Selecting the Right DROP Option for Your Financial Goals

On this week’s episode of The Secure Retirement Podcast, we continue our special series focused on the specific concerns of members of the Florida Retirement System. 

“Some people say they have the ability financially to retire, but they don't have the ability mentally to retire. And I call that part of the mindset,” says John. “When it comes to the subject of drop, it's not just about money. It's the mindset, what will you do with the money? Do you need the income right away? Do you defer it? Do you take the money and pay tax on it? Pay off the mortgage?”

John uses the wisdom gained through 45 years of experience in retirement planning to decode the options available within the Florida Retirement System, educating others so they can retire with a sense of financial security.

We chat about the retirement frame of mind, as well as:

  • To DROP or not to DROP

  • Choosing one of the four DROP options

  • Researching the right option for your goals

  • Understanding DROP and where to go if you have questions

  • Lawfully reducing income taxes

  • And more…

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John H. Curry’s Secure Retirement podcast. I'm your host, Steve Gordon, and I am here today interviewing John Curry. And we are in the middle of a series of episodes, talking about the particular challenges related to being a member of the Florida Retirement System, the considerations that you need to make as you prepare for retirement and coordinate all of your benefits. And, John, welcome. Good to be back with you.

John Curry: Good to see you again.

Steve: Yeah, this is gonna be fun. Again, I'm learning a ton. I can only imagine that these episodes are going to be really beneficial for the folks who get a chance to listen to them. And if you folks, if you've missed any of the ones if you're coming into this, midway into the series, and this is the first episode that you've stumbled upon, go to johnhcurry.com, click on the podcast link, and you'll find all of the episodes in this series there. If you are listening to this, and you're Hey, I'm not a member of the Florida Retirement System, should I hang on? In all of these episodes, we are covering things that really are general principles related to retirement. And so I think these are all beneficial. No matter who you are. Today, in particular, we are picking up from where we left off in the last episode. So John, last time, you touched on the idea of drop program. And today, we're gonna, I think, deal with the eternal question. To drop or not to drop.

John: Yes. I love that. I like to use that to drop or not to drop. That is the question. The first I want to go back to something we talked about last episode about mindset, mindsets real big here. So I'm not gonna get into all the details of drop here, because you can go to the website, myfrs.com, and download the brochure or read it, and get into all the nitty gritty, because some changes were made in 2011. A lot of stuff happened there. But I'm gonna touch on some of it. But I want to talk more about should you drop or not drop? And let's talk about mindset. So actually, really two ends of the spectrum, when people come in talking about drop, I have people who come in, say that they hate their job, I can't stand this anymore. I want to get out as quickly as possible. But I'm also tempted because of this bucket of money. So I'm eligible to retire. So do I just retire? Do I continue working longer and not do drop and come out in a year or two? Or do I go into drop knowing that I may not finish the full five years? Or I may do the five years based on that? And when I hear that I say to them? 

You know, Steve, it sounds like you're talking about a prison sentence here. Where do you describe that? I mean, are you? Are you so unhappy? And what do you do? Maybe it makes sense just to go back and retire today? Well, I can't I can't afford to do this. If you could afford to do it, would I quit my job now? And what would you do tomorrow? So you quit today? Maybe you can. I've actually had class where it's just a thrill to show them you know what? Why don't we look at all of your stuff and see if you can retire today. And one of my classes but just yesterday, he reminded me You remember nine years ago, we had this conversation, I was mad as hell. And you told me I could afford to retire as I do. 

Just like it was yesterday. And he said, I went back to his internment camps. I went back to my office that day. Instead of hating my job. I was bound and determined that if I wanted to retire I could. And he went to see his boss. He said, I just love my financial advisor. He has shown me I can retire today. So we had the chat. If you want me to stay here until you leave. This is what has to happen. If not, I'm going over to personnel, human resources and I'm filing my papers like acid. Gonna get your cup of coffee. He's never had a Showboat, easy never offered a cup of coffee. kitchen area, get a cup of coffee came back sat down and worked out our disagreements. So some people say they have the ability financially to retire, but they don't have the ability mentally to retire. And I call that part of the mindset. So when you come to me and you say I'm thinking about going into drop Should I do it or not?

Steve: Let me take us down a little bit of gravel road. This is one of the things, You and I are good friends.

John: Let me interrupt you for a second. You know, the nice thing about this, when it's not scripted, we get to do whatever the heck we want to do. So gravel road, dirt road, you just take us down buddy.

Steve: Well, and I think, folks, I think this will be useful. One of the things I appreciate most about our relationship is, is that we, we talk a lot about mindset, we talk a lot about thinking, and really what you described right there, if I could sort of observe is you gave that that gentleman, a future, he didn't have a future, in his own mind, he didn't see that he had a future in that job, right. But by You're right, looking at that, and I'm not saying you're able to do that for everybody, everybody's situation is different. We know that.

John: I know, I can't do it for everybody. No, I know that, but most of the people I can.

Steve: But that's that, that's not the point even it's not even whether you can or you can't. But sometimes it's just a matter of sitting down with someone who will act as your coach and challenge your thinking a little bit. And, and that's one of the things I think you and I do well for each other, one of the one of the reasons I consider you one of my closest friends, is that you, you have the ability to just challenge people's thinking and not be emotionally attached to it. And, you know, and having that ability to sort of see the whole thing. And what if you're listening to this, folks, I, whether you come meet with John and do it or do it with someone else that you trust, right? The point is, if you're in that sort of situation, where you're so fed up with what you're doing in the working conditions, you need to be in a position where you have no future right there. 

You need to find somebody who can help you talk through that and ask you questions and, and give you your future back. Because I think it's sort of sad not to have a future, particularly if you're, if you're very skilled at what you do, and you're an expert in your career, and you've done it for a long time. I think it's important that you have that conversation with somebody. So that was the gravel road. And to me, that's, I don't care what you did for that guy financially. The fact that you had that single conversation, and gave him back in his own mind, the ability to see this future is probably more valuable than anything else.

John: He went back and worked two more years, to four years. So he got more benefits for himself. And the organization he worked for benefited. And his boss got another promotion because of him saying, so he loved. And then we had to go through the same thing with his wife, when it was time for her to retire because she was unable to pull the trigger. And the way I helped her identify her future, is I hit a hot button about travel. She said I wish I could do this, I wish I could do more of this, I want to go back to Europe, I want to do this. And I said, so what's stopping you? Well, I've got to go to work, I got to do this. And this, as you have to go to work, you've got to go to work, or you choose to go to work. And he is sitting there because he knows Robert, this is going and she says Shut up, don't say a word. And I said he's not going to interfere. This is when you and me, we're going to reschedule. And you and I are going to have just the two of us chat about your future. I'm not gonna tell you what to do. And I can try to control it. Honestly, it doesn't matter to me. You're my friend. You've been class forever. But you're there if you choose to. I'm going to show you the path. You can do what you want with it. Take the path, don't take the path. And now you're right about one thing I am. 

How I set up here many many years ago, I got so I can tell you the year 1982 because of my brother in law committing suicide leave on a young widow two little kids. August of that year, that was in May, August last year my brother committed suicide that man a widow, two little kids. I was any emotional wreck. And I worked through that. And there was no morning really. I worked through it physically Work, work, work, work. Sunday's 20 hours a day. And one day it hit me. You know I can't make you do the thing. All I can do is guide you, coach you and hopefully take my life experiences, hopefully, what knowledge, some wisdom that I've gained by seeing thousands of plans engaging. But here's what I learned. I do not take responsibility for anyone who won't take action and help themselves. I have family members who won't do what needs to be done. You know what, suffer. I'm here when you want it. I'll help you any way I can. I'm not doing it for you. I'll do it with you. 

And that has carried over to the sense of where I can ask the tough questions. I call it ruffling your feathers, I can ruffle your feathers and smooth them back out. But somebody needs to do that. I have people who do that with me, you do it with me, we call it questioning each other's answers with us that phrase half a dozen times a day. Because we need people around you that you can trust. That will not be true. They will tell you the cold, hard truth. And that's me. I like it. I use this phrase over and over, I will show you and tell you about the good, the bad and the ugly in everything we're doing. I'll show you the ugly many times before showing you the good because if you don't like the ugly, hell Don't bother. But back to drama. So should you go into drama or not? Well, if you can ask me that question. I'm gonna say tell me about your job. Do you like a job? I love my job. Like the people I love the people there. 

Do you want to keep doing it for just five years, another 1015 years? Or I'd love to do 20 years, then you probably shouldn't drop. Now, let's measure it. So you get your paper and got some estimates? Well, let's do it for you. So roughly This is how much money you'd have a lump sum. If you go into drop. Is it worth having that money to walk away after five years? Some people say no. I love my job. I'm just saying, I think you've answered your question the other side Well, I don't want to stay in this job. I want to retire from the state of Florida. And then I want to go do other things. Like what? Well, I want to start my own business. Okay, then you probably should consider drop. Now you got a lump sum. We'll talk about what you do with it the minute. Others will say well, I don't want to do any work for income. I want to be able to retire, do nothing. And I'm thinking of a lady now who is very active in nonprofit organizations and her church. 

She she's working full time. This reorganization, and she loves not getting paid a nickel does. She is needed. So retired from FSU. So she is dynamic. I think she's now 85 years old. Unbelievable. Wow, more energy than you and I combined. And we're pretty entertaining. So I get into that first. And we talked about in the previous episode, which one now we're talking about, you've got the financial side, and you got the mental side and last episode again. So the mental side of it, I think I'm sorry, because then it makes the financial side negative while you're doing it. Say in the draw program, what people need to understand is, when you go into drop, most people don't fully realize the many you go into the drop program, you've had to choose one of those four options. So that's the first step, which option will you choose? 

Because you don't want to make the wrong choice, because you might hurt somebody, like we talked about my grandfather taking option one and my grandmother losing that income for the rest of her life. So that's the first step. Because once you go into drop, you have retired. As far as the state of Florida is concerned, you have retired, and now you're participating in the deferred retirement option plan. That's what it's called. So you're still working, still getting your salary, and they're depositing your retirement check into this account that under current rules is getting 1.3% interest. And then at the end of the five years, you can come out center but into five years, then you have a choice. And there are three options, you can take a lump sum, and no withhold 20% for taxes. You can do a direct rollover to any other retirement plan you have that will accept a rollover, Ira, deferred comp, FRS investment plan, so these are options available to you. Or you can do a combined. So you can say give me a part, lump sum partial, and further. 

And we have people do that just had it happened. Lady said I'm $50,000. I'm gonna pay the tax that pays off all my debt. And then I want you to take the rest of the money and invest it and I don't want to touch the income until I have 272. So those are for the people who are wondering should they even consider drop? Those are the thoughts I have. Now let's talk about people who've already been in truck programs. What do you do when you get the money? Do you take lumps on paying all the taxes today for some people they should? Most people that should most people should defer it or take income from inside an IRA. The thing I tell people is if you work with us, there's only one thing I can promise you That is service, we're not an 800 number, you're not calling an 800 number and having to punch through four or five choices to finally get a different person, every time you call my office at 850-562-3000, you're gonna get either me, or one of the people on my team to assist. You might get a voicemail, if it's after hours, and we'll call you back. But you're not going to have to chase those down wondering what's happening. 

And when I meet with clients, Steve, I have another teammate with me. So that if I'm gone, because sometimes I take trips, like we catch an ex, I'll be gone for a week on a trip with my lady. And if I've had somebody in every meeting, they know what needs to be done. So you're not relying just on me. So it's not just John Curry, it's John Curry and teammates to take care of our clients.

Steve: It's fantastic, John. Are there any other things specific to draw that folks need to know before we wrap this one up?

John: Well, I would encourage people, if you're thinking about going into drop to seriously go to the website and read the handbook and understand it. And then if you want clarification, call me I'll help if I can. But I think most people approach drop the wrong way. They approach it as being this is an opportunity to get out of here and have a big chunk of money. And the reason to drop program came into being to encourage people to retire to make room if you will get rid of us old folks and bring in new people well, drop has become something totally different. It's become something where we almost feel like an entitlement, like Social Security, okay, they made changes and drop and people get upset about it. It was never designed to be what it has become. It should have been a temporary program to get people out and bring new people in. But it's there. And as long as it's there, you should participate in it. If it fits, you've heard me use this analogy many times. 

This is a football field, this legal ban. So as long as I'm running the ball, and there's green space between my black shoe and that white chalk, I'm in bounds on it. It might only be a centimeter. But as long as there's green there, I'm in bounds. So my philosophy is real. I'm going to follow the rules, the regulations and the law. But I'm going to take advantage of every law that allows me to reduce income taxes, and have more money for myself and my family. So every rule and regulation and FRS My view is something, let's look at it. Let's understand it and take advantage of the opportunities that are there. We talk a lot about dangers, opportunities and strengths. The strength is you've got these benefits. The key is it's up to you to coordinate them. If you don't, you got nobody to blame but yourself. 

Because after the fact is too late, choose the wrong option. Say too far, they can't help you. Sorry, you made a choice. Take the main lump sum, they withhold 20%. But you're actually in a higher bracket and you lose 30 or 40% of the money to taxation. That's up to you. Because you do not get educated. So I was emphasizing when it comes to the subject of drop. It's not just about money. It's the mindset, what will you do with the money? Do you need the income route away? Do you defer it? Do you take the money and pay tax on it? Pay off the mortgage? I've had clients come in telling me I'm gonna cash in my drop money. Go buy this nice RV and travel. So pretty expensive RV? Because you got 200,000 you had to pay 30% tax you lost $60,000? What would it cost you if you finance the RV? I don't know? Well, shouldn't we consider that. 

So maybe what we do is you get them to finance it for you. And you take enough out each month to make the payment. Maybe that's a better choice, I don't know, depends on the interest rate that you get, how long you finance it. But shouldn't we just look at other options and not just automatically panel that tax up front? So that's to me, that's what drop is all about is it's just another to give you a bucket of money to do something with at some point in the future. And then the question becomes if you do transfer it over to an account, what do you do to protect it? Because you know my rules number one, protect it. Number two, grow it. Number three, enjoy income when you're ready. So protected first, really enjoy it as income.

Steve: John, where can folks reach you? I know you mentioned the phone number earlier but repeat that again.

John: Tallahassee. 850-562-3000, or the website, johnhcurrie.com. johnhcurrie.com

Steve: And you work with folks all over the state. So if somebody is in the Florida Retirement System, but they're working in Miami or West Palm Beach or Gainesville or anywhere else.

John: Well, the truth of the matter is that we have clients in 13 states, because we actually have clients who are Florida Retirement System employees in other states, because with the Department of Revenue, they're in various states doing work. So we have got, which blew my mind the first time it happened. God tracked me down. He was in New Jersey. And I'm thinking, I don't know anything about New Jersey's retirement plan. So no, no, I'm in the Florida Retirement System. I'm an employee, but I'm stationed up here doing this work. So it doesn't matter where they are. And you don't have to be a Florida Retirement System employee to work with us. We have clients across all brackets, you name it, self employed, engineers, doctors, lawyers, professors. All kinds.

Steve: Very good. Well, folks, if you want to learn more, go to johnhcurry.com if you are looking for the other episodes in this series, again, go to johnhcurry.com and click on the podcast link. And you'll find them there. And check out some of the presentations that John and his team do; they put on regular webinars where you can tune in from your office or home or wherever, on specific topics, definitely check those out. Make sure you get a copy of John's book, Preparing for Secure Retirement. And depending on when you listen to this, you're going to want to look for his upcoming book that will be specifically for members of the Florida Retirement System. All of that is available through his website.

John: Steve, I just had a follow up as you're going through that. And people say what is it you really do want to ask about my work actually myself as being a retirement educator? Because the more information I can get out there helps people and when they're ready for my services, they come to me and that's why I can do it and not have any pressure on me or them.

Steve: I love it. I love Well folks. subscribe to the podcast wherever you like to listen to the podcast, check it out at giants crew comm slash podcast and tune in for the next episode, where we're going to get into social security and the various options related to it. This is an incredibly popular topic when whenever John does a seminar or a webinar on this topic, it typically fills up because people have so many questions I think around that and we're going to cover it in the next episode so we will see you then.

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, masters in science and financial services, certified in long-term care registered representative and financial advisor at Park Avenue Securities LLC. 

Securities products and services and advisory services are offered through Park Avenue Securities, a registered broker-dealer and 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 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 and 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 2005-2020. 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. 

2020-113207 Expires 12/22

John Curry