Required Minimum Distributions and How to Plan for These Laws

On this week’s episode of The Secure Retirement Podcast, we approach the end of our Florida Retirement System series. The information in this episode will be valuable to our viewers nationally, even if you are not a member of the Florida Retirement System, as these laws apply across the country. We address the universal Required Minimum Distributions and offer ways to prepare for them so you aren’t caught by surprise.

John says, “No matter what type of retirement account you have, the day will come when you have to start taking money. And that's called a required minimum distribution.”

We discuss the recent changes with the Secure Act, as well as:

  • Tax codes on various accounts

  • Penalties for not taking funds when you’re supposed to

  • Verifying your beneficiaries

  • Which account types are subject to RMDs

  • When and why congress amended RMD laws

  • And more

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to Joh H Curry's Secure Retirement Podcast. I am your host, Steve Gordon. And I'm here with John today. And we are, I think, nearing the end, I think this and one more episode in our series for members of the Florida Retirement System. If you're listening to this, and you are not an FRS member, stay tuned, we're talking about a subject that actually is universal for folks retiring in the US. We're talking about required minimum distributions. RMDs. And, John, first welcome. This is a big, big topic, people get surprised by it and are worried about it, 

John Curry: Well they get surprised in a lot of ways, and we'll talk more about that some today. But the biggest thing is to understand that no matter what type of retirement account, you have, IRA, 403B, Deferred comp, a set plan, 401k, the day will come you got to start taking money. And that's called a required minimum distribution. As we get into it. I'll talk about the old law what the new secure act did. And we'll go from there. 

Steve: All right. Well, there have been changes here recently to all this. And I know that not everybody is aware of what's happening. As you're meeting with people, day in and day out, what are the big questions and concerns they have right now? About RMDs?

John: Well, surprisingly, a number of people say why do I have to even take one, I don't need the money. I don't want the money. So why am I being forced to take money out. An old law said 70 and a half the Secure Act changed it to age 72. So that's Congress's way of trying to spread it out a little bit farther. I don't think there should be a required minimum at all. I think if you have the money saved, then let it stay there until you die. And then when it goes to your kids, they can worry about getting taxes then. 

Because we keep we're being told that Social Security is in trouble. And it is, we're being told that Medicare is in trouble. And it is, and Medicare, excuse me, Medicaid is in trouble. And it is. So if all that's true, why wouldn't you just let Americans keep growing the money? And the answer is they want the taxes. So they put age limits on there, that you have to start taking it. So let's do a little history here. Let's just talk about an IRA an individual retirement arrangement. If you take money out before 59 and a half, you have to pay a 10% penalty, plus pay tax, because it is designed to encourage you to save for retirement. 

So if we believe that, and we do, that is to force you to save money for your own retirement, then why would you be forced to take it out if you don't need it. And so between 59 and a half, it was 70 and a half now 72 for most people, if you were 70, at the end of December 2019, this still applies for you to be 70 and a half. But if not, it's a 72. Unless Congress changes that which they might with the sunset of some of the tax laws. But the big issue is people get surprised because they don't know that they have to take a certain percentage. 

So I've had people say to me, oh, I've got a half a million dollars in my 403B or 457 deferred comp, I won't need that money, I'll just let that grow and sometime in my 80s I'll tap into. I said, well it doesn't work that way. At age 70 and a half, you had to take the value as of December 31 of the previous year, divided by a factor which currently works out to be 3.65%. So 3.65% of what's in that account, you've got to take out.

Steve: And that number is changes over time.

John: It changes every year. 

Steve: So if somebody's listening to this in the future, they need to check and see what the number is currently.

John: It's based on their age, and the IRS publishes a table. We have it. But just to give an example, at age 72, you're having to take out 3.91%. But at age 80, you're having to take out 5.35% at age 85 is 6.76%. So let's put this in perspective. So what if you're the kind of person you're real conservative, and you've parked your money in a money market fund, or a bank CD, that's earning 1% or less, and you're having to take out 3.65%. You're going backwards, aren't you? So it's very important that if you have money in any retirement account, that you don't just get so ultra conservative, that you say okay. I'm now retired and worried about losing my money. 

So we'll move it all over to a money market account, which we see people do. And then they get hit with the required minimum distribution. And they're seeing their account drop because they're tapping into principal. So there's a lot of moving parts here. So number one, when do I really need the income? Am I going to manage it myself? Am I going to invest in a way that I give myself a chance to outrun the distribution requirements. And then what happens when ultimately I die? Does my spouse get the money or not? Who gets the money. So there's a lot of moving parts. And on that subject who gets the money, let's think in terms of this, the secure act did away with something called a stretch IRA. 

That was a provision, Steve where if you died, and did not have a surviving spouse, you could leave the money to your children, and they could stretch it out over their life expectancy. So you're 50 years or you're 49 years old, your parents died, they left you an IRA, you didn't have to take it all today and pay taxes, you could take a monthly income based on your life expectancy. That was a great planning tool for people. A lot of our clients did it, a lot of them, because they didn't need all the money today. And they didn't want to take any but they at least they took a small sliver of it. Well, that was changed. Now, a non spouse beneficiary who gets an inherited IRA must liquidate that account, by year 10. They can take it all today. Wait until year 10 or anything in between. But 10 years after that death, that account has to be emptied. 

Steve: Wow. Big change.

John: Big change, and they did it because they wanted the taxes. It's just another way to collect taxes that people don't know about. And if they haven't been educated on it, they won't know.

Steve: Well, aside from the politics of all of that, because we don't have a whole lot of control over that. 

John: No we don't.

Steve: As you're working with people through, you know, accounting for the RMDs that they're going to have to they're going to have to contend with, what are some of the big considerations?

John: Well, the one I see most often is people have multiple accounts. As an example, I'll see someone who will have an IRA, a 457 deferred comp program with the state, and maybe a 403B from a previous employer. So they got these three accounts. And they've been told that you can just aggregate those, meaning add up the total, divided by your factor, and take it from either account. That's not true anymore. At one time, that was true, you could take all retirement accounts and bunch them up. 

Now, each account stands on its own. With this exception. If I have five IRAs, I can take it from one. If I have five 403B's, I can take it from one. So each category stands on its own. So if I've got three different accounts, IRA, 403B deferred comp, I've got to take from each code, I call it because each is based on a tax code. So I find that people don't know that. And they'll slip up and not take out an RMD that they were supposed to take. And if you if you do that, the penalty is 50% tax penalty on the amount you're supposed to take. So if you don't do it either intentionally, or you make a mistake, then if you get audited, then you could lose up to 50% of that amount you were supposed to take but did not take.

Steve: So that's, that's a huge risk, there.

John: It's a huge penalty, and it's on top of the tax you have to pay. So let's just say that your your RMD is 10 grand. And you don't take it. So you have to pay tax, let's just call it 30% tax. And then 50% penalty, you could lose as much as $8,000. Now, I've only seen it twice in my career. One was an attorney who said, nah, they'll never catch it. Well, they did catch it. And a widdow who didn't understand it. She went to the IRS audit. Said I'm sorry, I didn't understand how to do this. You know, is there any relief for it? And they they didn't make it pay the penalty. They actually refunded it. The attorney on the other hand, he was cocky and arrogant. No, sir, no relief, and he had to pay it.

Steve: Wow. So you have a note down here on on the sheet talking about tax history. 

John: Yes. 

Steve: Tell us a little bit about that and why it's important now.

John: Well, we we spent some time in one of our episodes on it. So I'd refer people to go back and listen to that. But I'll touch on it now. So we're told that when we retire we'll be in a lower tax bracket. If you go back and look at our tax history since 1913. When we first had the income tax with the 16th amendment, the tax rates go up and down. And they go up and down because there's Congress's way and whoever the current president is to argue with Congress to get their policies implemented. 

But I learned when studying for my master's degree in financial services, that it's really a controlling of the levers. See, Congress rewards and punishes us with a tax code. So they know that they need to employ more people, they will give you certain tax credits for employing people, or perhaps certain tax credits if you buy certain equipment because they're trying to stimulate the economy. Makes sense? 

Steve: Absolutely. 

John: So if you go and look at history, when we've seen massive amounts of spending, tax rates went up. What causes spending? Well, economic stimulus, or wars, go back and look at it. World War I, World War II, Korean War, Great Depression. 2008, 2001-2002. Just look at what happened with our market, stock market and taxes. And you'll see there's a little bit of correlation there. And so I tell people, when you retire, you should not assume that you're going to be in a lower tax bracket, I think you'll be in the same bracket, perhaps even higher. I don't know that until I see all of your numbers, we'll do some projections. But their RMD makes you take money out and most people that I work with, they don't really want to take it out, at least not all of it.

Steve: Well, I think this is this is one reason to begin, I think wrapping your head around this before you get there, right?

John: Yes, well, let me say this, if you're my client, I don't care if you're 45 years old, you're going to know about all of this because you'll be exposed to it. And I'll even tell you that you're you'd have no decisions to make now. But I promise you, you'll see this over and over again. Because I want you to be in a position that you're not worried about any of you already know which option to take with the state, you're going to do DROP or not do DROP, you'll be prepared. You'll know about Social Security, you'll have a good idea of when you're going to take it, you understand how Medicare works, you'll understand how RMDS work. What we're covering in this series is what I make sure that every person I work with, at least gets an overview of.

Steve: Yeah, well and, and I think that's that's the key. So we've covered these in individual episodes, because they are somewhat distinct topics. But in the practical sense, no one deals with them individually, you really only deal with them in concert with one another because they're also interrelated. And that's the thing that I've gleaned from our conversations through all these episodes.

John: And you're correct, because some things will be more important to one person than another. For example, if I have I'm thinking, one of my physician clients, he's got $3 million sitting in IRAs. That's a lot of money to be in IRAs. A lot of it came from rollover, some profit sharing plans where he worked in 401K's and things like that. Well, his biggest fear is how do I make this work for the rest of my life? 

Now, some of my listeners might say $3 million, and you're worried about that? Well, when you start determining that his age, I've got the factor, he's 75 years old. So he has to take that $3 million divided by 22.9. This year. And that's his required minimum, then you start taking into account everything else that's happening, taxation, things like that. He doesn't have a guaranteed pension. He doesn't have it. He's got Social Security. But I tell people who will listen to me that if you have a pension with the state of Florida, or anywhere, but especially the state of Florida, the value of that pension is huge. 

Because you take the monthly benefit, multiplied times 12, you get your annual benefit coming in, how much capital would you have to have invested with either a bank or mutual fund or some investment account to give you that same income?

Steve: This huge number I know.

John: It is if you if you're getting $40,000 a year, for example, let's just divide that by .04, say 4%? Because that's called the quote safe money withdrawal rate nowadays. I don't know if I believe that this one's called. You'd have to have a million dollars wouldn't you? $1 million at 4% is $40,000. Well, what if you lose some of the 1 million if the market drops, now your income drops. So these are risks that we have to explore, understand, because once you step out into retirement, you may not be able to go back into the job force. So how, how do we protect, grow and enjoy the assets during your lifetime? And then make sure that upon your death, we're all gonna die. Here's a question when? And when that does happen that's the grand exit. 

They're not going to put all that money in the casket with you. It's staying behind, so somebody will have to go unwind what you did, and deal with the taxes and expenses. So I spent a lot of time on this for clients. Because if you don't fix it, and I'll tell you the biggest thing, we have to help people do. We find people do die and have beneficiaries set up properly on their retirement accounts. And if they're not set up properly, it's a problem. Working with a couple right now, where he was arguing with me about beneficiary changes. It's all set up. It's perfect. I say okay, great. 

But until I see it, I don't believe it. Trust but verify. Well he comes back in, he said, Hey, I got eat some crow here because I didn't have a beneficiary. And his wife was angry. She said, well, what else have you not done? So needless to say, they are now going through the full planning process?

Steve: Well, it's so easy, it's just you're filling out the forms. Right?

John: Yes.

Steve: You know, it's an HR process at the time, you know, and you're filling out the forms, and you're trying to get through all of that. And you may not think as strategically as you ought to, in that moment.

John: Plus things change, people get divorced. Yeah. People die, you know. We're working on some stuff right now, for some clients that everything was perfect for them in the past, they've made some changes. I said look, let's check all the beneficiaries on everything, your retirement accounts, your life insurance, everything. Ahh, it's all perfect, we don't need to do that. I said, come on, you know, be better than that. You've been a client for 25 years, you know, I am not going to take that at face value. Let's find out. 

Sure enough, different beneficiaries wasn't set up properly. And the way it works, whoever's a beneficiary gets the money, you may have wanted your your wife to get it, I got news for you, if you named a previous spouse, they're getting the money. And you can they can protest that they can raise hell all they want like, I got new for you, ain't happening because this contract is going by beneficiary. And we see it all time. Another thing I see going back to the Florida Retirement System, is people picking an option without fully understanding the impact to the surviving spouse when they die. All this comes together. 

Let's talk for a minute about what accounts are subject to RMDs. Pretty much any retirement account, if you have a set plan or a simple IRA, if you have a 401k if you have a 403B, a 457 deferred comp, IRAs, where he talks about so any money that you put into the future without paying tax, we call it a tax deferred account, you've got to take RMDs. Roth IRAs, you're not required to take an RMD you could let the money sit there till the day you die. Now whoever inherits it will have to take some RMDs, but not you during your lifetime. And then the next thing is when do you have to take it, you have to take it by April 1, following the year now that you turn 72. You can wait and take two in one year, if you want to. I advise people not to do that. Let's take it in the year you turn 72 and then stay on track. But that's how the tax law works.

Steve: John what else do people need to be thinking about as it relates to RMDs?

John: I think one would be do you need all the income from the retirement accounts? Or can you take it from one account and let another one grow? So maybe we do enough from one account to satisfy the government's requirement and let the other accounts grow, and then reevaluate each year. I've got some people where we will intentionally spend down one account over say a 10 year period to over satisfy the RMD requirement and give them more income. But it gives them a 10 year period to let their other accounts grow.

Steve: So it sounds like there's there are a lot of different ways to approach this. And I would imagine everybody's situation is a little bit different based on where they have and what other assets they have. You know, you mentioned pension, Social Security, all of the other streams of income. And the interesting thing you said just just then was that you reevaluate this annually? 

John: Correct.

Steve: Okay.

John: They should, some won't, some will say no changes this year. So you in a couple of years. But the reason you look at it each year, what happened to your account, what if your balances had a big jump? Well, if your account grew as of December 31, so the following year, you've got to take out even more money. So this RMD is not static. It will change each and every year, if your account goes up and down. 

So you might have some years it goes down some years it went up, and most financial institutions now make it pretty easy. Because the IRS requires that they send a statement to you explaining what the RMD is. But every now and then what happens is on the statement, what do most people do with statements. They go in the trash can or the shredder, I'll help people come in with a stack of envelopes. I've been here for like seven or eight months, sometimes years. They say I didn't open these. Why? Because I didn't wanna see how bad my account was. Okay.

Steve: One of our mentors likes to say all progress starts with telling the truth.

John: That's correct. Just tell the truth, except it. I lost money. I lost money. Anyone who was invested in 2000, 2001, 2002 in the stock market, you lost money. 2008 s&p 500 was down 38%. Okay, people who stayed the stay the course it came back. But it's hard to stay the course when you got three years in a row like 2000, 2001, 2002. So let's talk about that one for a minute. How would you like to be coming out of the workforce at the end of '99, retiring, and you're all of your accounts are down? Double digits 20% plus, and you're being forced to take money out of retirement accounts. 

That's when Congress changed the factors. It used to be at age 70. You divide your retirement account by 16. They change that to 27. 27.5 I think it was. Excuse me, 27.4. Well, your life expectency did not go from 16 years to 27 years at age 70. That was an artificial number they use to give people relief, because of the having to take money out in a down market. I think that happened in 2001 is when Congress made that change. So again, we said this pretty much every episode, a lot of moving parts, and it's not static. Just look at what's happening today around us people staying home working more, pressure on businesses, a lot of things are going to come out of this. Some are going to be good, some not so good. Because more and more pressure on us every day.

Steve: Yeah. Well, all the more reason to have somebody to turn to that, as you and I like to say, question your answers. 

John: Correct. 

Steve: You know, and particularly somebody with the, with a breadth of experience.  

John: You know, I just thought of something that we'd not covered along the way, every now and then I'll have someone come to me, probably twice a year, on average, they'll come in and say, look, I can't do business with you. With any financial products because I have a relative in the business, I want to just pay you a fee. Have you looked at everything? Will you do that? Of course, we'll do that. We'll take it, we'll take you through our normal process A to Z, as if you were doing everything with us. 

And once I know what you've got, we can determine what the fee would be. Be happy to do that. We have to do that. In fact, we're to the point we're working on having a service where that's all we do. If you don't want to deal with us, you committed to someone else, come charge you a fee, we'll take you through our retirement rehearsal A to Z, you'll know everything you've got, you know?

Steve: Yeah, certainly sort things out for everybody. So John, we're getting really close to the end of this series. In fact, I think this is the last the last topic I know, in the next episode, we're going to sort of put a bow on the whole thing, and, and kind of do a summary. So I mean, definitely, you want to listen to that, because we're going to come back to this idea of how you tie it all together be you know, because at the end of the day, you know, we've said it all the way through this is like a giant jigsaw puzzle. And you don't you don't get the picture on the front of the box. So in the next episode, we're going to help paint that picture. Talk about a process to to bring it all together. Anything people should should be thinking about at this stage?

John: Well, actually, yes, there's a lot. Number one go check your beneficiary designations on every retirement account. While you're at it, check beneficiaries on life insurance policies, savings accounts, checking accounts, who is your beneficiary at the bank? Because most people don't do it.

Steve: Yeah, you just you just gave me a to do actually. Well John, thanks again for being here on this episode. Folks, go and and find all of the episodes in this series at johnhcurry.com. And and if you want to reach out to John, John, how can they get in touch with you if they want to book an appointment?

John: The best way is just call my office in Tallahassee. 850-562-3000. 850-562-3000 and just tell the folks you want to have a telephone appointment with me and if you're ready to go to work and you know you want to do business with us. Come on in for face to face or online meeting but I think it's better just have a telephone appointment to see if we get along and like each other.

Steve: Now people can be listening to this all over the state of Florida. And you actually surprised me in earlier episodes, you said, you've you've worked with clients who are state of Florida employees, but stationed in other states, that's correct, whatever your duties are, yep. So no matter where folks are, they can call that number and they can book a phone appointment. I know you work with people with video conference technology, so so you can meet that way rather than in person.

John: And have been doing that for several years. Because having clients and I think it's 13 states is a 12, or 13 states. But it's not just limited to the Florida retirement system if you have friends or relatives in another state, and we do the same type planning for them. Or if you own a business or employee and some other type business, pretty much everything we're covering applies to everybody, Steve, What's really unique is the Florida retirement pension system and how it works, and all the pieces around it.

Steve: Absolutely. Well, folks, again, go to johnhcurry.com. You can find all of these episodes plus a whole lot more. You can also find the latest dates for John's webinars and seminars. He and his team are doing presentations regularly on the topics that we've covered in this series and going in a lot more depth than on other topics. As well as they come up. You can find all of that at johnhcurry.com. And subscribe to the podcast, get the latest episode when it's released, right there on your phone, you can subscribe on Apple podcasts, Spotify, or Google podcasts.

John: Let me make a plug for that. Most of the podcasts, as you know, are about human interest things. You've been working with me talking about, hey, you really should do a series for the members of the Florida Retirement System and have several podcasts. And I gave you some pushback for a while. Said, ahh, I don't wan to do that let's just do human interest things such as friends who have retired and bought a motorhome traveled around the country, people who are retired, and volunteering, helping our community. I've got a half a dozen exciting podcasts I'll be doing in the next couple of months with people that are doing a lot of volunteer work, and looking forward to it.

Steve: Well and that comes back to something we talked about in the first episode in the series, John, and I'm sure we'll talk about in the next as well. The mindset around retirement and what is your retirement really look like? Because it really all has to start there. All the financial stuff is really just in service of how you want to live your life.

John: Correct. Begin with the lifestyle you want to live, and then make all of your financial decisions support that. But if you don't have a clue what you want as your lifestyle, no clarity, then it's difficult. So I tell people, my most valuable thing I can do for you is get clarity. Get you to get some clarity about your future.

Steve: Very good. Well, hey folks, thanks for tuning in. We will see you in the next episode.

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 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 or 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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Navigating Medicare Coverage

On this week’s episode of The Secure Retirement Podcast, we focus on healthcare coverage, particularly Medicare Parts A - D, as we continue to address the key issues that affect members of the Florida Retirement System. With Medicare available from coast to coast, the information in this episode will be valuable to our listeners nationally, even for those outside of the Florida Retirement System.

John says, “Most people do not feel the effects of healthcare, or inflation in general, until they've been retired five to seven years. Then all of a sudden, without increasing spending or being extravagant, it's enough time for them to see some cost of living increases at the grocery store. And, healthcare is the biggest expense in retirement.”

We discuss the rising costs of healthcare, as well as: 

  • Differentiating between the four types of Medicare coverage

  • Enrollment windows and when to make your decision

  • The delayed impact of IRMAA - Income Related Monthly Adjusted Amount

  • Staying updated with the annual changes and increases

  • And more

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John H. Curry's Secure Retirement Podcast. My name is Steve Gordon, I am your host today. And we are continuing our series of episodes, specifically geared towards members of the Florida Retirement System. Now, if you're not a member of the Florida Retirement System and you're tuning in today, then you do want to stick around because we're going to actually talk about a subject that applies to everyone. We're talking about Medicare today. I'm here with John Curry. John, welcome. 

John Curry: Hello, Steve. 

Steve: You know, this one. Again, following up after our last conversation on Social Security, this is another big area of concern for folks. And I know that, you know, health care is really one of the biggest worries and costs for people going into retirement. 

John: It is, in fact, it ties up there sometimes it'd be one or two. But always what comes up is I'm worried about how do I cover my health care costs and in retirement and beyond? And I'm also concerned about running out of income. I want to make sure I don't run out of income.

Steve: Well, the two seem to be tied together. Because if my health care costs go up too much, I'd run out of income, wouldn't I? 

John: Well, you're going to have less spendable income, because we're seeing health care costs go up more and more. And that is a big concern for our nation. And so many people who do not have health insurance. So what's the answer? Is that a universal health plan is that Obamacare as it's called, who knows? I don't have the answers. All I know, is this, something has to be done. But I go back, I'll save this 1000 times. You have to take control of your own personal economy and do your planning first. Because you do not know what's going to happen in Congress or the legislature.

Steve: No, and you can't, you really can't control any of that. So as we were preparing to record the episode, I said, you know, we really ought to start off by explaining the the two parts of Medicare, yes. And then you said, Well, no, no, there are four parts. And I didn't know there were four parts. So educate us on the four parts, because I may not be the only one that didn't know that.

John: Okay. Well, let me do this. Let me give a quick overview. And then we'll come back and put some meat on the bones. How's that? 

Steve: Sounds good. 

John: Okay. So there are four parts. Most people only think about Part A and Part B. Part A happens pretty much automatically at a 65 if you're in a social security system. And part A covers the what was called the hospital insurance. So it helps pay for inpatient care in a hospital or limited time at a skilled nursing facility, following a hospital stay. So part A also pays for some home health care and hospice care. So there's a lot of confusion about it, there are some deductibles that you have to satisfy. 

I'm going to stay away from those today, because they change each year. And I don't want to have to go back and change this every time. Medicare Part B is called medical insurance. It helps pay for services from doctors and other health care providers, outpatient care, home health care, and certain medical equipment. And Part B costs you money. So when you sign up for part B, you got to pay a monthly premium, which comes out of your Social Security check. And I have a lot of people come in and go I don't understand this. And I paid into Medicare all these years. Yes, you did. You paid 1.45% of your income into Medicare. Unlimited, if you're under a million bucks, you're paying 1.45% on every dollar. Social Security has a cap. We talked about it. Last episode is 137,000. This year at 6.2%. 

But Medicare Part A for the most people, you pay nothing for it. But if you don't have 40 full quarters, 10 years of service under the Social Security system, you may have to pay into Medicare Part A. So most of the people listening to this will not have that problem, but they may know people who do and then you have what's called Part C, Medicare Advantage plans. So Medicare Advantage plans is where you say okay, I'm not going to be in the original Medicare. It is a special program that was established by Congress to say, okay, we're trying to control these health care costs. So in our area, in Tallahassee area surrounding counties you have a CHP Advantage Plan. So Capital, Capital Health Plan, thank you Capital Health plans. Mental block. Capital Health Plan has a program where state employees can be a member of that

Steve: And capital health plan for those who are outside the area is a local insurance health insurance company.

John: HMO. Health Maintenance Organization. And we could get into the pros and cons of that. I will say this to people who say, Well, I don't like the plan, they have a good plan. I don't work for them, so I'm not going to be endorsing it. But I will tell you, I've been to two of their workshops, because so many clients who are affected by it is, is good. There are also issues, especially if you intend to travel a lot. 

And I'll come back touch on those, because when I made my decision as to which way to go, original or C, I chose original. So we'll come back to that. And we'll talk about the pros and cons. And I should say this, now, I am not licensed to sell Medicare Supplement policies, I don't get into that. And I also don't work for the government. So what I'm going to share is my information that I've gleaned from dealing with this with clients and also their websites, and the research I do. 

And then Medicare Part D, that's a biggie, because I just got impacted myself. I have a medication. It's a drug plan D for drugs, and medication I've been paying $25 a month for. Went to fill the prescription on Thursday price jumped to $108 a month for the balance of this year, because I'm in what's called the doughnut hole. So you reach a point of where certain medications, I'll even tell you this one happens to be eliquis. So there's no generic for yet. So it's expensive. 

I don't know what it would be without care. I mean a plan probably five or 600 bucks a month. But this stuff is a complicated topic. It changes, some people will change plans, or every year or two. So we'll talk about that in a few minutes. But let me pause there guys see you I see your eyes glazing over.

Steve: Already confused. John, you know this, I've got a technical background, I think I'd rather go play with a slide rule than try to figure this out. So so we've got these four parts, you've given us kind of the overview. And let's kind of break them down with a little more detail kind of one by one because I think that'll help people. 

John: Okay. Well, the first thing to look at is is what is Medicare just think of Medicare as being our country's federal health insurance program for people that are 65 or older. There's some exceptions, younger people can benefit too. But let's just keep it simple. Say it's designed for people who are 65 and older for healthcare. When I retired on paper, I was under a pension plan, but also the Health Insurance Program. So I chose not to go into Medicare Part B, at age 65. I waited until 66. So when I started collecting Social Security, I actually had another year before I started, Part B. Come to think it, so two years. And I did that because I had health insurance coverage. So it made no sense to switch. 

So if you are part of a qualified group plan, you can stay under that or go to part B depending upon which one is best for you. So it's not automatic that you've got to go to part B. But it is important that when you register for part A, you let them know, I am covered under a group insurance program. So I will be deferring into the future before I take part B. If you don't, you may find that you're paying for part B, and you didn't mean to. And to their credit, they actually will call you they called me and I'm told by their people they call. 

So you go online, you enroll, they follow up to make sure that they have everything they need from you. And then then they start taking Medicare Part B out of your check. Out of direct deposit. Now there's two parts to Medicare, think of it this way, original. And then we talked about the Medicare Advantage with the original plan. I'll just want to talk about myself pick on me. What I did, I chose after looking at all the options that applied in our area, and there's a bunch of them, I decided that I would stick with Medicare original meaning Part A Part B and I would purchase a Medicare Supplement policy that would fill the gaps. It's called Medigap insurance by some people. So supplemental plan. 

So I have Part A Part B that I pay premiums for. And then I have premiums, I pay for it a separate policy that would fill the gaps. Why? Because I wanted the ability that no matter where I'm traveling around the country, that if I have to go get services at a hospital or doctor, I walk in, I put down my Medicare card, I put down the card for the company representing the Medicare gap policy. And that's it I'm done. I rarely pay anything out of pocket. They'll be some things I have to pay. But very little. 

Now, where I get in trouble, though is the beginning of the year is there is a deductible, you have to pay out of your pocket before you get full benefits. And then I also bought a part D supplement. So Part D, is a plan, and I've changed it twice, once I had two different plans sort of one year, because of the medications or own, you'd want somebody who handles that for you to shop it and tell you which Part D plan is best. So that you have to do during the open enrollment period each year. And if you miss it, you'll have to wait until the following year.

Steve: And what is what when does that typically happen during the year?

John: The short answer is typically October through December. I can't give you the exact dates, I could probably look it up. 

Steve: But I'm sure it varies year to year. But generally what we're talking about is the towards the last quarter of every year. 

John: That is correct. And that's why you see so many ads on television about Medicare, because there's a limited window there to enroll.

Steve: So, so you've talked a little bit about the four parts. And there's this name that's floated around, I guess it's an acronym IRMAA. What in the world is IRMAA?

John: Well IRMAA is spelled IRMAA folks. And basically, here's how it works. When you sign up for Medicare Part B, like for example, this year in 2020, is $144.60 per month for part B. However, if you earn over a certain income level, and Medicare publishes that each year, it's a different number, then you could pay as much as 400, and something dollars a month. $428. So your income in retirement will impact how much you pay for Medicare Part B. And that part B number remember is in addition to any type of supplemental policy you buy. So we'll have people come in very upset with the government saying, Can you explain this to me, all of a sudden, my Social Security check moved from x down to here, because what happens is they look back two years. 

So whatever your income was two years ago, impacts you today on your Medicare Part B premium. And when when I do seminars on these topics, because the two biggest seminars we offer Social Security and Medicare, sometimes we'll combine the two, because people have so many questions about so we're just gonna do an extended sort of hour and a half with a two hour session and simplify it and cover both. But it's interesting that people will say I had no idea that the premiums could be higher. Well, most of us don't, until it hits us. So I started educating people. And the reason that I started educating people, Steve, was with one of my long term clients, 35 year plus client. 

She came in one day and said, You know, I don't understand what's happened here. But my Social Security check dropped, I got this letter. And it was about IRMAA, you know, your, your premiums have increased because of the IRMAA. Income Related Monthly Adjusted Amount is what it stands for. And she's waiting. So basically, they're taking my money from me. So yes, because they're feeling is because you earn more money. And any money you take out of retirement accounts, like CDs, she took a chunk of money out of her IRA for a trip. Well, that pushed her over. And it was two years previous, so it hit her this year. That year, this year. So it's pretty complicated. But when it hits you and you all of a sudden you see your check drop, or your deposit drop, you're like, what happened?

Steve: So what I what I'm hearing you say is that when people are making decisions about when they take income, from maybe their retirement accounts or through employment or anything else. Sounds like they need to pay attention to where they stand related to these thresholds.

John: Absolutely. And sometimes there's nothing we can do to help them other times we can, it depends on what assets they have. As we'll get into another episode, we'll talk about required minimum distributions. That's where people usually feel it. Because all of a sudden, they've been retired for a few years. And now they're forced to take money out of retirement accounts. So that's income they didn't have before. And it pushes them up into another bracket for the IRMAA test. And then they get, boom, they get smacked. Wow, Where'd that come from?

Steve: So you're forced to take money out? Yes. puts you in another bracket that forces you to pay more.

John: That's correct. I have said for years, 35-40 years, I've said, I don't understand. I know why, but Congress should do away with the required minimum distribution. If you are frugal and you saved your money, you should not be forced to take it out. Because if you have retime resources you're having, you're putting less pressure on the system. System, meaning Social Security to help other people. 

But the reason they do it is they want the money all these years, you defer, defer, defer thinking you're saving taxes, and all of a sudden, you're taking it out, you go, I didn't save any taxes, I simply deferred it into the future. And then you get a cost of living adjustment, the Social Security maybe, and then all of a sudden, you see that disappear because the Medicare Part B premium was raised. And then if you get impacted by IRMAA, you have a further increase.

Steve: This is all really depressing.

John: Well, I'm sorry. I didn't write the tax law. My job though, is to help people to the extent that they'll let me project them into the future. So I'm experiencing this, let me help you. So I learned a long time ago, if I see your head, forehead is bloody, and skin missing, and I look over that wall, and I go, I see some blood and skin there, I don't need to go pound my head into the wall, if I see you do it. 

So I learned a long time ago, I'll be glad to pay you for your time and your services to save me time, and money, and frustration, and in some cases, anger because I get frustrated. So my deal is this. This is what I do every day that I see clients. I read it, study it, and somewhat of a geek about it, I'm gonna learn and stay on top of it. But there's a lot of stuff I don't know anymore. But when it comes to retirement planning, understanding how to get money out of retirement plans had to coordinate with Social Security and Medicare required minimum distributions. That's pretty much where I live.

Steve: Well, you were you use the word coordinate there. And yes, we talked in an earlier episode, I think I'm hit the comment that all of this is like a giant jigsaw puzzle, where they don't give you the picture on the box. And maybe they mix two pictures together with the pieces. And somebody's got to somehow sort it all out and make it work. 

And I mean, with all of the, the rules and regulations, and the different considerations here. This just seems so overwhelming to try and deal with. I can't imagine having to, you know, you look, you're looking at this several times a day with different clients every day. It just seems like it'd be a real challenge to do. And certainly for individuals who don't go through this don't even know where to find all the information. Maybe sometimes, it's gotta be completely overwhelming.

John: It is overwhelming. And one thing is, I think, where I don't think, I know for a fact that what happened for me one day and and I won't call the client's name, but long term friend, 45 years. He came in frustrated. Said John, I don't understand this stuff. He's an attorney, very, very intelligent guy. He says, I'm tired of this. I'm sick of it. And I'm not getting I'm not getting help at work. I'm not getting help from the Social Security Office, when I call and ask questions. I'm more confused. Can you help me? 

And that was the beginning of me getting serious about many, many years ago. I don't know how long, 15-17 years ago, because I wasn't to the point of being concerned about Social Security or Medicare at that point. But I got on that track to start learning. And then, you know, among other financial advisors, they'll call me and say you're the expert in this stuff. I say, eh, be careful, I don't claim to be an expert, I claim to be very knowledgeable. But I don't know that I'm the expert. But I know I know it pretty well. I would say very well actually. But it's how do you coordinate it. And one of the things that I'm tempted, and I was tempted, am I now because we talked about keeping this simple for this episode. 

But there's so much stuff when I get the manual each year, the Medicare manual is about an inch thick. And I actually read it. I go through it every year, highlight it, you know my style. I'll highlight stuff, put sticky notes on it. So people come in the office, I'll ask the question, so I don't I'm not sure that. Let me look. Go to it right up on the website and make sure nothing's changed. So there's your answer. How did you find it so quickly? Because I read it and study it. 

Steve: It's critical.

John: I get I keep all of my letters there in a binder in the office. So somebody says, Well, that doesn't work that way. Well, there's a letter from Medicare. Read it. It shows you what my IRMAA is. So IRMAA does exist. Shows my premium going up. Okay, I read there some black and white read it, you will have increased Part B premiums, there's no way that that can't not happen, because of the costs.

Steve: Well, is there anything else that comes up in your conversations around Medicare? John, as we kind of push towards the end of this episode, anything we haven't covered? That's critical here?

John: Well, we've covered it, but I'm gonna put it in contrast for you, in 2019, the Part B premium was $135.50. And this year it's $144.60. Okay, so what a $9 increase. So people say, well, it's not that big of a deal. It's not in one year. But if you're retired, and all you have is your pension, and Social Security, because you didn't save or plan and have other resources, or you did but you used them to take care of children or grandchildren that had to come back home, then that $9 increase every two or three years or every year, that erodes your net income. And if you see tax increases, come along with it, that hurts. And that's why most people do not feel the effects of cost of health care, or inflation in general, until, until they've been retired five to seven years, is what I say. 

Then all of a sudden, they'll say, John, what's happening? You know, we haven't increased our spending, we're not extravagant. I say, Well, you've been retired about five to seven years, that's enough time to just see some cost of living increases at the grocery store. You know, health care, your health care is the biggest expense in retirement. For most people, some people still have a mortgage payment, most don't that I've worked with, but you look at your health care. I mean, I know what I'm paying for me, and then I go look at I have to pay $108 for that one prescription for the rest of the year. And then next year, I'll have a $400 deductible. So I'll have to pay for four months basically for it again, before the coverage takes over. 

So I would just like to conclude that it's hard to fully understand all the pieces. It's not that difficult if you're willing to take the time to read it and study it. And just about time you think you know it, something will change, and you got to go back and read it again. So I'm constantly looking at and when I do the webinars and seminars is good, because it forces me to go back and double check all the numbers, like this sheet that I showed you that took off of the Social Security website. In the past, we've just referred to a book. No longer. You got to go to the website and get a straight from the the Social Security Aministration. Let's end with this. I was going to say that Social Security, Medicare, healthcare in general and your pension are very important benefits to you. But it's up to you to make sure it's coordinated properly. The government is not going to do for you. It's up to you.

Steve: Good advice. Well, folks, this is another in the continuing series that we're doing on on the key things the members of the Florida Retirement System need to pay attention to as they approach retirement in retirement, as they're planning for that. We've got one more to go in the series. In the next episode, we're going to talk about required minimum distributions. RMDs. John, I know, that's a big topic. A lot of questions around that. You want to give us just a 10 second preview?

John: Yes. RMDs were never designed to create income for you. It was a way for Congress and the IRS to recover all the taxes that you didn't pay. And they're finding more and more ways to collect the taxes and faster. Stay tuned.

Steve: So folks, tune in for that one. That is a big, big issue for folks. And if you have enjoyed this episode, maybe you found you found this kind of midway through the series if you go to johnhcurry.com click on the podcast link at the top, you'll find all of the podcast episodes, including all the ones in this series for members of the Florida Retirement System. 

And if you're not a member of the Florida Retirement System, there is a wealth of resources there on the website for you as well. Make sure you subscribe to the podcast and leave a five star rating. You can find it on Apple podcast, Spotify, Google podcasts, and share it with a friend share it with a friend that needs to hear this information. You know and please help them. So John. Thanks for being here with me again. I'll see you in the next one.

John: Very good enjoyed it.

Voiceover: If you'd like to know more about John Curry's services, you can request a complimentary information package by visiting johnhcurry.coms/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 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 or any specific individual or situation or to otherwise act in a visionary 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. 

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Key Social Security Considerations

On this week’s episode of The Secure Retirement Podcast, we continue addressing the key issues that affect members of the Florida Retirement System with a special focus on Social Security. Even if you are not a member of the Florida Retirement System, this episode will be particularly useful because Social Security touches everyone nationally.

John says, “For many people, Social Security is really the only guaranteed lifetime income. Folks who have a pension like the Florida Retirement System, they have two streams of income that's guaranteed, but if you're self-employed, or if you are in a job where you have a 401K but not a pension, Social Security might be the only guaranteed lifetime reliable income stream you've got.”

We chat about the impact of the pandemic on Social Security, as well as:

  • How Social Security is taxed

  • How the collection of Social Security will affect your spouse

  • Actuarial equivalents

  • Expected changes to Social Security and cost of living adjustments

  • And more

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John H. Curry's Secure Retirement Podcast. I'm your temporary host, Steve Gordon, I am here interviewing John. And this is a continuing series that that we're doing on the podcast, where John is really addressing some of the key issues that affect members of the Florida Retirement System. Now, if you're listening to this, and you're not a member of the Florida Retirement System, today's episode is actually going to be particularly useful for anyone because we're going to be talking about social security. John, welcome. I know this is a big issue for everybody. 

John Curry: Yes, it is. And it's good to be here to talk about it.

Steve: Now you do seminars on this topic. You do webinars in this topic, I know the last live seminar that you did, was pretty popular. And if I recall, you had about 90 or 100 people.

John: We had 97 people in the room, 97 people in the room, wow. That's a lot for a seminar. I work with a lot of people and doing seminars, and that's about as full as as you get them. And I would imagine, that's because it's a hot topic, people are concerned and it's complicated, hard to figure out, is complicated and is becoming more and more important issue as we see this pandemic spread. And more and more people are losing their jobs and having to retire earlier. We'll get into that in a few minutes about you the different ages to claim benefits, but is going to become even more hot topic, because the politicians are kicking around a lot to the income base is going up. So you have to pay more and more taxes. There's a lot of issues with social security.

Steve: Well, kind of guide us down the path. Where do you begin when you're talking with someone about social security?

John: Well, first, let me say this, our podcasts are typically around 30 minutes, there's no way no way that I can cover this in 30 minutes the way it should be. So what I want to do today is simply wherever the conversation goes, but I've got a few key points I want to make, and let people know just understand the big picture. And then come sit with me or talk with somebody on my team for a while then go to the website. And I'll warn you the Social Security websites got a lot of good information. But then the question is you get information overload, what the heck do you do with it? I've got a summary sheet in front of me right here just shows up dates for 2020. Right off the website.

Steve: Yeah, folks, it was actuall. I chuckled a little bit as we're preparing for this, because it took John longer to get organized for this episode than any of the rest, I'm looking across the table. He's got printouts from the Social Security website, he's got printouts of slides and notes from presentations that he's given on this. The array of information that's in front of us here is quite astonishing. And compared to every other topic we've covered in the series, it's very unique. So I can appreciate the fact that we can't get through it all in a single episode. But where should we begin? Where do people kind of start within their thinking, and their questions about social security? 

John: Well, the first one is, okay, when can I start collecting benefits, there is still a lot of confusion on that the earliest you can go in Social Security is age 62 for retirement. And then people will say, Well, I think the system's going to go bankrupt. So I'm gonna start mine as soon as possible. And here people, they mean, well, but they would say to you, Steve, is going to be bankrupt, you better take it as soon as you can get all you can. And then the next step is understanding that if you went into a full retirement age, which could be 66, or 66, and two months, etc, until you're 67. 

So it comes down to your birth, and we'll cover that. And then the maximum benefit is paid at age 70. So at age 70, you can get the maximum benefit, and you can earn all the money you want. But that didn't have a penalty. Same thing with full retirement age, you can earn a million bucks, no reduction of benefits, but at age 62. And up until full retirement age, there's a reduction. So we'll come back and talk about that. Also, there's a lot of confusion about how social security is taxed. 

So we'll cover some of that. And then we'll talk about what happens from the standpoint of like, in my case, I'm divorced, but I was married 41 years. So what happens is that my dad, so we've talked about the widows and widowers benefit a lot of misinformation on that too. And a lot of changes just in the last few years on Social Security. So there's a big picture. And then I want to touch on cost of living because everybody thinks Oh my god, and we got a cost of living adjustment every years my law. Wow, there's a provision for it. But you don't always get a cost of living benefit. So there's a whole lot of stuff. And the truth of the matter is, I'm not even sure what we're going to cover because whatever pops in my head depending upon your questions is where I'll go, but I do want to touch on those things. 

Steve: Okay. Well, let's start with the age question, because I would imagine that's probably in the front of everyone's mind.

John: Yes. So

Steve: I'm not anywhere near any of those ages. But let's say that I was right. Let's say I'm 60 years old, and I'm approaching, you know, the first age, I can take it. How do you begin to counsel somebody on when they should make that decision?

John: Great question. And even though you're not 62, let's talk about you for a second. You, you're 50? 49.

Steve: Don't make me too old.

John: Okay, I'm gonna call you 50. To make the math easy. So 12 to 13 years away? What should you know, and be doing between now and then? And anyone who's even closer to 62? Let's use your 60. But I would ask this question. Tell me about after 62. So you turn 62? Will you still be working? Are you full time part time? What would you be doing? So let's suppose you tell me, I have a great future 62, I can see myself still working, earning $100,000 a year, whatever the number is, they tell me. Great. So if you're making that kind of money, are you aware of what your penalty would be? If you're working and making that kind of money? No. Well, you'll lose $1. For every $2, you earn above the limit, which as we're talking today is $18,240. 

So you hear people say I can't earn more than $18,000 in retirement. And what they're referring to is the Social Security cap, the earnings limit, if you're 62. And there's another one for full retirement age, which we'll cover in a moment. Now on the drive over. Okay? to see you today, I'm talking with a client, good friend of mine, who's in a position of where he thinks he can't earn any more than $18,240 this year. So that's just not correct. You are now 66. In the month that you turn 66, you can earn as much as you want, and not have that penalty. He didn't know that. So he's been holding back all this year on what he could he could have been earing more.

Steve: Well, that's no fun. I mean, you barely put the gas in the car for $18,000 a year?

John: Yeah, well, although lately, the gas prices are down, that's a good read, let me just give a quick example. Anyone born between 1943 and 1954, full retirement age is 66. And how we came up with this system, I don't know. But then at age 55, it is 66 and two months. And then if you're going to 1956 is 66, and four months, etc. working our way up to if you were born in 1960, or after full retirement age for you is 67. So people say well, I can retire at 66 and getting the full benefit as well as when you were born. So that's browser speed. So they say whoops, I gotta wait a few more months to collect.

Steve: So I would imagine making that decision doesn't just come down to what you know where someone is age wise, or looking at social security, you sort of have to look at the whole, the whole board. You know, if we use the chess analogy, and look at all of their other various financial assets, to determine what income do you need? Are you going to be working on all these different considerations? It's just one factor really.

John: Always a very, very minute factor. Because if you don't look at everything I promise you, you'll look back and say, Well, I made a mistake. Let me just throw something out. So there's 62, you're collecting roughly 75% of what your benefit could have been had you waited four more years or five years to 66 or 67. So it's a 25% reduction for the rest of your life. So that's number one. Number two, what happens in the event of your death? What is your spouse get, and for some people say they don't have enough life insurance. So I'll tell some people you should delay Social Security long as you can. Because in your case, your Social Security benefit is going to be very important to your spouse. It used to be that the spouse got one half of the higher income persons Social Security now it's 100%. So if someone does does not have a good life insurance program, and I see that and they've got very little savings, perhaps they can work to 70 I said this is not just for you this is for your spouse may want to consider this as a survivor benefit. And if somebody doesn't have that issue, so I will work to full retirement age. 

Start your benefits then if you don't want to wait to 70 now every year that you wait though, from full retirement age, you get an April than increase. Now in my case, I took minus 66, I could have waited to 70 and get 32%, more four times like 32. I didn't do that time value of money and working with so many people for 45 years, as I will mine now. And I took that money, sometimes I'll use it to pay for life insurance, sometimes I'll put it in savings, sometimes I'll add it to my investments. But I just use it based on what sometimes I use it to take care of grandchildren. But I didn't want to wait, could I wait, it? Absolutely. Should I only time will tell. Because another factor is how long will I live? There's something called actuarial equivalent. If I live to life expectancy, I'm pretty much gonna breakeven. And you'll hear people talk all the time. 

Who does this type planning? What's the breakeven point? In what year roughly? What I received the same amount that's roughly age 83. Roughly 383, because social security uses age 83 for their life expectancy for men and women. And we're living longer. And that's another issue. If your role healthy got longevity on your side? Do you want to collect a benefit at 66 and get it longer? Or wait until 70? Get a higher amount, but for a shorter period of time? These are all issues after we look at another issue is what is your income going to be in retirement? Maybe you don't need Social Security until 70 because of other assets. But in my case, I had the assets I'm still working best and I want the money now. But I did not take it before 66, because I would have a big reduction.

Steve: Complicated stuff. Lots of moving parts, John. So you know, as as everyone thinks about this, the thing that I hear again and again. And I'm in Gen X, so I'm in a little tiny generation that could or maybe couldn't I don't know, we're going to find out. But the common thinking among my generation is that social security's likely not to exist, correct by the time we retire, because all you old guys are going to spend it all.

John: Right. So keep working hard. I hear that all the time. And I tell people, I do not think you'll ever see Social Security go away. I do think you're going to see some major changes. They should have already happened years ago, and neither political party wanted to tackle it. In my opinion, you should never have been allowed to collect Social Security is 62. It was never designed for that. Congress let that happen. That was a big mistake. That's when we started seeing problems with the social security trust fund never should have been allowed. And they should take it away now. 

Nope. As of now, no more 62. Now that would create one hell of a fuss because you got so many people that are unemployed right now because of this pandemic. And they need to count on Social Security soon, in a lot of cases. So I'm not sure what the answer is. But I do know this. Back in 1983, there were major changes to Social Security. And things are changing quickly. 2015, Congress, bipartisan, made changes to social security in two weeks, two weeks, they made a vote if done and they implemented it. So things are moving faster, because more and more people are realizing, if we don't fix it, it's going to be in trouble. 

And I'll tell you, folks, if you go to the Social Security website, and read the trustees report, every year, you'll get good quality information. They're very forthright in saying that if something's not done by 2033, or 2034, depending on who you listen to which report you read, that the system can only add about 70% of the current benefits. So we might take a reduction, but I don't think it will ever go away. I don't think the system meaning us the democratic system would allow it to go away. I think that'd be such a big fuss especially people your age and younger.

Steve: I'm sure. well, you know, the the bargain is pay into it all your life that you ought to get that money back at some point. Right?

John: Well, that's the thinking. But what people need to be understanding is you're not paying in for you know, you're paying for the people in front of you. And that's hard for people to get their arms around. Yep.

Steve: Yep. Well, so we've talked a little bit about when to claim we've talked about the health of the system a bit. I love the suggestion of going and reading the trip. What are some of the other issues that people worry about? I mean, you knowing about all of your seminars and all of your webinars, this one consistently, this topic can help distantly gets more people to come in. And it's got them concerned. Maybe rightly so maybe not rightly so. But it seems to have this this bigger role in people's minds.

John: It does, I think, is for a couple of reasons. I think one, for many people, Social Security is really the only guaranteed lifetime income, they have folks who have a pension, like the Florida Retirement System, they have two streams of income that's guaranteed. But if you're self employed, or if you are in a job where you have a 401k, but not a pension, Social Security might be the only guaranteed lifetime reliable income stream you've got. The burden is then on you to take that money that you have, whether it be 401k, 457, deferred comp, your IRA, your Roth IRA, 403B, whatever you got, the burden is on you to make it last for the rest of your life. Now, if you understand how to do it, then you could take that money and create your own guaranteed pension to take care of just you or you and your spouse. 

But another big issue that you'll hear people who have retired talk about is cost of living adjustments, because we're getting kind of cocky about that. And I have a short number referred to here. We'll go back to 2009. The cost of living adjustment that year was 5.8%. That's hard to believe. Because remember what the economy looked like in 2008 and 2009? I think that was Congress's way of saying we've got to do something because people are in trouble financially. But then in 2010, and 2011, zero cost of living adjustment, nothing. And then it was 3.6. And then it hovered around 1.7. 

Then in 2016, zero again, for this year, they raise at 1.6%. So people will complain, okay, I got a cost of living adjustment. But with the increase in Medicare, which we'll cover in another podcast, my premiums went up for Medicare Part B. So the wiped out my pay increase. And I'll touch on this because it's important to understand that when you take Social Security, Medicare Part A as part of that, Part B you have to pay for. Now, if you don't have enough quarters, to get full benefits is 40 quarters, 10 years of employment. If you don't have enough quarters, then you may have to pay out of pocket for part A people don't know that. Then Part B we all have to pay for there's an out of pocket cost for that. It could be higher, depending upon your income in retirement. So it kind of sneaks up on you.

Steve: Well, we're going to cover that. And I think the next episode, we're going to get all all into Medicare. Yes. For folks who have questions about that, because that's a whole other complex topic.

John: Another issue is taxation. I still meet with people, they don't realize Somehow, I think they do it. But they forgot that when they start collecting Social Security, that it would be taxed, because at one time your benefit was not taxed. You pay tax on the way right, put the money in. And so what do you mean, I'm taxed? Well, depending upon your income level, and individual or married couple, up to 50% can be taxed as high as 85% of your income from Social Security can be taxed. There's a formula that your your CPA or who does your taxes can calculate for you. But the bottom line is married couple earning over a certain amount of income. I won't get into specifics, because it's changed each year. But you may find that up to 85% of your Social Security benefit is considered income for tax purposes.

Steve: Bet that's a shock for people.

John: It is for some. Others, no. And it impacts me I don't like paying that much tax on Social Security. And so you take 85% of your benefit times whatever your tax bracket is, you just watch that money go right back to the government.

Steve: Well, when you're having your seminar's John, and you've got people in the room, what are some of the questions that come up with, you know, when people have the opportunity to to ask you about certain aspects of the work. The other questions that we haven't touched on? 

John: Excuse me, one would be okay, what am I really paying into social security? And I find that interesting, because on your Facebook tells you the number of most people just don't pay attention to it. I think they're paralyzed by I'm just it's too complicated. Don't bother me, I don't want to know. Just tell me the answer.

Steve: Well, I can tell you on the front end, I mean, as somebody who pays that, it sort of just goes into the ether.

John: It does. It does. But let me give you the specific numbers and this is right off of Social Security's latest update 6.2% is what you pay on your earnings up to $137,700 a year. So anything over 137 in this tax year 2020, you don't pay tax on that, however, on the Medicare portion, you pay 1.4 or 5%. No matter how much income you make, if you make $10 million, you pay 1.4 or 5%. And there's a lot of people in the political world are saying, hey, it's time to get rid of the cap. And 6.2%, no matter how much and that's one of the big issues as being debated among politicians. 

Now, is a debate these issues in Congress. Why is there a cap? Why wouldn't you pay 6.2%, if you make $500,000 a year, we want you to pay 6.2% on the entire 500. So a lot of things happening there. This has been addressed so many times, and every time they get closed, there's so much political pressure. I mean, just just think about all of those gray haired people out there. AARP is such a big lobbying force, that every time Congress wants to do something on their own, and full disclosure, I'm a member of AARP, support what they do. But at some point, we've got to say, You know what? It's got to change. It's got to change, or it will go the way the dinosaurs became extinct. But I don't think I don't think people will let that happen to bend changes to make it work.

Steve: John, this is a this is fascinating stuff. Are there any other key issues at a high level you want to cover?

John: Well, I want to touch on a little bit more detail about the earnings cap for 62. So if you're 62 years old, you people will say, I can't make more than $18,000. And this year is 18,240. But there's another one that people forget about. And in my seminars and webinars, I like to ask this question. It's a bit of a trick question. What happens in the year that you turn full retirement age, and in the year you turn full retirement age, you can earn $48,600 without having a reduction. However, for every dollar over that, every $3 over that limit, you lose $1 of your benefit. But in the birth month, birth month that you turned full retirement age that year, then there's no camp, you could earn a million bucks a year. So it's a little bit confusing, because I'll see people who say, Well, I'm gonna start my Social Security now. So you might want to wait two months, because in two months, you'll be full retirement age. There's no difference. 

Yes, sir. Yes. Yes, sir. Yes, have social security calculator for you and come back and tell me what you buy. No, hold the cows and lose a bunch of money. Yes, your work. Because if you earn a lot, then it impacts you. Another issue that we should touch on what happens upon your death. If you've been married for 10 years, or more, key prizes, 10 years, then upon your death, your spouse would be entitled to a widow or widowers benefit a spousal benefit. While living in retirement, your spouse will be entitled to a retirement benefit based on your earnings, either theirs with this higher or yours if yours is higher, a lot of questions about that. And it's a little confusing, because I just had a situation where a man died, we thought she was gonna collect his full Social Security benefit. And I said, That's not gonna happen. You got to go talk to them, or at least get him on the phone, because you're going to have a reduction because of your age, and the amount of money you make. And she said, that does not apply to me as a widow. I said yesterday, that was changed at one time. You're correct. But that changed a few years ago. I can't tell exactly what year, but it was changed. And I'm telling you, I have to constantly review can update myself? 

Because it changes, Congress will make changes sometimes it's widely known most time is not and Social Security Administration. I don't even know how many 1000s of regulations are I don't even at one time I could tell you there's like 5000 plus rules and regulations regarding Social Security. I don't know what it is. There's probably 6000 by now Who knows? Doesn't matter is complicated. And there, there's frustration out there because you're talking to one person with Social Security, you get one answer and then another person another answer. So it's truly up to the individual to retiree to do their homework and get some help. And full disclosure. 

Say it again. I don't claim to be an expert in socialism. I'm pretty darn good at it. But I don't work for Social Security, they don't pay me. I don't have access to everything they've got any more than you do. I have to go online to look at it, I will tell you that I'm part of a study group where we pay close attention to what's happening with Social Security, Medicare, retirement income planning in general, and tax planning.

Steve: I think this is one of the probably most challenging and frustrating things, is just trying to keep up with it. Because you're right. I mean, the Congress has almost an incentive not to publicize when they're making changes, because it's going to ruffle feathers as you say.

John: Yes. 

Steve: And so to stay on top of all of these things, I mean, you have to be simultaneously a lobbyist or congressional reporter, and a financial planner, and an accountant, you know, to really keep up with it.

John: What's interesting, in the 80s, there was hardly any press coverage about the changes that Social Security made. And the little bit that was, it was talking about the taxation of the benefit. But there were major changes. And I would encourage people, if you, if you if you're into this, like I am gonna look at it is public information. But it does take time. And you have to have an interest in it. And most people will do it as a swan tell people, if you can do it yourself, we want to go do it. But if you don't want to do that stuff, come see us. And we'll have a discussion. And if we can help you, we'll go to work.

Steve: Well, let's, let's talk about that for a minute, John, because I mean, this is complicated stuff. And I think for most people, they're going to look to a professional to help them whether it's you or somebody like you, they're going to look for somebody who can kind of hold their hand who does this day in and day out. I mean, you've got the advantage of, you know, in a, you know, a given day, maybe you work with half a dozen people on these issues, or your team with a dozen people on these issues. Right. And, and so you see a lot of different variations, which gives you a perspective, you know, and a knowledge of it that that most people wouldn't have, as you know, same with other professionals in your business. They're looking at this all the time. So if someone is, is thinking, Okay, I need to go get get some help. What is the process look like for somebody to go through? They come in? And maybe they meet with you? And how do you how do you walk them through what to look at first, because it's not just Social Security. Doesn't happen in a vacuum.

John: That's correct. Well, and each person we started different places, for example, maybe you can say, I'm 49 years old, and concerned about saving for retirement. So each person is different. But my process is this. First, we either start with a telephone appointment, which is, you know, 20 minutes, 30 minutes, find out if we really need to get together. And then we'll either have a face to face appointment or do it online. I have clients in 13 states. So we do a lot of online meetings, even before the virus had. But then it's a matter of, Okay, let's have a constant conversation. 

Let's talk about what you're trying to accomplish. Let's find out if what you're needing, and my skill set will mesh? If so, then we go to work. For some people it is I am paying way too much in taxes, can you help me reduce taxes, as well? I'm not a CPA, I'm not a tax attorney. But let me look at it. And I might have to refer you back to one of those professionals. But let's look at it. For others. It is specifically Social Security. I am so confused. I've got my benefit, we have a spouse benefit. When do we take each other's you know, do I work longer and delay to 70 and my wife take it now. It's all over the place. 

But the first step for us the very and I won't, this I will not shortcut period, I will refuse to deal with the client. If they don't do this part. You have to give me full facts. I have to know exactly what you've got. We put it in the system that we use to look at everything. Everything from car insurance, home insurance or health insurance, your legal documents, your life insurance, long term care if you have really good everything. And then we look at assets, liabilities and cash flow. But occasionally, sometimes I don't I just sell me a product. Okay, if you just want to buy a product, you have to be a salesman, right? You know where you want to buy. 

But once we get into that they never do it that way. Because they realize it doesn't make sense, just a byproduct. But for me, the first step is we lay everything out. We discuss what's working, discuss what needs work, prioritize. And then the question is, are you going to do this or are we do for you. And if we're going to we'll sit down talk about what the fee is, and go to work.

Steve: Pretty simple process.

John: I think it's very simple. It's not easy, but it's simple. The hard part is bringing together all the pieces. So you bring me all these pieces. It's like you dumping a jigsaw puzzle on the desk, and my team and I have to take all these pieces and put them together. And most people when they're serious about it, and once they engaged and they find all the pieces, bring it to us.

Steve: Let's talk about that for a minute. Because I think that's, that's a real challenge. I mean, particularly, for people who maybe have had, you know, if they've been employed, maybe in multiple places, maybe they got multiple retirement plans, yes. Or when you know, we're talking with, you know, people here in the Florida Retirement System, there are a lot of different options there. So pulling, just the act of pulling all the information together can almost be overwhelming, I would imagine.

John: It is for some people is very overwhelming, and they don't get started. And they haven't gotten started because of that. So I say, come sit with me. And we'll make it easier for you, we'll give you a format that you can go get. And if you don't know what your benefits are, we can help you contact the former employer and get that the biggest frustrations they have as they as people within the university system. Because they may have worked in four or five different universities, they got a benefit here and a benefit here and a benefit there. Now, how do I pull this together, and then it with multiple accounts that got to do something with and we get into the episode talking about required minimum distributions, that gets complicated there. And we have to remind them, all these all this beautiful money you've accumulated on tax deferred basis, guess why? 

IRS is waiting, and they are licking their chops, because they're gonna you're gonna pay tax on every dollar that comes out. And so you start, we talked earlier, another episode about people think they'll be in a lower tax bracket. Well, fast forward, you retire, you have a pension, or you have your 401k. And you got money in deferred comp, maybe you have the drop program, but the chunk of money, and you're collecting Social Security, Social Security, your pension all taxed, every dollar from retirement plan taxed. So don't just assume that because you retired, you'll be in a lower tax bracket, it's probably not going to be lower, it would probably be the same or higher.

Steve: I think that's shocked most people. Well, John, bringing this all to a close, what, I guess from a sense of next actions. Somebody listening to this, and they're thinking, okay, well, I'm getting close. What should they do next?

John: Well, they should find someone or there's me or my team or someone else, I should find someone, they can sit down and say, Look, this is all my stuff. Help me. And I'll make a plug for me and my team permitted here? I've been through this for myself. Going through, okay, we'll take it at 60 to 66, or 70. What about Medicare Part B, and all this stuff? I've gone through that. And I've done it also, for a lot of clients, literally hundreds of clients. And what's happened with me see is I'm I started in business at age 22. I'm 67 now be 68 in December. So I'm in a situation where I've grown with my clients. 

So as they got frustrated with something, they would come see me so do you know anything about this? No, but I'll research it. So I would do my homework help that person. Next thing, and I've got this, hopefully some wisdom because of having that experience of helping people. So I've been there done that. Plus, I'll just remind people who may not have heard the first episodes, my grandfather and my father retired and all they had was social security in their pension, that was it then have dropped back then they'd have deferred comp, they didn't do not do a great job of accumulating other assets. They had no debt. They were debt free in retirement, but they didn't have a lot of assets. So I've been there. I grew up in a state employee family. So if I understand the issues, I understand I understand a lot of it, let's just put it that way. And I would encourage people if you're not sure, have a conversation with me, or somebody on my team. And if you'd like to get a copy of my book, I'll send you that. And you can check us out.

Steve: Very good. Well, folks, if you've if you've tuned into this, and have not heard the other episodes in this series, go to johnhcurry.com click on the podcast link up at the top and you can find the whole series there. And, and certainly subscribe in your favorite podcast player because we got a couple more episodes in this series ahead of us. We're going to be talking about Medicare in in the next episode, so you'll definitely want to stay tuned for that. And then in the final one of these episodes, we're going to talk about required minimum distributions. And I know that's a big hot topic, John.

John: It's is a hot topic and the secure act last year made some major changes that people don't know about yet. I'll mention it to them they go, I never heard of that. I understand. There was no reason for you hear about it. I'm telling you now. So it's 15-20 years in advance because your kids or grandkids are going to get hurt if you don't address this.

Steve: Well, well, folks, tune in for that. Again, subscribe in your favorite podcast player. And go ahead and leave a five star rating for this in Apple iTunes so other people can find it, share it with your friends. Mr. Curry, wrap us up by letting everybody know how they can reach you if they want to have a personal conversation. 

John: The best way is to call me at the office. Tallassee number 850-562-3000. 850-562-3000 and just ask for a telephone appointment. Or if you know you're ready to go to work. Just say I want to come see John or book a more detailed appointment. And see if you mentioned the website, johnhcurry.com, johnhcurry.com. Check it out occasionally, because there's some good information on there, all the podcasts and there's some information in there about social security from time to time.

Steve: Very good. Well, thank you for investing a little bit time with me today and sharing with everybody. Folks. We'll be back in the next episode. We'll 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 charter 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 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 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. 

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2020-113398 Expires December 2022.

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

How Your Mindset Affects Financing Your Retirement

On this week’s episode of the Secure Retirement Podcast, we continue our series on the concerns of members of the Florida Retirement System (FRS), focusing this week on the mindset of retirement and what that means for your planning process. And, if you’re not a member of the FRS, stay tuned because the information provided in this series is still applicable to any recent retirees, or those in the planning stages.

John says, “When you retire, every day is a Saturday. What do you do on Saturdays? Whatever you want. However, when do you spend the most money? During the week when you're working, or on weekends? Usually on the weekends. So, when you retire, if you truly retire and don't work anymore, every day becomes a Saturday, and you're more likely to spend more money because you're doing more things. We're going to touch on that today.”

We chat about the retirement mindset, as well as:

  • Determining what retirement looks like for you— will you stop working entirely or start working in a different capacity?

  • How your mindset will affect how you finance your retirement

  • Considerations around Social Security and Medicare

  • And more

Listen now…

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John H. Curry Secure Retirement podcast. I'm your host today, Steve Gordon and I am here interviewing Mr. Curry. And we are continuing the series of episodes, talking about the concerns of members of the Florida Retirement System and some of the considerations that, if you are a member of the Florida retirement system you want to be thinking about as you head into and plan for your retirement. If you're listening to this, and you're not a member of the Florida Retirement System, today's episode is actually going to apply to you because we're going to talk about when to retire and when you should retire. JOHN, welcome. That question is, I think, probably on everybody's mind, I'm not even 50. Yet, it's on my mind.

John Curry: Well, why would you want to retire?

Steve: That's a good question. That's a whole other conversation. I don't know that I'll ever fully retire. But I think a lot of people want to just know that they have the option.

Determining What Retirement Means To You

John: Well, you turn the tables on me, I'm gonna turn the tables back on you for a moment. Let's do this. Indulge me. So what does retirement mean to you?

Steve: Being able to do what I want when I want with whom I want and where I want? Good definition?

John: Very good definition. So you think in terms of why retire? So when you retire, every day is a Saturday? What do you do on Saturdays, whatever I want, whatever you however, when do you spend the most money during the week when you're working or on weekends, usually on the weekends. So now when you retire if you truly retire, and don't work anymore? Now, every day becomes a Saturday, every day's a weekend. And you're more likely to spend more money because you're doing more things. And we're going to touch on that today, what I like to call the mindset of retirement, what does it mean? And I'm gonna use myself as an example. And we'll talk about my dad and what he did, and also my granddad. And I think there's some corollaries in there. And I have a passion for this. Because I don't care where you work. 

I decided many, many years ago that my primary focus would be on retirement income planning. That's true for my FRS clients, university system, school teachers that are clients of mine, business owners, doctors, lawyers, everybody has in common the one thing if someday I want to retire, the question is, what does that look like? And that's the first place I'll start with people where I'm a little different than most people who claim to be doing retirement planning, as a way to it's not just about the money, the money, part, finances, retirement, but why do you want to retire in the first place? And then that helps us determine when.

It’s important to understand the distinction.

Steve: Something you said intrigues me a little bit, maybe you can expand upon it a bit, you use the phrase, retirement income planning, as and use that to describe your focus. And, you know, when I think of a financial advisor, I think of somebody who is going to help me with specific things with life insurance with maybe managing investments, you know, kind of those fine grained sort of specific tasks, because that's not what you're talking about here. Help me understand the distinction.

John: But as part of it, but that's the money side. So first, let's get into the mindset. And then come back to that. Yeah. Okay. So the first thing, you come to my office, and I don't know you, so we have a nice few minutes to chit chat. You have a cup of coffee. So tell me who you are. Tell me about yourself. What are you trying to accomplish? What's your vision over time? Why are you here? Why don't you travel across town? To sit in front of me for an hour, hour and a half? Why are you here? out here? Things like, I don't have a clue. All I know is that my best friends work with you. They love what you've done for them. I just know I have a pension plan. I'm on the GS 20 social security at some point, when to take it? Do I go into drop? Not going to drop? All this stuff is confusing. It's overwhelming. I just need help. 

That's great, we'll get there. But based on what you know about yourself today, do you see yourself retiring from the state of Florida taking your pensions and fully retiring and never working again? Or do you think you would do something else where you work part time? We start a business, we start a consulting company, and it's amazing where those conversations get. I've actually helped people who were within say two or three years of retirement, they retire. That's okay, before you retire, once you start thinking about what you're gonna do after retirement, and they've actually started doing businesses because they took what they knew with the state and learned and took it out into the world and got paid for. So now they're able to travel, do things they want to do and get paid to do it.

Steve: You know, I can imagine a lot of people get to that day. You know, because we've been told that's the goal is you get to that retirement day whenever it happens. And you have the party, you get the gold watch. You jump up and down and celebrate and then I imagine that and I would even wager that the majority of people wake up the next morning and go, now what?

Having a vision of your retirement is critical.

John: I believe that I've heard that, I see that. We see what I need to explain. I've been doing this for 45 years, just celebrated 45 years on September 13, I have seen thousands of plans. Most people see one on their own. And it's not complete. Nine times out of 10 is hodgepodge. So I tell people, let's back up. Before we get into how to invest money, how do you spend the money, let's talk about what you're trying to adapt. And back to your point about a financial advisor. I have people where we'll start at point A, and go through all of the protection that you just mentioned. Car Insurance, homeowners insurance, health insurance, disability, income insurance, their life insurance, we look at all that. 

And forever time, I don't care if you're in your 20s or 30s. Or if you're 90 years old. I do not deviate my plan. I look at everything. Then we look as assets, savings, investments, retirement plans, real estate, business interest, we look at everything. Even your obligations, your liabilities, credit card, mortgages, car loans, we'll look at everything. And then we look at cash flow, what your cash flow today, how much are you saving for the future? You know, what happens if we can stay? I mean, look at where we are in this pandemic, as we're recording this. We're facing unbelievable pressure. And some people think the economy is gonna crash like it did in 2008. 

Others say the economy's great, you know what I tell everybody, you can't control any of that. All you can control is your personal economy. If you stick your head in the sand like an ostrich, I got news for you, your butt sticking that you're vulnerable, take the time to plan for yourself. And if you work with me, the first thing I'm going to ask is tell me what the future looks like. Tell me what you want. What does retirement mean to you? What's your vision of retirement, and you shouldn't spend $1? You shouldn't invest money until we get clear on that. Because once I have that, guess what? It will come into focus. So clearly. Okay, these are the things I want to do in return. Well, you want to do them when you're in your 60s or 70s, or you want to work in and then do them in your 80s or 90s, when you're less likely to want to travel as much that helps.

Steve: It does, it does. So you go through this entire process. At the end of it, you come out. It's like magic, right? And come up with the date.

John: And obviously, it's magic. I'll use myself as an example there. I'll be 68 on December 9, on paper, I'm retired. Anybody who knows me, then I'll never fully retire. And my retirement definition is very close to yours. I think about four freedoms, number one is a relationship, right? I'm to the point in my life where I have that I don't have to take on a new client. If it's not a good fit, I won't take them. Why should I complicate my life at this point? And take on someone who is a pain in the butt.

So if there's a good fit, we'll work together. If not, okay, I'll refer you to a friendly competitor even. So if we're a good fitness group, time, freedom, I want the time to do things I want to do, money freedom, and location freedom. So I won't do it like you were saying to work when I want to work with whom I want to work with. So if I'm in a relationship narrows it down perfectly, because that includes family, friends, teammates, coworkers. Excellent. So I get the relationship. 

How much time am I willing to devote to the relationship. And by having money, I can enjoy that time. So if I have that in place, then I get to work when I want when I want and with him alone. To me, that's pretty darn good. And I also encourage people to look up the word retire. As soon as that's the definition to withdrawal is one of the definitions, withdrawal from one life. So we go to work. And we have a social connection there. And just had a thought and thought about this a long time. 

In the 80s I think 83-84 I was asked to do a series of workshops for General Electric employees down in Daytona, Daytona Beach, the war of mudded. One of them was very surprising. They had a psychologist come in and there were four couples being interviewed. And it was really interesting because in this case, all the men were the retirees and the wives were talking about how they felt about them being home and one stood out so clearly, she said, I wish he had never retired. He is a pain in the butt. He is constantly interrupting me and messing up my day. Because everyday he got it for 35 years and went to work. So she played cards with their girlfriends, they had tea. I mean, it was comical, but sad at the same time. 

You got to understand when that happened. I'm only about 30 years old. So I gained some insight that has helped me help other people with their planning. And then my dad, my dad, I was worried about him because he retired at 62. Back to this question of when to retire, he was so obsessed with retiring as soon as possible. So at age 62, he took us pension with a state of Florida, took option three, and took Social Security. And he promptly sat in a chair in the living room, his favorite recliner and watched television all day. And I was convinced that my dad wouldn't live any longer than his dad my granddad in retirement. And finally, one day, one of my uncle's convinced him and my mom to get in a car and ride with them on a vacation. And Cherokee, North Carolina, and my dad, something happened on that trip because he wouldn't go anywhere. Though, when he'd come visit me he's in the sun. I gotta get back home now before it gets dark. Now he's saying that at three o'clock, and it's only an hour and a half, two hour and 45 minute drive. So I was worried that he was just gonna sit there and wither away. That's what some people do. And they watch the news all day long. They get stressed and have anxiety, that is not retirement. 

Okay. Now look at my grandfather. My grandfather was very healthy when he retired, he could do 100 pushups, hundred sit ups are 65 years old. He was a hard working blue collar guy. Because my granddad and my granddad both worked with the Department of Transportation. At one time, they're a part of the bridge crews, rebuilding bridges in Northwest Florida. So I was very concerned about my dad. But then the people that I talk with Steve that have something to look forward to in retirement, and they're not retiring away from something, they do better. So I like to ask people this question. If somebody comes in, they're angry. They're frustrated. The tenant, why are you retiring? I can't stand the people at work. I hate their guts. I got to go. Well, I'm sorry to hear that. 

So here's a question. It sounds to me like you're running away from something not running to something. And if that's the case, I don't think you can be happy in retirement. So let's talk about what that retirement looks like. And I pulled out of them. And nine times out of 10 I go, we're gonna things really aren't that bad at work, because now they have hope. They got a future. But if you're sitting there in the heat of the battle, every day struggling with, do I go to work, I can't, I can't stand to go to work. Thank God, I don't have that. I don't have that. And I do have the power that if I do have that, I can clear some days off and go have what we call free days, you know and relax. But that I think the whole thing about when to retire comes down to mindset. 

Now let's get into financing retirement, because you can't be pollyannaish about it, you got it, it's got to be realistic. How do I fund or finance my retirement? So first of all, if you remember the Florida retirement system, you have to make a choice of which pension option to take if you haven't already done it. So you take 123 or four, we talked about that in previous episodes. When do you take social security? Do you take it as soon as you can 62 that will be determined by how much income you have. We just use a round number roughly, if you earn over $18,000, you take social security at 62 you'll be penalized $1 fair for $2 above that. So if you know you're going to be working part time, it probably would not make sense to take it at 62. So then do you wait until your full retirement age? Or wait until 70? In another episode, we'll be covering that in more detail. So I'll just leave it as a kind of big picture. 

And then if you have money in deferred comp, and drop, what do you do with that money? How do you structure the structure to grow? Or do you start taking income immediately on some of it or all of it? Or do you break it up in this account? I'll take income today to fill the gap until I get social security. And the other many I'll let grow until I'm forced to take it out under the required minimum distribution laws at 72. So a lot of it comes down to how well you've saved what is in is a taxable or non taxable. What are your income needs? And do you want to work?

Steve: So, John, I know there are a lot of a lot of moving parts here. And probably some of these, we need to come back to you. You've talked about drop a little bit. You've talked about Social Security, we probably need to cover this a little more detail is just from a high level. What are a few of the considerations around those two things?

Choosing the right plan for you

John: Well, the big thing is we see this every day that I choose to work with clients. Somebody will come in, just had 2 this week in fact. Okay, I'm trying to decide if I should go into the drop plan. So what's your hesitation? Well, because I'm not sure I really want to leave in five years. Because once you go in, you have to come out at five. And I've had a lot of people who have told me they regretted doing it. I didn't really want to leave. I love my job. I don't know why I did that. I guess you do. You saw an opportunity to have a big bucket of money, the largest chunk of money you have had in your life, and one bucket sitting there. So would you let the money drive your decision instead of focusing on what you really wanted in return. So it's not all about money, you have to have money, don't get me wrong. Nobody works for free. I don't, you're not nobody else's. But if you let money be the full driver, you might make the wrong decision. 

So my grandfather did that. He took option one, because that was the highest monthly benefit. He died. My grandmother lived to be two weeks out of 95 years old. So she lost all that income for all those years, all those years? So it comes down to what assets do you have? When do you want to work? When do you want to quit working? Do you ever want to fully retire, or say you know what, I'm going to retire and take all of my retirement income streams. But I still want to be productive. Now you don't have to work for a paycheck. You're not volunteering. I know people who do a lot of volunteer work at churches, some other nonprofit organizations, the key is just keep moving, keep moving. And then when it comes to social security, we'll definitely get into more detail there. Because there's a huge amount of moving parts there. We actually do workshops, and webinars, specifically own social security and medicare, that I would encourage people to tune into occasionally.

Steve: So John, what I'm getting out of all of this, I mean, this is now when we're on our third or fourth, one of the I think fourth episodes in this series. What I'm really getting from this is that this is a giant jigsaw puzzle. And sometimes it's got pieces from other jigsaw puzzles mixed in. And you've got to somehow sort it all out and turn it into the picture of what you want in retirement, and coordinate all of these different things. And I could really see for somebody, you know, you're an expert at this. 

Okay, so maybe I have something similar to the perspective of a client listening to this maybe where I just want it to be simple. And I just want to make a decision, because it's given me a headache, right? If you're listening to this, nod your head if you can relate. Because this is confusing. I mean, there are so many different options. Not just with all the different plans that that state employees might be involved in. And as you shared in the last episode, it depends on when you got into the plan. And when you are hired, there's all this complexity to it. And certainly Social Security multiple ages when you can begin taking Social Security. So there's decisions to make there, there's decisions around drop. I mean, it goes on and on and on. We haven't even talked about Medicare, we're gonna get into that. We haven't really even talked about rmds we're gonna get into that. I need to go find some aspirin.

John: Well, sometimes it gives me a headache. But two things. One, you made me think something somewhere in probably in a file somewhere, had this visual I had created a jigsaw puzzle. And it had on there as far as Social Security, Medicare, Dropped, Deferred Comp, 403b, IRA, had all these different pieces. And I was going to have that made into a puzzle that I could just give the people in a box here. Good, do your own plan. But you know, it's funny, because when you talk about the complexity, Steve, that's why a lot of people find their way to me and my team. nessa I don't do this, just charge me they do it for me to narrow down my options and get it done. Just make it happen. I'm tired of messing with it. I'm tired of dealing with product sales people who fix the damn thing. So I can enjoy every time. I get that on a regular basis. I say okay, here's my fee schedule. Here's what we do based on what I know. Here’s the fee, would you like us engaged? I go Yes. Take care of it.

Steve: Yeah, I can see that. You know this about me, I have a background in engineering. I don't know that I could sit down and figure this out or that I have the will to do it.

John: Well, first of all, we know you could do it. Everybody could do it. Let's be real blunt here. Anyone Listen to this. You don't really need me. You can do it yourself if that's what you want to do. But I'm the kind of person I'm not doing it myself. NASA ascribed to the same philosophy, instead of saying, How do I do this, I'm saying, who can do it for me or with me. So my deal is this, I only want to attract to me people who know they need help. They want help. And they want to be a partner in that I'm not doing it all for you by myself, you're gonna be engaged in the process, or we can't work together, we will do all of the work that needs to be done to get you ready. But also, you've got to make decisions. I can't make the decisions for you. But I can coach you and guide you and make sure that you're on the right path. I can do that. And I do that very well. And I love doing that.

Steve: Excellent. Well, John, we've got a couple of big topics coming up. Yes, we're going to talk about drop. And you're going to get in deep into that and explain that, that'll be our next episode in the series. And then after that, we're going to dive into Social Security. Because that's another deep topic. And we're going to get into that. And I know you do webinars on that on a regular basis. And when you could do in person seminars, you did those. And, you know, I know that you would fill the room with people curious about that. So I know, that's an important topic for folks. As we go forward in this series, we're also going to be touching on Medicare and how to coordinate that with everything and rmds. And lots of other topics that are going to be important, both to folks in the Florida retirement system, so that you can coordinate that with, with your FRS benefits, but also very important to people of any walk of life, who are thinking about and planning for their retirement because some of these topics are universal.

John: Absolutely. Especially Social Security, Medicare. And there's a lot of talk about social security right now. And both presidential candidates are accusing each other trying to destroy Social Security and Medicare and all this stuff. And what I go right back to what I say every time, you cannot worry about what they're doing. Everybody should go vote, as pay out the politics of you go vote for you, thanks best as your business. I'm going to focus on my personal economy. And if you choose to work with me, I'm going to make you stay focused on your personal economy. So that no matter what these knuckleheads do in Congress, and the legislature, you're secure in your retirement. Love it.

Steve: John, if folks have specific questions about anything we talked about today, how can they reach you?

John: They can call me at my office. Area code 850-562-3000. Or then go to the website, johnhcurry.com.

Steve: Perfect. And folks, that's where you can find all the episodes in this series. So if you're coming into this midstream, and you want to go back and listen to the prior episodes, we've we've talked about the FRS pension options in an earlier episode, we've talked about deferred comp and taxes and how the those kind of work together and what you need to know about those. We've talked about all sorts of things as we go through this. And in the next episode, we're going to jump into drop so stay tuned for that. You can find out more at johnhcurry.com click on the podcast link. You can subscribe to this in your favorite podcast app on your phone. And, John, thank you again. We're going to be back real soon with the next episode.

John: Look forward to it.

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.

2020-111910 Expires 11/2022

Tax Deferral — Everything You Need to Know

On this week’s episode of the Secure Retirement Podcast, we dive into the third episode in our series on the Florida Retirement System. Today we talk about an important topic that many people choose to avoid—  factors to consider while thinking about tax deferral. We also ask the important questions you need answers to before making your final decision.

“We're looking for opportunities to minimize tax. We want to avoid the tax, not evade the tax, because the difference between tax avoidance and tax evasion is about 10 years in prison”, says John.

We chat about taxes and their impact on your retirement, as well as: 

  • Questions to ask when deferring your taxes

  • A brief history of income tax

  • How a change in administration could affect your retirement

  • Whether or not income tax is really voluntary tax

  • And more

Listen now…

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John Curry's Secure Retirement Podcast. I am your host, Steve Gordon., and I'm here interviewing Mr. Curry on our ongoing series of episodes for members of the Florida Retirement System. So if you're a member of the Florida Retirement System, you definitely want to tune in to all of these. 

This is episode three. And if you missed the first two, you can go back and find those at johnhcurry.com or you can subscribe in your favorite podcast player, whether that's Apple Podcasts, Google Podcasts, Spotify, Stitcher, you can find it all there. And today, we're going to, I think, dive into an important topic and one that lots of people like to avoid. Before we get there, Mr. Curry, welcome.

John Curry: Glad to see you again. Steve. Thank you for playing host.

Steve: Yeah, this is fun. I tell you, I'm learning a lot myself. And I'm not a member of the Florida Retirement System. I think that's, you know, if you are listening to this and you're not a member, you will find, I think, a wealth of information here that actually will apply to you. Today's episode especially. So, John, today, we are talking about taxes. 

There is an awful lot of talk about taxes, these days in the news about should they be raised, are they going to be lowered? Who knows? I don't think any of us can predict what will happen in the political winds. And that's not really what we're here to talk about. We're really going to focus on taxes as they impact your retirement because as you've told me again, and again, they have a big impact. 

John: They do. 

Steve: So specifically, should you pay your taxes today or should you defer them into the future? 

John: Well, that depends. So here's a question for you. When you retire, Steve, will you be in the same tax bracket as today? Higher or lower?

Steve:  I gotta tell you, I'm really aiming to be in a higher one.

You May Not Realize, but You Want to Be in a High Tax Bracket

John: Very good. Good answer. correct answer. I'll have people come to me and say my goal is to be in the lower tax bracket when I retire. I say you don't need me. They go why? If that's your goal to be in a lower tax bracket, that means you have less income. That's not what I focus on. My job is to help you retire with as much income as possible, preferably at least what you were earning before you retire, not less. 

Why would you want to have more time in front of you, free time, but not have the money to enjoy it? Is that your idea of retirement? And it puzzles people because they've been taught, okay, when you're retired, you'll get about 50% of what you're getting with your pension plus social security. So you need to prepare yourself to settle for about 70% overall. I go, why? Why would you start there? Why don't we start with 100% or better? And if you can't get that, then settle. 

But why would you start there? And that's where the conversation starts. And then I'll ask, answer the question about the taxes. Tell me what your income will be when you retire. Tell me what the tax brackets will be. Have you looked at tax history? Nobody does. I don't do it much anymore but when I would do ongoing classes for CPAs continuing education, I would say Who can tell me what the top marginal tax bracket has been throughout our history of income taxes. 

Nobody ever got it right. They'd say 70%. The top bracket was 94%. And a little tax history. When I was getting my master's degree in financial services, we had one entire course, not a class, the entire course, just on the history of our income tax. Very fascinating. Tough course, but it was fascinating. 1913 was when we had the first illegal income tax in our country with the passage of the 16th amendment. Do you know what the top bracket was in 1913? 

Steve: I have no idea. 

John: 7%. Seven. And to get there, you had to earn $500,000 a year in 1913. So we were told, they were told, we weren't alive, that the press said headlines temporary tax. And it was. It was 7% for three years. In year four, they raised it to 15%. Why? Well, they needed more money to finance with things like World War One. Tax rates went up. It was crazy. 

Then you're in a great depression, tax rates for 25%. If you go back and look at, and this is data from IRS, this is not something I made up. You go to IRS website and see the history of the taxes, the brackets. So I find it interesting when people talk about let's go tax the high-income people, the wealthy people. If you look at the same charts I see, yeah, the tax rates went up higher for those folks but guess what, the tax rates came up for everybody. Everybody. Maybe not as severe but they still came up. 

And even though Ronald Reagan in the 80s pounded congress to drop the top bracket from 50%, down to 28, that was helpful. However, just because the tax rates dropped to 28% does not mean that we paid less in tax. Most of us did not pay less tax. Why? Because they were controlling the levers, they dropped the tax bracket but they took away deductions. They took away the interest you could deduct on your car loans before, department stores, credit cards, all that was deductible in the past. 

They took it away. It was phased out. So when people start talking about well, the tax law says this or this. I'm not a tax attorney, I'm not a CPA. I do have a Master's of Science in financial services, but I read and study this stuff, but I don't hold myself as being a tax expert. But I do enjoy reading it, studying it, understanding it and teaching it as much as I can. But I am convinced that if we really understood what's happening to us, there'd be another revolution and we'd say no, no. Another Boston Tea Party. I'm not paying that tax. And by the way, do you know that your income tax is called a voluntary tax, by the way? Does it feel voluntary?

Steve: Last I checked, it wasn't voluntary. 

John: It's interesting. So I say all that to set the stage for, answer your question. Should you defer? Should you defer? And it comes down to a lot of factors. What will your tax bracket be? What does the tax law allow you to deduct or not deduct? The new tax law, they came into play a couple years ago, made big changes because now the first $24,000 of income for married couples is not taxed because of the standard deduction being doubled. So that is set to sunset in 2025, that could go away. 

Every time you have a change in administrations or parties for sure, you'll hear a lot of arguing and bickering about tax rates. And people ask me every day that I see clients, what will my taxes be in the future? I have no idea, nor do you. Nor do you. I said however, I hope that with the planning we did during the maximum tax bracket and we're looking for opportunities to minimize the tax, avoid the tax, just don't evade the tax because the difference between tax avoidance and tax evasion is about 10 years in prison. So let us not evade, let's just avoid. 

Steve: That's right. So I know folks who are in the Florida Retirement System, and frankly, folks who are planning for retirement in any way, have some options. There are plans where you can defer your compensation, you can defer tax payments, all of that. Walk us through what some of the options are and what people need to be thinking about.

Choosing the Best Option For You

John:  Well, the most basic one is something called a 457 deferred comp, deferred compensation plan. Most state employees are familiar with it and will use it. So the question becomes do I set aside money for retirement, where it's coming out of my paycheck automatically, you cannot write a check and mail it in. It has to be a payroll reduction is where the law says. So I can have $100, $500 come out of that and be invested. And the state of Florida has different companies that they've chosen to be sponsors of the deferred compensation plan. 

So the employee can do that. And then when they come out of that plan in retirement, every dollar they take out is taxed. Now let's talk about the different plans that are out there for all of us. So, members of the Florida Retirement System, state deferred comp for most of them. There are exceptions. People who are in a school system and the university system and community colleges have something called a 403B plan, tax-deferred annuity. Now it's called tax-deferred arrangement because it's not just annuities anymore. You can also use mutual funds. So those are the two that you see in the school system and in the state government. 

Or people on the street out there, I call them civilians, like us, they can have 401K's and IRA, or if you're self-employed, some type of SEP plan, simplified employee pension plan. So any of those same guidelines, you put the money in today, you pay no tax on that contribution until you take it out. And people think that's a big deal. great deal. Well, it is if you are in a lower tax bracket when you retire. If you retire and all of a sudden you're in the same bracket or higher, maybe that was not the best strategy. Maybe you'd been better off taking the money, pay tax on it and do something else with it. Was there something else? You could have a Roth IRA. 

I'm surprised at the number of people who don't use Roth IRAs. Their mindset is, well, I'd rather save the taxes. And I have news for you, you're not saving taxes, you are deferring the tax. And I'm guilty of it myself. Yeah, I put a lot of money in my 401Ks, but I made sure I have a Roth IRA and also have life insurance that builds cash I can use in the future. So I paid the tax, bought the insurance because it allows me to do other things in retirement that if I don't have insurance, I can't do.

Steve: So John, what are the other key issues people need to be thinking about when it comes to these tax issues?

Figure Out When You Want to Start Receiving Retirement Income

John: There's a bunch of them, but I'll just cover a couple of right now. First one is when will you want the income? The law, federal law requires now that you have to take a required minimum distribution at age 72. The old law said 70 and a half. They just changed with the Secure Act at the end of 2019. So let's suppose Well, I'll be 68 in December, so let's suppose I retire, pretend I'm in the Florida Retirement System and I've got a quarter of a million dollars in my deferred comp account. 

When do I want to take income? Maybe I take income immediately, maybe I defer it to 72, and then take it. But the laws are very clear on this. If I have deferred comp and an IRA, I have to take it from both. If I have four IRAs, I can take my distributions from one if I want to let the others continue to grow. 

But if I have a 403B, 457, and an IRA, then if I leave them in that status, I have to take money from all. That may not be the best way to do it. We may want to have some money, some accounts giving you income today and others growing as much as possible. And that comes down to when you need the money, when you're willing to pay tax on it. You know, how are you structuring your money? Are you leaving it behind primarily for family members or you gonna spend it all yourself during your lifetime? 

But the key for people, especially in the Florida Retirement System, is to coordinate all savings and investments with whatever pension option you chose. It's very important to do that. And you and I have talked about this from time to time, I believe in talking about the good, the bad, and the ugly with anything we're doing. What does that mean? Too many times people will tell us what's good about something, they never tell us what's bad. And I always like to ask the question, Well, tell me what's ugly about it. 

They go What? Okay, don't just give me the good stuff. Tell me everything. So if you work with me, you're gonna hear it all. The good, the bad and the ugly. I call that the Clint Eastwood method. Remember, the movie, The Good, the Bad and the Ugly? But I think it's just important to understand that if we look back at our tax history and when the tax rates went up, it was because Congress was spending a lot of money on various presidential administrations work. 

And money had to be collected in the form of taxes to pay for that stuff. If you look at what's happening in our environment today, I don't see how any reasonable person, any reasonable person could say that our tax rates won't go up. I believe during my lifetime, I will see tax rates back to 50% if not higher. Maybe 70% because there's a lot of pressure to collect more. At some point, tax rates have to go up because the members of Congress are not willing to make some of the tough decisions that had to be made because they're worried about not getting reelected.

Steve: You know, as folks are looking at their different options and are in different plans, is there anything in particular, they need to know about the difference between, for example, 457 and 403B and all these other things? Or are those not as critical?

John: I think they're critical if you happen to have a choice of having both. I find some people who had 457 plans and 403B. It really comes down to the company of choice that's offering those plans. When I meet with people ask those questions, tell me what you're trying to accomplish. Are you looking for growth at all costs? Are you looking for what I like to call a moderate growth? Are you looking for absolute guarantees? What are you trying to find? 

And because I'm not licensed with these particular companies, I can't give specific advice on those particular plans because securities regulators are pretty tough on advising on something that you don't have the right to be doing. So I don't do that. But what I can do as a blanket, big picture is look at everything with you and say look, see, this might not be just right for you. Why don't we call your other guy and find out? Or you call if you want to. But if you're under my care and I'm doing the planning, I'll help you with it.

Steve: Very good. Well, John, any, any other issues folks need to be aware of? Any final thoughts before we wrap this one up?

Keep an Eye Out for Changes in the System

John: I'll tell you what I thought about doing one time then decided not to because the rules changed so much, I thought about getting into contribution limits and various rules. I think I'll just leave that out, Steve, because by the time someone hears this, the law may have changed. You know, the rules change. They're changing constantly. 

And for those people who say, well, not for me because I'm in state government, there was a major change back in July of 2011 to your pension plan. And if you haven't gone and looked at the plan summary document, I'd recommend you do that. Pay attention to it and go to their website occasionally at the Florida Retirement System and just see what's going on. See what the legislature is up to.

Steve: Very good. And if somebody is curious about that and just wants sort of have their hand held through it, will you do that for them?

John: Absolutely. And I would encourage people to start. Just, if you're not sure, just start with a telephone call. We have telephone appointments. 20, 30 minutes with someone, find out if there's a fit and then we'll sit down together. Sometimes that's face to face. Sometimes it's over the computer online meeting with a telephone call. But absolutely. I enjoy having conversations with people. You know, I tell people I grew up in a state employee family, you know, my dad worked for the state and my granddad worked for the state. So if I can help people, especially FRS, I love doing it.

Steve: That's fantastic. Well, John, I know we're, the next episode we're doing here in this series is maybe one of the most important ones. We're going to talk about what age to retire. And so I'm hoping you're gonna tell me that I can retire at age 50 because that'll be my next birthday. Probably not going to tell me that, but I'm hoping. 

And I think everybody else listening is probably wondering, well, when can I retire? So we're going to talk a little bit, folks, about how to approach that decision and some of the factors that go into, or ought to go into your thinking there. And I think that'll be Fantastic. John, for folks that have listened to this and have some questions, how can they get ahold of you directly?

John: Well, they can call my office at 850-562-3000. 850-562-3000. Or visit my website at johnhcurry.com. That's johnhcurry.com.

Steve: Very good. And, folks, if you're looking for the other episodes in this series, go to johnhcurry.com, click on the podcast link and you'll find them there. And you can also find them in your favorite podcast app. Be sure to go in that app and give the podcast a five-star rating. I know John would be happy about that and it'll help some other people find these episodes. And we hope that there'll be valuable both for you and for folks that you know. So stay tuned for next time. We're gonna talk about what age you're able to retire.

John: Plus they'll be other stuff in there too. 

Steve: Awesome.

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.

2020-110012 Expires 10/2022

Funding Your Future: The Choices and Their Implications

On this week's episode, we speak about properly planning your secure retirement based on your personal financial situation. John explains the four FRS options, what they mean, and how each is designed to suit a specific situation.The discussion, while aimed specifically at members of the Florida Retirement System (FRS), gives valuable insights to anyone in the process of planning their retirement. 

“Some people choose one of the four options in a vacuum. They're all good, but they're designed for different purposes. Now, the challenge is taking those four options and coordinating that with Social Security, your deferred comp, your IRAs, drop money, savings investments, and your life insurance. All that has to be reviewed as a total package in order to have a comprehensive retirement plan that will last you for the rest of your life. That's what I want to make sure that anybody listening understands. This isn't just about which of these options you take, it's about the total picture,” says John.

We chat about secure retirement plans, as well as:

  • The four Florida Retirement System pension plan options

  • Making an informed choice

  • Scenario planning: how long does your pension need to last?

  • The difference between pension and investment

  • When contributing to pension is not in your best interests

  • And more

Listen now…

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John Curry's Secure Retirement Podcast. My name is Steve Gordon and I am the temporary host. I'm here with Mr. Curry himself in the flesh. And we are in our second episode where we are going through some specific planning around the idea of retirement for the Florida Retirement System and members of the Florida Retirement System. If you're in the Florida Retirement System, this is going to be specifically geared to you. 

If you are not in the Florida Retirement System, you are going to gain things out of this that I think will be valuable for you as well because many of the topics that affect FRS members also affect everybody that's going to retire. And so if you missed that very first episode, you can go back and listen to that on John's website, johnhcurry.com or in your favorite podcast player. So, Mr. Curry, good to see you again. 

John Curry: Good to see you, Steve. 

Steve: So today we are really kind of diving into the meat of things. And we're talking about the FRS pension options. So set the stage for us. What are we going to cover today? 

The Four FRS Options

John: I always like to start with the basics. There were four options under the Florida Retirement System pension. There's a lot of confusion about them. There's a lot of changes that have happened over the years in 2011, legislature made some more changes that impact people. But I'd like to start with the very basics and just share some tidbits of information that many people don't know. The Florida Retirement System was actually created back in 1970. At that time, the legislature brought all the existing plans together. 

There was something called the Teachers Retirement Plan and the State Employees Plan. So they just merged them. At the time it was contributory, meaning you had to contribute some of your own money. 1975m it became non-contributory, meaning the state of Florida totally funded everything. And I remember talking with people that I've known for years in the Florida Retirement System, including my dad, saying, Wow, this is fantastic. 

You know, I don't have to make, pay anything into it. And then in 2011, that changed and employees now have to contribute 3%. And then the state contributes their portion, which we'll get into later. But I find it interesting that it's been years, I mean, many years since I had anyone who had taken the time to read and study and really understand their pension. 

I'll have people come to me, Steve, within six months of retirement, they've never read the FRS employee handbook, they've never read the plan, just some of the description about the plan. Now, I know I'm a little unusual because I eat, sleep and drink anything related to retirement. I do. I admit it. I'm a geek about it. But I would think that if either take the time to learn it or go find somebody who knows it inside out and hire that person, or persons to help you. So I love this. I have a passion for it. 

And I touched on it last episode, but I'll hit it briefly today. My grandfather took option one. So I'm gonna explain option one. Option one is the maximum benefit. You get that check for as long as you live, the day you die, it dies with you. So my grandfather died, that pension died, my grandmother got no more money for the rest of her life until she was almost 95. So that's an expensive option if you don't live a long time. Well, I'll cover all four and I'll come back to that. 

Option two, a little different. It also is a lifetime benefit but it has a 10-year guarantee. Life to the employee, 10 years to the beneficiary. So had my grandfather taken that one, he died about five years into retirement, my grandmother would have gotten the income five more years and then it would stop. Option three is joint with 100% to the survivor. That's what my dad took. My dad took that option, so it's less income, he had about 15% less income than he could have had with the top one, maximum. 

Steve: I want to stop you right there and talk about this a little bit because I know that the experiences of both your father and your grandfather really are what drove you to do what you do today. As I listened to it, it sounds like your grandfather took one option, your father probably looked at that as an example of what not to do and went completely the opposite. 180 degrees. 

John: He did. Totally opposite. 

Steve: And that was a little bit problematic as well. And share a little bit about that story and maybe why just looking at the surface can create problems. 

1, 2 or 3? 

John: Well, I'm gonna be as simple and direct as I can. My grandfather saw option one as being the maximum of money and he simply said, I'm healthy, I think I'll live a long time, I'm taking the maximum and he didn't give a whole lot of thought to what happens when I die. He had very little life insurance, less than 10,000. So he had a different mindset. Some people have a mindset, I'm absolutely going to protect the people that I love and care about even though I get less money. My grandfather didn't have that mindset. 

He was like, hey, dammit, I want every dollar I can get. My dad had a different mindset. When he saw and he had to reach into his pocket and help his mother every month, along with his brother, he said, I do not want my sons to have to do that for their mom. So he settled for less in order to guarantee her lifetime income. So it comes down to a mindset fee. And also, are you willing to listen and take advice? My dad and my grandfather were very stubborn men. They didn't take much advice. And they were skeptical. And so they didn't get the advice that they could have gotten.

Steve: Well, you know, the way you describe that, it makes it sound as if one of those two options is just inherently better than the other. And I don't think that's necessarily the case. 

John: It's definitely not the case because maybe I have enough resources that I can take the option. So back up. If my grandfather, let's suppose the head just a big old life insurance policy in place when he retired, he could have taken the maximum benefit knowing that if he died two days later, that the life insurance would take care of my grandmother. He didn't do that. Now somebody does not have life insurance, they don't have a lot of savings or investments, then maybe taking option three is better. So in my dad's case, he made the right decision. It could have been better, but he made the right decision based on what information to hand. 

Steve: But I think that's what I want to make sure that anybody listening understands is that it isn't just about which of these options you take. It's about the total picture. And so that's what we're really going to get into. 

John: Absolutely. And we'll talk about it some today in the sense that I this episode because some people choose one of the four options in what I call a vacuum, okay? Which one is the best? Well, neither is the best. They're all good. They're designed for different purposes. That's why they're there. 

But now the challenge is, how do we take those four options, coordinate that with social security, your deferred comp, your IRAs, you know, drop money, if you have that, savings, investments, your life insurance, all that has to be reviewed as a total package in order to have a comprehensive retirement plan that will last you for the rest of your life. Most people listening to this when they retire, they'll probably live 20 to 25 years or longer in retirement. We're living longer, so what if you live 30 years in retirement. Plan better work. 

Steve: I think everybody would agree. It better work. So get us back on track here because I, thank you for kind of pausing and clarifying that but get us back on track with the pension options. 

Long Term Planning for Yourself and Your Family

John: Okay, let me just summarize them real quick. So option one is life only. Meaning, if I take that option, I get it as long as I live. Live to be 100 years old, I get that check. And depending upon when I entered the Florida Retirement System, I might have a cost of living benefit. At one time, it was just a flat 3%. July 1, 2011, that changed. If you are a new hire coming in, you don't have a cost of living benefit in retirement. I find people don't know that. Sure, I have it. No. Read the plan document. If you were hired on or after July one of 2011, there is no cost of living benefit for you when you retire. 

People who have been there for a while instead of getting automatically 3%, it's been scaled down. So I just met with a client yesterday, 2.4% will be his cost of living benefit based on a factor. So each of these options will have a cost of living benefit. Prior to 2011, nothing ever. So option one, get that check for life, the day I die, nothing. The only thing that would come back to my family would be any contributions I've made into the plan. Option two life also for as long as I live, but 10 years guaranteed to the beneficiary, typically a spouse. 

So I'll live five years, I die income continues five more years. And again, if I die, 10-year guarantee but nothing after the 10 to the beneficiary. I've had people say I'm not taking that option. My dad said I'm not taking that option because I only get it for 10 years. I said, dad, that's not accurate. You get it for life. Mom is the one that will be hurt after 10 years. He didn't know that. And then option three is called joint life with 100% to the survivor. So my dad took that option, so the check he was getting lifetime. 

The day he died, that same dollar amount continued to my mother until she died. When both die, there's nothing left. So it's all gone. Because the state of Florida is investing that money to guarantee income streams for two lives. And then the fourth one is joint life with two thirds. A lot of confusion on this one. So the two thirds, I get the check, I die, my wife gets two-thirds of what I was getting, okay? What people don't know, is if the spouse dies first, you also are reduced down to two thirds. 

I've had people come to my office angry, you know, the state of Florida misled me, division retirement misled me. I said, No sir, they did not. It's in bold print right there. What happened is this, you saw that that benefit was greater than option three, less than two and you locked on it and took it thinking that upon your death, she gets to live on less. But you didn't ask the other question. If she dies first, can you live on this? And it's pretty sobering when you have to have that conversation. Maybe I can help you. 

Maybe we can do a little rescue plan here, talk to him about your other assets. But those are the four options. And some people say there should not be a pension plan. And I'm convinced that the day is coming when you're going to find that more and more pressure is going to be on the states to get rid of a pension plan and have more of what we have now with the FRS investment plan. So a new hire, you're hired today, you can do the pension plan or the investment plan. 

If you know you're not staying until you're vested eight years, you might want to take the investment plan because I'm leaving in a year or two and not do the pension. But corporate America went there a long time ago, back in the 80s. They said wait a minute, we're gonna give up the pension plan and have a defined contribution plan called a 401k. And all retirement plans come under two categories. It's either a defined benefit plan, like the FRS pension or a defined contribution. 

Let's spend a minute on that. And defined benefit is based on a formula based on number of years of service, what was my income and a factor. So I get a percentage of my income paid out to me. A defined contribution plan, like the FRS investment plan, or a 401k, that's different. That's based on how much money went in. And whatever chunk of money is there at the end of the rainbow, I, the employee have the pressure and the burden of handling that to make sure it lasts me forever. So the pension is good because it takes away all of the investment decisions for you. 

Because the State Board of Administration does all the investing and they're responsible for backing up the income. Now, 2008 pension, all pensions took a big hit. Today, there's worry that pensions are what we call solvent. Are they actuarially solvent, meaning can they meet the obligations into the future? And I can't speak for the state of Florida. I can't speak for the State Board of Administration. But I think they're doing a good job. And I think people who dig deep into it will see that our pension plan for our state employees in Florida is better than most. Very solid. 

Steve: I'm sure that'll be comforting to people who listen to this. So as we look at the various options, is there anything else people need to know? Anything else you want to cover here today? 

Making Sure the Plan is Solvent

John: Well, just a little bit, not much about the contribution. I have people who come in and they're angry that they're having to contribute 3% to the pension plan. And I'm trying to help people understand. Personally, I think we all should have to contribute. You got to have a little bit of skin in the game. That's the way I see it. But it's so easy if you've not done something and all of a sudden you have to pay into it, we complain. 

And we all do it, you know? But just understand that that's just another way of making sure the plan is more solvent to take care of not only you but the people behind you. It's important. And I would say this, final thoughts on this topic will simply be I have in front of me right now, the plan document. It's very complicated. I mean, there's formulas for it. What percent do you get when you retire? You know, should you retire early? Should you wait until the maximum? 

And it's not unlike social security. We'll get to that. But I would simply say, Steve, that it's not just looking at four numbers on a piece of paper when you get your estimate, and say Oh, I'm going to pick this one. You can do that. I think that's a mistake. It should be part of a comprehensive retirement income plan, not just a retirement plan. And I like to do what I call a retirement rehearsal for my clients. We take every stream of income you got, we put it into our model, we project you out to age 100, and see how it works. I think that's a better approach. But each person has to make their own choice. 

Steve: I want to do two things here before we wrap up. One, I want to give folks a little bit of a preview for what's coming next. And I also want them to know how to get in touch with you if they've got questions. So, what do we have coming next in the series? 

Coming Soon...

John:  Well, I think the next thing we want to cover is going to be should you defer money. Should you be in the deferred compensation plan, sometimes called a 457 Deferred Comp, or 403 b if you're in the school teacher of the university system? I think it'd be fun talking about what happens in the future. You know, we're all programmed to think that when we retire in a lower tax bracket, so I'm going to talk about some of that. 

Okay, great. That's perfect. So we'll cover that next time. Where can folks get a hold of you if they've got questions? Maybe they're having to make these decisions right now? Well, they can reach me at my office at 850-562-3000. I'll repeat that, 850-562-3000, or the website, johnhcurry.com. Johnhcurry.com. 

Steve: Perfect. Well, my friend, thank you again for sharing a little bit of your insights and wisdom with us. And we will be back folks, with another episode in this series talking about deferred compensation. Doesn't get any more exciting than that, does it? 

John: Well, it's nice to have the compensation. And you're going to need it deferred so you can enjoy it later. 

Steve: That's right. That's right. All right. Thanks, everyone. 

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 and 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. 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 undertaken 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 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.

2020-110011 Expires 10/2022

Concept First — What Does Retirement Look Like For You?

This week’s episode of The Secure Retirement Podcast marks the beginning of a special series focused on the specific concerns of members of the Florida Retirement System. However, the key topics covered in this series will still relate, in principle, to any retiree, regardless of whether they are a member of the FRS. 

“I have clients from across all walks of life— doctors, lawyers, business owners, and we all have something in common. All of us. And that is: someday, we have a vision of retirement,” says John. 

As always, with this series, John uses practical knowledge gained through 45 years of experience in retirement planning to provide insight, not only to members of the FRS, but to other retirees and those planning their retirement, so that they can retire with a sense of financial security.

We chat about why John specifically wants to help members of the FRS, as well as:

  • His retirement planning principles

  • Concept first— what does retirement look like to you?

  • What working with a retirement planner looks like

  • And, what to expect from the rest of this special series

Listen now…

Mentioned in this episode:

Transcript

Steve Gordon: Welcome to John H. Curry's Secure Retirement Podcast. I am not your normal host, but I am standing in for the host. My name is Steve Gordon and I am actually here to turn the tables on Mr. Curry. 

And we're going to do a special series here on the podcast, really focused on the specific concerns of members of the Florida Retirement System, but even if you are not a member of the Florida Retirement System, what we're going to cover here actually will apply to you in principle and certainly worth listening to as we go through, we're going to get into really all of the key topics that affect everyone related to retirement. And I know this is going to be a real great service to folks. So before we dive in, I first want to welcome your normal host and my guest today, Mr. Curry. John, welcome.

John Curry: Hello, Steve. Nice to have the tables turned.

Steve: Yeah, I know. 

John: Literally. 

Steve: Right. Well, I'm excited for this. We've been planning this for a little while and, you know, I think your wisdom in these areas really gonna be helpful to a lot of folks. You've been working with members of the Florida Retirement System for

John: 45 years.

Steve: And so, you know, you have a lot of experience. You know, as I always like to tell my clients in my marketing practice that, you know, I've created 1000 marketing plans, you're only ever going to do one. Same is true with retirement plans. You've probably seen thousands and people listening to this only really ever get to do one. So you've seen all the variables at play. But I'm curious, why the specialization in the Florida Retirement System and why this particular series? Why do you want to do it?

Why John Chose Retirement Planning

John: Well, it goes back to my grandfather. When my grandfather retired from DOT out of Phoenix Springs, Florida he chose option one with the Florida pension option thinking he was going to live a long time. When he died shortly before he turned 72 years old. My grandmother lived to be 94, two weeks shy of being 95. 

She lost that pension. So all those years, 20 something years, 27 years, I think it was, she had no pension. All she had was a small social security check. And you fast forward to my dad, my dad worked at the same place my grandfather did. He saw what my grandfather did and said I'm not making that mistake. So he chose option three with the state of Florida pension. 

He retired at 62, died at age 85. So 23 years he got that check, reliable check every month. And it was designed that when he died, the same check would continue to my mother. So it did exactly what it's supposed to do. She lived another year and a half and died. So I realized that they could have made better decisions had they had the information that I had. But over the years, they were both stubborn. They wouldn't listen. What do I know? I'm just a grandson or son in my 20s at the time. 

So that's what got me focused on specializing in the Florida Retirement System and members of the Florida Retirement System. I have clients from across all walks of life, you know, doctors, lawyers, business owners. We all have something in common, all of us. And that is someday, we have some vision of retirement. Now, mine is that I never fully retire, it is that I continue doing what I'm doing with people I want to do it with but when I want to do it. So I built retirement into it. But for some people, they truly want to retire. 

But for these two men, I saw what happened. And I saw what could have been better. And then a friend of mine who's a professor, retired now in his 90s, 95 years old, one day he came to me with a big box of stuff, dumped it on my desk and said I need your help. Help me. I said I don't know all that. He said please walk through it, learn it, help me. Those two scenarios, grandfather, father, and then later in life, this fellow friend, client asked me for help. I realized right then, that was it. It was like a calling. I had to do it.

Steve: Well, I know you've really focused in this area. And there are some unique challenges. But before we get into those, one of the things that I know about you as you approach this entire idea of retirement planning with a set of principles in mind. Can you walk us through what those principles are? 

Retirement Planning Principles

John: Absolutely. The very first one is protect what you have. I hear people all the time asking me to invest your money in ways that are too aggressive, so I can do that. But what happens if you lose 38 percent, like in 2008 when the market crashed and the s&p 500 was down 38%? So what if I take your money today and I promptly lose that? How would you feel? 

That would hurt. You might not recover from it because the five years leading up to retirement and the first five years of retirement are critical. You lose money then, you're in trouble. So number one principle is protect the asset. Number two, grow the asset. And number three, at some point, make sure that asset will pay you income that's reliable, preferably guaranteed reliable. But those are the concepts I'll look at. 

And I also look at planning comes first, before you go look for products. Just had a guy call, he wants me to do, focus on life insurance for him. I said I'll do that, but would you mind if we just do the planning first? Because I don't even know what kind of policy to get you. But some people, they gtt their mind so made up. I want this and only this. And, you know, you try to respect that but at the same time, it'd be like going to your doctor and you say, Hey, Doc, I need some penicillin. And what you really need is amoxicillin.

Steve: Break that down a little bit because, I mean, it sounds simple enough. Yes, you have to plan first. You sort of have this, this idea of concepts first. So, what does that mean?

John: Well, the details don't matter if you don't buy the concept. Agree? If you don't like the concept of retirement in general, then why should I get deep into the details? All I'm gonna do is confuse you or frustrate you. So let's first get an understanding of what retirement means to you. In the worksheets I use, what's your vision of retirement? And most people can't answer that. They're like, I don't know. Well, why would you retire if you don't know what you want to do? Let's get some clarity because my job is to bring some clarity, some leadership and competence to the table for you. 

But if you don't have any clue as to what you want in retirement, why would you want to retire? And they go, Oh, good point. So the first concept is, let's understand what retirement is. And if you agree, we got to work on what that looks like, then we start the planning process. But it first starts with what does retirement look like? Your vision, not mine. I know what mine is. Mine's nailed. I'm retired now, to be honest. You know, I collect social security, two pensions. I work, Stev,e because I want to, not because I have to.

Steve: I watch you. You and I know each other pretty well. I know you work because you enjoy it. It's fun. And you love getting up and helping people. So concepts first, I get that, and then you roll into the planning. And then you touch briefly on the different parts of that protection, growth, income. And so paint a picture. When a typical person comes in to work with you, what is that interaction? When you take somebody through this, what does the interaction look like?

John’s Planning Process

John: Well, the first thing is we, I tell everybody, we're going to invest about an hour, hour and a half together in our first meeting. We're gonna get to know each other. I'll ask you questions, you'll share with me your financial data. And we'll determine number one, are we a fit? I have no false delusions, I'm not for everybody, okay? Some people should do it themselves or find somebody else, but the ones where we're a fit, then we will engage and go to work. But the first thing that I walk them through, our planning process. We look at everything they've got. Something as mundane as car insurance and homeowners. 

And I've always had people ask me, Why do you care? You don't sell those products. I don't sell those products. But I don't want you to be my client and get hurt because something was overlooked. So I look at everything. And then I'll refer you back to the appropriate person. If I find that your deductibles or your liability limits aren't right for you, or think they aren't, I'll send you back to your property casualty agent, because I'm not licensed in that area so I'm not going to give you advice on it other than to say, Steve, go talk with your agent. 

Here's what I think. Talk to them. Sometimes pick up the phone and call them right then. But we do the same thing. Car Insurance, home insurance, health insurance, which is a big issue for people in retirement. Many people continue working longer than they want to because they're losing health insurance. Legal documents, Again, I'm not a lawyer so why do I care if you have a will or not? 

Well, I don't want to do all the work for you and then upon your death, it all disappears because of lawsuits. And then, of course, we'll look at protection. What do you have in life insurance? How much life insurance should you have in retirement? And then we get into the retirement assets, savings, investments, retirement and liabilities. Do you have a mortgage? Do you have credit card debt? Car loans? How do you plan on handling that when you retire? And then we look at every stream of cash flow, money coming in money going out. We look at all of it.

Steve: I know it's, having gone through it myself, it's a comprehensive process. So we are doing a series here on different issues that members of the Florida Retirement System, and really everybody, needs to think about and pay attention to. As we wrap up this kind of introductory episode in the series, can you give us a little bit of a preview of what's to come?

Everyone’s Situation is Different and Should Have an Individual Approach

John: Absolutely. The, first of all, everything we're going to be talking about now applies to every person who has a job, with the exception of FRS pensions specifically, but everyone is going to have some type of retirement money in all likelihood. Either they have a 401K, a 403B, or they have an IRA, a SEP plan if they're self-employed. 

So those who are not members of the Florida Retirement System, you can just substitute those things. But number one for FRS members is, do you take the pension or the investment plan? If you're already in the pension, you probably want to stay there. Then we talked about does it make sense to defer money into the future with a 457 Deferred Comp Plan or a 403B plan? Many people have been told put money in these plans because when you retire, you'll be in a lower tax bracket. 

We're not seeing that. Most of the people I work with, they're in the same tax bracket, if not higher, when they come out of retirement, into retirement. Which pension option should you choose? I touched on that at the very beginning about my grandfather and my father. Too many people have just been told by well-meaning friends, take this option, that's it. It shouldn't be done that way. You may be in a position because of having other assets or life insurance in a place that you can take a different option than maybe your friend did. 

So I tell people, I'll listen to whatever you say but I'm going to design a plan based on what I know about you, present it to you, and then you get to vote, you decide. What age should you retire? Should you retire at 62? Should you continue working as long as possible? When do you want to retire? And that leads me to a discussion about DROP. Should I go into the DROP program or stay out of DROP and just keep working? 

Some people get into DROP and later they regretted it, Steve, because they said I don't really want to leave now. But if you're in the DROP program, in ten to five years, you got to go. And I've had people who are so anxious, made a mistake, I should not have done that. So that's an important decision. And then social security. Do you take social security at age 62, the earliest you can get it? Do you wait until full retirement age which is between 66 and 67, depending upon the year you were born? Or do you delay all the way to age 70 to get the maximum benefit? 

Again, well-meaning people will say take it at 62 because the system is going to be bankrupt and get your money as early as possible. Well, first of all, I don't buy into that. I did start mine at 66, time-valued money, I didn't want to wait until 70. Even though I'm still working, I saved the money, invest the money, sometimes I use it to buy, for life insurance premiums, but I didn't want to wait. And then Medicare, you have Part A, which you will automatically be enrolled in 65, then you have Part B. If you're still working and under a group plan, you can delay Part B until you actually retire. 

A lot of confusion on that. Also, a lot of confusion about what the premiums would be for Part B because many people are realizing they're paying higher than the normal Medicare Part B premium. At the time of this recording. It's about $140 a month. But you may have to pay, I call it a surtax because of your income level. It's called IRMA. And then the biggie is what do you do with all this money? The old law said at 70 and a half, you had to take a required minimum distribution. The new tax law under the Secure Act stretched that out to 72. 

But at some point, you've got to start taking money. And they're not doing that to guarantee you income streams. They're doing that to recover the taxes that you never paid. They meaning Congress and the IRS. So those are some of the topics that all of us will face. I believe everybody will face those. The only question is do you have a pension? Most people today don't. So if you don't have one, you might want to be asking yourself, how do I create one for myself?

Steve: I love it. Well, we're going to get into all of those topics. I think we're going to have a dedicated episode on each one as we go. And so folks, as you're listening to this, make sure you are subscribed to John's Secure Retirement Podcast. You can do that in Apple Podcasts. If you got an Apple iPhone, right there on your phone. If you've got an Android. you can do it right in Google Podcasts. 

And you can also listen to them on John's website. John, I know you'll be sending emails out to folks every time a new one of these episodes is released in the series. And so look for those emails as well. If you're not on John's email list, go to johnhcurry.com and get on his email list. And John, before we wrap this episode up and move on, I want to give you an opportunity to share any final thoughts. And I also would like you to share with folks how they can get in touch with you if they want to have a conversation.

Tend to Your Personal Economy First

John: Well, my final thoughts will simply be this, first of all, thank you for doing the interview for me. I've got the stuff in my head and you've told me over the years, get it out. And that's why I did the first book and we're doing another book also, so that'll be coming. But the final word would be simply this, pay attention to your own personal economy. There's a lot of anger out there today. There's a lot of divisiveness, there's a lot of worry and anxiety. Take care of your own economy. Take care of your planning. 

On the airplane, the flight attendants tell you if the mask drops, put it on yourself first. Same thing with your planning. Take care of yourself first and you'll be able to weather the storm just fine. And if you'd like to know more about my information, how to get in touch with us, the best thing to do is call the office at 850-562-3000, 850-562-3000. I would suggest people start with a simple telephone appointment, 20, 25-minute discussion. Or you can go to my website, johnhcurry.com, johnhcurry.com. And a lot of resources there, as you mentioned the podcast, but there's a lot of other good data there too.

Steve: Absolutely. Absolutely. Well, folks, stay tuned for the next episode in this series where we are going to cover the FRS pension and investment options. And we'll be back, I guess about two weeks with that next episode. John, thanks. 

John: 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 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 undertaken 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 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 in 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.

2020-110010 Expires 10/2022