Episode Transcript:
John Curry: Hi, folks. John Curry here. Thank you for listening in on another episode of the Secure Retirement podcast. I'm excited about today because I'm sitting across the table from my friend Kay Harris. Kay, welcome.
Kay Harris: Thank you, glad to be here.
John Curry: I'm glad you're here. We have talked over the years many times about different topics. We've known each other 19 or 20 years, I'm not sure which, but it's been a long time that we've worked together.
Kay Harris: More than 20.
John Curry: More than 20. Would you please take a moment and just tell our listeners a little bit about who you are, your background. There's so many topics we're going to touch on today.
Kay Harris: Okay.
John Curry: Florida retirement system, the importance of planning, widowhood, travel, because there's just so much information that you have that you can share, but please take a moment and tell them who you are.
Kay Harris: Okay. Once again, I'm Kay Harris. I've lived in Tallahassee since I went to college here many, many years ago, and I am a Seminole fan for sure. But, I stayed on to work for the state, and ended up working for the state in many capacities, mostly as a systems analyst, as a programmer, as a manager. I ended up working my 30 years, plus another two and a half years in the DROP program, and then I was ready. It was time for me to retire. So, I've been retired now since 2006, and had some opportunities to do some of the things that I wanted to do since then.
I'm a widow, which is I think important for me to bring into this conversation, that I was widowed in 1997, and so, I had to deal with not only the loss of a husband, but I had to deal an 11 year old son I was still raising, and two daughters in their 20s. So there were a lot of issues that I had to deal with since retiring that I might not have been fully prepared for. But, I had a lot of good counseling during the time, because I've known John, and he's been steering me along all this time.
I made some really good choices I'm very proud of, and I've made some surprising issues that have popped up that I was not prepared for, and that's what I'm here for, is maybe to share some of those, and to steer some other people in the right direction.
John Curry: Very good. We'll get into some of those that you're alluding to, because we've had some fun with that a lot. Kay, talk a little bit about the importance of planning going up to retirement. A lot of people will hear this, that are not members of the Florida Retirement System, but a lot of them will be members of the Florida Retirement System.
While we were having lunch, we were talking about some of the things that are important. You, and Jay and I were talking about that, so talk a little bit about the importance of planning, and I don't want to tell you what to say, but just the overall planning that you mentioned to us over lunch.
Kay Harris: Sure, sure. I'm a pretty good planner anyway. I was a pretty good manager with the state, and I've kind of prided myself on planning things well ahead of time, but I've learned along the way that there were some things I didn't plan as well as I should have.
Prior to retirement, I think I had my plans for travel, and I had my basic plans down, but there was some little details along the way that I look back now and say, you know, I should have had a little bit more knowledge about what to do with things like excessive leave that I had accumulated over the years, and the wisdom of taking that immediately, or using it up before I retire, what to do with deferred comp.
I knew about the rollover situation with the DROP program, but I didn't know what the questions to ask along the way, and made some decisions that could have been better beforehand. So, I would advise anybody in the Florida Retirement System, if you're in DROP especially, to get some counseling well before you're retired, and before you start making all your travel plans, and all the things you're going to do in retirement, make sure you got your ducks in a row, as far as everything that's related, that's going to come to you when you retire, and make sure you've made adequate plans to do that.
John Curry: You know, in our work, Jay and I meet with people, or April and I, we talk about what we call a retirement rehearsal, we've done it with you a bit over the years. I find that if we can get people to sit and do that, and we project them ahead five years, 10 years, 20 years, 30 years, and we always assume that our clients are going to live to age 100, why? Because some of you will, and we don't want you to run out of money, or run out of income. So I think that's good counsel to get counsel well before you think you need it.
Most people won't do that, because we're so busy fighting the fires that are in front of us, we don't take the time to plan ahead. I want to go back to something you shared earlier that I think people should know. I know this is a little bit of bragging, but share with our listeners what you experienced. You're ready to retire, you were asked to stay, talk a little bit about the change you help make you staying in government, because this was a big deal.
Kay Harris: Sure.
John Curry: You helped a lot of people who are listening to this, and they don't even know it.
Kay Harris: Right. Well, I was pretty much ready to retire after my 30 years, and leave the state, but I was asked to come back, because a dear friend of mine, who had a boss, one of my bosses previously, begged me to come back to the medical data section of the Florida division of worker's comp, which is in financial services. The reason was because Florida was like at the number 50 in terms of processing worker's comp medical data. It was basically a batch system, a hand entered system, and he knew that I was pretty knowledgeable about transforming systems.
John Curry: Excuse me a sec. When you say number 50, you mean as far as ranking of the states? We were dead last?
Kay Harris: Ranking of the states. We were dead last. Florida, this big state with huge worker's comp claims, and a lot of medical data that had to come in, we were still processing out, like something out of the '60s, with data coming in on pieces of paper that were then double entries in a huge room full of data entry people, and they said, "We got to change all this," and what we did, and I said, "Okay, I'll come back. I'll stay one year," that turned into two, that turned into two and a half. But, what we did is we transformed, we basically, together, transformed the worker's comp data medical management system in the state of Florida to a server based system that was top in the country when I left, and I'm pretty proud of that.
We were able to save the state a lot of money in doing that. We got rid of a lot of those data entry people, and then we put them into other jobs they could do that were better, that were related to electronic data processing, and when I retired around 2005, and 2006, that was still pretty new with the state, to have a fully electronic medical data system for worker's compensation. It's just so many pieces of paper, it's unimaginable. But, we did that, and I got an award for that, and our unit got both the Davis Productivity Award for innovation, and for saving the state money. We saved something in the neighborhood of four million dollars, I dare.
So that was a nice way to exit, when I did finally leave. It was nice to know that we had accomplished something great for the state of Florida, and a lot of people maybe don’t think it's glamorous to work for the state, but I fairly enjoyed my 32 and a half years. It was time to go, and it was time to go, but I thoroughly enjoyed being there, and I was happy that we accomplished something that helped so many people, and made Florida look really good.
John Curry: That's awesome. I was probably there when you received that award. I go to most of the presentations. I always like to be a sponsor when I can. Your comment about state work not being glamorous, but you know, it's important. My grandfather, and my father both retired from the department of transportation out of DeFuniak Springs, and all these years I've had a passion, and I mean a passion for helping members of the Florida Retirement System, because my grandfather got bad advice.
When he retired, he took option one. He lived less than five years in retirement. So when he died, my grandmother lost that check for the rest of her life. She lived 27 more years. All she had was social security, and then what my dad and my uncle did to help her. When my dad saw that, he said, "I'm not making the same mistake." So when he retired in 1992 at age 62, he took option three. A good option, because my mother's still getting that check when he died three and a half years ago. But, they lost tens of thousands of dollars that they could have used in their lifetimes. So both men did the best they could do with what they knew, but they would not seek advice, and not matter how much I offered, they didn't want to hear it.
What did I know? I'm their son or grandson, you don't know anything. So, I'm adamant about us bring good information to help people, whether they work with us or not. They could work with somebody else, as long as we help them.
Kay Harris: Exactly.
John Curry: So, this thing about state employees, when somebody says, "Well, state government, their state employees are lazy," or as one of our governors call it, "Lard bricks," I go, "Okay, great. Let's fire all the state employees. Let's just shut them down." What happens to our economy? It goes to hell, that's where it goes. It all falls apart, because we need those no good state employees.
Kay Harris: I didn't know those lard bricks. We all worked very, very hard where I worked, and had a great relationship.
John Curry: But don't you think most people who work in state government honestly do a good day's work, and they care?
Kay Harris: Absolutely they do.
John Curry: Absolutely. You got a few bad apples everywhere.
Kay Harris: And they're dedicated, and they're committed. The really want to make a difference, just like people everywhere else.
John Curry: Absolutely, and they take pride in their work.
Kay Harris: Exactly. Exactly.
John Curry: I love it. Thank you for sharing that. I wanted to make sure that we gave you a little kudos for what you did, because you see, it wasn't just for you personally, and your team. You made a contribution-
Kay Harris: To the state.
John Curry: To everyone who lives in the state of Florida.
Kay Harris: Sure, absolutely.
John Curry: And that's what we want.
Kay Harris: Yep.
John Curry: Great. Let's switch gears and talk a little bit, still on the theme of Florida Retirement System. You experienced becoming a widow with a young son, two daughters in their 20s. Talk a little bit about what went up to your husband's passing, anything you want to share in the standpoint of, I know that we talked about your friend, Marylyn, who referred you a long time ago. She shared information regarding what happened when her husband passed away, and so many people have benefited from that. To the extent that you're will to share it, would you do that?
Kay Harris: Sure. Sure. My husband was ill for many, many years from ... Has a lot of health issues, and health problems, so I was, I guess, more aware than most people are of the importance of being prepared if something should happen to him. When he died in 1997, I had an 11 year old son and two daughters that were in college, and he had a lot of heart problems, it was this third heart surgery. So, I was always wanting to be sure I had my benefits with the state of Florida, and they were good benefits, they were really good.
I was really grateful to have them, and I always wanted to know what my situation would be. Of course, death is never really expected, even when you think it's expected, and he died suddenly, and I found myself with an 11 year old son I had to raise. I had prepared fairly well for that, but there were a lot of things I didn't know, and I didn't even know to ask about before he died.
John Curry: Can you give me an example?
Kay Harris: One of the things was how my son would be taken care of, and how long he would be taken care of, because I made assumptions, that I'm sure many people would have, that social security would take care of him all the way through college, and I discovered, to my surprise, that those benefits as soon as your child graduates from high school or turns 18, if they don't ever graduate from high school, as soon as they turn 18.
That was a huge surprise to me. For someone who planned well, I just didn't know that that law had changed many, many years, possibly even before he was born it had changed, and I just didn't know about that until it occurred. The other part that I dealt with the Florida Retirement System, however though, because my husband had 27 years in before he died, I did get a retirement benefit for him, and it was option three that you were just mentioning, and that was a good benefit, because it took care of my son, at least up until the time he was out of high school.
I was able, for myself, since I was getting my own pension when I retired, to take option one, but if I had not been in that particular situation, John, my husband were still living, if I expected him to live, I certainly would not have taken option one, but it was good to know my options under those circumstances, that made sense for me.
John Curry: It does make sense, and let's review those four options for a minute.
Kay Harris: Sure.
John Curry: So, people listen to this. I know what we're talking about. Option one is the option that gives a lifetime income, but the day you die, if it's one month, or 10 years later, that income stops.
Kay Harris: It's the highest amount of income.
John Curry: It's the highest amount of money. That's what my grandfather did. Option two is a little bit less, call it roughly five percent less, you get the check for life, but it's guaranteed for 10 years to whoever you want to get the money. You can leave it to anyone, but if you live 10 years or longer, when you die there's no more money. Then option three that your husband took, is the one that gives him the income for life, but upon his passing you got the same income for the rest of your life, that's what my dad took, and my mother's still getting his check.
Option four is a variation of that. It's a joint life income with two thirds to the survivor. So, if I'm getting $1000 a month, I die, then two thirds goes to my widow. Likewise, what most people don't know, if she were to die first, even if she's never worked outside the home, my benefit would also be reduced, and most people don't know that. They find out the hard way when they take that option. So that's one of the things that we want to make sure that we educate people on that are members of the Florida Retirement System.
Kay Harris: Absolutely.
John Curry: And again, your comment earlier about doing it well before they retire, because then they have time to plan. Some people come to see us literally three, four, six months before they're going to retire, like, "Ops," not much we can do now.
Kay Harris: And most of them want option one, because that's the most money, and they don't think they're going to ever have to deal with the death of a spouse, or unusual situations.
John Curry: It's interesting how we want to avoid this thing called death, isn't it?
Kay Harris: That's right.
John Curry: But yet, it's inevitable. We all have it coming. It's going to happen. My dad said, literally, one week almost to the hour before he died, he said, "You know, guys. You should quit worrying about me. I'm not going to die until God wants me, and when God wants me, he's going to get me. So lighten up." He always said that. All the time he was battling cancer, all those years, his attitude was, "Hey, lighten up, guys. I'm not going until he wants me."
Kay Harris: That's right.
John Curry: It didn't matter what your religious views are, his was, "Hey, when God wants me, I'm out of here."
Kay Harris: It sounds like a guy I would like to know.
John Curry: Talk a little bit about what were you thinking as you were getting close to retirement for yourself? Were you anxious at all about retiring? Because look, you were a pretty high performer in what you were doing. Was it hard for you to retire?
Kay Harris: No, I think you know when it's time. You know, even when you're making a contribution, and you enjoy the people you work with, I think there's something that comes to you one day, when you say, "You know, it's time for me to go," and I had planned to of five years at DROP, but after two and a half years, I had that moment.
John Curry: Do you remember what it was?
Kay Harris: Yes, it was. I was at one of those long staff meetings that last three times too long, with someone who didn't understand what we did-
John Curry: So, you said, "Hell, no?"
Kay Harris: Yes. I said, "You know, I'm ready to get up and walk out of this meeting," and I'm a very polite lady. I don't do things like that, but if I'm having those thoughts, perhaps it's time for me get on with my life.
John Curry: So, you're telling me someone helped you make that decision?
Kay Harris: Yeah, someone helped me make that decision. But, I think I was sure. That day I was sure. I went to work that day, and wasn't even thinking about it, and by the end of the day, I was saying, "Okay, how much do I get for two and a half years in DROP? Let me go talk to John about that." So, I made that decision. I think you just know when it's time, John, I really do. I've talked to other people who've retired and they said the same thing.
John Curry: I didn't recall the experience of the staff meeting, but I remember shortly after, I think within a week or two, you and I met.
Kay Harris: Yes, we did.
John Curry: And I remember you saying, "I've had enough," you were stressed, because you'd reached a point where, as much as you enjoyed your work, you didn't enjoy the process.
Kay Harris: I didn't enjoy the process. I didn't enjoy parts of it, yeah, and I was anxious to get back to my grand piano that I bought to retire on, and it was sitting in my living room waiting for me. So, I was ready to read all those books, and take all those trips, and play my piano, and do whatever I wanted to.
John Curry: That's a great segue, because see, so many people, was worried about my father when he first retired, 'cause he had no interests. He didn't want to travel, he didn't want to do anything other than go hunting and fishing. Then all of a sudden, one of my other uncles convinced him to travel with him, they'd go to North Carolina doing things. So talk about having that list of things that you really wanted to do, because you're one of the most active people I know in retirement. You don't sit on your butt watching television all day long.
Kay Harris: I do not.
John Curry: So talk a little bit about getting ready to retire, and some of the conversations we had about planning trips, how to finance them, and then talk a little bit about where you are today. You've been retired now how many years? 20 years?
Kay Harris: 12 years.
John Curry: 12 years?
Kay Harris: 12 years. I'm still kind of working though, on the side.
John Curry: 13 years.
Kay Harris: Yes, yes, yeah.
John Curry: So, talk a little bit about when you first retired, planning trips, and now when people would say, "I don't feel like traveling anymore." You're excited about it.
Kay Harris: Oh, absolutely, I was excited about it. One of the things that might not occur to people, I had a list of 300 books I wanted to read. I love to read, I'm a reader, and I found that during my working years, I didn't have a lot of time to read, and I just had so many books that I wanted to read and consume, I had a long list. Then, I had another list of places I wanted to go, and things I wanted to see, so that was there too.
But, I also just wanted downtime. I wanted me time. I wanted time to go to the gym, I wanted time to learn things I never had time to learn before, maybe how to grow a garden in my backyard, but I had plans of what I wanted to do.
John Curry: I remember shortly after retiring about ... You just taught me something, as many times as we've met over the years, I never knew about the list of 300 books.
Kay Harris: 300 books.
John Curry: I read a lot too. I read a lot, and I love to read.
Kay Harris: I do too. Real books, not Kindles. I like books.
John Curry: Right. I want to hold it.
Kay Harris: I want to dog ear those pages.
John Curry: You've got real serious about your health and nutrition there too, shortly after retiring. You got almost like obsessed with it.
Kay Harris: Right.
John Curry: You want to talk a little bit about that?
Kay Harris: Yes. I retired in November 2006, and worked a little bit part-time for my son-in-law, and then got ... He's a naturopathic chiropractor, and he got me really changing a lot of things about my life. About 2008, I decided to get serious about it, and I actually lost 80 pounds in a year and a half, and that made it much easier to travel. So, that was something that I was able to focus on, that I ... A lot of people say, "I don't have time to work on my body, because I got to work." Well, I had time, and I made time to do that. It was a slow process for me, but I got it done. I got it done, and that changes so many things about what you can do when you lose that weight, when you get it off, and you feel great about yourself.
John Curry: You didn't lose 80 pounds, you released 80 pounds.
Kay Harris: I released it, and dropped it, and didn't come back. So, that's right.
John Curry: It changes your world, doesn't it?
Kay Harris: It does, it does. It's great if you can do that before you retire, and be able to climb that mountain a little bit earlier, but I got to it afterwards, and I made the time for myself. That was something a lot of us don't do in our working years, raising families. We don't make that time for ourselves, so that became a big part of my retirement, was-
John Curry: What made it a priority, Kay? What took it from down at the bottom to the top?
Kay Harris: I think it was just that I finally had an opportunity to focus on me. I was really concerned about my kids, and focusing ... That was my excuse, anyway, that I got to focus on them, I got to focus on them. For anybody who food is a comfort, and they gain weight, that that's a way you cope, it certainly is a way you cope, and it's the way you look at yourself as well. I finally didn't have to look at any of them, I was just looking at me, and I said, "I got things I want to do. I got places I want to go, and I want to look great doing it." So, that's what it was for me.
John Curry: So, I think you just hit a key point. It's a holistic approach, I don't know how I came up with this thinking, but it dawned on me about 30 years ago, and helping clients with this. You know, people talk about they want to retire, okay, you want to retire, and you have more time. Do you want more money to go with the time, or less money? I remember arguing with one of my best clients. He said, "Well, I won't need as much money in retirement."
Kay Harris: Yes you will.
John Curry: I said, "Well, I think you will, but even if you don't think you need it, why wouldn't you want the same money you're earning now? Why do you want to settle for less?"
Kay Harris: Exactly.
John Curry: "You got more time on your hands, do you want to have to cut back on your standard of living? Wouldn't that be a time to go pursue other things? If you want to travel, travel. If you don't like traveling, don't do it, stay home. Do whatever you want to do."
Kay Harris: Right, and John, one of the things you prepared me for when we ... First we sessions we ever had, was the fact that it's a myth to think that you're not going to have as much, or need as much money in retirement. That's not true. If you're going want to have any kind of life, you're going to probably be spending more, and you might have to still be dealing with tax consequences of things, because you'll have more money. I never thought that way, that I'm going to have less money, I just wanted to have plenty.
John Curry: Well, think of it this way, because I've known you a long time, so I'm just going to be to the point. So you went from being who you were, "Worker, employee state government," to retired, okay? Then you got serious about your health, with David's help, and you got ... Do you mind if I do a little plug for him? It's David Fraser is who we're talking about.
Kay Harris: David Fraser.
John Curry: Awesome guy.
Kay Harris: Awesome chiropractor.
John Curry: You got serious, and you had a coach who helped there. But, the coach doesn't do the work for you. You're the one who had to change you're eating habits, you're the who had to get your butt in the gym to work out, and if you don't take care of yourself, how can you expect to take care of someone else?
Kay Harris: Exactly. You're exactly right.
John Curry: So, you did that, but the benefit of that is, okay, if you want to take time to read, you want to take time to travel and do things with your family, if you're not healthy and don't have the financing to do it, how can you do it?
Kay Harris: You can't do it, and then it's depressing. Yeah, it's depressing when you can't do what you want to do. I discovered in going to the gym that I love to swim. I hadn't been swimming since I was a kid, under the age of 10. I just didn't, and I just go, "You know what? I love this stuff. I love swimming," and that became my favorite exercise. That had a big part in my losing all the weight.
John Curry: Is that what you still do, you swim?
Kay Harris: I still do, I still swim. I'm still a swimmer, yeah.
John Curry: I've never gotten into swimming. I can swim, but I am not real good at swimming. If you threw me a pool, I could swim, I'd be okay-
Kay Harris: You don't have to be good at it, John. You don't have to be good at it.
John Curry: For me, it's the treadmill, the elliptical-
Kay Harris: It's kind of like dancing. You don't have to be good at it, just get up and do it.
John Curry: Yeah, but I enjoy dancing. That's good. All right, let's take it another step now. You made a comment about taxes. So let's talk about taxes, but let's do it in a big picture of you've got this benefit from the Florida Retirement System, you have social security, and then later when you're 65 you have Medicare, so let's talk about how to coordinate those things, because here at the seminar we did a couple weeks ago, it was packed, we had like 88 people in that room.
But, so many people think that it's compartmentalized, I got my pension or my 401K at work, then social security is standalone, Medicare, and it's not, is it? It all ties together.
Kay Harris: It all fits together. It certainly does. For example, your social security benefits are going to be taxable if you have good income coming in, decent income, not necessarily being wealthy, but just decent income from other sources, a lot of people have no idea that their social security benefits will ever be taxable.
That's a big, big surprise to some people when they retire, and they're just stunned that they have to pay tax on social security they paid into for years, and that's a big cut to do that. The other thing that you learn when you're on Medicare is that that can become an issue for you as well. The reason is because the government, unbeknownst to me, starts looking at your tax returns when you're on Medicare, and-
John Curry: Let's be specific, one second there. Let's talk about what you're getting, let's set the stage. Because a lot of people don't know how Medicare works, you have part A and B, A costs you nothing if you have your full 40 quarters.
Kay Harris: That's right.
John Curry: Part B, you have to pay a premium, folks, each month. This year, 2019, is $135.50 a month, and then what Kay's about to describe is what we call a surtax, I call it, and I'm going to let Kay walk you through what she experienced, because I have to give credit where it's due. Kay Harris is the reason that I got motivated to learn more about taxation of Medicare.
I already knew about the social security, because we taught that all the time, but the Medicare, Kay you're the reason I got so focused and obsessed with that. So share your story.
Kay Harris: Right. Well, I never even thought about my Medicare payments each month, which come right out of your social security check. I never thought about them changing more than cost of living, or government adjustments to it from year to year. I never thought it had anything to do with my taxes, and what I discovered in 2016, is that the federal government takes a look at your income from two years prior, and in 2014, I came to John and said, "John, I want to pull some money out of annuity, and I want to travel a little bit."
He said, "Sure, we'll do that," and I took out, I think it was about $20,000, paid my taxes on it, didn't think about it, had a good time, traveled and enjoyed that. Well, apparently my income for that year, my AGI, was higher than it had been. It was very different from it had been in previous years, or years afterwards, it was just an anomaly. The government looked at that and said, "Oh, my goodness. You have hit a ceiling." In other words, we have this number and if you go over this number for your adjusted gross income on your 1040, you get to pay more for Medicare Part B, and you get to pay more for Medicare Part D, because it looks like you got a lot of money.
So, I studied this, and this is called IRMAA. It stands for Income Related Monthly Adjustment Amount, that's IRMAA, and like the recent hurricane, it can hit you when you don't know it's coming. So, I got hit on this, and I discovered in my research that I only went a couple of hundred dollars over a ceiling I didn't know existed, at the time it was around $85,000, if I recall, John, just because of that extra money I took out one year. I went $200 over, and got penalized about $200 a month for the next year.
John Curry: Because of Part B-
Kay Harris: Because of Part B I had to pay a surcharge, and then Part D I suddenly had to pay for the first time in my life, because I'm in an advantage program, I never had to pay Part D. I tried to get out of it, I tried to say, "Well, wait a minute. This was an unusual situation, and I'm not ordinarily like that.”
John Curry: I thought about you last week, Kay. I went to my mailbox, and I had an IRMAA letter.
Kay Harris: An IRMAA letter.
John Curry: I'd already gotten one on B about three weeks prior, but I got the second one. So, instead of just sending one letter, they love to make it painful to say you do have one.
Kay Harris: Yes, yes, and it's very hard to get out of it. You have to have some kind of traumatic event, and you've got only so many days to apply, so you got to be sure you watch your mail. But, as a good planner, which I always plan my taxes ahead of time, and it was just something I didn't know that I didn't know. If I had known that, I could have easily gone in two months before the end of the tax year and bought myself something for my cabin up in Kentucky, and spend another $400, and it wouldn't even have applied, but I didn't know.
John Curry: Or, if we knew that, we could have taken a little bit less. You could have said, "I'm going to take less."
Kay Harris: Sure.
John Curry: Now, for some people, there's nothing they can do, because if their income is such, they're going to have to deal with it.
Kay Harris: Sure.
John Curry: But let's go back to what you said earlier about social security. See, at one time, social security benefits were not taxed.
Kay Harris: That's what I've heard.
John Curry: I am amazed at the number of people who would come in, and they think the money they take out deferred comp for the state, or their DROP money, or an IRA, or 403B if they're at the university, or hospital system, they think that money is not taxed, for whatever reason.
Wait a minute, you never paid tax on it before, it's retirement, surely you've known this tax, but we got people who they forget it.
Kay Harris: They forget about it.
John Curry: They totally forget about it, because most people are so worried, and afraid of taxes, and hate taxes that they allow the tax tail to wag the economic dog, and until people forget about taxes for a minute. Go through the planning first, look at do you have enough income? Kay, I'm think of someone this morning we spoke with about their required minimum distributions, because of stuff we put in place a couple years ago, this guy doesn't have to take money out of two other accounts if he doesn't want to.
He can let those grow for another year, and spend the other money. But, it's understanding the rules, and the regulations.
Kay Harris: Understand that too, right.
John Curry: It's understanding it. So, while we're on this theme of social security, Medicare, and IRMAA, anything else you want to throw in that mix? Because I got a couple more questions for you here in a second.
Kay Harris: Basically about tax planning.
John Curry: Tax planning, because you're very, very meticulous about planning that, yes.
Kay Harris: Yes, yes, I plan way, way ahead, and for years, I do have a schedule E deduction for a cabin that I invested in years ago, and that's a wonderful cabin, I continue to use that, but that helps me with my adjusted bills income, for sure. For a while I had a corporation, which gave me certain benefits, I have now changed that to a schedule C, so I'm always planning ahead ... That's schedule C, sole proprietorship business.
I'm always planning ahead, and looking at all the implications well before the end of the tax year. My annuity started here recently, and that was a taxable event, but it was also income that came, so all of these pieces have to fit together, and that's what's really important, is understanding all the pieces to the puzzle that are going to hit you when you retire.
John Curry: Yes, also if you start early enough, as Kay pointed out, you can implement strategies to where a portion of the income you receive is not even taxed. But, you can't do it at the last minute.
Kay Harris: You can't do it at the last minute, it's too late, and if you don't know what's coming.
John Curry: I haven't promoted this yet, but on April 4th, Peter Stahl coming back, remember him? The Medicare guy.
Kay Harris: Yes.
John Curry: That's one you definitely want to attend, and we'll get the word out. But, he is going to take an hour, and cover some of the stuff we're talking about, but more so, how do you manage healthcare costs, in general, in retirement? Then together, he and I are going to talk about solutions to some of this. He's of the mindset that if people in their 50s will start paying attention to this, that gives them enough time that when they are worried about required minimum distributions, they can have other non-retirement dollars in place to help offset that tax.
Kay Harris: Yes, exactly.
John Curry: But, if you do nothing until your 66 years old, or 67, or 70, then it's pretty late.
Kay Harris: Right, it's too late to plan for that.
John Curry: Not much you can do. The government controls it.
Kay Harris: Right.
John Curry: And, as we're seeing in the news today, we're seeing all kind of talk about raising tax rates back to 70%, and the highest in our country, they were 92% at one time, ordinary income tax.
Kay Harris: Okay, I don't remember that. I think I would remember that.
John Curry: Yeah, I can promise you it's there. We can look it up, and can show you 92%. In fact, that was one of the motivators for Ronald Regan, that when he became governor to cut taxes, and then became president, because he got a million-dollar signing bonus, and he lost 90% of it for doing the movie. He said, "If I ever can control taxes, I'm going to."
It's interesting when you read his story about that, because when he became governor, he pounded the Assembly in California to reduce the taxes, and then when he became president, he was the reason the tax rates dropped from 50% down to 28%, top bracket.
Kay Harris: It's interesting you mention taxes, because I think a lot of people have this idea that what they're going to receive in retirement is mostly not taxable, for some reason they think that, and if you planned well, and you have some income coming in of years ahead, you need to know that that income if mostly likely going to be taxable, unless you've made certain provisions for that.
John Curry: I think they're two myths. "I will be in a lower tax bracket when I retire," we rarely see that. Most people are in the same bracket, if not a bit higher, and then they tool along for a few years, then this thing called RMD, Required Minimum Distributions, when you're 70 and a half get them.
If they've done a good job of accumulating money in a higher raise in deferred comp, now all of a sudden, "Whops, I got to take out 10, 15, 20 thousand dollars," that on top of their income, makes them in a higher bracket, so they pay more income tax. Medicare Part B looks at it, and says, "Mm, you're rich, Kay. I'm going to take some more to the tune of 200 bucks a month."
Kay Harris: Exactly, exactly.
John Curry: So that's what you're describing.
Kay Harris: Yes, exactly.
John Curry: There is no way, in my opinion, I'll just say it emphatically, there's no way that you can plan for that without doing some rejections. You've got to do a dress rehearsal, retirement rehearsal, and say, "What will my income be five years, 10, 12, 20, 30 years out?" Then ask the question, "If we have the same tax brackets we have today, what would be the impact? If social security and Medicare are taxed the same as today, what would it look like?" We know that's going to change, because congress keeps screwing with it.
Kay Harris: Absolutely. Absolutely.
John Curry: And depending upon, I don't care about people's political views, it doesn't matter if you're democrat or republican, or independent, whoever's in power is going to try to change the tax rates, either up or down. That's just a game that's played every year.
Kay Harris: Exactly.
John Curry: Every administration.
Kay Harris: Well, you got to know your options, and you got to consider the consequences, because that's good planning.
John Curry: You're talking about options, let's talk about what we were discussing during lunch. One of the things that I focus on more, and more is getting people to plan first. I tell them, "We're going to charge you a fee for the planning. You have zero pressure to buy a product, I have no pressure to sell a product, but we're going to take you through everything we've been talking about, so you'll understand what the heck is out there."
I like to tell people, there are only four things you can do when we get done with the planning. We'll give you a report, only four things you can do with that report, totally ignore it, and do nothing. You could shred it. Number two, do it all by yourself. You can take the result of our study to someone else and get them to help you, or you can say, "Okay, I want team Curry to help me," that would be me and my team. Give me your thoughts on that, about the process, the way I'm doing it from the standpoint ... Your view is find counsel, get help. Am I being too abrupt with that four step approach?
Kay Harris: Oh, I think that's awesome. I think that's great, and I'm certainly the one that will go and get a lot of other opinions, and ask a lot of questions, and find someone I'm comfortable, that I have some confidence in, for sure.
John Curry: Let's address that for a second. That wasn't the purpose of this podcast, but let's talk about that. Too many times, we told this gentleman this morning, he was uncomfortable with his accountant, I said, "Well, ask him some questions. You and your wife sit down, prepare your questions, it's okay. If he's offended by that, you should find another professional."
Kay Harris: Absolutely.
John Curry: Now, if you're being horse's patoot, that's a different issue, but everyone who's a professional providing services should be willing to answer your questions to make you feel at ease, but you always do your homework.
Kay Harris: I always do, and when I need professional help, whether it's an estate planning attorney, or a CPA, or anyone else, I do what's called a meet and greet. I call them up, and I say, "I'm not doing a consultation, I want to come meet you." I can tell with my list of questions, and the response of that person within about five minutes, if that's somebody I can work with. That's been important to me all my life.
I don't just go by a list of somebody's credentials, 'cause I have to sit down them and look at them, eye to eye, and get a feel for that. Maybe I'll have a second visit after that, but that's relationships and trust are very important to me.
John Curry: You and I met because of the strong relationship, someone that you valued her opinion, and I valued her opinion, and she said, "John, you need to meet Kay," and I don't know exactly what her words were to you, but we met ... It was the no BS deal. We got right now, you had your questions, and we created a relationship, and went to work.
Kay Harris: Right, it was my relationship with Marylyn that I had the confidence to do that. That was probably a rare situation, John, because I got a good person the first time. Usually I go through a lot of people before I get that happy person that I want. But, in that situation, I had so much confidence in her, and you had so many things that I had never even thought about that were not on my list, and that was so impressive. Now, I've known you 22 years, so that's a good thing.
John Curry: Well, I appreciate you saying that, but I will tell you, you taught me a lot over the years. The most impressive one though, that I felt badly about, was about not knowing about IRMAA, and I remember you saying, "Well, look. There's no way you can know about everything, but this is something you can learn to help clients." Leading up a few weeks ago, and I called you about doing this, you even asked the question, "How can I help?"
I said, "Are you kidding me? You've got such a wealth of knowledge that people would benefit." But every time someone brings a problem to me, I don't get upset about it. I go, "Okay. How can we learn from this?" Because if I can help you with it, now I've got another piece of knowledge that I have, that we could help other people with.
Kay Harris: Sure.
John Curry: So, I can either be upset about it, grudgingly solve the problem, or embrace it and learn, and help other people.
Kay Harris: Yeah, we’ve got to keep learning. We just got to keep learning. I can promise you, I will not be caught by IRMAA again.
John Curry: No, you may not get caught by IRMAA, you may have to pay IRMAA, but it won't be a surprise, is what you mean.
Kay Harris: That's right. Yeah, I'm going to make sure.
John Curry: There's another side of that coin. I remember, I even said this in the last seminar, people will come into me, and they'll say, "I want to be in the lowest tax bracket possible when I retire." I'm like, "No, you don't." "Yes, I do. I want to pay less tax." "No, that's not what you said. You said you want to be in the lowest tax bracket possible. If you're in the lowest tax bracket possible, you don't need my help, because that basically means you have no income, and you have a lousy retirement. What you meant to say is you'd like to be in the highest tax bracket, but find legal ways to reduce the income tax."
They go, "Oh, yeah. You're right." My goal in some ways is, I hope you do have a IRMAA issue, because it means you made so much money, you don't care, and you're living the life you want to live, doing the things you want to do. So, let's go back to some of these things that are on your bucket list.
Kay Harris: Okay.
John Curry: I want you to talk a little bit about travel. Some of the travel you've done, some of the travel plans you have in the future, because I see so many people who've, "Retired," and they say, "Well, you know. I'm too old. I can't do this. I'm 70 years old now." "I'm 75, I can't do that, I can't do that." Would you help me get rid of some of that nonsense of their thinking?
Kay Harris: Absolutely. There's so many options out there for great travel. It's a whole new world that I never had the time until I retired, because I was working, I had my family, other people always came first. Well, when you retire, there's a whole world out there, and you're not going to know what's out there unless you just get out there and see it.
I decided if I'm going to travel, I'm going to travel first class, so that's a decision that I made for myself, was to get out there and see what I wanted to see, in the way that I wanted to see it, and very rewarding, it really is. It costs money to do that, but you're spending it on yourself, for a change. You're spending it on yourself, but I've had an opportunity to see parts of the world, Canada, the West Coast that I've never seen before.
I've been to Costa Rica, I've been to Austria, I've been to London, I've been on several trips, and every trip makes me want to do more traveling, and do more traveling. There's so much of the world that is out there, that is such an opportunity to have new adventures, and the more you go, the more you want to go.
John Curry: How do you go about planning those? Do you say, "I'm going to take one or two major trips a year?" Or do you think you sit down and say, "Here's number four and five on my list," and just go down the list? How do you do that?
Kay Harris: Well, I'll segue into something there. I like to try two big ones a year, really big ones, and then small getaways. The only thing, John, that interferes with my plans for really great trips twice a year is those unexpected medical expenses we've talked about, that people don't plan for in retirement. Everything from the neck up that is not cover by Medicare, your ears, your eyes, and your teeth.
When those expenses come along, sometimes those trips are once a year, or not at all. And so, I wanted to be sure to get that in, because that was the one area that I really had no idea how expensive it could be, and how much Medicare would not cover. So, when I have to give up one of my two trips, that's not a good thing.
John Curry: Well, let's go back and expand on that for a minute, regarding Medicare.
Kay Harris: Uh-huh.
John Curry: Earlier we were talking about the fact that you are under the CSP Medicare Advantage.
Kay Harris: Yes, I am.
John Curry: Another option is to do original Medicare, with a Medicare supplement policy, which is the way I went. Talk a little bit about your experience, because you share some real positive things earlier about all the different places you've gotten care, and a lot of people listen to this are going to have CHP Medicare Advantage available, so share some of that.
Kay Harris: Sure, I will. I was, of course, with the state system all the years that I worked for the state, and that was great, and then you have kind of a bridge when you get out of there, they cover you for so many years until Medicare kicks in for the state of Florida, so that was great. I started with CHP in 1983 when they first opened, and my family had been with them the whole time, I had a very good experience all along the way.
Then when I hit Medicare, I went to their seminars that they offer here in town, and got all the scoop, did my homework, and talked to them about it. I said, "Well, I like all that." By that time, almost ever doctor in Tallahassee was somehow integrated with CHP, it wasn't like they had a small network, they had a huge network of people all over the city. It's hard to find anybody now, who's not associated with Capital Health Plan.
So, I chose to go with their Advantage program, which basically means that they take over the drug portion of Part D Medicare, and you work through them. You don't carry your Medicare card anymore, you carry your CHP card. My experience with them, and every year I go back to their seminars and review everything again, is that it's provided great benefits for me, in the form of healthcare, $150 a year I get back for being part of a gym and taking care of myself. I don't have to get any permission from anybody to go to a specialist anymore.
But, one of the issues that some people might question that I have not had a problem with at all is travel. Every time before I travel to Europe, and before I went to Canada, before I went to Costa Rica, I called, and they checked, and they said, "Well, just take your card with you, and you might have a base charge of $50, or something, depending on the country you're in, but we cover you." That has been true for me. I have been in Kentucky and gone to urgent care, and paid nothing. I just showed them my card.
I have been in Europe and had an issue where I had to go to a pharmacy, and they didn't ask for anything. They just took my card. I've been to Costa Rica, and had the same experience, and then in South Florida, I went to an emergency room, Sarasota, they gave me a bill, I took it to CHP, and they paid it. My experience with CHP has been positive. That's all I can do is report what I have, and one of the reasons I probably won't move out of the county before the maker calls me home, it's because I love CHP, and this is where I've been happy since 1983.
John Curry: So, to me that was refreshing for you to share that, because I've heard stories-
Kay Harris: Sure, everybody's got their story.
John Curry: The one that's most painful was a friend and a client, who had a $5000 bill, and CHP would not cover it. I don't know if they've got it resolved, but the last time we had talked, they had not, because he was traveling on a cruise ship, it's where it occurred.
Kay Harris: Wow, okay.
John Curry: Yeah, and he got very ill, so that's refreshing to hear that, because like you, from time to time, I would go to the Medicare Advantage workshops, even though I knew I was not going to take that, I wanted to be knowledgeable about it.
Kay Harris: Right.
John Curry: I wanted to understand it.
Kay Harris: Well, just do your homework. CHP has wonderful seminars, they're every year in October, for everybody on Medicare. They have a series of them, you just go to their website. There's several options for state workers who retire, you can get ... I'm actually on the, I'm pretty healthy, so I'm on their basic plan, but there's other plans where you can get more. I don't think I've used prescriptions more five times in the last eight years. So, I'm healthy, and I choose the option that goes with that, but they have other options as well, and just ask a lot of questions, talk to a lot of people, and find out for yourself.
And you know, if I had ever had a bad experience, then I probably would have looked at another option, but for me, it has worked beautifully.
John Curry: Let's do this. Let's take a few minutes and kind of summarize, and then wind down. I'm just sitting here, just amazed at how much we've covered here in this time together. You've shared your experiences with which option to choose for yourself, and also your husband from Florida Retirement System, how to coordinate that with social security, and Medicare, and your health insurance covered you after retirement.
To me, the most profound though, is your willingness to talk about what you experienced becoming a widow. What would have helped, in hindsight, for you to be better prepared for widowhood? Is there anything that could have made it better?
Kay Harris: Probably not for the emotional part, no. You're never prepared even though you're prepared, is what I can say for that.
John Curry: Say that again.
Kay Harris: You're never prepared, even when you're prepared, because my husband had been ill for 17 years before he died, off and on with hearth problems and other problems. So, I guess, one part of your brain says it could happen at any time, and another side of your brain isn't ready, no matter how ready you are. So, there were a lot of issues I had to deal with that were just financial, and I don't think any of us expects to find ourselves alone, when you've been married a long time, before you're 50 years old.
So, I was prepared in general, but not in specifics for how to deal with what I would face, with a young child.
John Curry: Did you and your husband talk about finances on a regular basis? I know you focus on it. Was he the same way, or did he kind of resist it?
Kay Harris: He resisted it, even though he was a CPA, which is kind of unusual. It was kind of like ... I think a lot of people are like this, they don't really want to talk about their own death, and he was not healthy. So that was a topic that he probably thought about a lot, but didn't want to talk to me about it. So a lot of my research I did on my own. A lot of my thinking and planning I did on my own, or with other professionals rather than with him.
John Curry: Well, one of my mentors told me many, many years ago, he said, "Look, happy, well-adjusted human beings don't want to talk about dying," and in my own case, I do my planning usually once a year, either on or close to my birthday, and my attitude is let's talk about death once a year, and then live the rest of the time, and then move on.
Whether that be life insurance beneficiaries, reviewing the wills, because I don't want to dwell on it either. Get it done and get it out of the way.
Kay Harris: Get it done, and move on. Exactly.
John Curry: Right. What advice would you offer anyone, especially anyone who's listened to this, that's a member of the Florida Retirement System, that is ... Let's say they're five to 10 years away from retirement. What advice would you offer them?
Kay Harris: Basically just to plan ahead, and know what you want. Define what you think you want your retirement to look like, even if it's 20 years away, even if it's 15 years away, and then talk to some experts who can give you options, and explain consequences to you, and do it early, rather than later.
John Curry: Expand on when you say, "What you want retirement to look like," you mean like, as far as are you going to travel?
Kay Harris: Yes, what do you want to do in retirement? What is your bucket list? What is it you imagine it to be? When you start talking about that, that's when you bring up things like, "I won't make as much money in retirement." You need to be thinking about, "Really? Really?" Is that what you really want in retirement? Where do you want to go? What do you want to do? How much will it cost? How will you pay for that? How are you going to live? Where are you going to live? What do you want to do? What your options are, but those things you should talk about when you're as young as your colleague here at the table, who just had his first baby last year.
You need to think about that now. What do you want your retirement to look like? What do you want to be doing with that child in 20, 30, 40 years? Do it well ahead of time, and find out what you need to know way ahead to time, not two months before you're ready to have your retirement party.
John Curry: All right, one more question. What is next for Kay Harris, because I know you're not sitting on your fanny doing nothing, so what does the future look like for Kay?
Kay Harris: The future for me is getting back to that list, because I didn't get through all 300 of those books. I got kind of diverted into some other things, or solving other people's problems, and I'm getting back to my book list very quickly, I'm going to get back. In fact, John, I think I have a book in me to write.
I've always been a good writer, and I really didn't know why I have the gift of gab, and writing and didn't have a funnel for it, so I think that that's probably going to be on my list of things to do.
John Curry: What would the subject be of the book?
Kay Harris: It would have nothing to do with my career. It would have nothing to do with financial planning, or anything like that. It would probably be more about knowing yourself, and being happy in the moment, of every moment of every day, being happy and making choices, and knowing how valuable you are as a human being, something along those lines.
It hasn't come to me yet, but that's what I'm finding in my own life, and if I can find a way to effectively share that with some other people, you don't need years of therapy to get your mind on the bright track.
John Curry: I want to buy the first copy. So when are you going to get busy on this thing?
Kay Harris: Soon. Soon, very soon.
John Curry: I'm going to bug you. As your friend, I'm going to poke at you.
Kay Harris: Do that. Do that. I don't care if it's a best seller, nobody has to read it, but it's just a lot of thoughts, things I have learned that I want to get down.
John Curry: Get it done. I procrastinate on mine for literally three years, I talked about doing it, and finally 2009 got it out, and just this morning, driving in, I was talking with the lady who help me do it. I said, "I got another book in me. Will you help me?" She said, "Absolutely." So if you need an editor, I got somebody that can help you.
Kay Harris: Right. I also want to get back to my piano, which I bought when I retired, my beautiful white baby grand piano that hasn't been played enough. I want to get back to doing that. Music has been a part of my life from the time I was six years old, and took my first piano lesson. My birthday's coming up Sunday, and I'm going to go hear my favorite pianist on Clearwater Beach, because he's going to be there, and so am I. I'm going to do the things that I enjoy doing on a daily basis.
John Curry: Happy birthday in advanced. Kay Harris, thank you so much for joining us today.
Kay Harris: Thank you, John, for being there for me.
John Curry: Aww, thank you so much. Thank you.
Speaker 3: If you would 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 805-562-3000. Again, that is 805-562-3000. 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 and investment advisor.
Financial representative of the Guardian Life Insurance company of America, New York, New York. Park Avenue Securities is an indirect, 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.
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The living balance sheet, and the living balance sheet logo are registered service marks at the Guardian Life Insurance company of America, New York, New York. Copyright 2005 through 2018. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with, or endorsed by Park Avenue Securities, or Guadiana and opinions stated are their own.
2019-77163, Exp 3/27/2021
