start thinking about retirement? The day you get the job. That's your exit strategy. You love what you do, but what are you going to do at the end?

April: And that's a great question, too. I get this a lot from clients, too, about when do I have to make that choice on my pension. When do I have to choose? And you have to make that choice on your pension when you go into DROP, which we're going to talk about in a few minutes, or when you officially retire and step out. 

So some people think I have to make this decision much earlier, and you don't have to make it until towards the end of your career, but you want to have a game plan way before then about what you're going to do. So one thing too, is, one question we get is, what happens if I leave working for the state? 

So maybe I leave, I didn't work the full 30 years, maybe I leave early, or maybe I just left and I go work on the private side. We see that a lot too. So we get questions about what happens to my benefits. Well, on the pension plan, if you're vested, then you don't lose your pension. 

So some people think that if they don't work the full 30 years, that they're going to lose their pension, and that's not accurate. As long as you're vested, your pension will stay there. Now you may again need or want to wait until you hit that normal retirement age and start taking your benefit so you get the full benefit, or you can take it early, but they would have a penalty for that.

John: They'd have a reduction in benefit based on the number of years.

April: That's right, and again, so that's for the pension. And then on the investment plan, again if you're vested, you can take your account balance with you. So you can roll it over to another retirement plan. You can roll it over to an IRA. You can leave it in the investment plan. 

John: Or cash out.

April: Or you can cash it out.

John: And that's something we should touch on, just for a moment. Why would someone cash out? Well, let's say you have an emergency and you need the money, but let's say everything's good. Tax planning is important here. You know, in 1986 when Congress dropped the tax rates from 50% down to 28, I tried to convince a friend of mine to take a chunk of money out of his retirement plan. He said I'm not going to do that. 

Well, he's been dead several years now, but so many times he said, John, I wish I had taken that money out and paid 28% tax instead of the tax rates going back up. So part of it could be if you see that the tax rates are going down, which is not likely, but it could happen again. But if we see that happening, maybe at that point your plan is I'm gonna take a chunk of that money out and enjoy it now and pay less tax. 

But that's hard for people to do. And I call that letting the tax tail wag the economic dog because we do everything based on taxes. I'm not a big proponent of that, but I am in favor of taking money out occasionally, paying the tax on it, and enjoy it now if you need it or want it.

April: Yeah, and taxpaying is very crucial. So I know one of our clients, she just retired at the end of August, and she was going to take some money out of her DROP to pay off some debt, and we talked about how, well we encouraged her, can we wait until January? 

Because she'd had all her income that she'd earned this year, next year, she's not going to have as much coming in from just the pension. And so we're like, let's wait and do that next year to take advantage of some of that.

John: It's interesting looking at people's faces when you bring up the tax calculator and you show that tax bracket today versus then. It's interesting because I go, I never thought of that. I know because you're you're so focused on a goal, or you're so emotionally committed to it that you're not doing the day the analytics we call it. Looking at the numbers. And of course, you're a geek when it comes to that stuff.

April: Oh I love it. I love it. I really need that sign that says I have a spreadsheet for that. That's totally true. 

John: You have a spreadsheet for everything. 

April: That's right, I have a spreadsheet for my spreadsheet. So let's talk about the DROP program, what it is, and how it works. So DROP is just for those in the pension plan. And what happens with DROP is it allows you to retire. I'm going to use air quotes for that retire while still working. 

So on paper, you've retired, even though you're still going to be working and you still receive your income, your salary. And what happens is the state starts paying your pension into a, it starts accruing into a retirement account on your behalf, and it's going to earn interest. And so while you're in DROP every month, that pension payment, instead of going to you, is going into your DROP account, it's a retirement account. 

And at the end of DROP, you're now going to start getting your pension as income, and then you're also going to receive a lump sum. They call that your DROP payout. This is the accrual of all those pension payments while you were in DROP that have been earning interest. 

And again, this is going to be in a retirement account, because this wasn't paid to you as an individual. It's going to be categorized as retirement money. Very important to understand how that part works. And you'll have to make a decision about what do you do with your DROP. 

Do you transfer it to some type of retirement account, like an IRA or deferred comp, or do you cash it out? So you're gonna have to make decisions about what to do with that DROP payout. And today, you can stay in DROP for up to eight years. It used to be five, but now you have the choice, the option to be in DROP for up to eight years. 

One thing to note here is when you go into DROP, that is when your years of service stop. And sometimes there's some miscommunication, misinformation about that because you've retired on paper. Your pension is now starting, so your years of service stop, and also your highest five. 

John: Yeah, you've officially retired. 

April: Yeah, you've officially retired. So keep that in mind, too. And then on the pension I want to cover briefly, what are the four pension options and how do they work. And just know we have other episodes that go into way more detail on not just the pension options, but all of these topics as well. 

So if you're curious and have more questions, go check out our other videos and episodes. But the four pension options. Option one is called life only. That means you get that income for life, but the day you die, that pension dies with you. There are no options to a beneficiary. 

So life only. Option two pays you an income for life, but guarantees that that income is going to go to some beneficiary for the first 10 years of retirement. So let's say I chose option two and I passed away after one year, then my beneficiary would receive my pension for the next nine years. One thing to note on option two is when you go into DROP starts that clock. So if I'm in DROP for eight years, and then I fully step out, now I only have two years left of the 10. 

Option three is called joint and survivor. We usually think about this for couples. So it would pay me an income for life, and then the day I pass away, it pays the same income to my spouse, or vice versa, if he passed away first, there's no change to my pension. We get both get the same income for the rest of our lives.

John: Just like I described at the beginning with my dad. Same thing.

April: Option four is the one there's the most misinformation and confusion about. Option four says it's gonna pay, it's a joint and survivor benefit, so let's say for you and your spouse, and it's gonna pay you income for as long as you live. But when one of you has passed away, your benefit is going to be reduced down to two-thirds of what you're receiving before.

John: So let's be clear. You and I are married. I've died. You die first, let's say I'm the worker, and it's my pension plan, but you die first. I'll soon get a reduction of a third. 

April: Correct.

John: And I've had the, I'll call it displeasure of having to sit down with people during my career and say, look, this is the way the system works. They're not hurting you. They're not taking advantage of you. You made this choice, and it's usually because they saw the higher number. 

I'll get this for life. And a guy said this, he said, and somehow the old girl is going to live on less. Well, now it's the old boy living on less. So it's very important to understand these options thoroughly before you sign up for them.

April: Absolutely. It's so crucial, so crucial. And a lot of you may be listening to this. You may have already made your pension option when you went into DROP. And you may be saying, oh, I don't even remember what pension option I chose. We see that a lot. 

It's so important for us to understand which pension option that we're under. It's gonna change your retirement plan. So thinking of that, what are some things, John, that people should consider in just planning overall for retirement? Of course, their FRS benefits are going to play a huge part in that. But what are some things they need to consider?

John: The things that pop in my mind, April, are number one, don't just count on the pension to give you the income. Don't just focus just on that. What are the other benefits? What are you going to do as far as health insurance in retirement? Are you going to do Original Medicare with a supplement? 

You going to do Medicare Advantage? What are you going to do? So the health insurance side of it. What are you going to do with money that's in DROP? How do you manage that in retirement? Will you need that income or not, or do you want to let it continue to grow to help offset inflation? So many things to look at.

April: Social Security. When are you going to take Social Security? And there's some, there's definitely some planning strategies out there for Social Security, whether you're a couple or if you've been divorced, if you're a widow or widower, there are definitely planning strategies around social security to maximize those benefits.

John: Well, if you think about it,  if you're in FRS pension, and you have Social Security, that is two guaranteed streams of income. However, they're going to be reduced at some point without proper planning. And you want to coordinate those two benefits with whatever you've done on your own, whether it be an IRA, deferred comp, DROP, whatever. It's just important to look at the whole picture. 

And then the big issue for me, because my health issues, I'm soon to be 72 years old. What is your health situation? Because that may change how you use that money. I guarantee you, my mindset has changed on how I'm gonna use my resources. I'm using more of the money now and enjoying it while I can with the people I want to spend time with.

April: Yeah, you know, we think about this retirement planning and this FRS benefits, we always talk about the retirement planning puzzle, and how we just think of all of these different pieces being part of a puzzle for our clients that are trying to figure out, how do we put it together in the best way possible? 

And that's where we come in to help them. And I think about these FRS benefits, and those are those cornerstones, right? Those are those corner pieces. We've got to identify those first and figure out how they fit in, and then where does everything else come in and coordinate as well.

John: Not only cornerstone, they're the foundation. Especially the pension.

April: Absolutely. Well, thank you guys for tuning in today as we are covering these common questions that we get. Really quick, I know we've got a couple other podcast episodes coming in the pipeline where we're going to talk about one episode just on DROP. So we're going to go into more detail about what it is. 

How does it work? When should you go into DROP? We're going to do a case study of going into DROP versus not going into DROP, and how does that impact your pension. So be sure to stay tuned to that. And then we're also going to talk about some tax efficiency strategies when we think about retirement, especially for those of you in FRS. 

We're going to talk about what we see from a tax planning standpoint from FRS members. What are those common tax planning mistakes that we see? And we're going to dive deep into that piece.

John: I want you to show us how we can pay zero tax for the rest of our lives.

April: If I could wave a magic wand and do it, I would. Thanks you guys for tuning in, and we'll look forward to seeing you next time.

John: It was a pleasure sharing time with you folks. 

April: Bye now.

Voiceover:  This promotional information is not approved or endorsed by the Florida Retirement System or the Division of Retirement. Neither Guardian nor its affiliates are associated with the Florida Retirement System or the Division of Retirement. This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice, make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and the opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address, 1700 Summit Lake Drive Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of  FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7188596.1 Expires November 2026

Finding Balance in Life and Finances

Retirement isn't just about building a nest egg—it's about crafting a balanced, fulfilling life. Dive into a conversation that goes beyond the numbers.

In this episode, John and April uncover the holistic approach to retirement planning that goes far beyond financial savings.

You’ll discover…

• Why retirement planning involves much more than just accumulating wealth

• Four essential areas to focus on for a balanced retirement

• How to identify your personal retirement needs and goals

• A unique approach that differentiates Curry Schoen Financial from other advisors

• The most common yet overlooked expenses you need to prepare for

Mentioned in this episode:

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hello and welcome to today's episode of The Secure Retirement Method. Today we talk about something important, and that is how retirement isn't just about money. I know a lot of us think that. We get sometimes even obsessed about that, thinking that retirement is all about the money, and how much money do we have, and what is that going to look like. But it goes way beyond just the money side, the financial side of our lives. And today I'm joined by John.

John Curry: Hello April. Hello everyone.

April: And we're gonna talk about these four key areas in life that are really crucial when we're thinking about having a fulfilling retirement. We're gonna talk about your health, wealth, time, and relationships. So let's dive right in. So John, as you're thinking about this, I know you're gonna be coming up on your 50th year in financial services and helping people with these topics. 

John: Yeah, for a long time. 

April: Long time, long time. And, you know, we can kind of joke sometimes that a lot has changed in those 50 years, but I think a lot of stayed the same, too.

John: I agree with that. More has stayed the same.

April: Absolutely. And so, we're going to get into this today in talking about these four crucial parts of someone's life. I think these are important while we're working, too, but today we're going to focus on the retirement side. What have you seen from your perspective of how these four different components work together when we're thinking about wealth, health, time, and relationships?

John: Well, first of all, most people come in the door worried about retirement. They're very insecure. And that's why, when I created the Secure Retirement Method, I used the word secure. Not a comfortable retirement, a secure retirement. And secure retirement means different things to different people. But it's not just about retirement. 

You could be 35 years old or 20 years old. We all have some insecurities about money, and if not, everything would be perfect. But everybody's worried about. Do I have enough? Will I have enough? Will I lose my money in the market? But the things from a wealth-building standpoint, people come in with this mindset of, okay, I have to work harder, investing money, and put myself in a position where the best balance that I have in this account, a 401k, my IRA, 457, deferred comp, TSA, whatever they've got. 403b. 

Okay, I have to use this money to take care of me in retirement. Then they are worried about rate of return. Okay, am I getting a good rate of return? Then they worry about, okay, am I gonna lose my money? Because you could. Go back and look at 2008. The market was down 47% for a lot of our clients. 401k, just half of it disappeared, you know, and that's scary. Could it happen again? Yes. And it will happen again. Question is, when? 

So I think number one is from the standpoint of the wealth side is people, they're anxious, they're concerned, and part of this is because they do not have the unique planning process that they can follow to help them address those issues. And we'll talk about that some. Matter of fact, why don't you talk a little bit about our planning process, and then we'll talk about the health side of it.

April: I think a couple of things on that, you're absolutely right, in that the first people think about, is this money side when we think about retirement. But you know, I know we, what we've seen, especially in the work that we do with our clients, that it's not just about accumulating some big number in their retirement account. It's about having this holistic approach to the financial side. 

So yeah, I'll talk a little bit about our planning process. And we have a proven process that we take all of our clients through. I was just meeting with a new client last week, and he's retiring next year. And one of the things that he said is that he wanted to work with someone who could help him figure out the timetable, even. When do I need to do what? When do I need to sign up for Medicare? When do I need to apply for Social Security? 

He's retiring from the state of Florida. So then he would say, well, when do I need to let them know about my DROP options and what I'm gonna do with that? When do I need to let deferred comp know? So he just even had a lot of questions about the when and the timing side of things. A lot of clients, and this might sound silly, but they really wonder the how. How do you do these things? 

John: Correct.

April: How do you sign up for Social Security? I've done a great job-saving money, and I've got money in my retirement accounts, but how do I actually start turning this account balance, this account, into income? What's the process for that? So I think some of it's that. But when we're looking at overall retirement planning, we look at having this bucketed approach to retirement income. 

So we first take a look at what are the guaranteed streams of income that you are going to have in retirement. That might be Social Security and a pension, and we call that your retirement baseline. What is the base income going to be for you in retirement? And that's a great starting point for us. We've got to know what's that guaranteed income going to look like. 

And then we can have conversations around, is that enough, or do we need more guaranteed income in retirement. And then from there, we also want to have other distinct buckets. We want to have buckets for discretionary income. So if we have all of our basic needs covered by guaranteed streams of income, and that would be the ideal situation. That our basic lifestyle is covered by guaranteed streams of income. 

John: Absolutely. That should be the goal.

April: That's the goal, right? And we think about having working and you got this paycheck coming in every couple of weeks, we want to have the same feeling in retirement. We want to have that income just coming in on autopilot, so you don't have to worry about it. You don't have to think about it. And then we want to have discretionary income, so we've got assets that we tap into for discretionary needs. Thinking about maybe we're going to take a trip, or maybe we're going to remodel the house or something. Whatever it is. A new car.

John: Or a wedding. Something pops up where you need money to help a family member.

April: What are those things that are going to happen that are outside of our basic living needs? And then we also need asset buckets that are continuing to grow on our balance sheet. Ones that we're not tapping into because we know you're going to need more income tomorrow than you need today. We've got to have enough future income coming in to offset inflation.

John: And we hear a lot about inflation nowadays, don't we? 

April: That's right. 

John: The Fed is focused on it. They're absolutely obsessed with it, trying to get it down to 2%. They say it's around two and a half right now. But I don't know if I believe that. You go to the grocery store and see what I pay for milk and eggs, I'm not so sure I believe the numbers anymore.

April: Absolutely. I know we don't have enough time to get into all of this today. And the intricacies of these buckets, because there are definitely some key points. You gotta think about the tax situation. You gotta think about required minimum distributions. You know, there are some assets that are better suited for that guaranteed stream of income. 

There are some assets that you can't use for the growth bucket because you have to tap into it for required minimum distributions. So there's a lot of intricacies there, and a lot of things that you want to work through, but that's definitely one of the things that we look at. you

John: On a regular basis, a few times a week now, somebody will say something to me along the lines of, hey, why are you still working? Are you still working? Do you have to work? Different questions. And I'll tell people, look, here's my retirement plan. I have two things that are working for me that help me tremendously with retirement. 

I have life insurance in place as one bookend, and I have guaranteed streams of income on the other. Now, some of those guaranteed streams of income are two pensions, Social Security, the VA benefit, and annuities I purchased to guarantee me income. So as you were saying earlier, all of my base expenses are covered. 

If everything else went away and I had those benefits, my life's good. Now, in the middle I have money that's in the savings account, making very little interest right now. But it's parked there for a reason because I want to use that to do things. I have money in money market accounts, in my brokerage account, then I have individual stocks, then have some ETFs. 

So I'm in a position that if I need money, I have it available. When we get into some of the health issues in a few minutes, I'll explain more of why that's important. But the key thing is, these buckets you're talking about, most of us want to leave money behind in some form of legacy to someone or something, some organization. 

So that could put somebody in a position where, how do I do that? And that's why I have the life insurance in place because it allows me to use the life insurance to replace every dollar if I spend the dollar, I have guilt-free ability to spend every dollar that I have in savings and investments.

April: I think that that's great. Thinking about that and how to structure that, I know that's what we coach our clients on. So on that theme, can you talk a little bit about why having money set up correctly is more important than just having some magic number? Sometimes people think, what's my number? How much do I need to have saved before I can retire? We get that question a lot, and we talk it's not so much about having some magic number and just having all this money saved up. It's really about how you have it structured and set up. So can you talk about why that's more important?

John: I'll tell you why it's more important for me. I have money coming in that I don't have to worry about the market. I don't have to worry about, did the market go up or down today? Because it's guaranteed income that shows up in my account. Some of it shows up on the first of the month. Some of it shows up on the second Wednesday. 

Social Security is the second Wednesday. It's just like a mushroom overnight, it pops up, and that's in my account. So I would say to people listen to this, some of your money, a good portion of your money, should be invested in a way that increase guaranteed, reliable streams of income for you that can never go away, never. Now you can't put all your money in something like that, because you have to have liquidity. 

Liquidity is a big deal, and we focus on that with people. But for me, April, it's come down to where it's more important today, I'll be 72 in less than two months, December 9th, I'll be 72. At 72 all of this means more now than ever. And I'm gonna jump into the health side for just a minute. I know you probably have some questions on this as I go through it, but I look at my health situation. 

You know, three and a half years ago, my right leg was amputated above the knee. That was a life-changing event. That's the most difficult thing I've ever dealt with. Heart surgery back in 2008 was child's play compared to this. Changed everything. How I walked for six months. I was confined to a wheelchair, then I finally got a prosthesis. 

Had to learn how to use it, still learning how to use it. I still fall every now and then. So the health side has become even more important. And I started working on that back in 2008 after the heart surgery. And I read and I study about longevity. But I also pay more attention to health, because what good is it to retire with all the wealth that we've been talking about, but your health is so bad that you can't do the things that you like to do? 

You can't travel and you can't walk across the parking lot because of knee replacement or hip replacement, things like that. And I'm seeing that as I'm getting older. I see things that pay more attention to. We have a lot of clients in their 80s and 90s, even 100 and you see they can't do some of the things they used to do. And you reach a point that you don't even want to do it. There are things I used to want to do. I'm not doing that. I'm not doing that now.

April: How would you say thinking about your own health journey, how would you say that that has shaped your view of planning for retirement, especially in the most recent years?

John: That's an interesting question. I would say that the latest challenge that I'm dealing with is the cancer. I have colon cancer that already spread to the liver when we found it. And I would tell everyone listening, please pay attention to your doctors and get colonoscopies scheduled and go. Don't miss it, because that's how we found mine. 

And when I asked the doctor, if we had not found it, what do you think my life expectancy would have been? She said, I think you'd have less than a year, six months to a year if she wouldn't have found it. Now that we found it, what do you think? She said I think you have three to five years. But she was quick to point out that she's not God. 

She can't cure me. She can just treat me. And it reminded me. I told her what my dad used to say, God will not take me till he wants me. When God wants me, He will take me. So you can't run around worried about dying. I don't worry about it. People say, well, I would think you'd be more depressed or whatever. I'm not going there. I'm not going there. 

But what it has made me do is pay attention to my health, because some of the reading, and I noticed you have the book here, Outlive by Peter Attia. I've always been a big student about longevity. Started that with a guy named Ken Dychwald who made it popular. We're living longer as Americans, although life expectancy has dropped some for men and women in the last few years. We're living longer in retirement than most people think. 

Well, let's take a picture of that. At one time, I weigh 284 pounds. Now I hover around 212, 213. So I got serious about my health because I realized that if I started making changes in my 40s and 50s, it would pay big dividends later. Someone your age, tender young age of 40, so the things you're doing today when I see you in the gym are going to give you huge benefits when you're my age that you don't even realize yet.

April: And it's interesting. As you know, John, my really good friend, we work out together several times a week. And we talk about this, that the things that we do today it’s not about looking a certain way. And it's not necessarily trying to do something for today. It is all those future benefits. 

John: Big time. 

April: We talk about how, and we see you, we see other people in the gym. We're like, you know what? We're gonna we wanna be. She was telling me how she was in the gym working out, and there was a gentleman who was 84 and was doing the leg press. That's what we want to be. We want to be in the gym, you know, 40-something years from now, doing this together, and it's all about building those future benefits on that. A lot of times you'll hear that, that saying too, that your health is your wealth. I have a friend who's a personal trainer, and her thing is, is she'll say, you either pay for it now, you pay for it later.

John: Just like the old oil filter commercial that some people will remember, pay me now or pay me later. You do the oil change now or buy an engine later. It's the same concept. It's the same concept, the same idea. But one of the things that I'm amazed by, you made a comment about being in the gym. One of the things I do is the farmer’s walk with 53-pound kettlebells. One in each hand. That blue carpet wear was 90 feet according to Tom. 

So I walked down 90 feet that weights down, rests are 45 seconds to a minute, and then repeat. I'll have people come to me and say why are you doing that? Why do you do that? I say, well, it works on my balance. It works on my strength overall, my hand strength, my grip. And then research has shown that one of the measures of how healthy you'll be in retirement is how good your grip is. 

And I work on that. I mean, my hand grip is like where I could, I could grab your arm and you're not getting loose. And it's not just about going to work out. Why are you doing it? I like the concept of functional fitness. You know, have the false illusions. I'm not going to look like Mr. Universe or whatever. I just want to go in and get in better shape. 

I did some traveling in September, the first time in four and a half years, I was on an airplane. And that travel, that little trip, speaking in Dallas, Texas, I was there, got there Sunday and left on Wednesday, flew to Columbus, Ohio, spoke there, came back on Friday. So it was an experiment. It was a test. Okay, how am I doing? 

And do I even want to travel and speak like I used to on a regular basis? I used to be on a plane two or three times a month, and this was four and a half years in between. That was the big deal. What I learned from that, April, the most important thing I learned from it, number one, I loved what I did, but the most important thing was I have to work on my endurance and my stamina. I gotta walk more. 

So now what I'm doing, I was going to increase the number of days at the gym. I'm not doing that. I'm walking more outside, up and down hills because I have to be able to walk longer distances. And it's more difficult with the prosthesis. It wears on the hips and the left knee. So I just have to work on that.

April: What are some other things? So you mentioned there, like grip strength, you mentioned endurance, and walking. So what are some other things you think that people should be thinking about, as kind of being prepared for that, or things they should be working on for their health? What are some things else that you're working on?

John: I'm working on more and more of making sure I don't sit as much as I used to. Like when you come in to work. Yeah, folks, I'm still working two or three days a week. This week, April is making work a lot.

April: It's good for you.

John: But you sit too much. We all are sitting too much. So what I'm working on more and more April is getting up and moving more. I've always talked about the key is, how did you go from 284 down to 213, 214, 212. Real simple. Eat less, move more. But the things that I'm reading and studying that are impacting people as they're getting through their 80s, 70s, 80s that's limiting them is overweight, okay, not strong, and endurance. 

April: And mobility.

John: Mobility and the ability to get out and walk. Some of the things that I'm involved in with my lady, Susie, we'll talk about relationships later. But do I have the ability to go do some of the same things? Some things I can't do. There's some travel that we do for festivals because of our role in Springtime Tallahassee. I'm not gonna do those. But, yeah, I'll just be in the way. The other things I do, and I do it with fervor.

April: That's right! So let's move on and talk about time. I love talking about this, especially thinking about retirement. So one of the things I think that people don't think about is how much time they're going to have now that they're retired. And people may look forward to that of being able to be on their own time and doing the things that they want to do. But how have you noticed that people handle now having all of this free time now that they're not working? Both the good and the bad, because I know we see both.

John: Well, let me start with me first, then I'll tell you what I see. When someone says to you, I think you have three to five. Years to live, it damn sure changes your focus about time. And even the oncologist, she said, John, I'm amazed at how you responded when I told you that. I don't see any anger, bitterness. What's up? I said, well, I appreciate you telling me what you think, but I think I'll live longer. I may not. If I don't, I don't, but I'm prepared. Everything's in place. I'm at peace. I've had a good life. If I die today mid-sentence, I've had a good life.

April: Let's not do that today.

John: I'd rather not. I'd rather not do it today. I'd rather not do it any day. I even talked about it sometimes in workshops and speeches I did when I was gone in September, that one of the financial hazards is dying too soon. I said, I don't know about you, but whenever I die, it's too soon. 

But when I see with people who come in the door or just chatting with a guy at the post office yesterday, a total stranger. I didn't know him, he knew me. He said you're John Curry, the retirement guy. I said you're close. I'm the Secure Retirement guy. Well, somewhere along the way, he had gotten a postcard that we'd set and he told me about it as he was throwing away a political postcard. He said that's how I'll remember you because I used to get postcards from you about your seminars. 

So we're talking about retirement. He said, if I had known that I was going to be this old in retirement, I would have taken better care of myself. So think about it. Goes back to health again. So we spend all these years trying to get wealth, then in the end, we're spending all of our money to try to get health. 

April: And time.

John: And time. So the time part of it, what will you do with your time? I'm struggling with this a little bit now, because, you know, I'm fortunate that I have a place on Lake Talquin so I go there. But if I'm not careful, I'll catch myself sitting too long, either on the back porch there or watching television. Because I love watching the financial and political news. I'm a junkie when it comes to that. 

I could sit in front of that television, well, from 6 to 9 in the morning Maria Bartiromo, then from 9 to 12 watching Stuart Varney because I like what they cover. But that would be six hours of my life I did nothing. So instead, I am working on watching less television and reading more. I'm back to reading two or three books a month again. I got off for that for a while. But how do you spend your time? What do you want to do? What do you want to do with that time?

April: I know when we're working with clients, we talk about how important it is that we're retiring to something, not just from something. Because sometimes we get to a place where we're so unhappy in our job. We're so frustrated. There's been maybe management changes. Maybe there's, sometimes we hear too, they're making all these software changes. 

I don't want to deal with it anymore. And so sometimes we're retiring from something, and that's okay, as long as we're also retiring to something. So really thinking about what are you gonna do now that every day is Saturday and Sunday?

John: Correct. Expand on that. What do we tell people about that?

April: Absolutely. So right now, if you're working a traditional job, and we work Monday through Friday, then we have Saturday and Sunday to go do the things that we want to do. So like this past weekend, I feel like I did nothing but run 90 miles an hour because Saturday morning, Eli had soccer, and then a flag football game, and then we went out with my in-laws to celebrate my brother-in-law and sister-in-law to celebrate Brian's birthday. 

And then on Sunday, we went to church and we played golf and had dinner with the family. And so it was just, it was great, and it was wonderful. We got to spend some time outside. It's a beautiful time in Tallahassee right now outside. And you know, it was great, but it was just jam-packed. 

So then you kind of come in on Monday like, oh, I need a break. I need to rest from my weekend. So now, what will we do, though, if we've got seven days of free time? We're not going to golf all seven days. So what are you going to do? But some of our clients, they do now play pickleball.

John: One of our clients plays golf every day. Literally every day that man plays golf.

April: Yes. So, but what are we going to do? And you need money for that too, right? So thinking about what are we going to do with our time? What is that lifestyle that we want to have in retirement? Do we want to volunteer? Now there are a lot of our clients that we hear that they're doing so much wonderful things in retirement, whether it's volunteering or traveling, or their hobbies that they say, I don't know how I ever had time to work. Isn't that amazing?

John: I hear that all the time. We hear it every time we see clients.

April: And, you know, my favorite story to talk about all the time is a client of ours who was 90 at the time, and we had reached out, scheduling a time for us to get together, to meet and review his things. And he goes April, I have got to let go of some of my social commitments. I have no time in the next three weeks. 

John: Was that Charlie?

April: Mm-hmm. 

John: I thought so.

April: At 90 years old. 

John: Yeah, he's 97 now I think.

April: And I was just like, this is where you say, oh, I want to be like you I grow up. To have so much going on in your life and to feel still so engaged in having a purpose. And I think that's the thing for most people, is like again, is going back to that purpose, whether it's good or bad, we get a lot of our purpose and our identity from work.

John: Well let's talk about that. You made a comment earlier about your dad, that when he retired, that, you know, he lost that social connection with people that he worked with. My dad retired at 62 and he died at age 85. 85 and a half, to be exact. Almost to the day. And I asked him, I said, any regrets? 

And one of his regrets was, he said, son, I retired too soon. I should have worked longer. I said because of the money. He said, no, just because of the relationships. He said because you think about it all this time. He's on his deathbed when we're having this conversation, he said, all this time I've been retired, I've enjoyed the time with your mom. 

I've enjoyed the time with you, going to the lake house, riding the pontoon boat. He said, but I should have worked longer. I would have had a better financial situation, and I would have maintained a relationship with those people. But I've lost those relationships because they don't keep in touch. He said I regret that. I regret that. 

And one of the things that I want to work on is nurturing those types of relationships. I picked up the telephone this morning on the way in and called a friend. I've known him since 1975. 49 years. A colleague, you know. We talked for 15 minutes and it was great, but we don't talk enough. Too busy. Everybody's busy. Too much to do.

April: Yeah, so let's talk about the relationship side of things, and what we see. I do think that the social aspect is important too. If you think about it, we spend more time at work than we do with our family. So you know, now that we're retired and we don't have that aspect of our lives anymore, what is going to fill that? 

Are we going to maintain those relationships with the people that we used to work with? And then also, what are we doing while we're working to foster those relationships with our family or whoever is important in your life, whether that's friends or, you know, your spouse or your kids, but who are those relationships? And how are we going to work on those? Do you want to talk about the relationship side for a few minutes?

John: I do. I do. Because another thing that happens when you are facing some type of health crisis, especially one that's shortened your life expectancy. I have no false illusions. I used to tell people I'm gonna be like George Burns lived to be 100 years old, or Kirk Douglas, 102. Kirk Douglas and I have the same birthday, December 9. So I always used it as an example. Bob Hope lived to be 100 years old. 

Betty White missed it by about two weeks. These are all people that I read and studied because of how they adapted to change. But I have no false illusions. I'm not gonna live to be 100 years old, but what I can do is if I have the wealth in place, and I work on my health and I manage my time wisely, okay, if I got this time who do I want to spend it with? 

I got to thinking about that big time, especially when I was when you go to chemotherapy, the infusions, you’re sitting in a chair for four or five hours, sometimes. The whole day is about five six hours from that. So it gives you time to think. So I got to thinking about some things. There are people around us that are toxic, that when you're around them, they drain your energy, they don't give you energy. 

So one of the things I've worked on for many years, even more so now, if I'm around someone that's draining my energy, I limit that time. I want to be around people that I feel like I'm encouraging them. They encourage us. It's almost like it's two batteries, you know, we energize each other. And if I find that I'm around someone who’s toxic, I get the hell away as quickly as I can. I'm nice, I'm cordial about it. 

And I've got family members that are in that mode that I spend very little time with. I spend time but I'm going to limit it. So the question I have for people is this, when you retire and you have this money, hopefully good health, and now all this time, who are you going to spend it with? You going to be by yourself? Studies have proven people who are by themselves, they get real lonely, they get into a period of depression, and they don't do very well. 

So you got to have some social interaction. I would encourage people to think about that way before you retire, a long time before you retire. For me, I rejoined a couple of organizations I dropped out of because I like those people. I like being there. For a while, I stopped going to my Rotary Club. Now I'm going back to Rotary and I enjoy it because of the people here. 

So I would just say, determine where you want to spend the time. What are the things you want to be doing, but most importantly, who will you do them with? And think about this, if you have no relationships, and you have the wealth, you got the money, you're in good health, you can travel, you got the time, and you got nobody to do it with, what kind of life is that? 

And I'm working diligently on repairing some relationships that frankly, suck. Family wise. I had a very good friend tell me over the weekend, look, you've done all you can do, you've reached out, you've done all you can do. The other person has to want to do it. And I said, thank you for that reminder. That's true. 

But what are the relationships that you want to work on? You think about it. You got work, okay, we got your free time, maybe with your children. You go to soccer games, you go to flag football games. You meet other people there. There's a common interest. So what is the common interest? And that's where you're most happy when you're doing things like that. And then the same this with work. A friend of mine, his name's Chuck. 

He said, why do you still go to work? You don't have to work. Why do you do that? And I said, well, let me ask you a question, Chuck, if you're doing something you love doing, you're dealing with people you love doing it with, and you have a team around you you love working with, and you still get paid. When would you want to stop that? He said, well, you put it that way, never. I'd always wanted it. 

And I said that's what I have. I said, because of the relationships I have with people. At the same time, if somebody comes in and they're rude to you, me or Leslie or Luke, our team, we're not gonna work with them. Well, we have a little come to Jesus. You can't do that. We're going to work on mutual respect. And if we don't have that, then we probably should not work together. It's a two-way street.

April: It's a two way street, that's right. Also what I think is interesting about thinking about these four concepts is, you know, it's very clear that retirement is more than just about the money. And even though that might be where people initially think about retirement, all of these other aspects are tied into it at the end of the day. And I really think it's more about having balance in these areas. 

And yes, you know the money is important, right? You got to have money to be able to go do these things. You got to have money to be able to go travel, if you want to travel, or even to spend on things for your health, or spending time with people that you want to spend time with. So yes, I'm not cavalier and just thinking it's not important, but it is just one piece of the puzzle.

John: You're right. And other things, let's think about activities we've talked about, going to the gym. Membership is not free, right? Going to play golf. You gotta pay greens fees, get a cart, or you gonna walk. So everything you do, you need money, everything. Now you can just say, well, I'm not gonna go to the gym. I'm just gonna have some weights at home and walk. You can do that. And some people do it very well. I don't do that so well. 

I find that going to the gym a couple of days a week is good for me. I used to go three days a week and work with a trainer, and it was the best health I ever was in. Talking about leg presses earlier. One time I was leg pressing 600 pounds. That's how we found the aneurysms that later led to the amputation. I was in my 60s when I happened. 

So you look at how you spend your time, your money, the people you spend it with. It's all connected. And I think that's where we're different than most financial advisors. We don't just say okay, how much money you got, where do you want to put it? Have the conversation first. Who are you? What do you stand for? What's important to you? What does the future look like? What do you want it to look like? 

You know, and that's where our planning process helps so much because we can actually demonstrate, okay, this is what you said you wanted. Here's a picture of it. What do you think? Well, I don't like that. Well, you have time now to make changes, so what would you like to change? But you asked a question earlier about the money side. 

I think most important is, before you get into how to invest is how much money do you think you're going to need/want in retirement. And the truth of the matter is, none of us really know for sure. We don't know for sure what's inflation going to be, or what's our tax rate. We don't know that. 

April: What's healthcare gonna cost?

John: Healthcare, that's the biggest expense we have. And then work on at least, as you call it, the baseline, what is the minimum number you want to know that's coming in every day, every month or other. And I would just tell you, from a peace of mind standpoint, I have that, and I am going to preach that until the day they bury me. I'm just going to say over and over, it's the four things. Work on your wealth, your health, your time, relationships. 

Over and over, until people get it. And then, you know what? Every time I work on teaching that, I did that, I spoke six times in one week, and every time I spoke, I made sure that I shared that with people. And you know what? People in the room, I'm talking about advisors, other advisors are like, wow, that is so different because we're not hearing that. We're not hearing that which is so important.

April: Absolutely. And I'm just, I want to remind you listening to this too, that we're here to help guide you through this process. We understand that retirement is about the whole person. It's not just your bank account. So if you're interested, you want to learn more about how we can help you, feel free to reach out. You can go to our website and find ways to connect with us. 

You can listen to other podcast episodes. We have a YouTube channel. Make sure you subscribe to our YouTube. But yeah, if you want to start working through this process of thinking about retirement, especially in these four areas, not just the money side, but all of it. Your health, your wealth, your time, and your relationships, again, I would encourage you to just reach out. A lot of times how we structure that is scheduling a time for a call. 

So it's a 30-minute call. We do not charge for that call. It's complimentary, and it's just a time for us to get to know you a little bit, and understand, what are your concerns when you think about retirement. What questions do you have? 

Of course, we'll share with you how we work with clients. And we're obviously, we're not the right fit for everyone, but I do know that at the end of those 30-minute calls, it's really clear if it's a good fit for us to work together, and we talk through what that looks like.

John: I'm gonna make a very bold comment. There's no way, no way that someone will not benefit from either a 30-minute conversation for coming sitting down face to face with us. Because we've had people walk away and say wow, I'll learn more in one hour with the two of you, or with you or with me, than I ever have before when it comes to financial planning and retirement planning and estate planning. And it's because we have no need to pressure anyone. We could be just as relaxed. If we do business, great. If we don't, it's okay too. There's zero pressure. Zero. Come have a cup of coffee and chat.

April: Well, thank you guys for tuning in today, and we look forward to seeing you on the next episode. Goodbye.

John: Thank you.

Voiceover: This material is intended for general public use. By providing this content, Park Avenue Securities, LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, visit our website at curryschoenfinancial.com, or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial, and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address, 1700 Summit Lake Drive, Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7188586.1 Expires October 2026.

Maximize Your Social Security Income Without Confusion

Planning your retirement can be a maze, but knowing when to claim your Social Security benefits might just be the key to unlocking a secure future. Ready to make the most pivotal decision of your retirement journey?

In this episode, April Schoen, dives into the intricacies of Social Security, outlining strategies to ensure your golden years are actually golden.

You’ll discover…

• How to determine if you and your spouse qualify for Social Security benefits.

• Various timing strategies for claiming your benefits to maximize your income.

• The critical differences between spousal and survivor benefits.

• How your work history and earnings impact your Social Security payments.

• The often-overlooked tax implications of taking Social Security benefits.

Mentioned in this episode:

• https://www.ssa.gov/

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hello and welcome. My name is April Schoen, and I'm glad you're joining me today. I'm a financial advisor with over 10 years helping clients not just get to retirement, but through retirement with confidence. And today we're going to be talking about one of the most important subjects when it comes to planning your retirement, and that's going to be Social Security.

When you start taking your Social Security benefits is going to be the biggest decision you make when it comes to your retirement. Not only is it going to impact your income for the rest of your life, but if you're married, it's going to impact your spouse's income for the rest of their life, too.

So I'm glad you're here. I'm glad that you're diving in to learn about this important topic. Now this is actually going to be part three in a series that we're doing about retirement planning for people over 50, called your path to a secure future. So if you haven't watched episode one and two, I encourage you to hit pause, go back, watch episodes one and two, and then jump back into today all about Social Security.

Now I know this is not going to surprise you, but people who have more guaranteed streams of income in retirement are happier. They feel less stressed. They're happier. And Social Security is one of those benefits that's going to provide you with that guaranteed stream of income. And Social Security is really this cornerstone for retirement income for many Americans.

We consider it part of your baseline for retirement, and then you may have a pension, which is going to increase your guaranteed income. You're going to have investments, retirement accounts. All of that added up is going to create your retirement income. But Social Security is one of those cornerstones. It's one subject that we get the most amount of questions on. People are always asking when's the best time for me to take Social Security?

So let's get into it today. As I said, this is gonna be one of the most important decisions that you make about your retirement. I think the two questions we get most often have to do with Social Security and also healthcare in retirement. That's another big topic of discussion. What are we going to talk about today? We're going to go through and talk about, how do you qualify for benefits?

Just going to give some high-level basic information about how do you qualify for benefits. Because sometimes there's some questions around that. We're going to talk about, when can you claim and how do you maximize your benefits under Social Security? There's some different claiming strategies. And then also understanding spousal benefits and survivor benefits as well. Let's get into it.

First, let's talk about how do you actually qualify for Social Security? It's pretty simple. As you're working, as you're paying into Social Security, you earn what are called credits. And you essentially need 10 years of work history to be able for you and your spouse to qualify for both Social Security and Medicare. Now one of the things I encourage everyone to do is review their Social Security statement.

They used to send them in the mail, but now you have to go online to see your Social Security statement. And the Social Security website has got a ton of great information. We'll make sure that we link the Social Security's website in the description box, but it's got a ton of great information. There's some calculators actually out there too on their website. But I encourage you to create a login.

Go look at your statement. You're going to see your earnings history, which we're going to talk about in a few minutes. You're going to see the different benefit amounts, showing if you took Social Security at 62, your full retirement age or age 70, and every age in between there. You want to go and take a look at that and review that about every year or so as you're getting closer and closer to retirement.

How are benefits calculated? What is this amount going to be? How much am I going to receive from Social Security, and again, your statement is going to tell you all of those options. But let's walk through it. Benefits are based on your average indexed monthly earnings, and they look at your highest 35 years of work history. Let's talk about this for a second. Couple things I want to note here.

If you don't have 35 years of work history, they put in zeros for those years that you don't have. So be careful of that, because that's really going to pull down your average if you don't have 35 years of work history. The other thing I want to point out here is it's your highest 35 years of work history.

And for most people, when we're getting towards, close to retirement, that's when we're earning the most amount that we've ever earned. So the more years that we have of those higher earnings, what happens is something from early in our career, say, in your 20s or so, falls off of that average. The longer we work, earning more income, a higher salary, the higher those Social Security benefits are going to be.

They use a formula using your highest 35 years of work history to determine what they call as your PIA, your Primary Insurance Amount. And really, all this is, is this is the amount that you receive if you claimed Social Security at your full retirement age. So again, we're going to talk about that in a few minutes as well. What is that? How do you figure that out? How does that play into your Social Security benefits? So we're going to go through that in a second.

But like I said, you can see how a working longer is going to increase your benefits, because the more income you have at these higher levels, it's going to replace those earlier earnings history when we didn't make as much. So what are some things that we can do to increase our benefits, to maximize our benefits? That's really what most people want to know. How do I get the most out of it? I've been paying into Social Security all these years. How do I squeeze every bit out of it that I can?

First know you've got some different claiming options, and you can start benefits as early as 62. That's the earliest that you can claim Social Security. But if you do that, you're going to have a permanent reduction in your benefits. So if you're not taking it at your full retirement age, you take it early.

Now, full retirement age for most people, is between 66 and 67. I'm going to show you a chart in a minute that's going to show you exactly what your full retirement age is, but I just wanted to point that out to you as a point of reference. We think of three stages of Social Security. The earliest I can take it is 62, I have my full retirement age when I receive 100% of my benefit, and then I could also delay to age 70, where I get a higher benefit.

Anyway, so you can start it at 62. Also, like I said, your full retirement age, that's going to be based on the year that you were born. And then you can delay taking benefits until age 70. And every year that you delay past your full retirement age, you're going to get an 8% increase. Let me say that again. 8% increase. It's pretty big. So here's how you figure out your full retirement age. It's based on the year that you were born.

So if you were born in 1960 or later, your full retirement age is 67. So when I'm going through and talking about some examples today, I'm going to assume someone's full retirement age is age 67. But again, like I said, you can take it early at 62 so let's talk through that. What if you say, hey, April, I'm retiring. I'm not going to be working anymore, because there are definitely some key considerations you want to take.

You want to think about if you take it early. But let's get into a little bit about claiming strategies and what are some benefits of taping it early? Well, one of those is, you're gonna get immediate income. This might be, if someone has, maybe they've got some health concerns, they may want to go ahead and start taking their benefits early. But you're gonna get that immediate income.

This may also mean that you can delay tapping into your retirement accounts. Your investment accounts. Some clients say, Hey, I would rather take Social Security and let my investment account, my retirement account, continue to grow on my balance sheet. Kind of like keeping your powder dry. We want to keep money on your balance sheet growing for your future, and then tap into this Social Security benefit instead.

Coordinate it with your spousal benefits. It might be that one spouse takes it early and another spouse lets theirs grow until age 70. There's a lot of coordination you can actually do for a couple, and it's one of things that we help clients with. If that's something you're interested in, we could definitely help you with that.

What we would need is just a copy of each of your Social Security statements, and we can put a report together that's going to show you taking it early, taking it late, what's that kind of crossover point. How do you actually maximize those benefits. And then again, this might be useful for someone who's thinking, oh, I'm retiring at 62 I might be having some health problems. I'm not sure what my life expectancy is going to look like, and so I'm going to go ahead and take these Social Security benefits early.

Now, for Social Security calculations, what they assume is that someone at age 65 they are assuming that your life expectancy is 20 years, about age 85. That means, if you really look at the numbers, women live a few years longer than that on average, men a few years shorter. So they average it out to be about age 85, is what Social Security looks at.

Again, these are some benefits of taking it early. And this is stuff that we all walk through with our clients. But let's talk about the benefits of also delaying Social Security. Because I hear this a lot, I want to delay it as long as possible. If you do that, you're going to get those higher monthly payments.

Like I said, when you delay from full retirement age to age 70, you get an 8% increase per year. So my full retirement age is age 67 so if I wait till 70, that's 124% of my full retirement age benefit. That's a huge increase. This would mean an increased benefit for my spouse. Let me walk through that. We're going to talk about survivor benefits in a minute, but surviving spouses receive the higher of the two Social Securities.

I'm a numbers person. I don't know if that surprises you or not, but let me just put some numbers on it. So let's say that my Social Security benefit was $3000 a month, and my husband's benefit was $2000 a month, and I passed away first. Well, then Brian, my husband is going to receive $3000 a month from Social Security. He's not going to get both, but he's going to get the higher of the two. This is when we do look at, does it make sense for someone to delay their benefits because it's going to be a higher Social Security benefit for either of the surviving spouses.

I was just talking with a client this morning about this. Sadly her husband passed away earlier this year, and we were talking about the different Security Benefits and what she used to get and what she's getting now. And this can be ideal for people who are continuing to work, because Social Security penalizes you if you take your benefits early and are still working.

So it's really ideal for those who are continuing to work past their full retirement age.

And again, this can mean that you're going to have more financial security later in life, when we might find that health care is increasing, other expenses are increasing, you're going to have a higher baseline. If we compare that to say, someone taking their benefit at age 62. This really comes down to a very personal decision. I feel like sometimes people want me to give them a blanket answer.

Everybody should always do this all the time. And unfortunately, that's just not the way it works. It really comes down to everyone's specific situation. Comes down to your financial situation, your health situation, your family situation. There's a lot to consider about when to take your benefits. I really encourage you to sit down with a financial advisor, a planner, who knows what they're talking about, who understands Social Security and can look at this with you.

Don't make these decisions in a vacuum. Make sure that you're looking at all of your options and going through it. Let's talk about overview of pros and cons. Early benefits, you're going to get that immediate income, but your benefits are going to be reduced, and there are also income limits if you're continuing to work, which we're going to talk about. If you decide to delay your benefits, you're going to have higher income, increased benefit, and there's no income limit for working.

Now let's get into some of these spousal and survivor benefits. So for spousal benefits, the spouse must be at least 62 years old, and they're going to receive either their own record or up to 50% of the higher earning spouse's benefit. So let me use my example I gave earlier, where my benefit, let's say, is $3000 a month. Well, my husband is eligible to get his benefit on his own record, or half of mine, whichever is higher.

So even if the spouse didn't work much out of the home at all. Maybe they don't even have 10 years of work history. They still qualify for spousal benefits under your record, and can receive up to 50% of the spouse's benefit. If they claim Social Security before their full retirement age, they will also have a reduction, and there's also survivor benefits. This is a claiming strategy.

Now this is available to both widowed spouses and dependents. You can get up to 100% of the deceased spouse benefit, and you you can claim as early as age 60. We just had a client in this week, and her husband passed away several years ago, and she's been receiving his social security benefit. He was already getting Social Security, so she's getting 100% of what he was receiving, but she has never taken her benefit.

She's actually been letting her benefit delay and grow. And she just turned 70 this year, and she flipped over from her survivor benefit to her own record, because Social Security now is going to give her a pretty big bump, because she's changing over to her own record. This is a huge planning strategy. Definitely make sure that you keep that in mind if that is your situation.

So how do we have strategies to maximize benefits for a household? We want to coordinate when we're taking Social Security. It might mean that someone takes it early and another person delays into the future. We've got to look at those survivor benefits so that we understand what's going to happen when one of the spouses passes away. Do we have plans in place to replace that lost income?

That's a big part of what we do, too, for clients in that situation. When they've had a spouse pass away, we know they're going to have a reduction in income because of Social Security, and we've got to have buckets that we can tap into to recreate that, to replace that income. Now, what if you are continuing to work? I get this question a lot. You're saying, hey, April, I'm still working, but what if I want to start taking my benefits?

So the question I always ask here is if you're taking your benefits early, before your full retirement age, are you going to be working in any capacity? Because Social Security has earnings limits, and if you make over that limit, they're going to reduce your benefits. So the earnings limit in 2024 if you claim before your full retirement age is $22,320.

That means, if you are claiming Social Security early, and you're working, you have earned income, and you make over that amount, then they're going to reduce your Social Security benefit $1 for every $2 over that limit. Okay, so this is very important for us to understand how that works. And let me explain again. This is only on earned income.

So if you're getting money from a pension, you're taking money from retirement accounts, investment accounts, you have other passive income like real estate. None of that is earned income. It's, I have a job, I have a consulting business, I am self employed. It's any earned income is what they're going to look at there. And then when you do hit your full retirement age, they actually will go back in and do an adjustment and figure out what's your new benefit amount based on what your reduction was.

So you do get an additional adjustment for that when you hit your full retirement age, but it is something really important to know. So how do these earnings affect your benefits? If you claim early again, you've got that earnings test. They will recalculate. Once you reach your full retirement age, Social Security is going to recalculate your benefit amount to give you credit for the months that your benefit was reduced.

So that means then you're gonna have a higher benefit at your full retirement age. But a lot of times, the math doesn't work out where it makes sense for you to work and get your benefits early. It's still better for you to wait and take your benefits when you've fully stepped off into retirement. Balancing that work and benefits requires careful planning. So for some who continue to work it's going to be very beneficial.

This is when you want to work with that financial advisor and think about your financial needs, your health, and your long-term goals when making those decisions. Another question that we get a lot is understanding how Social Security benefits are taxed because they used to not be taxed a long time ago. And so a lot of times, people think that Social Security benefits are not taxed today, but that's not accurate.

Part of it does get considered in as your taxable income. And this one I'm going to give you my disclosure is that I'm not a CPA, I'm not a tax attorney, so make sure that you're consulting your own tax professional when talking through this. But let me give you an overview of how this works, and then you can meet with your tax professional. Social Security has something that's called combined income, and what they do is they take your adjusted gross income, they add any non taxable interest, and they add in half of your Social Security benefits.

And this combined income determines how much of your Social Security benefit is considered taxable. And that ranges from none of it's taxable, half of it's considered taxable income, or 85% of it is considered taxable income. Let me show you these income thresholds. Depends on how you file your taxes, if you file as an individual, or if you file married filing jointly. If you file as an individual and your combined income is less than $25,000 no taxes on your Social Security.

So there is still a possibility to have no taxes on your Social Security. It just doesn't impact as many people. And then, if your combined income is between $25,000 and $34,000 then 50% of your benefit is considered taxable income. And anything over $34,000, 85% of your benefit is considered taxable income. If you file married filing jointly and your combined income again this for both of you, so we have on your tax return.

So this is both incomes, is less than $32,000 no taxes. Between 32 and 44, 50% of your benefits will be considered taxable. And then over $44,000, 85% is considered taxable income. We talk through this with clients, and I'll tell you that when we're doing planning, we assume it's all taxable because of then that just means that bit that's not is going to be icing on the cake for you.

So if you're like, man April, that's kind of complicated to think about a combined income, and where does all that fit in? Then I would say in planning, just assume it's all taxable, and just know it's not going to be as bad as you think that it is. But again, this is really when you want to take this into consideration with everything that you have. Very important when you're doing strategic planning, part of what we do with clients is this strategic planning of like, hey, when am I going to take money from different buckets, so I can be as tax efficient as possible?

Maybe I want to stay under some certain tax limits because of federal income taxes, or maybe I'm concerned about IRMA, which affects your Medicare premiums. These are all things that you want to take into consideration when thinking about when to tap into benefits, when to tap into not just Social Security, but also investments, retirement accounts. That's a big part of what we do is as helping coordinate that.

Well, I hope today, again, I wanted to give like, a quick overview of Social Security, just to give you an overview, again, of how does it work? How do you qualify? When can you claim? What are some strategies to take into consideration? We do have, we actually give full hour, hour and a half long presentations on Social Security. I know we do have some of those up on the podcast, up on our YouTube channel as well, so you could definitely go there and get more detailed information.

But I want to just give that high level overview for Social Security, for those that are like, hey, I want to get this introduction and earn about Social Security as I'm diving into this. Make sure that you subscribe to our channel or our podcast, because the next episode we have coming up is going to be about investment strategies for a secure retirement. I think you're really going to enjoy that episode as well.

We're going to talk about developing that strategy for integrating social security with your other income sources, with your other investments and retirement accounts as well. Stay tuned for for that next episode that we have coming up. And you know, if you're like, hey, April, thanks for this but I'm really not sure what I should do in my situation.

I'm trying to decide what's going to be best for me and my family. Then I would suggest scheduling a time to do a consultation. We do complimentary consultations, so there's no charge to you. We do a 30 minute call, and what we're going to help doing that call is first of all, get clarity. What are some of the most important things to you? What are your goals? What are your concerns? What questions do you have about retirement?

And usually in that consultation, we're going to have a couple of ideas that we can share with you, like, hey, I think you should look into this, or maybe these are some ideas to work on as you're getting close to retirement. If you're interested in that, I would say hop over to our website, which is curryschoenfinancial.com.

You're going to see a button that says book a call, and that's going to take you right to my calendar so you can book a 30 minute phone call. gain, best way to do that, I would say, would be to head over to our website, which is curryschoenfinancial.com. We'll have a link that in the description box, so you could easily get to it. You could also call our office, 850-562-3000. Again, that number is 850-562-3000. Hope you guys enjoyed today's episode, and I look forward to seeing you on the next one. Bye now.

Voiceover: The Social Security Administration has not approved, endorsed or authorized this presentation. There is no charge to attend this event or subsequent consultations. Contact the Social Security Administration for complete details regarding eligibility for benefits. Guardian, its subsidiaries, agents and employees. Do not provide tax, legal or accounting advice. Consult your tax, legal or accounting professional regarding your individual situation. This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with, or endorsed by, Park Avenue Securities, Guardian, or North Florida Financial and the opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address, 1700 Summit Lake Drive Suite 200, Tallahassee, Florida, 32317. Phone number, 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Company of America, New York, New York. Park Avenue Securities as a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

6990460.1 Expires September 2026

Boost Retirement Income: Secrets Every Senior Needs to Know

Retirement planning can be overwhelming, but what if you could uncover strategies to secure a steady income and live stress-free?

In this episode, April Schoen dives deep into various strategies to maximize your retirement income and ensure financial stability.

You’ll discover…

• The key factors influencing the timing and strategy of claiming Social Security benefits.

• Different pension options and the impact of your choices on long-term financial health.

• Strategies to transform your retirement investments into a reliable income stream.

• The pros and cons of annuities and how they could fit into your financial plan.

• The significance of asset allocation and diversification for risk management and stable returns.

Mentioned in this episode:

• https://www.ssa.gov/

• https://curryschoenfinancial.com/

Transcript:

April Schoen: Hello. I'm April Schoen, a financial advisor with over a decade of working with clients and helping them not just get to retirement but through retirement. And over the years, I've helped hundreds and hundreds of our clients achieve their financial goals, making sure that they can enjoy their retirement with confidence. Welcome to our channel, and today's video episode is really the second installment of our five-part series we're doing on how to get ready for retirement for people over the age of 50.

So if you haven't watched part one on creating your retirement framework, I suggest you hit pause, go back watch that first episode on creating your retirement framework, and then come back to this one. Because that first one's going to really be all about setting up goals for retirement, starting to really take a look at assets and liabilities, and what are all those things that you need to do to start getting prepared for retirement.

And this is part two. We're going to talk about how do you maximize your income in retirement. I'm sure this will be no surprise to you, but having a steady stream of income in retirement makes people feel more comfortable, right? Research has shown that retirees with higher more secure income sources are not just happier, but they tend to live longer and have less stress.

Who wants to sign up for that? Who wants to be happier, live longer, and have less stress? There have been studies by the LIMRA Secure Retirement Institute and the RAND Corporation, and they found that retirees with guaranteed income streams like annuities, Social Security, pensions, they report higher levels of satisfaction in retirement and lower rates of depression. So again, these are all things that we want to have in our world.

And today we're going to talk about various strategies to help you have that. We're going to talk about Social Security timing and strategies. We're going to talk about pension options. We're going to talk about how do you create an income stream from your investments in your retirement accounts. Excited you're here, let's dive in.

So on today's agenda, we're going to talk about Social Security timing and strategies. When you go to take Social Security is going to be the biggest decision you're gonna make when it comes to your retirement. If you have a pension, you're gonna have lots of decisions, lots of choices to make. We’re gonna talk about all these choices, and how do you know that you're making the right one for you and for your family.

And then, how do we create an income stream from our investments? Congratulations. Congratulations, you've done a great job. You've worked hard, you saved money, you have money in your retirement accounts and your investment accounts, and you get to retirement, but now what? What is that income stream really going to look like? And how do you go about that? We're going to talk about some key strategies on how to do those today.

These three topics are by far the most common questions that we get from clients about retirement. When to take Social Security, what to do with a pension, and then, how do they structure getting an income from their retirement accounts and their investments? Social Security timing and strategies.

Again, this is one of the most important sources for income for many retirees. And depending on when you start taking Social Security, is going to significantly impact your retirement income. So we're going to talk about the pros and cons of taking these benefits early versus delaying them. How do you maximize spousal benefits, survivor benefits, and how do we coordinate that with other assets that you may have?

Now today I'm going to give a high-level overview of Social Security because part three of this series is going to be all about Social Security. So today I'm going to give like high level and then come back for part three so you can learn more. Let's understand the basics of how Social Security works. Social Security benefits are calculated based on your highest 35 years of work history.

If you've ever looked at your Social Security statement, you'll see your earnings history. So if you do not have 35 years of work history, guess what? They add in zeros into the calculation, and that's really going to drive down your average. So pay attention to that. That's one strategy is making sure that you've got at least 35 years of work history. That's going to make a big difference. Now, you have to have at least 40 credits to qualify for Social Security benefits.

What are credits? Basically, you need to have about 10 years of work history because you earn four credits per year. So we need to have 10 years of work history to qualify, actually, it's for both you and your spouse to qualify for both Social Security and Medicare. Now the amount you receive depends on what's called your average index monthly earnings. And again, that comes from that 35 years of work history.

And what's also going to be really important for you to know is when is your full retirement age? Your full retirement age is determined by the year you were born. For most people, it's between ages 66 and 67. Now you can take your benefits early. So if you take your benefits as early as 62 which is the first time, that's the earliest you're able to claim Social Security, your benefit is going to be permanently reduced. Very important to know.

But if you wait past your full retirement age, you can delay taking Social Security all the way to age 70, then your benefit is going to be increased. We're going to talk some more about that. Let's talk about the impact of claiming age. When you take Social Security, that's going to have a big impact on your benefit amount. So when to start claiming benefits? Again, this is going to be one of the biggest decisions that you make.

You can begin taking benefits as early as 62 and you can wait until age 70. Claiming benefits before your full retirement age results in a permanent reduction. Let me give you an example. If your full retirement age is 67 which is what mine is, and that's also for anyone born after 1960. If you start your benefits at 62 your benefits could be reduced by up to 30%. Three zero. That's a big difference.

On the other hand, if you delay taking Social Security, your Social Security benefit is going to increase 8% every year that you're waiting to take Social Security past your full retirement age, until age 70. So this can significantly boost your monthly payments, which is what we're talking about here. Delaying your benefits is going to increase those monthly payments. So when should you take Social Security?

Well, really, you want to take a lot of factors into consideration. You want to think about your health, your financial needs. Are you married? How much life insurance do you have? There are a lot of factors that play into when should you take your Social Security benefits, which we're going to talk a little bit about here today, with survivor and spousal benefits, when we get to that which is coming up next.

Let's talk about these survivor and spousal benefits. Spousal benefits allow a spouse to receive up to 50% of the higher-earning spouse's benefits. Let me just put some numbers on it, because I'm more of a numbers person. I know that probably doesn't surprise you. But let's say that my Social Security benefit was $2000 a month. We're gonna make the math easy here. So $2000 a month. My husband is entitled to receiving Social Security benefits on his own record, or at least $1000 because that's half of mine.

So again, he will receive the higher of the two, but he can receive his benefit on his own record, or he's entitled to receive half of my benefits at my full retirement age. Again, in that analogy, in that example, if my benefit is $2000 he would be able to receive $1000 from the spousal benefit. Then you've got survivor benefits, and this can be up to 100% of the deceased spouse's benefit. So let's use that example again.

My Social Security is $2000, let's say my husband's receiving the spousal benefit of $1000 per month, and I pass away. What happens? Well, now my husband's going to receive the higher of the two benefits. So in that case, he's going to get $2000 per month from Social Security. He doesn't get both, but he's going to receive the higher of the two.

So these survivor benefits, these spousal benefits, can really provide financial support for spouses, for children, and understanding these benefits can really help you maximize the household's total social security income. One of the things that we do for clients is we do Social Security claiming strategies.

So if it's a married couple, if we receive both of your Social Security statements, we can run Social Security claiming strategy reports and show you what if we both take it early? What if you delay to get the maximum income? What if we do a combination of the two? We could actually show you how to maximize those Social Security benefits, and all we need is a copy of each of your Social Security statements in order to put that report together for you.

One of the things we talked about too is coordinating Social Security with other income sources, because this can be really crucial to helping optimize your total strategy. Let's consider how Social Security fits in with pensions, retirement accounts, other investments, and if planning is done properly, this can actually help you minimize taxes and maximize the longevity of your retirement savings.

One option is you may say, hey, I want to go ahead and start my Social Security benefits because I want to allow my investments, my retirement accounts, more time to grow. I want to leave more money on my balance sheet and tap into my Social Security benefits early. Or the opposite may be true. You may say, you know what, I'm actually going to use some of my assets to bridge this gap for retirement, and I'm going to allow my Social Security benefits to grow, especially past that full retirement age, where I'm getting 8% per year.

So when we're working with clients, and we do our retirement rehearsals, we look at both options. What if we take Social Security early, and then what if we also delay into the future? But if we're going to delay Social Security in the future, then how are we going to bridge that gap for income? Are we going to take it from investments or retirement accounts? Are we going to work part-time? How are we going to bridge that gap for income?

Because it's important to create a comprehensive retirement plan that integrates all of your income sources, and not just look at these things in a vacuum. Now let's talk about pension options and decisions. So if you have a pension, this is going to be a significant part of your retirement income, and understanding your pension options making informed decisions is crucial for you.

So we're going to explore these decisions that you have to make, like choosing between a lump sum or monthly payments, and also understanding those survivor benefits. A defined benefit plan, often referred to as a traditional pension plan, promises to pay a specific monthly benefit at retirement. This amount is usually calculated based on a formula that looks at salary history, years of service, the employer bears the investment risk, not the employee, because the employer is the one who's promising to pay a monthly income to the employee for the rest of their life.

Again, employer bears the investment risk, and you're going to have multiple payout options for how you receive your pension, called pension payout options. When we think about payout options on the pension, usually you're going to see a lump sum option as well as some monthly income benefits. The lump sum is going to give you the entire calculated value of your pension upfront.

It's basically like taking your money and running. Thank you very much for my pension, I'm going to take my lump sum and I'm going to go do something else with it. This option is going to give you more flexibility, so you can invest it, you can spend it how you want to. However, this also means now that you, the employee, bears the investment risk, and you have to make sure that it's going to last you throughout your retirement.

Monthly payments, on the other hand, are guaranteed for life. Think of it like an annuity. This can offer you more security, so you don't have to worry about managing the investment or the risk of outliving your money. And when deciding between lump sum or monthly payments, you really want to take into consideration your health, your financial needs, your risk tolerance, the stability of the pension plan. And this is really where a financial advisor can help you make the best choices for your situation.

Now there are usually survivor benefits available under pensions. Defined benefit pension plans again, usually offer some type of survivor benefits, especially for married couples. And so this is going to be on those monthly guaranteed income streams. So when you're choosing payout options, you're going to have multiple choices available to you.

You can do what's called a single life, a joint survivor, a period certain is also an option. And a single life provides, typically the highest amount of income to you, but it dies when you die. So when you pass away, that income is going to stop and there's there's nothing that's going to continue on to a beneficiary. However, if we look at joint and survivor options, yes, the income is going to be lower, but now it's covering two people. It's covering you and your spouse.

This means you get that income for as long as you're living. The day you pass away, that same income continues on to your spouse. So choosing between the survivor benefit really is going to depend on your financial situation, your spouse's needs, other assets that you have, life insurance.

Again, We don't want to make these decisions in a vacuum, and say, you know what option one gives me the highest income, I'm just going to select it. We want to make sure that we're making these decisions based on knowing our options, based on facts, based on looking at all scenarios to know we're making the right decision. Because when we choose these payout options on the pension, guess what, they're irrevocable.

You cannot change your mind. You can go back 10 years later and say, hey, just kidding. Instead of that single-life payout, I now want to do joint and survivor so my spouse is covered. It's irrevocable. So very important that we're making those decisions from the beginning correctly.

Let’s shift gears and talk about how do we create income from investments in retirement accounts? Again, Social Security, pensions, these are really going to provide you with that retirement, we call it a retirement baseline. These are your guaranteed streams of income. And what we want to talk about as well as, okay, great, April, yes, I have Social Security, maybe, or maybe I don't have a pension, but I've got money saved up in my investments, investment accounts, my retirement accounts.

How do we start structuring an income from those? Because when we're saving money, when we're in our working years, are saving money that strategy, that investment strategy, is very different from now that we're retired and we're starting to pull money out of our portfolios. So we're going to cover some different approaches like using dividend-paying stocks, bonds, different types of systematic withdrawals. We're going to talk about the importance of asset allocation and diversification.

And again, today I'm going to give a high-level overview, because later on in our series, we're going to talk more in detail about the investment strategies, but I do want to give you an overview so you can be thinking about these. Let's talk about systematic withdrawals and withdrawal strategies. Systematic withdrawals means that you're regularly withdrawing money from your investment account, your retirement account.

Usually, this is done on a monthly basis, and clients will use this to provide an income for them during retirement. This strategy really helps make sure you've got a steady cash flow while allowing your investments to continue to grow. And there are definitely different strategies when it comes to taking money out. Let's walk through these different withdrawal strategies.

The first one we're gonna talk about is called the 4% rule, or the safe withdrawal rate. And this suggests that we're going to take 4% out of our portfolio in the first year of retirement, and then we're going to adjust that amount every year for inflation. There were some studies done back in the ‘90s by a financial advisor, and he really sought to understand how much could someone pull out of their portfolio every year without running out of money.

And he went back and looked at the stock market and the bond market since 1928 up through the ‘90s, and he ran a bunch of different calculations to figure out what that number was, and he settled on 4%That rule took off.

There was research done at the collegiate level, who also backed up this 4% rule, and it kind of became known then as the 4% rule or the safe withdrawal rate. And it's still widely used today. Another approach is to use what's called a bucket approach, or time segment approach.

And this is where you divide your assets into different buckets based on when you're going to need them. So you might have a short-term bucket that's invested in cash, and then you're going to have some mid-term and long-term buckets that are invested more for growth, and as time moves on, you're refilling that short-term bucket.

There's also what's called the safety-first approach, which looks at having enough guaranteed income to cover all your basic living expenses and then using one of the other approaches to provide discretionary income for retirement, like travel and home remodels.

I can tell you in my work with clients that when we're going through these different strategies, a lot of clients like the safety-first approach, where we're covering all their basic living expenses with guaranteed income, and then we're having other buckets on their balance sheet for discretionary income and also for growth.

When we're working with clients, it's not really an either-or, we actually look at using a combination of these different withdrawal strategies to give you the best, optimal outcome. It's essential that we're choosing these strategies again, that we're aligning these with our goals, our risk tolerance, our life expectancy. And this is really when I encourage you to work with a financial advisor, because they can help you analyze these different strategies and figure out which one works best for you, or is it a combination of them.

When we think about the investment side, again, this is on those withdrawal approaches, one option is to look at dividend-paying stocks and bonds. This can be a great source of retirement income. Dividends are payments made by companies to shareholders, typically on a quarterly basis.

And we usually think of these companies, they usually have a history of being stable, growing dividends. They can often be seen as financially healthy and reliable. This not only gives you income, but you could also see improvements right through the potential for capital appreciation as the value of those stocks go up.

Bonds, on the other hand, are fixed-income securities that pay interest regularly. So when you invest in bonds, essentially what you're doing is you're lending money to a corporation or a government entity, and in turn, they promise to pay you interest over a specific time period. And again, when working with clients, you really want to have a diversified portfolio.

These dividend-paying stocks, bonds can help you have a steady income stream while managing that investment risk. It's important to research and make sure that you're selecting high-quality stocks and bonds that align with your risk tolerance and your income needs.

Another approach that you may look at is annuities. Annuities can have a good and bad name. There are pros and cons and annuities are really insurance products that are designed to provide a guaranteed income stream. There are a bunch of different types of annuities, fixed annuities, variable indexed.

Fixed annuities offer guaranteed interest rates, stable payments, while variable annuities or index annuities allow more for growth and investments in a different range of securities, and those index annuities can offer the potential for higher returns with some downside protection. The benefits, when we look at pros and cons of annuities, they can provide guaranteed lifetime income, protection from outliving your savings, and the potential for tax-deferred growth.

But what you also want to make sure that you look out for are fees, surrender charges, and less liquidity compared to other investment options. Make sure you understand what are those terms, what are those conditions, and how is this going to fit into my overall financial plan, and this is when consulting with a financial advisor can help you make that informed decision.

Now, asset allocation, when we think about the investments and how important it is, so asset allocation, diversification, are important parts of a successful retirement investment strategy. I mentioned earlier, when we're in our working years and we're saving money, that investment strategy is very different.

Should be different from when we're in retirement and we're starting to pull money out of our portfolio. So we want to make sure that we're spreading out our assets across different asset classes, stocks, bonds, cash, so that we can balance risk and return. So this asset allocation can help us manage risks. It can help provide more stable returns over time.

A well-diversified portfolio can really help us have more stability. But it's also important that we're reviewing this on a regular basis. We have to make sure that as time moves on, as we have market changes, that this remains, that our investment portfolios are still aligned with our risk tolerance, our investment horizon, our financial goals. So, yes, diversification and asset allocation can be wonderful tools to help us reduce this risk, but we have to make sure that we don't just, it's not something you want to just set and forget it and not look at it.

It's something that you want to regularly look at and address. Especially as things are changing in the market. I don't know about you, but if you think back to how much things have changed in the last four years since Covid, you could get whiplash with how much things have changed. So think about the market, inflation, geopolitical risk.

There's been a lot going on, and so we've got to make sure that we're staying attuned to that and not just having a blind eye to it. Let's recap some of the things that we've talked about today. We've been talking about how do you maximize income from your retirement through social security strategies, pension options, creating income from your investments.

Here are some key steps I want you to take. I want you to review your social security options. I want you to go, if you haven't done it in a while, go to the Social Security website, which is ssa.gov, we'll probably link that in the show notes. You can create an online profile, and you can pull your Social Security statement. Take a look at it, review it, become familiar with it.

Understand what your options are. Work with someone who can help walk you through and actually model that out for you to show if you take Social Security at different time frames, what's that going to look like for you. If you have a pension, evaluate those options so that you can make better decisions.

And don't forget about those lost pensions. We had a client earlier this year, they got a letter from Social Security that said hey, you might have a pension from a previous employer. Somewhere he hadn't worked in 20 years. And guess what? He did. He has a pension with that company. And then develop a strategy about how you're going to get income from your investments.

Focus on diversification, focus on risk management, but again, it's not just set it and forget it, but what's our strategy gonna be to generating income from those investments? In our next episode, we're gonna be diving deep into Social Security. Again, that's one of the most crucial parts of retirement planning, so be sure to tune into that.

Thanks for joining us today. If you haven't done so already, subscribe to the channel so that you get alerts about new episodes. And if you're ready to take the next step in securing your financial future, I suggest you go to our website and book a free consultation. So all you're going to do is you're going to click the link in the description. It'll take you right to our website, and you can schedule a 30-minute call, and that way we can go through and personalize some advice to you and your unique situation. So again, don't forget to like and subscribe for more retirement planning tips and strategies, and we look forward to talking with you all soon. Bye now.

Voiceover: The Social Security Administration has not approved, endorsed, or authorized this presentation. There is no charge to attend this event or subsequent consultations. Contact the Social Security Administration for complete details regarding eligibility for benefits. This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian, or North Florida Financial and the opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address, 1700 Summit Lake Drive, Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities, member of FINRA and SIPC. April is a financial representative of the Guardian Life Company of America, New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.

7055700.1. Expires October 2026.