When it comes to planning for retirement, the decisions you make today determine your destiny tomorrow.
And no matter what stage of life you’re at, making a plan now will ensure that you can retire with maximum freedom, security, and enjoyment.
If you wait any longer, your time and money are on the line.
In this webinar, we answer the most common questions about retirement and show you how to plan for a secure future.
Listen to learn:
How to get the most out of FRS benefits
When is the best time to retire
If going into DROP is right for you
When you should start taking Social Security
Why you should retire TO something—not FROM something
What you may not know about required minimum distributions
And more
April Schoen: Hello, everyone, and welcome. So glad you could join us today. My name is April Schoen. And I'm sitting here today with John Curry.
John Curry: Hey, April. Hello, everyone.
April: So today we're going to be talking about how you can build your own secure retirement. Now this talk is going to be primarily for members of the Florida Retirement System, because we're going to be talking about how to get the most out of your FRS benefits. But if you're not with the FRS, and you're listening to this today, or you're tuning in later, don't worry, we're going to cover a lot of great information too, that's going to be helpful for you. Because not only are we going to cover how to get the most out of your FRS benefits, but we're going to talk about some of the most common questions that we get from clients. So you know, John, I, the other day, I was just thinking about how crazy it is that we're two years from when COVID first started.
John: Yep.
April: You know, and actually it was probably this week like two,
John: Do you remember where we were two years ago, and all this started? Come March.
April: I do, we were in Phoenix. We were at a conference in Phoenix, and we get back from that conference. And then it felt like the whole world just turned upside down. Gosh, I was just thinking, how I remember how all that felt all the uncertainty and the fear that we had at that time. You know, we were all worried about one the, the COVID itself, we were worried about our health, we were worried about our loved ones, you know, I remember, my boys at the time were three and five, they were just babies, they had no idea what's going on in the world. And but I remember being worried about them, and also my parents, because my parents are getting a little older.
So having some concerns there. And then also just thinking about the economy. You know, we were obviously the market was down. And we were starting to hear about layoffs, and just all that fear, fear and uncertainty that we were having at that time. What's interesting is that I had hired a coach right before COVID hit. So she's a business coach. And it's kind of funny, I was thinking about this too, is I actually hired her to help me with my public speaking. And I'd hired her right before COVID started, having no clue what was right around the corner. And she did. She was she was great with helping me with public speaking.
Hopefully, you'll see that today. But one of things is that I got so much more out of working with her. And I'm so grateful I hired her. Because I knew when COVID started, I knew at that point, I couldn't do it on my own, that there was a lot of pivoting happening, a lot of changes were happening. We were going from having our live seminars to doing just webinars. Well we were already doing stuff online anyway. But now it was you didn't have a choice, you didn't have an option. So a lot of things were changing. And she was very helpful, helpful for me to be able to bounce some ideas off of her, someone to kind of lean on. And you know, she'd been a coach for 30 years.
So her experience her perspective in working with all these other clients was invaluable to me during that time. And she was well worth the investment. I'm still benefiting from the work that we did two years ago, together. And the reason I kind of bring all this up is because for you, for those of you on the call, I think we've all been there. Right? We've all been at that place where we feel uncertain where we feel fear. And you may be feeling that today, as you're thinking about what is this next phase going to look like for me? What's retirement gonna look like? Am I ready to retire? Not to mention all the uncertainty we have going on in the world today. Just look at what's happening with Russia and Ukraine right now.
Think about inflation being the highest it's been 40 years, and the Fed raising rates, what is all that going to look like? So if that's you, if you're feeling a little uncertain today, I'm glad you're on the call. You're in the right place. You're, glad that you're here because we're going to actually talk about how do you take some of that off the table? How do you create your own secure retirement? Okay, not my retirement, not John's retirement, not your co worker's, your neighbor's retirement, but your own retirement. And what makes it secure is not just that you have money. And while that's important, but it's that you have money for the things that you want.
John: Absolutely. Can I put some insight on that. From a 69 year old's viewpoint. 47 years of business. Some people are not going to understand what I'm about to say. But you know, what, it's nothing more than we've been through before.
April: Absolutely.
John: In 1974 the economy had gone to hell in a handbasket. Real estate market was crazy. 1974. You weren't born then.
April: No.
John: So we have these cycles, we're going to have scary times, we're going to have fearful times, we're going to have ups and downs in the market, we're going to have inflation real high, like in '79, '80, and '81. So this is not my first rodeo, and you're talking about coaches. I've had coaches in my life, my entire 47 year career. It is very important that we are willing to invest in ourselves and hire the right coaches and get the right guidance. And it will save so much time, one of my coaches has taught me who, not how. I don't have to know how to do it, I just have to know who can either do it for me or do it with me?
April: Absolutely. That's great insight. And so as we kind of get into it today, I'm going to talk about creating your own retirement. What I want to do first is I'm going to have John speak in just a few minutes about how to how to do that. But I want to I want to tell you a little bit about John. So John's kind of alluded to a little bit is that, you know, he's 69, he'll be 70 this year, and he's been helping clients for over 47 years. Okay. And, John and I have been working together these last eight years. We work together in helping our clients.
But I want to tell you, he is so good at seeing strategy for someone. At taking a look at someone's big picture, their overall plan, and being like, you know what, this is the strategy that's going to give the best outcome. He knows how to do it, right. He knows how to do it well. He knows what works and what doesn't work for clients. And he's great at spotting red flags. And what I mean by that is looking at someone's plan and saying, ooh, there's a weakness. There's an area here that we need to address for someone. Because if we don't address this, there's going to be a problem. And how he has that experience how he has that ability is because he's been doing this for 47 years.
John: There's some value to getting old.
April: You've helped 1000s of clients at this point in your career. You think about the books, you've written, your podcast, training other advisors around the country, you've helped, who knows multiples of probably 1000s of people at this point in your career. And I'm glad to have you on the call today to share some of that wisdom.
John: Well, thank you. It's great to be with you. But let's be fair here. In our eight years together, you have brought a heck of a lot to the table. That's why we're partners. What you bring to the table. And what April brings to the table folks is she is very analytical, but the thing that I tell everyone who will listen, you can't hire someone and teach them to care. They either care or they don't. And April has that big heart. She cares. So she puts in whatever time and effort it takes to take care of the clients. You can't teach that. People either have it or they don't. But you can see the picture up there, I want to make a comment that I love doing is you think about the brains and the beauty of the outfit. I'm the beauty and she's the brain. I don't think they're going to buy that, do you?
April: No, maybe not this time.
John: But on a series note, what happens is the reason we're such a good team, April, is because you have this analytical side about you as well as the caring, especially when it comes to the investments. You have a passion for it. You have the patience for it. I don't have the patience for it. I freely admit that. I can look at the big picture, zoom in like you said, wait a minute, you said this, here's what your behavior is given. Are you sure you mean that? And then you're able to take that like the gentleman we just got this morning. He's going through a heck of a lot of emotional roller coaster as well as the financial side so we're able to help him to where now he doesn't have that in his life.
April: Absolutely.
John: He's got enough issues.
April: And I think that's really what helps us get the best results for our clients because it's us working together in our own unique strengths, our unique abilities that we bring to the table.
John: I want to address something that I guarantee you some of you folks are asking. Okay, John is 69 years old, is he, has he retired, is he retired. On paper, I am retired. I will retire when clients no longer want me. As long as I'm relevant and bring value to the table and healthy, I'm working. Why? Because I love what we do. This is not work. It's fun to come to work each day and help people.
April: Absolutely.
John: I love being a coach. We're talking about having a coach. I've been coaching people. Well, sometimes I get paid for it. Sometimes I don't. But I've been paying, excuse me, I've been a paid coach either because of an advisor as you have or someone as a financial advisor saying hey, I need some coaching. But your comment about coaching, I'm glad you brought that up because it truly is more important that you find the who instead of wasting all your time energy and effort trying to do it yourself.
April: Absolutely. I agree. Alright, let's get into some of this today what we're going to be covering. So today we're gonna go over how you can create your own retirement. So no matter what stage of life you're at, whether you are where you want to be financially, or you're not sure where to start, or even if you think you've all got it, you got it all figured out. Okay, we're going to talk about how to create your own retirement.
John: Your own secure retirement.
April: Secure retirement. That's right. So I've got a couple questions for you. And if we were in a live seminar, like John and I did pre COVID, in our training room in Tallahassee. We used to have 90 to 100 people there, it would be a little bit more fun, because we could get some interaction, but just kind of answer this to yourself a little bit here. How many of you would want more freedom in your life today? Okay, or how about security? Do you want more security? What's more important to you? Is it freedom? Is it having more security? Is it having more time with your family? Okay, or maybe it's all of those things. And I bet, I bet the majority of you would say, yeah, you know what, I want more of all of that. Okay, which is great, because that's what we're going to talk about. All the ways that you can do that. Okay, here, we've got about 45 minutes left, okay. I sure do talk a lot.
So we're gonna get down to it here. And we're going to go through the most important aspects of creating your own secure retirement, and you're going to know which pieces are most relevant to you. But here, here's the one thing. There's no way we have enough time today, to get all the knowledge from my head and from John's head to you. I wish we could, I wish we could just boom, zap it, you have all this information. So if it's okay with you, what we're going to do is we're going to set some time at the end. And we're going to talk about how we can do a strategy session. That way we can condense this 50 plus years of experience down to customize it to you, so that you can create the retirement that you want. So if it's okay, that's what we're gonna do.
We're going to save some time at the end and show you how to do that. Okay, but don't stop listening. Don't wait to the end, we got some really good stuff. Okay. But we'll save some time at the end to talk about it. So let's get into it. Here are the three things we're going to go over. We're going to talk about when is the best time for you to retire? How are you going to know when that is? Okay, we're going to talk about how do you get the most out of your FRS and Social Security benefits. Okay, and then we're also going to talk about some pitfalls. And I'm gonna give you the Cliff Notes version on the pitfalls. When we talk about pitfalls, we're gonna be talking about taxes. We're gonna talk about Medicare, we're gonna talk about required minimum distributions. All the fun things, okay. So there's some pitfalls, some things you need to be aware of, to make sure that you don't leave money on the table.
John: And also now inflation.
April: And inflation.
John: Because most people got lazy about inflation. Ignored it. It's not a big deal. But it is a big deal, especially in retirement.
April: That's right. So and here's why this is so important, because the decisions you make will determine your destiny. Write that down. The decisions you make will determine your destiny. So first up on the agenda is we're going to talk about the pension options that if you're a member of the Florida Retirement System you have available to you. Okay, if you don't know, there's four options that are available to you under the pension. Okay, now, when you work for the State of Florida, you have different options, you can be in the pension plan, and you can also be in the investment plan. So we're not going to go into too much on the investment plan right now. We're going to focus in on the pension plan and what your options are. John, would like to go through the four pension options that are available?
John: Absolutely. And this gives me an opportunity to talk about why I have such a passion for this. So I'm gonna cover a little background real quick. My grandfather and my father both retired from the State of Florida. Specifically DOT, the Department of Transportation out of Defuniak Springs. What led me to having a passion for this is each man got bad advice. My grandfather chose option one. And when he died, my grandmother lost that income. So option one is life only. So I get the check. As long as I live I get it. The day I die, doesn't matter when I die, it's gone. Option two is a version of that. Life to me, then retire, and a 10 year guarantee. So if I only have five years, then my beneficiary gets it for five more years. But I live 10 years or longer and I die. It's all gone. My dad took option three. Option three is joint with 100% to the survivor.
So what my dad collected when he died August of 2015 my mother got that until she died in 2019. So both men took the option they thought was best based on their set of facts and knowledge. But there's another option, option four. It's a variation of option three, in the sense that you get the check every month for as long as you live. But upon your death, the benefits reduced to two thirds to the spouse. Now, here's the kicker. If the spouse dies first who has never worked in the State of Florida Retirement System, then the retiree's benefit is also reduced to two thirds. Many times in our careers, we've seen people say, oops, I took the wrong option. So the first step is making sure that you thoroughly understand each of those four options.
Number one, life only. The day you die it's gone. Number two, life with a 10 year guarantee. Number three, 100% to the survivor. And then number four, lifetime income to you. But upon either death, the survivor gets reduced to two thirds. People need to pay attention to those. And the question of which option should you choose depends upon how much life insurance you have in place. How much savings, investments, your health at the time, a lot of options there. In my grandfather's case, he took the maximum, thinking he was going to live a long time. He didn't. He lived about five years in retirement. My dad took option three, and he paid a price for that. It was about 22% less than what he could have had. But he had the peace of mind mom was taken care of.
April: Absolutely, there's, like I said, if you think about only four options, but it really gets complex, because you can't think about how just how much is it going to be this one year, right when I would retire. This is going to impact your, for the rest, it's gonna impact your income for the rest of your life.
John: Well, it's not just you. It's you and your spouse, it also impacts other people in your world.
April: Absolutely. So I was thinking about some clients of ours that we met, when we met them, they had already chosen their pension options. I want to say they were already in DROP, if you know what that is, which we're going to cover later. So when you go into DROP, you actually have to go ahead and pre select your pension option. So we met them, they had already selected their pension. And they both, they both work for the state, they both chose option four. Okay. And what they didn't realize is that when one of them passed away, the surviving spouse's income was going to be cut down to two thirds, plus, they're going to lose one of the social securities. So it was much more of a loss than they thought that it was going to be.
John: Because they didn't think it through from that standpoint, and they even said so. So if one dies, both of the benefits are dropped.
April: Correct.
John: They still get it, but it drops. And then they lose the lower social security.
April: Absolutely.
John: So all this stuff is important that you don't do it in a vacuum, you don't just say well, I'm just gonna choose option 1, 2, 3 or 4. No, no, no. What else do you have going on in the background? Or the foreground that might make you think differently about an option?
April: And for those clients, we weren't able to help them, we were able to help them bridge the gap. Now, I'm going to tell you, we couldn't get it perfect. Right. Had we met them, had they come in years before, we probably could have done something else. But we did the best we could. And I told him we're not gonna be able to get this to be perfect, but we're gonna get it as close as we can.
John: I don't think we can ever get it perfect. But we can get it to the ideal if we have the timing and some people come to us six months before they retire, sometimes two months. Here, we need your help. Bingo. And it's like, wow. It's scramble time.
April: That's right, and then we can only work with what we got. Right? So let's talk about another option, another benefit that you have with your pension, which is DROP. So if you are in the pension plan with the State of Florida, you're going to have some options about do you go into DROP. Now there are specifications of you've got to have a certain amount of years of service or be a certain age to be able to be even eligible to go into DROP. So that's one thing to consider. But deciding if you go into DROP or not can make all the difference in your plan. Okay. But I'm not here saying that DROP is the end all be all and everyone must do it. It's not for everyone. You can't make this decision blindly. Or you could leave money on the table. So it's not a rule of thumb. You can't just say everyone should always go into DROP because that's not the case.
John: But that's what people have been told by well meaning friends and some advisors who don't fully look at the big picture.
April: Absolutely. And so really, you have to look at it both ways. What will your retirement look like if you go into DROP? And what does it look like if you don't go into DROP?
John: Obviously because of time we can't get into the have detailed issues regarding DROP, you know, how you qualify and all that. But that's something you can either look up on your own or have a strategy session with us, or come in, we can help you then. But we're making the assumption that some people should go into DROP when they're ready to qualify. Others make the decision not to. I love the conversations around that April because ever since DROP was started I've had the conversation about do you really want to retire? And how many people we work with, they went into DROP, then they were forced out, and they regretted it. Even though you can stay out for a year go back, but they still regret it. I love my job. I wish I had not done that.
April: Yeah, I'm thinking about two clients, one who, when we looked at the numbers, I'll be honest, I told her at first is that I think we're gonna find that you should go into DROP. And I told her that and I said, well, why don't you let's get the numbers. And let's look at it and make sure. What do we always say trust but verify, right? But so in this case, it was okay. Here's what we think. But let's not just think about it. Let's actually go in and verify the numbers and see if it makes sense if the numbers match up. And I'll tell you it was close. But it actually made sense for her not to go into DROP and just work those extra five years so that her pension was higher when she retired.
John: For good. Yep. And that's part of the key higher pension. Also, do you love the work you're doing? If you can't stand the people you're working with, can't stand what you're doing, well, maybe you should get into DROP, just to get out. And have some bucket of money.
April: And we can actually kind of plug those into our planning software and look at side by side, which option will be best for someone. And again, not just today, but what's it going to look like the next 20, 30 years. Okay, one of our favorite topics, taxes. So taxes are different for everyone, right? It's your tax situation is going to be different based on all the different income sources that you may have. You could have a pension, Social Security income from retirement accounts, income from non retirement accounts. And so that's all going to factor into your different you how your taxes are treated.
John: Taxes are a form. Okay, a form of confiscation of our assets. Taxes, we need to pay, because we live in a great country and we have to finance it. But when I say confiscation, it's up to us as individual tax payers to focus on minimizing the tax. When I was getting my master's degree in financial services we had one entire course, on tax history of taxation. It was a really eye opening. And the burden is on us to find ways to minimize tax. I'm not talking about avoiding tax, okay, I'm talking about avoiding not evading. If you do tax evasion, you're going to prison.
April: But we don't want that.
John: I don't want to to be housed by the government. But it's very important that you take control of that and plan ahead.
April: So what we look at, I'm gonna get into a little bit of the nuts and bolts on this. But one thing I want to tell you too, while I'm thinking about this taxation thing is we actually are going to have a webinar in April, that's all going to be about tax diversification. So that webinar is going to be if you want to go ahead and jot this down, it's going to be on April 28th. That's a Thursday, we'll do it at noon again. But that's when we're going to do a webinar on tax diversification in retirement. And we really spend the whole time just talking about taxes.
So I'd encourage you to join us for that webinar. But here's what we're going to be cover in that webinar is we talk about three different types of accounts and how they're tax. We talk about tax deferred. We talk about taxable and then tax free. Okay. So tax deferred would be I contribute money today. Think about a 401k or 403b or 457. Usually we think of these as pre tax. So it's money I put in today that I haven't paid tax on. It grows tax free, but every dollar I take out of it in the future comes back taxable at my highest marginal rate. Okay, so that's tax deferred.
Then you have taxable accounts, okay. This is like a brokerage account investment and non qualified if you're familiar with that term, non retirement account. This is an investment account where you pay tax today. You invest it in stocks and bonds and then your taxed as you go. You could be taxed on interest payments, dividends, and then realized capital gains. So it's taxed differently than your retirement counts. And there's actually some interesting things you can do with that bucket when you get to retirement and you start taking income out of it. Okay. And that's something we're definitely gonna hit on on the webinar in April.
John: And your DROP and deferred comp would come into that category of tax deferred.
April: Yes.
John: And what people forget about is adding that income stream when they take the income to determine their taxes. How many times we've seen people oh, I forgot all about that, right. But the reason they forget about it is because it's in the growth mode. Accumulation phase is great. But the day will come when the government will force you to do distributions called required minimum distribution. All that money has to be accounted for. So now that pushes them into another tax bracket.
April: Absolutely. And so that's one of the things we want to look at. Right? Is the impact. What's the impact the taxes you're going to have over over our lifetimes? And so those three types of accounts we look at are tax, deferred, taxable, and then tax free. So tax free would be like a Roth IRA or Roth retirement account. Also, cash value life insurance fall into that category, as well as being tax free, which we can talk more about later. While I'm thinking about it because I just mentioned Roth, I'll tell you, I think we're having more conversations about Roth conversions today than I've probably had in my career. And we've been talking about this a lot recently. And it's clients asking, hey, should I do a Roth conversion? Should I do a Roth conversion? What do you think this looks like? And, you know, it's because a lot of people, us, we feel that tax rates are gonna go up in the future. And so then it's the idea of what is better? Is it better to just defer the tax until I have to take it out? Or is it better to pay some tax today, when it's a known number, to have more tax free income later?
John: Well, one of the things we've looked at in planning is we can show people tax history. That's not our numbers, that's coming from the Internal Revenue Service, going back to 1913. And you take a look at tax rates, even though the top bracket now 37%, that's still considered a low tax bracket compared to 50, and 70%. And many of us, and I'm definitely one of them, I believe in my lifetime, I'll see tax rates back at 50%. I think there'll be higher. But if you take into account all the taxes you have to pay in retirement, you're pretty close to 40 to 50% anyway. Because the time you look at your Social Security, that you pay tax homes, you take a look at the Medicare premiums, especially if you have higher income for Part B. So you start adding it all up. Most people are going to be in a higher bracket than they think if they add that up. But what's interesting, they're affected income tax bracket, usually we see that they're lower than they think. But we add everything else together, it's higher. Which is pretty amazing actually. How do I go into retirement, and have to pay this much tax.
April: You know, and you mentioned earlier, you said that who not how right. Who can help me with this. And I would say this, this category here on taxes, you may want to put a star by it, is definitely one that you don't want to do on your own, it's one you don't want to do in a vacuum, because you don't want to make any mistakes when it comes to the taxes. So it's very important to have someone that can help you look at all of this, especially because I just mentioned a Roth conversion. So especially if you start thinking about that you want to have someone to take a look at it. Alright, so let's talk about when is the best time for you to retire. Okay. And here's the thing, retiring at 62, or working and retiring to 70.
I mean, that's a different life. Right? And here's a question, how long will you live? Right? All these questions. So we're gonna, we're gonna kind of walk through this a little bit. But here's what we find too. A lot of people make this decision about when to retire based on feelings, okay? And what you really want to do though, is make sure you make your decisions based on facts. Based on knowing all your options, so you can evaluate which one will be best for you. And you can make that decision based on what's important to you. And that's how we help guide you to so that you can have all the information, have the knowledge, have the facts, so you're not just basing it on feeling but on on having concrete information.
John: Totally agree. Because if I have all the pieces of the puzzle on the table, I've got the lid, it shows me what it looks like on the jigsaw puzzle. I put it together. Now, I can look at it see the whole picture. And that's what I love doing, is how do we look at the whole picture? You got pieces scattered everywhere. Let's put it together and now know what we got.
April: Absolutely. John, will you take a few minutes and talk about these four freedoms, especially when people are thinking about when should I retire?
John: I would love to, because you know, everything I do, I filter through these filters. The first is time. But I want to hit the bottom one first. Freedom of time for the wrong reasons, because I think it will amplify what I'm gonna say. And you might touch on that also, I don't know what your thoughts are. But I see people and you see people who are retiring for the wrong reasons. They're retiring from something. You hear things like I hate my job, I can't stand this anymore. So they're retiring from something, not to something. The people that seem to be the happiest in retirement are retiring to something. They have something they're looking forward to, they're excited, maybe they're moving to another location. Maybe they're starting a business. Maybe they're spending time with their grandchildren, or in my case, even great grandchildren.
And that leads right into the freedoms, if you have time freedom, but no money to enjoy the time, what good is that? If you have time and money, but your relationships are bad, what good is that? Okay, and then location is where do you want to be. Do you want to stay in the home you're in, do you want to build another home, do you want to move to another city? But these things are important. And it's interesting that in our conversations with people, what people tell us over and over that separates us from other people, is we're not just talking about their money. We're talking about these other things. Okay, so you retire, and you got an income. Great. What are you gonna do with the income? How will you spend your time? Who will you spend your time with? Relationship. Where will you be when you spend money?
I think it's powerful. It's powerful. And for me, everything I look at, the first question is what's the relationship like? How much time even energy and money is this going to require? And if the relationship is good, then I'll consider more time, energy and money. If it's not a good relationship, why would I give you any of my time, energy or money? And we have to create value. You awnd I have to do that every time we see a client, or a new person who might be a client. If we can't bring the value to the table, then we don't deserve their business.
April: Absolutely. You know, when you were going through those freedoms, I was, it reminded me of some clients we helped a couple years ago, and they were getting ready to retire or say he was getting ready to retire. But they have a, is a married couple. But there's 20 years difference in ages. Okay, so he was almost 70 when he was going to retire. And I remember when we first met with them, back to that fear and uncertainty I was talking about in the beginning. There was a lot of that, because it was like, okay, well, he's getting ready to retire. But I'm only 50. How much time will we have together? Or by the time I retire, how old is he gonna be and now we can't go do all these things. And there was a lot of fear there. And I remember we just were able to kind of help them create a plan where they both could retire at the same time, and enjoy this time together.
John: And isn't it fun to be able to help someone do something they thought was impossible. I cannot tell you how many times in 47 years, I've had that feeling. And I go wow, I made a difference. And now I say we're making a difference as a team in people's lives. You can't put a price tag on that.
April: No, and even for them, it's so fun to watch now, because they retired, they both retired. And they bought an RV. And they've been traveling all over the country and getting to do all these fun things. And it's been great to kind of keep up with them. And they're really just living life to their fullest. And it's been really fun to see. And the truth is you know, she may go back into the workforce one day. It's not going to be because she has to it's going to be because she wants to. And that's also very powerful too. And then I was thinking about another client, John you remember this story is that one of our, this has been a longtime client of John's, and I was I called him one day because we wanted to set up a time for a review.
Because we like to see our clients at least once a year, if not twice. And I remember calling him to say, hey, you know, to talk to him about coming in for a review. He's 90 years old. And he said, and he says April, I have got to give up some of my social commitments. I have no time on my calendar. And I remember just thinking how great it is that here's someone age 90 still living life on his terms, enjoying life and doing all these things that he wants to do socially and in the community. It's very powerful.
John: And he's creating value in those events he's going to and doing, because he's very active.
April: That's right. That's important. I love, I love, I love his perspective.
John: I wish we had time where I can share some of the things that he and I have done together. Wow. We've been working together, it's got to be 40 years.
April: I was wondering.
John: That's got to be for 40 plus years.
April: Okay, now this is one of the topics we get asked questions all the time, and it's when should I start taking Social Security?
John: Hell, I get these questions when I see somebody at Publix. I was at Publix right across the way, John, can I ask you a question about Social Security? Yes, go ahead.
April: So you may already know this, but the earliest you can take Social Security is age 62. The earliest you can take Social Security. But if you take it early, you're going to have a reduction in your benefit. You also have what's called your full retirement age. And that's going to be somewhere between age 66 and 67, for most of you on the call. And then you can delay taking your benefit to age 70. That's the latest to claim Social Security. And you do get extra benefits for delaying taking Social Security. Now, we are going to have a webinar on Social Security in March. Okay. And so we're gonna talk a little bit about here, kind of the high points, but in March, it's going to be Thursday, March 24th, if you want to jot that down, it's going to be at noon again. And we're going to go all into Social Security.
John: You know, I'm getting tired of you making me work so much.
April: It's fun though, right?
John: It is fun. I love it.
April: Absolutely. So John, can you take a few minutes here and just talk about when should someone start taking Social Security? There's obviously I know, a lot that goes into it. So what are some of those considerations they should be thinking about before they start Social Security?
John: Well, let me tal about my own situation. April and I talked about mine, we do I take it. Do I take it at full retirement age, which for me was 66. Do I wait until 70. And I made the decision to take mine at full retirement age. Why? Because I'm healthy. And I believe that if you take a look at the going to move into life expectancy, there's not that much difference. Yes, there's more, if I delay it, but you also have to take into account that I have that money the four years along the way. But for me, it comes down to the biggest consideration is, this may surprise people. What do you have in place as far as benefits to a spouse.
If you have plenty of life insurance and other investments, and income to the spouse is not that big of a deal, then take it early. If you don't, then you may need to delay it so that upon your passing, there is a higher Survivor Benefit for that widow or widower. So I think you'd have to take into account your health, your family history. And frankly, if you want the money now. My case as you know, every time I get my Social Security check, it gets invested, right. And the way I look at it, I'm taking money that is coming in, and I don't need and I'm investing in very aggressively. I don't do that with my other money.
But this is extremely aggressive. But it depends. Do you want the money today, do you want to use the money, use it to benefit your children, your grandchildren, your great grandchildren, which I did some of that as you know the first couple of years. But now I save it. And I think it's a very highly individual and personal decision. But I will tell you, people get in trouble again, and they do it in a vacuum. Everybody says I should take it at 62 because Social Security is going to hell in a handbasket. Don't listen to that nonsense. I'm gonna wait to 70 because I'll be better off. Well, maybe not. If you're in poor health, why wouldn't enjoy the money today? So there's a lot of moving parts to that.
April: Absolutely. I think what I was thinking of is, I know definitely some clients that we've helped that qualify for a widow or widower's benefit. There's a lot of misunderstanding out there about what's available and what's not available and what you can do. So we've helped clients where they were leaving 1000s of dollars on the table by just a simple tweak, tweak in their strategy for when to take Social Security.
John: Yes.
April: Very impactful. And then I was thinking about another couple that retired a couple years ago, where she was full retirement age. So she went ahead and started taking Social Security, but he was 62. And I remember him saying, oh, well, I'm gonna go ahead and take Social Security, I'm gonna have this big reduction. And he thought, he was kind of disappointed, he thought he was gonna have this big reduction in Social Security for the rest of his life. And we said, well wait, let's see if that makes sense. Right? And we were actually able to show him how he could get the most out of his Social Security, because he was in a position to do so. Right. And in that way, it was also going to help his wife upon his passing because he's the higher wage earner.
John: Well, if you take a look at the visual you have on the screen you see the puzzle pieces and it goes back to what, I forgot that was in there. If you take a look at the puzzle pieces, Social Security is a big piece of the puzzle. Your pension is probably the largest than Social Security.
April: Absolutely. So yeah, so we're gonna dig more into Social Security on March 24th on our webinar.
John: Would you go back for one second. I want to address will Social Security ever go away. I hear people all the time being told you better do this, you better do that, because Social Security is going to go into bankruptcy. I think that's pure hogwash. We're going to see changes and there should be changes. Politicians should have already done it. We never should have been allowed to take Social Security at age 62, it should have been longer. We'll cover that we can have our webinar. But I don't think we'll ever see it go away, we will see it modified, we'll see more of the benefits taxed, will pay more and more into the system to make it stay solvent. We may see our benefits reduced some. But I don't think we'll ever see it go away.
April: I don't think so either. I think there's going to be, they're going to have to make changes. And let's be honest, they're going to wait to the 11th hour to make those changes.
John: Well, what we shouldn't do is lock everybody in Congress in a big room and say you're not allowed to leave until you get this resolved. Doesn't matter if you're Democrat, Republican, Independent, Mickey Mouse, Pluto, whatever the hell you call yourself, you're not leaving until you get the people's business taking care of,
April: Agreed. Okay, we're gonna move on, for sake the of time to.
John: Wait a minute, I've got a lot more I want to say.
April: I know you do.
John: You're not letting me do it.
April: I know you do! So, um, we're going to move on and talk about Medicare. Okay, so Medicare is very complicated. I'm going to go ahead and tell you it's very complicated. And you want to make this is one of the areas where you could have some pitfalls. Okay. And here's one of the main things with Medicare is you've got to make sure that you enroll on time when you are supposed to enroll to avoid any penalties. Okay. Now, if you are a member of the Florida Retirement System, and you're working for the state, or university, or what have you, one of the things you're going to want to do is if you when you retire, and you're going to be over 65, you want to check into what Medicare plans are available to you, as a, into the retiree health insurance, okay.
So that's one thing you want to look at, and making sure that you enroll on time. Your HR departments are very helpful about knowing what you need to enroll in and when, okay. But there are two ways to get Medicare. You have Original Medicare, which is Parts A and B. And you're going to add on a supplement plan and a drug plan. Or you have what's called a Medicare Advantage plan. That's Part C, and that's where everything is included in one. Okay.
John: When is the Medicare webinar? I know you got one planned.
April: I'm so glad you asked. John, I'm so glad you asked. We happen to be having a Medicare webinar on May 26th. Okay, and we're gonna go through all of the nuts and bolts of Medicare from A to Z. There's a lot of letters in Medicare, if you've read anything up on it.
John: Well, you know, I'm a geek about that. That and Social Security are second only to FRS for me.
April: Do you wan to talk about the hidden costs. Do you want to talk about IRMAA for a second becuase I know next we're going to talk about required minimum distributions, which will tie back in so.
John: I'll let me do it briefly. And because of time, but when you retire, and you're required to take money out of your retirement accounts, you have to be extremely careful how you do that. We've had people who take a big chunk of money out to travel, and then they get hit with something called IRMAA. Income Related Monthly
April: Adjustment Amount
John: Adjustment Amount. Thank you. I went blank there for a moment. I don't know why because I sure as hell feel it every month. But if you take out too much in a lump sum to push in another tax bracket or a IRMAA bracket, then you would find instead of paying the $170.10 per month, that Part B costs now, you could find having to pay more. They don't call it a tax, they call it an excess premium, but it's a form of tax. And you could be paying as much as $500 per month for your Medicare Part B if your income is high enough. Now I hear people always say I'll never been in that capital bracket. Well, you could be.
Because if you close down an IRA, if you close out a deferred comp account, and you take all that money in one lump sum, it could push you into that bracket. We've seen that. And there's a two year look back. So this is truly a hidden cost that people don't know about. And we didn't know about it for a long time until we were helping clients and learned about it, sai whoa, wait a minute, what is that? That's one of the beauties of being around a long time, is we see things that other people haven't experienced yet. We can help them because we've helped so many other people. Right. But, we'll cover more of that when we get into our Medicare webinar.
April: Absolutely. Now, let's talk about required minimum distributions. So if you do not know what a required minimum distribution is.
John: Time out. Are we going to do a webinar on that, too?
April: I do not have one planned.
John: I think we should.
April: We should, there's a lot of misinformation out there. So I'll put that one on the calendar. Um, so with your required minimum distribution, and we caught RMDs, for short, because it's a mouthful. With your RMDs, how that works is you can defer taking income from your pre tax retirement accounts until you're 72. And at 72 the IRS says you have to start taking money out of those accounts. Now, it used to be 70 and a half. So some of you might being saying no, it's 70 and a half. And you're right, it used to be 70 and a half. And a couple years ago, they passed the Secure Act, which delayed it to age 72. Okay, so that's when you must take money out of your retirement accounts. And there is a, there is a schedule you have to follow. So you can't just take $1 out and satisfy it, they have a specific amount that you have to take out every single year.
John: And the longer I live, the higher the percentage is I have to take out, which means I can't just stick my money somewhere and ignore it. Because I may find that I'm making 1% on my account balance, but I having to take out four or 5%. So now I'm tapping into my principal faster, and I'm running out of money faster. On the other hand, I can't be so aggressive, that if I lose 15, 20 or 30%, like we saw in 2008. 40% losses. It's hard to recover that from that. So this gets into discussion, not just about how you're investing money today for retirement, but also how will you, what's your distribution plan? Will you have a plan of your own that you create? Or will you accept the IRS version, which is take out RMDs each year based on their formula, because you do have the right and the ability to design a different plan as long as you satisfy the government requirements.
April: Right. And that's why it's so important to look at this. If someone on the call is listening to this later, and you're retiring at 62. You may be thinking this doesn't have anything to do with me. I have 10 years. And I would say that's not true. Because we've got a plan today, what you're gonna do for income between now and 72. And then what happens after. And there is a correct order to doing things financially. A correct order of operations, right. And this is really what it comes down to and how we tie all of these pieces together. When do you take Social Security? What pension option do you take? What do you do with your retirement accounts? What do you do with your investments, what's healthcare going to look like? What's your required minimum distributions going to be? That's how we tie it all together to make sure that you're not missing anything. That you're not leaving money on the table from some of your benefits, that you're not going to get charged too much in penalties from the IRS or taxes from the IRS, or even those IRMAA premiums from Medicare.
John: I just had something to go through my mind I hadn't thought about in a while, April I have a picture up there of an airplane. When I was in the Air Force I was a crew chief on the B-52 Bomber. And before every plane took off, we had a pre flight checklist. And we had to make sure, back then it was a grease pencil, because it was covered in plastic and you checked everything off. What went through my head is you were going through this. We have our secure retirement scorecard. But it made me think about that pre flight and post flight checklist we would use. And that's what we do every time with clients. We're making sure in, while you're still working, that's pre flight. But when you retire, that's post flight. And I never, I've never said it that way before. I've talked about working on the plane but that's truly what we're doing is we're making sure you got the right checklist on the way toward retirement. And then a checklist coming out of retirement.
April: Absolutely. Well said.
John: And if you miss, if you miss one of the items on the checklist people's lives were in danger with an airplane. Eight crew members lives were in our hands every time that plane took off. That's pretty heavy for a guy who's 18 years old when I was doing that nonsense. It wasn't nonsense, but I look back on it now, it's formed a lot of what I do now as far as my attention to detail and making sure stuff's right.
April: Absolutely. So here's what I would say that no matter where you are, no matter if you think you can wait or not, you have to be proactive with your money. You have to be proactive with your decisions. Because if you don't know what all your choices are, then and you wait, what's going to happen then? Right? So I want you to imagine for a second, imagine that you wanted to buy a house. And let's say you say, I want to buy a house three years from today. But in those next three years, you don't think about it. You don't look at your income. You don't think about how to get a loan, you don't care about your credit score at the time, or how much are you going to need for a down payment. You don't look at any of it.
And then let's fast forward three years, okay. And it's gonna be no surprise to you that you're not buying a house tomorrow, okay? Because you didn't do any of the planning that you needed to do. So what if you were proactive about it? Today, you said I want to buy a house in three years. But you start thinking about it today. And you said, you know what, let me start dreaming about what kind of house do I even want to buy? Do I want that three-two ranch style? Do I want a townhouse? Do I want a house that's big enough for all the kids and grandkids? What kind of house do you want? Where do you want to live? Do you want to live in a neighborhood that's family friendly? Maybe you want to live in like, you want the hustle and bustle of being in like a downtown area, or a community that's for 55 and older.
Or maybe even say, I don't want to be in the city at all, I want to be more rural. I want to go buy me some land and live on the land for my retirement, right? So just imagine you start dreaming about what house you want, and where you want to live. And then you start looking at, okay, how much is this house going to cost? What are my options for how I'm gonna finance it? You start going to meet with realtors and mortgage brokers and getting all this information together. How different is that going to feel? Because if you do that, if you take the time to be proactive with your money and making these decisions, it's gonna make all the difference in the world for you. And today, what I would say is that we talked about a lot, and honestly, we probably talked about too much. And so if it was overwhelming to you, I'm sorry, I am, because we just threw a lot at you.
John: I'm not sorry. Because these are issues if they don't deal with it, whether he's with us or someone else, it's going to bite them in the butt. And they're going to be in trouble. So no, no, sorry. I just wish we had three hours to do it. Maybe someday we should do that. But I'm just concerned about people's attention span for three hours.
April: Absolutely. It's a lot for three hours. And so you know, we did we talked about a lot. We talked about different strategies that you can implement, right? And, but the question is now going to be what's right for you. So I would recommend that we schedule a time for a strategy session. Okay, and this is a call that's going to be with me or it's going to be with John, and it's going to be a time for you to get clarity. Clarity on your financial goals and concerns. Clarity about what opportunities are available to you. Okay, is it one of the strategies we talked about? Okay, what specific steps do you need to take that's gonna save you time and money and get you where you want to be even faster. But here's also something that's true. I know is true. Is I don't know yet. We don't know yet if we're the right fit for you, because we're not the right fit for everybody.
But I will say this. Scheduling a time for a strategy session, now these are complimentary, we do not charge for a strategy session. It's usually about a 30 minute phone call, okay. And at the end of that call, we'll know if we're a good fit to work together. Okay, I just had someone I met with earlier this week, and we talked and we're a good fit, but not right now. He needs to wait a few months. But that's not for most people. He just has some extra things going on in his life right now that needs to get worked out. But there are some things we're gonna help them with in the meantime. So but that's where we can learn in the strategy session where we're a good fit enough. Okay. So how you know that this call is is for you is if you're motivated, right. You want to have a plan for retirement, it's important for you to reach these goals, okay. You're committed to reaching these goals, right.
You want to have this lifestyle in retirement that you want, and you want to make sure that you have all the pieces in the right place. Okay, if you're coachable and you're willing to learn and be open minded, and if you take action. So John and I are both action takers. We love working with people who want to get in here, roll up your sleeves, get to work, and make sure that we get this done for you. Okay. So that's how you know if it's for you, alright? If it's, this is not for you is that it if you're not coachable, okay. If you're not willing to listen, you don't want to come in and hear some other ideas. And if you're expecting some unpaid consulting, okay. That's how you know it's not right for you. But I would say this, having this 30 minute call, like I said, it's going to help you get clarity about where you are today. And really where you need to focus on going forward.
John: Let me offer this, that 30 minute strategy session, if they never worked with us, gives them clarity and gives them a track to run on. They will at least have an idea of what needs to be done. They can do it themselves, or go somewhere else if they don't want to work with us. Do you agree?
April: Absolutely. Yep. And I get this question a lot, too. But there's nothing you need to prepare for the call. Okay. Just bring it, you know, grab a notebook, we can do it over the phone, we can do it over Zoom. Grab a cup of coffee, grab some tea, and let's just have a conversation. Okay, we'll have some things we'll walk through with you.
John: A good friend of mine says let's just conversate.
April: That's right. So there's a couple of ways that you can schedule a call. You can call into our main office at 850-562-3000. And ask Crystal or Zac to schedule your strategy session with me or with John. You can send me an email at april_schoen@glic.com, okay. Or you can also go to our website, which is johnhcurry.com/call. C A L L. And I know that's a lot. I don't expect you to write all that down and remember it, I will just think about this, I will make sure I send a quick email out to those on the call so that they have the link to be able to book a call.
John: And also, I'm assuming, I should not assume, we are recording this and it will be repeated. Correct?
April: Mm-hmm.
John: Very good.
April: Well, great. Well, thank you guys so much for joining us on the call today. We really appreciate it. Hope you guys have a wonderful day and we look forward to talking to you soon.
John: Enjoyed it, April. Good job as usual. Thanks, folks.
April: Thank you.
Voiceover: If you'd like to know more about John Curry's services, you can request a complimentary information package by visiting johnhcurry.com/podcast. Again, that is johnhcurry.com/podcast. Or you can call his office at 850-562-3000. Again, that is 850-562-3000. John H Curry chartered life underwriter, chartered financial consultant, accredited estate planner, master's in science and financial services, certified in long term care. Registered representative and financial advisor of Park Avenue Securities LLC. Securities, products and services and advisory services are offered through Park Avenue Securities a registered broker dealer an investment advisor. Park Avenue Securities is a wholly owned subsidiary of Guardian. North Florida Financial Corporation is not an affiliate or subsidiary of Park Avenue Securities. Park Avenue Securities is as a member of FINRA and SIPC. This material is intended for general public use. By providing this material we are not undertaking to provide investment advice for any specific individual or situation or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. All investments contain risk and may lose value. Past performance is not a guarantee of future results. Guardian, its subsidiaries, agents or employees do not provide legal, tax or accounting advice. Please consult with your attorney, accountant and or tax advisor for advice concerning your particular circumstances. Not affiliated with the Florida Retirement System. The Living Balance Sheet and the Living Balance Sheet logo are registered service marks of the Guardian Life Insurance Company of America. New York, New York copyright 2005 to 2020. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, or Guardian and opinions stated are their own.
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