Retirement planning can feel like a daunting jigsaw puzzle—where do you even begin? Discover the secrets to securing your financial future and achieving a lifestyle of freedom and fulfillment!
In this episode, John Curry and April Schoen unravel the complexities of retirement planning for FRS members and beyond. Get insights into making informed and strategic decisions that ensure peace and stability in your golden years.
In this episode, you’ll discover...
How to create a clear vision for your retirement using a powerful jigsaw puzzle analogy.
The vital role of Social Security timing in maximizing your benefits.
Key considerations and strategies for Medicare selection and supplemental policies.
The secrets to maintaining engagement and purpose to avoid isolation in retirement.
Tax planning techniques that could save you from future financial headaches.
Mentioned in this episode:
Transcript:
April Schoen: Hello, good afternoon. My name is April Schoen and I'm sitting here today with John Curry.
John Curry: Hello April. Hello, everyone.
April: I'm so glad that you could join us today on our webinar. And today we're going to be talking about retirement planning made easy for FRS members. Now, I love the title of this presentation, but I kind of laugh a little bit because retirement planning is not easy. It's actually very complicated.
John: But with proper planning, you can make it easier.
April: That's right. And so today, what we're going to do is give you an overview of things for you to consider if you're thinking about as you're getting ready to retire. And hopefully, that is going to make it easier for you. Because the more information we have and the knowledge that allows us to make better decisions.
Because we want you to make decisions based on facts, based on knowing your options and not making decisions based off emotion. So we find that a lot of people will make decisions based off emotion of your feelings, but we want you to make decisions based on facts. So glad you're here. I want to just acknowledge you for being here.
It shows a lot that you're taking time out of your day, your busy day to learn about this important topic. So John I was thinking the other day about how in December when I was on vacation with a family, and there were about nine of us in this cabin in North Georgia. How I brought a puzzle on the trip with us. Now I am not always the family favorite for bringing a puzzle.
John: This is a jigsaw puzzle?
April: Jigsaw puzzle. Yep. Especially when the teenagers in the group, they roll their eyes a little bit at me for bringing the puzzle. But one of the things that I love about it is that usually, I'll find a table that we're not going to be using that often to try to get the puzzle started. And it might be me and I can usually get my oldest son Eli to start helping me with it.
But I love it because then I start having other people join the table. Come over. It might be that day or throughout the week, helping us get started. And it does have a tendency to kind of bring people together. Now when I do a puzzle, what I first like to do is look at the picture on the box. Because I want to know what are we building.
John: Stephen Covey would call the beginning with the end in mind.
April: That's right. That's right. It's exactly it. I want to know what is this picture going to look like. And then I think about, well, what are the easy parts of it gonna be? This was a picture with a, whatever you call it, a water mill. Alright, there's a building and a water mill and a stream. And there's a big blue sky in the background.
And I'm not starting with the blue sky. That seems like the hardest part to me. But some of the pieces that are more distinct and like, oh, we can start there. That'll be an easy way to get started can get some progress. And usually with Eli, I can say, hey, can you help me find the four corner pieces? We're going start with those four corner pieces, we want to start building out the edge. And then we can start going from there.
So when I think about retirement planning, it's very similar. We want to start with the end in mind. We want to think about what is it that we want retirement to look like. What do we want to do in retirement? Who do we want to spend our time with in retirement? But I love the idea of what are we going to do now.
And we're going to be getting into that a little bit about when should people retire. When's the best time for someone to retire? But can you speak to that just a little bit about thinking about working with clients and crafting this vision about what retirement is going to look like for them?
John: I will but let me go back to your puzzle for a minute.
April: Yeah.
John: Here's what I've noticed years ago when I would set up a table at the lake house where we would do puzzles. It was interesting because sometimes I love doing puzzles, sometimes I don't. But I would set the puzzle up. It's interesting how people would grouse and grumble. I don't want to do that. That invariably you will see somebody walk over every time they walk past the table, they look and they find a piece.
So I'm bringing that up because some people listening to us are going to jump in and want to get on the puzzle immediately. Others are going to tinker around and say well, yeah, I know I need to do that. They have a tendency to put it off and procrastinate. It's okay. When you're ready, we're here for you. You don't have to jump in, as they say, whole hog.
That's the best way to do it, is get it all done. But back to the vision of retirement. Many, many years ago, I've been in business for 49 years now. Remember yesterday we had the pleasure of meeting with some folks that I've been working with for 48 years. And you've been working with them for what, 10, 11 years.
And it's interesting going back to their story about they didn't think they could retire. They didn't think it was going to be possible, that they would work forever. Yet once they got the vision of what they really wanted to do in retirement, then they have the slight hope that they could do it. And then we kept emphasizing, you can do this if you choose to.
Now if you want to work until you die, go ahead. But you have the ability, if you want to, by taking these actions, to accomplish your vision. And folks, it's your vision. It's not ours. One of the things that I will tell you right up front. We listen carefully. And then we help you get what it is you say you want.
Our style is real simple. If we know that you can't do it, based on your resources, we will be candid and tell you that. And then at that point, maybe you have to adjust your vision over time. But most people can truly accomplish what they want if they'll take the time, get clarity, and then take the planning actions to get them there.
April: Absolutely. Yeah, again, it comes back to thinking about what is it want that retirement to look like. And in our puzzle analogy, I think about those four corners. You want to start with those. And we're going to be covering similar, we would call those four corners of retirement. These big building blocks.
We're going to be talking about your pension, especially retiring from the Florida Retirement System, we're going to have a pension. Social Security. Think about other retirement investment accounts, and then also Medicare and health care. So there's a lot, and that's just a few. That's not all the pieces of the puzzle. But those are some of those big pieces.
John: Well it certainly forms the border. Because if you don't have the outline the border in place, you will never get the puzzle put together. It will be a bunch of pieces sitting on the table and moving around constantly.
April: Yeah, and those on the call, especially FRS members, we know that you do have those four pieces. Social Security, if you're on the pension, pension plan, we have other investment retirement accounts, and then you're also going to have to make decisions about health care and Medicare in retirement. So we know that those are going to be four big, crucial parts of it.
John: And frankly, those are big issues that many people procrastinate on and don't learn until the last minute. I was at a luncheon on Monday, and one of my fellow members got me aside and he said, I have been ignoring all of your webinars and seminars in the past on Social Security and Medicare. I'm going to be 65 in three months. I need help. Can we talk?
So we sat down to talk for a few minutes, and he'll be in to get some guidance. But there is an example of I've known this guy, well since 2011. 2011, that's 13 years now. We talk about it, but he hasn't been to any of our educational workshops or webinars, but he's been listening to the podcast. So all of a sudden, he's ready. Now I wish he would plan ahead, so we're not scrambling last minute.
April: Yeah, we do get that sometimes. So yeah, yes. So today what we're gonna talk about is, when is the best time for you to retire? So we're talking about these big pieces of retirement that are going to help you determine when's the best time for you to retire. How do you get the most out of your FRS and Social Security benefit?
And then what are some pitfalls to look out for? Nobody wants to make a mistake. We definitely don't want to make a mistake, unintentionally, right? Where we didn't know something. That's what we hear a lot. I don't know what I don't know. I want to make sure that I'm not overlooking something.
That I'm not, that there's not some big tax mistakes that I might make. I might leave money on the table because I didn't know about all the options I had available to me. So we want to talk about what are those pitfalls that you should be looking out for in these areas.
John: I would modify that by saying this also. Maybe you're getting all the money that's on the table. But you did not. You did not do a good job of making sure that money continued on you're passing. I'm sure we'll get into that later.
April: Absolutely. Let's roll up our sleeves and get to work. All right. So let's talk about first of all the FRS pension program. There are four options under the pension. So let's go ahead, I want to give an overview of the four pension options. Then we'll talk through these. I just had a client in yesterday.
She's in DROP, she's planning to retire in September. And I said, oh, I see here, you took option three. And she goes, yes. Can you remind me what that does again? So she knew she had selected that when she first went into DROP, but she forgot which option that was. So four pension options.
Option one is going to pay you the highest income, but it's going to die when you die. It's called life length. So it's going to pay you income as long as you're living, but the day you die, it dies with you. That's option one. Option two is going to be life only, with a 10-year period. So that means you get the income for the pension for life. But if you pass away in the first 10 years of retirement, then that income is going to continue to your beneficiary for the remaining 10 years.
But let's talk about this one for a few minutes. Because when you go into DROP is when you select your pension option, or if you go into DROP, that's when you're going to select your pension option. And that is going to start the clock on your 10 years. So now we're gonna talk about DROP more in a little bit.
But now you can be in DROP for eight years. So if you chose option two, let's say I chose option two and I go into DROP today, then when I actually retire from the state eight years later, I only have two more years of this guarantee period. So it's important for us to know how that works.
That 10-year clock starts when I go into DROP, or it starts when I retire if I did not. Now option three and option four are joint and survivor benefits. So these will apply if you're married. Option three is a joint with 100% to the survivor. So that says I'll just use me for an example. We'll say I get the income for as long as I'm living.
The day I die, my husband Brian gets the income for the rest of his life. And vice versa. It is the same income to both the employee and the employee’s spouse. There is no change, there's no reduction in that income upon one of your passings. So that's option three. Option four is 100%, and then two-thirds to the survivor.
So this is probably the most misunderstood option in the Florida pension system. So again, let's say that I retired from the state and I chose option four. So I'm gonna get this income that starts when I retire for me and my husband as long as we're both living, but upon one of our passings, it could be either I died or he died, the pension is going to be reduced.
John: And what's interesting is even though he may not have ever been in the Florida Retirement System, his death still triggers that reduction. That's a big shock. I've seen this so many times in 49 years. I remember on three occasions where people in the division of retirement that I knew asked me to speak with the retirees because they were angry. Because one of them and died and all of a sudden the benefit was reduced. They said no one ever told me this. I said yes, they did. In their defense, it's right here in bold capital letters on your paperwork. You were so focused on getting that higher income that you didn't think about that. And in all three cases, they said, honestly, you're right.
April: And I think in most cases, people who've become clients after the fact when they've already made their pension choice, a lot of them don't understand how option four works.
John: Correct.
April: What they think happens if I'm the employee is just that when I died that my spouse's pension, what he gets would be reduced. But that's not accurate. It's upon either one of your passings. And I do find there's a lot of confusion around that piece.
John: There is, but also there are opportunities to help people who've made that choice. So anyone who's listening, if you've made the choice of option four, or you think might in the future, we look at all the other assets and find ways to replace that income. So all is not lost. So don't panic if you did that. Just come with us and have a conversation. And let's see if we can help.
April: Absolutely.
John: I want to jump in there and talk about the impact of these options. And I'm going to tell a story. A guy named Holder retired and he took option one. And his mindset was this. I am very healthy. And he was. Extremely healthy. So he took option one, but he didn't make it even five years.
So when he died in July, now his widow Eva, got no more income. 38 years of working with the Florida Retirement System, DOT to be specific over in DeFuniak Springs. So all those years of work, and all that income died when he died. All she had was social security. Fast forward, Holder's son Marlin saw what his dad did.
He also worked with the DOT over there in DeFuniak Springs, he said I'm not doing that. He took option three. So option three, he took care of he and his wife, Jessie. And when Marlin died in August of 2015, that income continued to Jessie until she died three years later. So what's the best option to take?
If you have a crystal ball and you know your date of death, and you can make a really great decision. I've got a bit old crystal ball right there. And I have a little one in my drawer here, but we don't have a crystal ball that tells us exactly the day we're going to die. Now these two men I know intimately. Holder Curry was my grandfather. Eva, my grandmother. Marlin Curry, my dad, Jessie Curry my stepmom.
Both men did the best with what they had. But both men got bad advice. In some cases got zero advice. There was no deferred comp back in those days, there definitely was not DROP when they took the retirement options. So those two things happening, made me realize, April, and you know this story, at a very, very young age, I started working with people in retirement planning.
People would say what do you know about retirement? You're only 27 years old, or 30 years old. I know a lot about it because of what I experienced with family. Especially my grandfather. So I would say, the numbers don't matter as much as the planning matters. What is it you want to accomplish?
Maybe you retired with $10000 a month, maybe it's $1000 a month, the numbers don't matter. Conceptual planning is what matters. So make sure that we protect every dollar we can for you while you're living and also for your spouse, and ultimately, family members when you both have died. That's what we're all about.
And unfortunately, people will say, okay, I'm just gonna make this decision in a micro manner, when it's really part of a macro planning process. But every time I talk about FRS and the options I go through my mind about my grandfather and my father. Because their lives could have been better. In my dad's case, he did the right thing for my mom, but he lived 20 years into retirement.
Look at all the money they lost, because of the reduction of benefit, which we have not gotten into, because there's a pretty big drop, depending upon the age difference. When you go from one or two to option three. They could have used that money. And they made out just fine. But if we had been able to look at other planning opportunities, maybe they could have taken option three and had other income.
And I go back to your puzzle analogy, which is great. And we just look at all the pieces of the puzzle. What are they? Your deferred comp, DROP, IRAs, 401ks elsewhere? Your life insurance, Medicare, and Social Security. Everything. All that goes on the table like puzzle pieces.
April: Absolutely. So yeah, so thinking about this pension, I mean, which pension option you take is going to be one of the biggest decisions you make in retirement. Which pension option and when to take Social Security? Those are really going to be the two biggest decisions that you're going to have. Because it's going to impact your income for the rest of your life and the rest of your spouse's life.
So as John mentioned, even though if you've already made your choice, it's okay, it's not like you can't do some other planning. You just want to make sure that you're doing it in enough time to do that. So let's get in and also talk about, okay, great, I've made my pension choice, I'm in the DROP program. So this is for those of you already in the DROP program.
What are some things that you need to know about DROP? Well, when you first go into DROP, the state is going to consider you retired. So up until that point, you will have accrued your years of service with the state. So if I went into DROP today, and I had 30 years of service, they're gonna count me as having 30 years of service for my pension calculation.
So that's the first thing you want to know is that when you go into DROP, the state's going to consider you retired, as it counts for your years of service. While you're in DROP, you're still going to be getting your income from your salary. And the state's going to start paying out your pension paychecks.
But instead of it going to you it's going to go into a retirement account. And it's going to accrue and it's going to build in this retirement account while you are still working. While you're in the DROP program. Now the state made a lot of changes to DROP last year in 2023. And two big changes, one they extended DROP.
It used to be good only been dropped for five years and now you can be in DROP for up to eight years. You don't have to stay the whole time but that's as long as you can go is eight years. And they also increased the percentage of interest that you're earning on your money in the DROP account. It used to be that it only accrued by 1.3% interest. And now it grows by 4%.
John: Back in the beginning it was 6%. A lot of people were unhappy when it dropped to 1.3%, so at least now, members of FRS have recovered some of it.
April: Absolutely. So that's a huge benefit to go from 1.3% to 4% on the interest side. I'm glad to see that they did that. I'll be curious to see how long it lasts. Here we are in this higher interest rate environment. So I'll be interested to see how long we have that for. So right now your pension is gonna be going into the DROP account, and you're gonna be earning 4%.
When you finally step out of retirement, so you, you hang it up, you say, I'm done, I'm walking out, I'm fully retiring from the state. What's gonna happen is, you're now gonna start getting your pension as income, and then you're gonna have an amount that is accrued in your DROP account. And you are going to have to decide what to do with that.
You cannot leave the money in DROP. You have two options or a combination thereof. You can cash it all out. You can say, just send me the money. If you do that, all of that is going to be considered taxable income. Because that money has not been taxed, it's in a qualified plan. So let's say you had $200,000 in your DROP account, if you cash it out, that's $200,000 that's going to be considered taxable income, and it's gonna push you up into a higher tax bracket.
The other option you have available is to transfer that to a retirement account. So you can transfer that to some other qualified pre-tax retirement account, like an IRA, like deferred comp. And if you make that choice, then when you do the transfer, that it's not a taxable event to you. So the money goes from DROP into your retirement account. It's not taxable. Again, it's only taxed when you start to take money out of it.
John: I want to reiterate something. Some people have been told that the best thing to do with their DROP money is to cash it in and pay off debt. I'm thinking of a gentleman who chose that and went out and bought a motorhome. A quarter of a million dollars. And in hindsight, interest rates were so low at the time, he would have been far better off financing that motor home and keeping his money and making payments out of the account.
But it's hard to help someone after the fact. So I would simply say to anyone who's listening, if you got money now or will have money, don't cash it in until you get some counseling and some advice. And my advice, I don't mean a well-meaning friend or relative who says, go buy what you want. Deal with someone, either us or someone like us who understands and can help you.
April: Understand those impacts. What I love about looking at our planning software is that we can model that out. I love being able to forecast it and kind of test it and say if we did this, this is what the impact is gonna be. Not just now, but also later.
John: It's a way of stress testing it in advance.
April: Let's talk about some tax considerations in retirement. When we're thinking about taxes, John and I actually do an entire webinar just on taxes in retirement. So we'll recap that a little bit for you here today. But the decisions that we make about where are we saving money and what sort of assets are we going to have?
That is going to be what determines your tax landscape in the future. Taxes are different for everyone. It's going to be based on all of your income sources. But really, the decisions you make today are going to control your future. Where do we have our assets placed? Are they in tax-deferred vehicles, taxable, or are they in tax-free options?
So when we're deciding, it's really important that we knew where we are today. But it's also important when we think about retirement about deciding which buckets are we going to take income from. We call this order of operations. Which accounts, which buckets are we going to take income from first, and then which ones are better to let it grow for the future?
John: You know, it's been said that there are two things that are certain death and taxes. Taxes, we have control over. People are being told you have no control over taxes. Yes, you do. You have no control over the tax law. Speaking of which next year, the current income tax law will sunset. Meaning it's gonna go away, revert back to what it was before. And most people don't know that.
Because the politicians don't tell us that stuff. But we have the responsibility as taxpayers to do our own planning and calculations. Or you can let the government do it for you. And I promise you the IRS is not going to call us, April, we did a calculation, you overpaid in your taxes. We'd like to give you a refund. It's not going to happen. So the burden is on us.
Each of us as a taxpayer to do all the planning we can to legally reduce our taxes. Tax avoidance is okay. Tax evasion is not good. You go to prison for that one. But if I can find ways to legally reduce my taxes, I'm going to do it. Now if you choose not to, that's good for you. Pay all you can. Our attitude is can we find ways to reduce those tax burdens? And we're not CPAs, we're not tax attorneys. But we've been doing this a long time, we can guide and help people with this.
April: Absolutely. And this is one of the things you don't want to do without having a professional who’s going to help you because this is where you can have a big tax mistake. We've seen it over and over again. Thinking about some clients who were contributing to different types of retirement accounts and they were filing, they didn't do it on purpose, but they filed on their tax return as if they put money in a traditional IRA when they actually put it in the Roth. And it just creates a tac nightmare. Again, it was unintentional consequences.
John: If we had time, we would just create a nightmare list. We could just go through a lot of stuff we've seen that you would shake your head and go what in the hell where they thinking?
April: Yeah, absolutely. So I'll summarize this is on the tax side of things is when we think about taxes, we again break it up into three different types of accounts, three different types of buckets. Tax deferred. So this would be like a 403b or a 457. You might have heard of a 401k. But these are retirement accounts, you put money in today that you haven't paid tax on, it grows tax-deferred, so you're not paying any tax while it's growing.
But when you go to take it out in the future, it's all taxable at your highest marginal rates. So this is when we wanted to do some tax planning. We want to look and see what is your income going to be in retirement already. Thinking about pensions and Social Security. Because that's all been a new taxable income as well. And then what is the income going to look like for these tax-deferred vehicles?
John: I'm glad you referred to that as tax-deferred because most people look at it as being tax-deductible. That gets them in trouble because they think they're saving taxes. You're not saving taxes. You're simply, as the name implies, you are deferring the tax. And promise me that you will be in a lower bracket when you retire.
You and I know most of our clients we meet with they're not in the lower bracket in retirement. Many of them are in a higher bracket because they have their pensions, Social Security, and they have their assets they're taking income from. So they're in the same tax bracket or higher. So my advice would be, I'm 71 years old. Bought into the whole concept of maximizing retirement early on. And then one day I realized in listening to an economist friend of mine, that was a mistake.
So I backed off. I didn't put as much money into a 401k. I put it elsewhere, with after-tax programs and I came out ahead. And I think about that and I go that is counterintuitive because financial institutions, government, everybody's telling us, max, max, max put all the money you can into retirement. But they have reasons for that. They want that money later, they need that money.
April: Oh, yeah, people see it year by year. They go to file their taxes. Maybe they owe some tax this year instead of getting your refund. And so their immediate response is why should I be putting more into these tax-deferred vehicles?
John: Correct.
April: When a lot of times that's not the case. They're actually better off paying the tax today and then doing something else with the money.
John: Can I go back to something you said earlier, April, and that is the planning software we will use. Where we can say here you are today, we can project you into the future 5, 10, even 20 or 30 years in the future. And we can play what if. What if the tax rates are higher? What if the tax rates are lower? So you can actually see it. And then maybe the best way to do your planning is year by year. Okay, this year, I can only put in more. Maybe the next year, you don't do as much.
April: That's right. It gives you more flexibility and control. The thing about these taxes in retirement, again tax-deferred vehicles we just went through. You've got taxable accounts, these would be like after-tax investment accounts. Like a brokerage account or something along those lines.
But it's where you're putting money in that you've already paid tax on. And we call them taxable or tax as you go because you're going to receive a 1099 from those accounts and you're going to pay taxes on the interest and dividends and realized capital gains. But there are so many things you can do with those types of accounts in retirement to help structure income that comes back to you in a more tax-efficient basis.
But the key there with that is you have to have it. You have to have this account before you go into retirement. So it's something you want to start on earlier. And then you also have tax-free. So these are options where, again, I laugh as they say tax-free, there are not very many things that are actually 100% tax-free. These are accounts where you pay the tax today, and then it grows tax-free, and then you can take it out tax-free.
Again, kind of tune in the next time we're having one of our webinars on taxes in retirement because we go through those three buckets in detail with more examples and showing you how that works out in retirement. So John, as people are thinking about these all these puzzle pieces, and these items for their retirement at what age should someone be thinking this is when I'm going to retire.
John: Truthfully, the day they start their job. So can I pick on you for a minute? You're 40 years old. Okay, so you don't wait around until you're 69 or 70. You say, okay, I'm in this career. I'm helping other people plan for retirement, when do I want to retire? In my case, I'm pretty confident I will never, ever fully retire. It says on paper I'm retired now. And I still love what I'm doing.
So I'm still working two or three days a week seeing clients. But the question becomes, do you really want to retire at all? And if you do, what does it look like? I go back to vision again. I know people, well I just attended a celebration of life for a gentleman who retired at 52. He died at 85. So he was retired longer than he worked. And he had a plan and he solved that plan. Had a great life.
So what do you want to accomplish? But I look at it this way. I see you've got the freedoms up here, which I love. First of all, time freedom, money freedom, relationship freedom, and location freedom. So to us, we want to make sure that our clients have the freedom that if they want to continue working they can. If they choose to retire because they want to or they have to because of health issues, that they have the money to allow them to do that.
Because think about this, when you're retired, you've got more time. Will you have more money or less money when you retire. Did you accumulate a lot alive? And relationship. Who do you want to spend your time with in retirement? I mentioned this earlier. Is it family members, friends, what is it? Location. Do you want to travel a lot or not?
So there's a lot of moving pieces here. But I love the four freedoms because personally, I want the time. I have that. I want the money. I have that. Relationships. Yes. And I want the location. If I decided today to get in my car and drive to San Francisco tonight I could do it. I decide to go hop on a plane and fly, I can go do it. And there's a lovely thing about what we do, is I can work from anywhere in the world as long as I have a computer.
And most of us can nowadays because of Zoom. And you and I were doing computer-based appointments, video way before Zoom came in. And we were using apps back when you lived in Jacksonville. So way before COVID hit, we were already accustomed to doing it. But I think sometimes we will work with people who are retiring for the wrong reason.
Meaning they're angry, they're bitter. And I like to ask this question. Are you retiring to something or from something? Because if you are leaving work, because you're all messed up mentally, I don't know that you're going to have a good comfortable retirement. Maybe not a peaceful one. So sometimes I say well, what are you guys? Counselors?
Sometimes I feel like we are. Sometimes I feel like I'm a combination of a CPA, tax attorney, marriage counselor, guidance counselor, vocational counselor all in one. But our job is to listen and help people get where they want to go. But I would encourage people to think in terms of these four freedoms and ask yourself when I retire, what will I do with my time?
You've definitely got more time if you're not going to work. And the saddest thing I've seen is people just in front of the television all day, they get bitter. And a personal story here. A lot of people listening right now, they know this. Some probably not. Three years ago, my right leg was amputated above the knee. And I remember during my recuperation time, I fell into the trap of watching way too much television.
Just sat there and watched it all day long. Sitting at home. I had to snap out of it. Because I was just being inundated with a lot of crap that was impacting my thinking. So I got away from that. And now a new episode, I'm dealing with cancer. And I have chemo once every three weeks. And if I'm not careful, the same thing happens. You know, last week I was out for a few days because I was tired and weak. I'm losing my voice now, that's why I'm kind of hoarse.
But it would be so easy to allow yourself to just pull back and escape being around people. And that's why I think relationships are so important. If you withdraw from life, you're not going to be as happy as those people we see who are involved, are socially active, and they're enjoying family and friends.
April: Absolutely. There are two things when I think about this, about retiring. What age should I retire and retiring for the wrong reason is one for a lot of us, a lot of our identity is tied to what we do. In our careers.
John: The majority of it is, I think. Not just a lot.
April: And I think it's more so for men that are nearing retirement age than I see for women. But it is something you want to pay attention to is what is my identity? Who am I? If I'm not working anymore, what am I going to be doing? And then making sure that you have a sense of purpose. So our clients that volunteer, that have a sense of purpose that know what they're going to be doing in retirement, they're happier because of that.
And I'm thinking of clients who have started up their own businesses and do maybe some work on the side or consulting. It keeps them engaged. And thinking about some other clients who volunteer a lot with Meals on Wheels. That's their passion project,
John: Or the church.
April: Or the church.
John: I'm thinking about a lot of different people that do that.
April: Yep, I've got clients who say they're busier now than they were when they were working. Because they get involved in so much.
John: I'm going to share something that just popped in my head. Back in the 80s. I think it was '82, '83, I was hired to do a series of workshops for General Electric employees in Daytona. And it was interesting because I learned something. They had a panel discussion as I was allowed to say the whole workshop, two days.
And I saw these three couples brought in, and a psychologist was there interviewing them. And back in those days, in all three couples' cases, the wife didn't work outside the home. And to a person the wives are saying, put him back to work, he's messing up my world.
Here he is at home, sitting around bored, telling me what I should do and questioning everything I'm doing. Please hire him back. That was the overall gist of it. And what came out of it was that the husband, the man, you're right, was so busy at work that that was his identity. And he was not involved in other things.
But yet the people that were involved, doing things together, their marriage was happy. They had a high volume of divorces of people in post-retirement years, which I found shocking. I'm only 30 years old when I'm doing this, 30, 31. I was like holy cow, did I learn something.
April: For sure. Well, another thing is the social impact. We spend more time at work than we do at home. We get a lot of our social interaction from work. How many people do we say, I don't want to talk to anybody because I talk to people all day long. So now when I get home, we tend to kind of be a bit more reclusive, and use that time to recharge. But where are we going to get our social interactions from?
John: And I just thought about something else. We're sitting around nowadays, we get a lot of exercise, our thumb is bigger because you're using the remote.
April: The remote or scrolling on your phone. Definitely making sure that we're still getting these social interactions.
John: That's such a valid point, April because it's not just about money, it's about the people in your lives, again, we could do this all day, we could do a whole workshop on that. And it's fun to talk about it, but it's also very serious stuff. What are the relationships that are important to you?
April: We're going to continue on with our program and start thinking about when should I take Social Security? So I'm going to cover some high-level level here about when's the best time for you to start Social Security, what are those tax considerations to think about, and then my favorite question, will Social Security ever go away?
So most of you probably know the earliest you can claim Social Security is age 62. And then with Social Security, you're also going to have what's called your full retirement age. That's right now between 66 and 67, depending on the year that you were born. And then the latest that you can take Social Security is at age 70.
So depending on when you take it is going to determine how much you receive from Social Security. If you take it at your full retirement age, then you're going to receive 100% of your benefit. If you take it earlier before full retirement age, then you're going to have a reduced benefit for the rest of your life.
And if you take it later, you wait and take it after your full retirement age, every year, every month you wait past your full retirement age, your Social Security benefit is going to increase. This is a big planning opportunity for clients about when are they going to take Social Security. It's really going to come down to your personal situation. Are you married?
Then we need to look at when should both spouses take their Social Security. Is it you take it at the same time? Do you take one and let the other one continue to grow? There are definitely planning opportunities for couples about when to take Social Security. If you were divorced, you have options available to you under spousal benefits, under your divorced husband or wife as long as you'd been married for at least 10 years.
So there may be some opportunities for you if you're divorced. We see planning opportunities for widows and widowers, where you've got choices of taking survivor benefits and then letting your own benefit grow until age 70. There are definitely several things that you want to look at here. This is an area which we can help you look at and determine when should you take Social Security.
John: I chose to take mine at full retirement age of 66. Let's talk about that. Because you and I have gone through hundreds of discussions with people about this. I chose 66, full retirement age because I wanted the money now. Time value of money. If I lived to life expectancy, there's not a lot of difference. It's actuarially sound, meaning if you take it at 62, 66, or 70, and you live to life expectancy, you don't see a big difference in it.
And again, we have the ability to demonstrate that with our planning. I was able to do a lot of things between 66 and 70 with that money, helping children, grandchildren now do some things. Instead of waiting until long after I'm dead and gone for them to get something. So there are a lot of things you can do with the money now.
Also, some people should not take it until 70. If someone is uninsurable or along the way they chose not to buy life insurance, they may find that if they're married, the best thing they can do, again, going back to the man that's special, because we tend to be more hard-headed.
Maybe you're better off not taking it until 70 so that the survivor benefit, the widow's benefit in this example, would be greater to provide income. I go back to my grandfather. My grandmother didn't have very much income. My dad and my uncle had to help. So it's not just about income in retirement, it could be that your Social Security benefit becomes a survivor benefit that's important to your surviving spouse.
April: Absolutely. Some think of it as being one of those four corner pieces of the puzzle because it's so important about when are you going to take Social Security and thinking about those spousal benefits as well.
John: I do want to make this comment before you get into whether will it ever go away. I'm sick and tired of people, they're trying to convince people to take Social Security early with scare tactics. It's going to fall apart. It's going to hell in a handbasket. I tell people, please don't listen to that nonsense. Is it going to have challenges in the future? Absolutely.
You'd have to be living in a cave not to anticipate that there couldn't be a reduction of benefits in the future. If we keep spending money the way we are, you're going to have to see tax rates go up or benefits reduced or a combination thereof. We've been talking about this for years. All the years you and I have been working together.
April: Yeah, absolutely. And on that, will Social Security ever go away? No, I do not believe that Social Security will ever go away. In my opinion, there are too many people that are reliant on it as their only source of income that it won't ever go away. Do I think that there will be changes in Social Security?
Absolutely. I'm 40 years old, I think I'm gonna see sweeping changes to Social Security in my lifetime. We already know that we're going to have to make changes to the program over the next 10 years because Social Security is projecting that the trust fund is going to be exhausted in 2033, 2034, in that timeframe.
So we do know some changes are going to happen between now and then. Don't forget Social Security tends to be that political football. So here we are in a presidential election year. I wouldn't be surprised if we hear a lot about Social Security this year and some of those changes.
John: It's already started. It's already started.
April: Absolutely. So we'll kind of keep you posted on that. They do make changes to Social Security occasionally. And when they do that, we'll be sure to give that information out to you.
John: By the way, take a moment and tell everybody briefly what happened a few years ago when Congress, almost overnight, made sweeping changes.
April: Yeah, back in 2015, Congress made major changes to Social Security. They got rid of what was called file and suspend. And it was a major claiming strategy for Social Security. But what was most shocking about it is that like it literally passed through Congress in like two weeks.
It was one of the fastest legislations that we've seen to get through and pass by Social Security. And but we were making sure we had many, many webinars after that informing people of the changes, what happened, what were your deadlines, what did you need to do to still be able to participate in that.
John: It's the fastest change I've seen in 49 years of doing this, even what Reagan pushed Congress to do back in the 80s took time. A lot of debate back and forth. But this was fast.
April: Let's hit Medicare. Now listen, Medicare, can seem very complicated. Sometimes I joke again, I'm 40. And I know more about Medicare than I want to know about Medicare. But when we think about Medicare, there are four parts of it. And when we think about Medicare, there are two ways that you can get Medicare.
You can get Original Medicare, which means you get parts A and B through Medicare, and then you're going to add on a supplemental plan. Sometimes those are called Medigap plans, and you're going to add on a drug plan. Okay, so that's one way to get Medicare. And the other way to get Medicare is to do what's called a Medicare Advantage plan.
And this is where I think of it as everything is all wrapped into one where you don't have different pieces, but it's all under one insurance plan. So John, you're 71, you're already on Medicare. Can you just briefly tell us a little bit about your experience with Medicare so far?
Because I know clients get a lot of questions about it. They're very worried about this piece. And I know we find for most people, once they get on Medicare, it's not as bad as they think it's gonna be, it's actually much better than they think it's going to be.
John: It's far better than what most people think. It exceeded my expectations. But in my case, I looked at doing Original Medicare versus Medicare Advantage. I chose Original Medicare and purchased a Medicare supplement policy. Many people that we know have done the other way.
They've done Medicare Advantage. Those who have CHP, while working with the FRS with the state. You also have a very good plan, Medicare Advantage through CHP. So I would say just take a look at the different plans. But in my case, I was pleasantly surprised at how quick and easy it was to get services provided medically.
Especially with the amputation, and now with the cancer treatments. And I was shocked to see what Medicare pays for. Especially for someone who's diagnosed with cancer. Other than my normal Medicare deductibles, I've paid nothing out of pocket. I also have a very good supplemental policy. And that's very important.
So for those who may be tuning us out of this, well, I'm a few years down the road from discussing this, don't tune us out. Start paying attention and learning and be aware of what's happening. And I would encourage you to come to one of our Medicare webinars or when we're doing another live event come to our seminar.
April: Oh yeah, we'll go through Medicare in detail in those and so you can understand the different pieces and what you're choices are going to be.
John: I will say this about Part D, a drug plan. Every year for four years I change drug plans. That's something you don't want to just assume stays the same. It comes down to what medications are you taking, and whoever you're working with on your plan can look at that for you. And now, in my case, I also have VA that's providing my Part D benefit, instead of having a drug plan.
So those of you who are veterans, don't overlook what the VA can do for you. I took the mindset for years, I did not need VA benefits because I had good health insurance. That was a mistake. I should have educated myself earlier. Because not being involved locally with the VA clinic, I realized I was hurting the clinics. So if you're a veteran, please listen to me. Go to the VA clinic, and let them know that you exist and become part of it. Help us locally.
April: Absolutely. One other piece of the retirement planning puzzle is required minimum distributions. So let's talk about what are RMDs, required minimum distributions. And then we'll talk about some other considerations because there's no, there's no more stretch IRAs, and what should you be thinking about with your RMDs.
So required minimum distributions. This is a time when, with your pre-tax retirement accounts, think about that 403b, 457, 401k. So your required minimum distributions say that you have to start taking money out of them whether you need it or want it. So right now, you can defer income until you're age 73.
And then in 2033, is going to be going to age 75. Okay, but right now, once you hit 73 or older, there is a formula that you have to use to make sure that you're taking out the appropriate amount.
And that's why they call it required minimum distributions, because there's a minimum amount that you have to take out every year, or you have a penalty from the IRS. So that penalty is 25% of what you have to take out. So not only do you have to take the income out and pay taxes on the income, but you also have a penalty, if you didn't do it.
John: At least they lowered it from 50 down to 25.
April: They did lower it. It used to be pretty steep. 5 - 0. 50%, that's a huge penalty for required minimum distributions.
John: Can I tell you what RMDs really are? Forced liquidation. The IRS and Congress do not care about increasing your retirement income or guaranteeing the rest of your life, it is a way to recoup those taxes you deferred all those years. Period.
April: That's right.
John: And I think they should do away with it. People should not be penalized or forced to take money. If you've done a good job of saving your money, they should leave you alone and let it grow. And then upon your passing, let that money go to a surviving spouse. And then if they are taxable when you both die, that's a different issue, but don't penalize people for being frugal and prudent with their money.
April: I agree. I really wish they would get rid of them. We have so many clients when they get to required minimum distribution age and say I don't need this income, what do I do with it? And we'll structure our plans around that. So there's there's definitely opportunities for you around required minimum distributions, you want to make sure that one, you have a plan for how are you going to take your required minimum distributions.
You want to make sure that you've got accounts structured and set up properly for you to do some RMD planning. Okay, and then you want to have conversations and decisions around what do you do with this income now? Do you use it for lifestyle? Or do you turn around and invest it in some type of vehicle that can continue now to grow for your future? So that's a big part of what we do, too, is RMD planning. Required minimum distribution, planning, and making sure one, we're taking out the right amount and that we're structuring it properly.
And when I say structuring it properly, I don't mean that we're following the IRS guidelines. I mean, that we're structuring it in a way to put you in the best possible position. We got to still meet all those rules and requirements, but what can we do to make sure that this isn't going to be the thing that's going to cause you to run out of money.
John: Think about the number of people that we talked with that are very charitably inclined, and they're paying money out of their pocket, and maybe they can't get a tax deduction because of the standard deduction is so high.
They didn't use it on a qualified distribution, charitable contribution, we can help them, their charities, and get the required minimum distributions taken care of. But it's very important for some people to understand that as we get older because a lot of people are not being told that. They're like, what is that? It's a QCD. Qualified charitable distribution.
April: So now we have talked about several different pieces of this puzzle. We've gone through and talked about pensions, DROP, and taxes, Social Security, Medicare required minimum distributions. So we've talked about several different pieces. So how do you start putting all of that together? While one of the things I would recommend that you do is schedule a time for a focus session.
This is usually a 30-minute call where we get clear on that retirement vision for you for the future. We talk about what are your goals. What are your concerns? And start figuring out what are those key strategic items that you need to be focused on to make sure that you're ready to retire. And how do you get the most out of those benefits like your your state employee benefits? The most out of Social Security.
So again, thinking about this focus session, I'm going to give you a couple of ways that you could schedule it. You can call our office at 850-562-3000. Again, that's 850-562-3000. Let them know, let Leslie or Luke know that you were in the webinar for retirement planning for members of the Florida Retirement System, and you'd like to schedule a time for a call. The other option you have is that you can go directly to our website. I'm gonna see if I can pull this up, actually.
John: Watch out for the technology gremlins.
April: I know, they will get you. You're gonna go to curryschoenfinancial.com. So that's curryschoenfinancial.com. This is our website. And there are several different things on the website. You can go to our podcast page and listen to our podcasts. Our podcast is also available if you have the Apple podcast app, or through Spotify.
You can listen on our website. And then you're gonna see in the middle, a yellow box that says schedule a call. So you can click on that. And that's going to take you to a web page where you can select what type of call you want. So I would say select this 30-minute phone call. It's gonna be the first option available.
And when you do that, it's going to show you options, dates, and times that we're available for a call. And you can click right there, put in your name and email and phone number, and get that booked on your calendar. Okay, so again, the best way to do that is to call our office at 850-562-3000.
You can also go to our website at curryschoenfinancial.com. And again, I just want to say thank you for being on the call today. I think it shows a lot that you took the time out of your busy schedule to be here. I know we covered a lot and looking forward to our future webinars that we have on the schedule.
John: And I also would comment that thank you for taking the time. Your time is your most important asset. And I hope you see this as being a good investment of your time today.
April: Thank you have a good day.
John: Goodbye, everyone.
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. The Social Security Administration and Centers for Medicare and Medicaid Services have not approved, endorsed, or authorized this material. There is no charge to attend subsequent consultations. Contact the specific 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 opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address 3664 Coolidge Court, Tallahassee, Florida, zipcode 32311. 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.
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