Heading Into Retirement? How to Have More, Tax-Free Income

On this week’s episode of The Secure Retirement Podcast, April Schoen talks about the importance of tax diversification in retirement.

April discusses the three different types of retirement investments, offering examples of each type of account, how you can contribute to them, and their tax implications.

Listen as she explains: 

  • Tax-deferred accounts

  • Taxable or tax as you go accounts

  • Tax-favored accounts or tax-free accounts

  • How spreading out your retirement investments can help you keep more income in your pocket

  • How to use Roth IRAs in retirement tax planning

  • Permanent life insurance as a financial tool

  • And more

Mentioned in this episode:

Transcript:

April Schoen: Hello, everyone. Welcome to today's webinar on tax diversification in retirement. I am hosting the webinar today. My name is April Schoen. And we're so glad that you guys could join us today. Today, we're really going to be talking about tax diversification in retirement. It's going to be all about different types of accounts, and how you can use these different accounts to have more income in retirement. Very important. Before we get started, I want to go through a couple of housekeeping items with you. If you don't have it handy, go ahead and grab a piece of paper or a notebook and a pen. We're going to go through a lot of information today. It's going to be informative, upbeat, and so make sure you've got something where you can jot down some questions you may have for us. Maybe a little to do list on things that you think like, oh, I need to look into this and take care of this. So have a piece of paper and a pen handy. 

We will be recording today's webinar. And our webinars are then posted on to our website, as a podcast. So if you go to our website, which is johnhcurry.com, you're going to find lots of information there. You're going to find access to our podcast, where we do interviews with clients and people in the community about their experience, especially when it comes to retirement planning. We have recordings of our webinars that we do on all sorts of topics. And some of our webinars are us. Maybe it's John, maybe it's myself doing a presentation on a specific topic. So if you've never been to our website, I encourage you to go go check it out. There's lots of great information there. 

A little bit about us. So John is has been John Curry, and I are both advisors with North Florida Financial. North Florida Financial is headquartered in Tallahassee. And we were started about 50 years ago, a little over 50 years, we just celebrated 50 years last year in 2020. We've since grown, we have over 100 advisors now. And we span anywhere from Jacksonville, Florida, which is where I'm located all the way over to Louisiana, Georgia, Alabama, and down to Tampa. We have quite a big, great geographic area now, and we help clients all across the United States. So we're not just to this one specific area. Like I said, We've been in business for about 50 years. And there are a lot of lessons that we've learned about what works and what doesn't work for people, especially when it comes to retirement planning. And one of those things is on having tax diversification. 

So I'm going to walk you through that today. My plan is to kind of go through some case studies and talk about some different things. I'm mostly going to have a PowerPoint here for us today. But I might pull off of this and kind of pulled some out other information as we go to. So let's go ahead and get started on our presentation today. Before I do want to make sure that you, everyone gets to meet the team because we have such a wonderful team here to help our clients. So you've got John and myself. As I said, I am located in Jacksonville currently, although I'm from Tallahassee, and then we've got John Curry, who is also in our Tallahassee office. And we have a great team around us to help us support our clients. We've got Zac Hirschler,  Audie Ritter and Jay Wolfe. And I cannot rave about them enough that we just simply could not do what we do if we didn't have these great people. They have a servant's heart, and they're very caring, and they everyday go out of their way to help our clients. And so we're very, very grateful to have them. 

I do also want to make sure that you've got my contact information. I know some of you may have to get off the call early because that happens. And you know, today, hopefully we're going to wrap this up in probably about 45 minutes is where I think we'll kind of end up today. So not going to keep you here forever. When John and I did our live events, you know, back pre COVID. We would do live seminars in our office in Tallahassee. And those seminars were an hour and a half long, and we do them on topics like Social Security, Medicare, taxes, risks that you face in retirement and how to avoid them. And they, like I said, we're always an hour and a half. Don't worry, I am not going to keep you an hour and a half today. So we're going to get through this information and hopefully you find it impactful. 

So I've got my contact information on the screen. My number, the best number to reach me out. This is my business cell phone. And that's 850-544-8464. Like I said, I'm in Jacksonville, but I'm from Tallahassee, so I kind of bounce back and forth from working in Jacksonville, and also in Tallahassee, so my cell phone is usually the best number to reach me at. You, of course, can always email me, which is April_Schoen@yoursws.com, that's April_Schoen@yoursws.com. Easy for me to say. Okay, a couple of things that you can email over to me or someone on the team. One, if you've got questions during the webinar, we cannot have a chat box in the webinar. So if you've got questions that come up, feel free to email those over to me, I am going to try to check that periodically during the webinar, just to see if any questions come in. 

But if I don't get to your questions during the webinar, I'll make sure to get to you afterwards. You can also request a copy of today's PowerPoint, we get a lot of requests from people to get a copy of the slides. So we'll be happy to send that over to you just feel free to email and ask for a copy of the PowerPoint. You can also request a copy of John's new book, if you saw the email that I sent out yesterday. And some of you may not have if you had registered prior to yesterday. But John has a brand new book out. I've got a right here in my hand. It's called The Secure Retirement Method for Members of the Florida Retirement System. And there is an entire chapter on tax considerations in retirement. So a lot of the information we're going to cover today is in the book. And like I said, this is a brand new book, it's hot off the presses, we really haven't even announced it yet. We've just been talking about it a little bit on our webinars. 

So if you would like a copy of John's new book, feel free to email, send me an email with the preferred mailing address. And we will make sure to get that out to you. We are sending these out complimentary. The hard copy of the book, we'll send that out to you free of charge. It's also available on Amazon. So if you'd rather say hey, I'd rather get a Kindle version of it, you can go right to Amazon, and I think it's like $4.99 or something like that on Amazon. So you got a couple of options for how to get a copy of John's new book. Now, his new book is for members of the Florida Retirement System. So if you're in FRS this book is definitely for you. If you're on the call today, and you're not an FRS, you may be thinking, well, I don't need this book, because I'm not in the Florida Retirement System. There's really two chapters in the book that goes through the pension plan for FRS and goes into DROP. 

Okay, so it's two chapters that are really specifically for members of the Florida Retirement System. Everything else applies to anyone. Okay, tax considerations in retirement. When should you retire? When should you start taking social security? What about Medicare? What about required minimum distribution? Those are all issues that have had impact to everyone. So good, good information. Even if you're not in FRS. Another option to for sending an email would be if after today's call, you would like to set up a 25 to 30 minute Focus Session. A phone appointment for you and I just speak 25-30 minutes talk about what your goals and concerns are. And again, when we're doing first calls with someone there, those are also free of charge. There's no cost for our first meeting.

Let's roll up our sleeves and get to work. So today we're going to talk about different types of retirement investment accounts, how they're taxed. So there's really three different tax statuses of accounts that we talked about. Tax deferred, taxable and tax favored. We're going to talk about those. We're gonna talk about tax planning strategies, and then how to use Roth IRAs and permanent life insurance for tax planning. So we're going to walk through a case study on what that looks like. I do have a couple of disclosures for you. First and foremost, I am not a CPA, and I am not a tax attorney. So I do not give tax or legal advice. I do not make out to be like I said a CPA or a tax attorney. So what I'd recommend as we're going through things today, if you've got specific questions on your situation, you should always consult your tax and legal adviser. 

So again, today we're going to talk about the importance of tax diversification and retirement. And really the main thing here is how do you maintain your retirement savings, while paying less in income taxes. We don't want to have less income in retirement, right? We want the same or more income in retirement. But what we really want when it comes to taxes is how do we pay less taxes? So, because what does that mean, if you pay less taxes, it means you have more disposable income, more money in your pocket for you and your family. Now, while we know that there will always be taxes, it's hard to know what the changes and the tax rates may be, and how they could impact your retirement planning. Okay, and then on this call today, you know, we had over 85 people signed up for the webinar today. And I imagine that we have a wide range of people on the call. 

So we may have some people who are already retired, wondering, hey, how can I systematically and automatically reduce taxes over time. We may have some people who are close to retirement, maybe they're three to five years from retirement, and they've got questions about retirement, income and taxes. And then we may have people who are decades from retirement. So I want you to know that what we're going to go through today can help you, no matter which one of those categories you're in, either you're retired, you're close to retirement, or you're even decades from retirement. These strategies we were going to go through today could be helpful for you. So as I said, we don't know the tax rates are going to be in the future. Especially if someone's on the call, you're like me, I'm 37. So if you think about me retiring at age 65, I have no idea what taxes are going to be almost 30 years from now, it's just impossible for me to predict. 

So that's why I'm a big believer in tax diversification. Because when we have a wide variety of investment accounts, and different types of taxable accounts, it gives us options, it gives us flexibility, and it can allow us to actually pay less in income taxes, when we start to draw money from those for retirement. Which means more disposable retirement income for you and for your family. We're going to get into now and talk about these three different types of accounts, the tax deferred, the tax favored accounts, and we're gonna walk through each of these, and we're gonna talk about how you contribute, what are some examples of these accounts? And what does it mean when you get to retirement. So by far, the most common approach to retirement planning, is that we see as advisors is using a tax deferred account, like a 401k, a 403b, or a 457 plan.

I want you to think here, like traditional retirement accounts, okay, or traditional IRA, for example, these are what we find to be the most common. I'm not saying it's the most tax efficient, it's just the most common approach that we see as advisors. So let's talk about what is a tax deferred account, there's actually two different types. The first one we're going to talk about is the most common, and that is one that is contributions are made with pre tax dollars. So you put money in today, you haven't paid tax on it, it's going to grow tax deferred, you don't pay any money while it's growing. But then when you go to take money out of this account in the future, every dollar is taxed and it's taxed at the highest marginal rate. Okay, at that time, whatever your highest marginal rate, when you make the withdrawal is what that money is going to be taxed at. Here are some examples of these tax deferred accounts that are made with pre tax dollars. 401k plans, 403b, 457, traditional IRAs. 

These are all examples of a pre tax tax deferred vehicle. And again, the main thing here, it's great if you don't pay tax today, and it's great that it grows tax deferred, but the problem that you're going to run into with these is that every dollar that comes out is taxable. So what can seem like the best place to put $1 when we're saving money can be the worst place to take $1 when we're withdrawing money from our retirement accounts, or investment accounts. And we're going to talk more about that in a little bit. Okay, there are also as I mentioned tax deferred accounts, where you contribute with after tax dollars. So you pay the tax today, you put the money in this account, it's going to grow tax deferred, so you don't pay any taxes while it's growing. But then when you go to take money out in the future, the gains are what is taxed, okay, the gains become taxable, and they usually come out the gains usually come out first as these accounts. 

The example for this account would be a non deductible traditional IRA, and also a non qualified annuity. Those are examples of tax deferred accounts. Now let's look at tax favored and taxable. So taxable accounts. I call these tax as you go, these are just most people will, you may think of them as just an investment account, right? It's not in a retirement account, you've got an investment account, this is considered taxable the tax as you go, because these are accounts you get a 1099 on every year. Okay, so these accounts you contribute with after tax dollars, pay the tax today, and you've put the money in the account or in the investment. And then you may have to pay tax on it while it's growing. So for example, if you have interest payments that come in, dividend payments that come in, and you sort of realize capital gains, all of those create taxable events to you. Also, depending on how it's invested, I'll give you an example. If you're in mutual funds, you may have a high degree of taxation in your mutual fund. Because of all the turnover that's happening in mutual funds. 

All the buying and selling that's happening, that the the investment manager is doing inside that fun, can actually cause you to have a taxable event. So let me give you some examples of these. I kind of laugh at the first two right now. But examples of taxable accounts, money market funds and CD. Okay, so it's kind of funny because interest rates are so low right now, right? Incredibly low, we're almost having to pay the bank to hold our money for us. But if you do have money in a money market, if you have money in CDs, you're earning an interest on that money. And then guess what, you get a 1099 at the end of the year. And so not only do you get a little bit of interest but you got to pay tax on. Almost like adding insult to injury. Jay and I had a meeting with a client earlier this week, he has a very good liquidity. Has about $200,000 in a savings account at a bank. Supposed to be a high earning savings account. So we asked them, I said, okay, what were you earning on this account? And he said, oh, the bank even said it's embarrassing. .37 to .5% is the rate of return he's now getting on this high earning savings accounts. 

I think all of us can agree that that's not not hiring as what we're used to seeing on these types of accounts. So you've got money market funds, you got CDs, I will say here that there are strategies and things that we can do when it comes to money market funds and CDs to put you in a better position. So if that's you that just kind of rang a bell, and you said, oh, that's me, I'm kind of having the same issue where I've got money in CDs or money market, it's not earning a lot, what can I do with this, we do have some strategies we can talk about. I'm not going to get into those today, cuz I want to make sure I stay on, stay on my time with our webinar. But just jot that down to something you'd like to discuss with someone on the team. Other types of taxable accounts, you've got mutual funds. We talked about those earlier. Stocks, bonds, and real estate rentals. You know, with bonds, we're having the same issue right now with bonds because of low interest rates. So with with bonds, we really see two things that are happening right now. One very low interest rates. 

So bonds don't have a high yield, they don't have a high interest like they used to. And then we also have higher risk right now with bonds, because as interest rates go up, which right now probably won't be for another year or so. But when those interest rates do start to go back up and start climbing up, the value of our bonds will go down. So same, same thing here, I'll say if if you are sitting there saying hey, ding, ding, ding, that to me, this is something I've been thinking about too. Wondering about what bonds I have in my portfolio, then I would suggest you jot that back down. And let's talk about it on our 25 to 30 minute phone call. Because again, there are things you can do right now, to put you in a better position than where you may be in some of those categories.

Let's now switch gears. We kind of went through taxable accounts. Let's talk about tax favored, because this is where we're going to spend the majority of our presentation our time together today is talking about tax favored accounts. So I also call these tax free. These are accounts where you make contributions with after tax dollars, right? I pay the tax today for the money in the account. It grows tax free, you don't pay any tax while it's growing. And then you can pull the money out tax free as well. Okay, so this is really where going to talk about some planning strategies. Here are some examples of tax favored accounts. You've got municipal bonds, you've got Roth IRAs, 529 plans, cash value life insurance. I would also add HSAs to the list, which would be a health savings account. We're not going to go into too much detail about HSAs today, we do cover that a lot when we're talking about like our, we're going through Medicare, but if you do have an HSA, or you're eligible for an HSA, HSA, which is a health savings account, jot that down. 

And let's talk about that too, because there are some unique things you can do with an HSA to help provide you with a tax free income later. Now let's get into some tax planning strategies. So the accounts you choose to use for your retirement income will be that will depend on where do you think your tax rate will be when you retire? Okay. And there's a couple of considerations that we've got to think about when we're thinking about what will our taxes be in retirement? Two things. One, what's your income gonna look like in retirement? Is it going to be higher or lower, or the same as it is today? So again, what is your income going to look like in retirement? Is it going to be higher or lower or the same? Now, you may be saying, April, I don't know what my retirement income is going to look like. So a couple things, I would say, if you are on the call, and you are 10 to 15 years or less from retirement, we should look at doing what's called a retirement rehearsal. If you're about 10 to 15 years from retirement, we can really kind of pull together and look at a retirement income plan for you and kind of start pulling together what your retirement income streams are going to look like. 

And give you a baseline for that. If you're more than about 15 years from retirement, we can still do a baseline, it's just a little harder to kind of get those numbers. But there's definitely some things that we can do to say, hey, if you stay on the path you're on, this is what it looks like. And then we can kind of tweak it from there. So first of all, if you say I don't know, my retirement income is going to be, then that's the first thing we need to figure out. What will your retirement, what will your income be in retirement? The second question is, what will tax rates be when you retire? So right now, in 2021, we the tax rates that we have today are set to expire in 2025. The Trump tax cuts are set to expire in 2025. So I can tell you this, if nothing changes, if Congress doesn't make any changes between now and 2025, tax rates are going to go up. So we already know that. The other thing I want you to think about is what do you think will happen with tax rates in the future? Do you think that Congress will make a change before 2025? And raise taxes? I'm sure you know, right now, with COVID. And the pandemic, our government is spending a lot of money because our economy needs them to spend that money right now, to keep our economy up. Right. 

And so however, that money is going to have to get paid from somewhere. And I'm just going to be honest with you, we're probably going to be paying for that for decades. So this is another thing you got to think about the current landscape of the environment that we're in right now. Does that mean that tax rates will be higher in the future? And I believe it does. So two things when we're thinking about tax planning strategies. What will my income be in retirement? And will my taxes be in retirement? So if you think that you're going to have higher taxes in retirement, then what you want to do is you want to contribute more to tax favored account, like that Roth IRA, like that cash value life insurance, you want to pay the tax today, so that you can have tax free income later. 

Okay. I, some people, when we go through this, and we're looking at analysis, and we're doing the planning, we find that they're actually doing what's called reverse tax planning, where they put money in a tax deferred vehicle vehicle today. So they don't pay taxes today, to defer in the future and pay higher taxes in the future. We call that reverse tax planning. And another comment on this too, about your income and retirement. You know, I always said earlier, will your income be higher or lower or the same? As an advisor, I can tell you that most people their income is the same if not higher in retirement. I can also tell you, I have never had one person come to me and say, hey, April, you know want I really want retirement. I want my income to be lower. I want to have less income in retirement. Because let's think about retirement for a few minutes. What are you going to be doing in retirement? When everyday is a Saturday and a Sunday? 

Right when you're retired everyday feels like the weekend. And what do we do now on the weekend? We spend more money, we go out to eat, we go golfing, we go shopping, we go to the spa. We tend to spend more money on the weekends. And so we find that people do the same thing in retirement because they have more time on their hands. So again, I, you know, we're going to talk about what happens if you're, if your taxes are lower in retirement, you've got less income in retirement. But one, I do not find that to be true for most people, and nor do people want that. They want to have the same income, if not higher, in retirement. If you but again, on the other hand, if you did think that your tax rate will be lower in retirement, then you should favor tax deferred vehicles like that 401k, 403b, or 457 plan. You're willing to take that chance, right to say, hey, I'm gonna, I'm gonna take this chance on tax rates, and that's because I think my tax rates be lower than it is today. So I'm going to use these accounts and take advantage of the current tax deductions they offer. 

So I'm going to put money in, I don't pay tax on it, it's going to grow tax deferred, and then I'm going to pay taxes on those withdrawals in the future. So again, that's something you want to look at, if you think that your taxes will be lower in retirement. So let's take a closer look at these three different types of accounts, taxable tax deferred and tax favored. And let's talk about how they are taxed. So as you can see, the only type of account in this group where the owner receives a 1099 is that taxable account. Tax as you go. That's because those accounts again, generally have the owner pay some sort of tax on the proceeds, you know, think interest payments, dividends, capital gains. You can also see here that with tax, the vert account, owners will pay ordinary income taxes on the gain, but they do benefit from the tax deferral. And then tax favored accounts on our hand other hand are generally not taxable, you benefit not only from the deferral on the taxes as it grows, but then you also benefit from having tax free income when you go to pull money from those accounts in the future. 

So when most people think of retirement plans, they think of a 401k plan, or you think of that 403b or that 457 plan. But as you can see here, there are lots of alternatives for different types of accounts for retirement savings. CDs, mutual funds, municipal bonds, IRAs, which both regular IRAs, traditional IRAs and Roth IRAs. And there's also cash value life insurance. And we want to look at when we're thinking about where are we going to save our money. And this is one thing that John and I spend a lot of time with our clients on is having a cash flow discussion. So a cash flow discussion includes, how much are you saving on an annual basis back onto your balance sheet? How much should you be saving? And are you saving? And where should you be saving it at? Where's the most beneficial for you to have your money going back on your balance sheet? Where can your money be working at its highest and best use on your balance sheet? And we can actually run different scenarios and kind of play what if. 

Okay, what if you put it here? What if you put it there? What if you did part to a Roth and part to your 401k to get the match and parts of this permanent life insurance? What does that really look like and mean to you both now and in the future. And we can run those different scenarios. It's kind of fun for me to do that I can, I'll be honest, I'll kind of geek out on a little bit for you. So I'll try not to do that for you guys today. Alright, so let's kind of keep going here and talk about these two retirement savings alternatives that are usually overlooked. Okay, and that's going to be the Roth IRA, and then the cash value life insurance. So let's get we're going to look at those two as a scenario for what it looks like for retirement. Let's talk about first the impact of taxes. So as I mentioned earlier, tax diversification means that your money is mixed throughout multiple strategies of accounts. 

This strategy provides you with flexibility and choice when determining how much you'll be taxed during your retirement. So here's an example of how this might play out. We're gonna look at two scenarios. The top scenario shows you what would happen if you take 100% of $100,000 out of a 401k, after age 59 and a half. And what would happen if you took half of that from the 401k and half of it from a tax favored asset, like a Roth IRA, or the cash value life insurance. So as you can see, when you take out 100% from the 401k, if you're in a 32% tax bracket, you would pay $32,000 in taxes and that would leave you with a net withdrawal of $68,000. But when you take half of the cash from the 401k, and half from a tax favored asset, like the Roth IRA, like the whole life policy, let's look and see what happened, you pay $16,000 less in taxes, which means you got a total withdrawal of $84,000. Again, meaning more money, disposable income in your pocket. So going from $68,000 to $84,000 in net income, that's a 23% gain. 

That's how impactful taxes can be on your retirement income. That's why we're having this webinar today. Because it can make a big difference. And this sometimes the things that we've got sort of thinking about, the earlier we can think about them, the better it is, sometimes I meet with people who are getting ready to retire, and they have all of their money in traditional retirement accounts. And so again, while that's not inherently bad, it just means they don't have this option. Rather, they don't have the option to take also some income from a tax favored asset. That's why this is so important. So we're gonna look at both of these strategies in more detail. Let's first talk about the Roth IRA. We've talked about this a lot with clients, we get a lot of questions about Roth IRAs. So I want to make sure that we go through this with you. Okay, so Roth IRAs, you contribute today with after tax dollars, gains are not taxed when the account is growing. And income is tax free, as long as it's structured properly, we're gonna talk more about that in a few minutes. There's a wide range of investment vehicles. You can basically have at anything from just sitting in cash you know in a Roth IRA to being completely invested. You've got lots of options there for you. 

And so lots of options, when you're going to talk about what kind of investments to have it in. You have no required minimum distribution. So if you're not familiar with that, what that means if you have money in a traditional retirement account, an IRA 401k, a 403b, or 457, the IRS tells you today that at age 72, you have to start taking money out of the account, whether you want it or not. So that's called a required minimum distribution. And those are guidelines put out by the IRS that you have to follow on traditional retirement accounts. But on a Roth IRA, there are no RMDs. So you're you don't have to follow those IRS guidelines. And this also passes tax free to beneficiaries, which again, traditional retirement accounts do not. 

Very different for how people inherit traditional IRAs. Whether you're a spouse or non fowl, there's a whole nother topic of discussion. Maybe I'll set up to do a webinar and talk just about kind of distribution planning strategies as well. So Roth IRAs go tax free to beneficiaries. So how do you get started with a Roth, you really have a couple of choices, you could start up a Roth IRA, which means you contribute to a Roth, there are contribution limits, you can do $6000 per year, if you're under 50, or $7000 per year, if you're over age 50. There are income limits, to be able to contribute to an IRA, or Roth IRA, excuse me. So if you make over a certain amount, the IRS will not let you contribute to a Roth IRA. There are also certain limitations on when you can make withdrawals and for what if you're under 59 and a half. 

So before you start up a Roth IRA, you want to make sure that you understand all of these options and what it means for you. You may have a Roth option through your employer, there's a lot of employers now that offer a Roth 401k. So check with your employer and see if you have any Roth options available to you. And then the other option is if you have a traditional IRA, you can convert that to a Roth IRA. So let's talk about that and what that means. So you could do a Roth conversion, let's say you've got an a traditional IRA. Let's say you have $100,000, in that traditional IRA. You could rip the band aid off and convert the full $100,000 in one year. That means that $100,000 in that traditional IRA would be added to your current income, and you'd pay taxes this year on that conversion. 

So again, $100,000 you convert from an IRA to a Roth, it gets considered as income for this year and you pay your highest marginal bracket on that income. But then the account is considered a Roth IRA. So all gains will be tax free, and withdrawals will be tax free as well in the future. Again, as long as it's structured properly. You could also do a partial conversion. So let's say you didn't want to convert, you want to rip the band aid off and do a full $100,000, you could do $25,000 per year for the next four years or so, until you've converted the full IRA. That's also an option for you. So when you're going to do if you're looking at doing a conversion, there's a couple of key things you want to think about. One is how will you pay the taxes, you really have two choices on how to pay the taxes, you can pay the taxes out of pocket, so you can say, again, in this example, convert the full $100,000. 

And then I want that $100,000, to be in a Roth growing for my future. And I've got money over here and a CD or money market or savings account, there's not earning a lot of interest. And so I'm going to use that to pay the taxes. You can also let the account pay the taxes. So when you do the conversion, the company that has the IRA, they can do the conversion, and they can send part, let's say again, $100,000, let's say you ended up sending, I don't know, let's say you did 20%. And so $20,000 goes to the IRS for the conversion, and your $80,000 remains in the Roth, and that grows for you. So you do have some options for how to pay the taxes. I can tell you, when I've done these, run these scenarios, for people, it's usually in your best interest if you can pay it out of pocket and let the full account grow for the future, especially when we're really trying to take advantage of the tax benefit these tax favored benefits of the Roth. So it's helpful to have more in the Roth, be converted and grow for your future.

One other thing you want to think about too, if you're thinking about doing a Roth conversion, is when are you going to need to tap into this account. We asked this question all the time, when do you need this money? Do you want to take it for income? Do you plan on taking like just large withdrawals and draw the account down? What's the overall plan for this account? Because I can tell you is that you're going to need to tap into it quickly. I would say within the next maybe three to five years, you'd want to run the calculations. But it may not make sense to do the conversion, if you're going to need to tap into it quickly. But we can help you with that too. We can run both scenarios that here's what it looks like if you leave it as a traditional IRA. And here's what it looks like if you do a conversion. Because unfortunately, with these things, there's not a rule of thumb, right? It's not a one size fits all, it depends on your overall situation. What are your other income sources? When are you need to tap into this account? What's your liquidity, lots of things to consider when you're talking about doing that Roth conversion. 

Now let's look at cash value life insurance, and how that plays in with your overall plan. So earlier we mentioned you know life insurance, Roth IRAs can be overlooked as a retirement savings vehicle, you're probably familiar with the primary purpose that life insurance serves, which is to protect someone's family or protect someone's benefit in the event of the death of the insured. So this is what we refer to as the death benefit. But a permanent life insurance policy also has other living benefits. The policy owner can access policy cash value for a range of financial purposes, which includes supplemental retirement income. In fact just earlier today, I was on a client meeting at 10am this morning, before our webinar, and that's what we were discussing. He has two life insurance policies was with us. And we were talking about what if in the future, he keeps the one to provide a death benefit for his family, and the other has built cash value. 

And we talked about him structuring an income from that policy that if again, if structured properly, can come back to him tax free. So that's one of the ways that this is why the cash value life insurance can be seen as a very versatile tool in your overall financial plan to help families create and enhance your wealth. Life Insurance is viewed as a benefit for society. It causes a societal, it creates a benefit, it's beneficial for society. So as a result of that it has significant tax benefits that do not apply to other financial instruments. And so that includes having the tax free death benefit and includes having the tax deferred buildup of cash value. So with the class or your life insurance, you have the death benefit, you have this cash value that's growing tax deferred, and you can ask us the policy values that cash value on a tax favored asset on a tax favored basis. And as we mentioned earlier, you there are live benefit as well to this to these types of policies. So of course, you've got the death benefit, right? 

This allows for insurance protection for the family, it can be viewed as a comprehensive portfolio asset, right? We consider it to be a non correlated asset, because it's not tied to the stock market. So the cash values in your life insurance, they don't go down with the market, you know, so like, last year, last March, during the pandemic, when the S&P was down 30 to 35%. The values of your whole life policy were not down, right. And so if that's what we consider to be a non correlated asset, there are guarantees inside the policy which helps to grow. There's also a policy dividend, which now the dividends are not guaranteed, but depending on the company that you use, they have a good track record, right, that's one thing you want to look at is their dividend history. Okay, and then again, it offers you liquidity, you don't have any sort of, you don't have to have worry about those guidelines or stipulations by the IRS, right? There's no IRS guidelines on all, you got to wait till 59 and a half or 72, you have to start pulling money out. You don't have to worry about anything with these types of policies. So there's no requirement distribution, no having to wait till 59 and a half as well. 

And then, depending on the state, you could also have creditor protection. For example, in Florida, we do have creditor protection on the cash values of the life insurance policies. So let's kind of wrap up from today. So here's the thing. So today, we've talked about using different types of investment accounts to help you achieve tax diversification. And what does that mean? That means that you get to have flexibility, you get to have control and choice about where you take income from in the future, where is it going to come from? And how will it be taxed? 

Now, of course, there are some accounts like those traditional retirement accounts, you do have to follow IRS guidelines and rules on those for required minimum distributions. But we'll make sure to walk you through all of that. The big key takeaway from today that I hope you that you hope you have is to see how having investments and retirement accounts and different types of accounts, from a tax status, have those tax deferred accounts, have tax favored, have taxable, how they can actually help you in retirement to have more income in retirement by having that tax free income. I love this quote, by Ben Franklin that says, In this world, nothing can be said to be certain, except death and taxes. Isn't that the truth? So we know it's important. And again, while we don't know what the tax rates are going to be for sure, in the future, we can definitely do some things now to put you in a better position so that you do have control, and you're not painted in a corner. That's the last thing I want for you. I want to make sure all of my clients, you're not painted in a corner that you do not have. You're not painted in the corner, and you've got multiple exit strategies. 

So as we wrap up for today, I want to make sure again, you've got my contact information, or and say thank you for joining me today as we go through taxes. I know it's not always the most fun topic to talk about. But we try to make it a little more interesting for you. And so again, my contact information you can call me, or you can send me an email at April_Schoen@yoursws.com. You can send me an email for a couple of things. One, if you have a specific question about something in the webinar, I went over today, feel free to email me about that. You can request a copy of the PowerPoint. I know we went through a lot. I was going through it kind of quickly. So if you'd like a copy of the PowerPoint, you can ask us for that. You can request a copy of John's new book, which is The Secure Retirement Method for Members of the Florida Retirement System. 

And you can also request to schedule your 25 to 30 minute phone appointment to discuss maybe some of those things you jotted down. Something you've got a question about. Maybe some concerns you have when it comes to what does retirement income going to look like for you? What tax is going to look like for you in retirement? You know, maybe when we talked about those CDs and money markets and bonds, maybe that was something like a little bell was going off and said hey, I need to I need to look at this too. So those are just some things that we can kind of cover in our 25 to 30 minute phone appointment. And as I said in our first meeting, there's no cost for that. It's really just a chance for us to get to know each other a little bit, to you know, I can learn more about you and what you're trying to accomplish. I can share with you what we do and how we help clients. And usually by the end of that call, we'll know we'll know if it makes sense to move forward or not, and do kind of some more in detail planning. So I want to say again, thank you, to everyone for joining us today. I hope you enjoyed it. I hope you've got some nuggets out of it that can help you and then feel free to let us know how we can further help and serve. You have just have a great day and then I'll talk to you all soon.

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. 

2021-119416 Expires 5/2023.

How To Mitigate The Five Financial Risks In Retirement

On this week’s episode of The Secure Retirement Podcast, April Schoen joins us to take a deep dive into the five financial risks you will face in retirement and how to overcome them. Additionally, April discusses retirement planning and what balance looks like in retirement. 

 Listen in to learn more about the retirement red zone as well as:

  • Mitigating financial risks

  • Retirement planning: what works and what doesn’t 

  • Building a financially balanced retirement plan

  • And more

Mentioned in this episode:

Transcript:

April Schoen: Hello, everyone. Good afternoon and welcome to our webinar today. We're going to be talking all about financial risks in retirement, and how to avoid them. My name is April Schoen, and I am an advisor here with North Florida Financial. And I'm glad that you guys were able to join us today on our webinar. So before we get started, I've got a couple of housekeeping items for you. First and foremost, if you don't have it, grab a piece of paper and a pen. So what we want to do is we're going to go through, we've got a lot of information we're going to get through today, it's going to be very informative, uplifting. And so you may want to jot down some questions that you have, there might be something that you like, oh, I need to look into this, this is something I need to do. Maybe you've got a question you want to have with someone on our team as well. So go ahead and grab a piece of paper and a pen and make sure that you can take notes as we go along. 

We're also recording today's webinar. And the webinar will be posted to our website, which is johnhcurry.com. And those are going to be posted in our podcast section. We do have a podcast where we interview people in the community and talk to them about retirement planning. And then we also post copies of our webinars as they're we go through our webinars, record them, and then they'll be in our podcasts. So we're going to get started today, like I said, today, we're going to talk all about risks, financial risks that you're going to face in retirement, and how to overcome them. What's kind of interesting about these risks as we're gonna get started here is that these risks that we face in retirement, we actually face them in our working years, too. It's the same risk that we face in retirement we face when we are in our working years, but they affect us differently in retirement. Okay, so we're going to walk through those today. 

So especially when we're talking about retirement planning, the risks that we face are living too long, because that really compounds all the other risks that we're going to talk about. It's having health issues along the way, right? It's becoming sick, it's becoming injured. With market volatility. I mean, if you just look at the market over the last year, it's been a crazy year on the market, right. And so market volatility is a concern that we have to face. Taxation. If you were not on our webinar a couple weeks ago, we just did an entire webinar all about tax diversification in retirement, and how important it is to have tax diversification in retirement. So we're going to talk about taxes today. We're going to talk about inflation, right? How do we combat inflation? So we're going to talk about that. 

And then we're also going to look at some real life studies, we're going to pull up some different scenarios, we're going to run some Monte Carlo assumptions, some Monte Carlo simulations. We're going to look through some sequence of return risk and talk about it and how you can navigate sequence of return risk as well. So what I'm going to do is I'm going to go ahead, I'm gonna share my screen with you. So we can get started talking about these risks in retirement. So give me just one second here. There we go. Okay, so hopefully, you can all see my screen now. So like I said, at the very beginning, my name is April Schoen, and I am an advisor here with North Florida Financial. I work with my partner, my senior partner is John Curry. And John has been helping clients when it comes to retirement planning for over 45 years. 

And as you can imagine, there's a lot that has changed in the last 45 years, especially when it comes to retirement planning. And so what we want to do is, we're going to share with you some of the things the lessons that we've learned about retirement planning, and how things that that work for people and things that don't work for people, especially when it comes to retirement planning. So as I said, today, we're going to be talking about how traditional planning doesn't work when it comes to retirement. We're going to look at some real life scenarios that talk about traditional approach to planning and how that doesn't work. We're going to talk about the difference between saving money and spending money. So there's a big difference between we're when we're in our working years, and we're saving money. And once we get to retirement and we begin spending money, right? So we're going to talk about the difference between those. 

And along the way we're going to talk about the risks that you're going to face in retirement. Okay, we're going to talk about those five financial risks that you are going to face in retirement and what are some tactical things that we can do to overcome those? And along that we're going to talk about what does balance look like in retirement? We talked about in our planning with clients, we talked about balance a lot, what is financial balance look like? What is tax diversification? What does it look like to have balance from a tax standpoint look like in your planning. So there's a lot of things that we're going to go through on the balance side of things today. So as I said, earlier, we've got these risks in retirement, we're going to do a deep dive into those, these risks are living too long, becoming sick or injured, market volatility, taxation, and inflation. 

So those are all the risks that we're going to those are the five financial risks that we're going to talk about today, living too long, becoming sick or injured, market volatility, taxation on retirement accounts, and inflation. Now, I know some of you may have to jump off the call early. Just so you know, we've got, our webinars, we plan on them to be an hour, sometimes they do end up being around 45 minutes, 45 minutes to an hour. So that's really what we plan on for the webinars. I know some of you may have to jump off early, so I want to make sure you've got our contact information. One of the things I'd recommend for those on the call is for us to schedule a time for a phone appointment, this would be a 25 to 30 minute call, to talk about the concerns, the goals that you have, when it comes to retirement planning. There's a couple other things that we can do as well. You know, sometimes we get asked for a copy of our PowerPoint slides. So if you'd like a copy of the PowerPoint, you can email me for that as well. 

And then I want to tell you one other thing, too. I don't think I have a copy of it here. I was going to show you, John has a new book that just came out. And it's all about the secure retirement planning for members of the Florida Retirement System. It's a great book. It's hot off the press. It really just came out about a month or maybe two months ago, I guess it was first printed. So it's really it's brand new. And it's all about retirement planning for members of the Florida Retirement System. Now in this book, we cover a lot of these risks we're going to talk about we talk about taxation, inflation, RMDs, we go through a lot of different information in that book. So if you'd like a copy of it, just you can also send us an email, and we're wherever you'd like us to send that book. And we'll make sure to get it out to you. Alright, let's get started talking about these risks that I've been talking about these risks that we face when it comes to retirement planning. So as I said, we are firm here in North Florida Financial, and John has been with the firm for a little over 45 years now. 

I've been in financial services for almost 11 years, and I've been here with North Florida actually just celebrated this week, my seventh anniversary with North Florida. So time flies when you're having fun. So it's been crazy to think that it's already been seven years. But it's been it's been great. So really what I want to share with you today, like I mentioned earlier, are these lessons that we've learned about retirement planning. And you know, what we've learned when it when it comes to really seeing clients step off into retirement and what works and what doesn't work from them, what works and what doesn't work for them. From a planning standpoint.

The first thing I would say is that, by far, the most common approach that we see, to retirement planning is something called the safe withdrawal rate, the safe withdrawal plan, or you may have heard of it as the 4% rule, or the 3% rule. This is the most common approach to retirement planning. But it doesn't always have the best result. And we're actually that's part of our case study today, we're going to do a deep dive, and we're going to test it out and we're going to see what does it look like really to take a look at this 4% rule and how does it work? So the idea behind this common approach is that you have an asset that's invested in stocks and bonds, and you begin to take fixed consistent withdrawals from this asset that is variable, right, that's inconsistent because it is invested in the market and so it fluctuates on a daily basis. 

So that alone brings a certain amount of uncertainty and unrest to the strategy. And really, studies have shown that while it's the most common approach, it's not the most efficient. It doesn't always have the best outcome, I'm going to tell you why. So what we find with this approach is that it needs, right it needs the most amount of capital, you have to have the most amount of assets to provide you less income. To provide you the least amount of income than some other strategies that you can employ. So it's the most capital to produce less income. And at the same time, it causes a high degree of taxation, based on how the strategy's invested and the income that's coming off of it, it causes a high degree of taxation, and there's more risk, there's actually constant risk, because everything is always invested, everything always has to be invested. 

So it causes us to have more risk than maybe we normally would in our portfolio. And it causes us to have less liquidity. Because we've got this bucket, this asset, and we're taking an income from it a fixed income, right? If we take more income from it, we take a larger withdraw. Guess what that means? That means we have less income later. So while this approach, again tends to be the most common, it really does leave a lot to be desired. And we don't find that it really works well on a consistent basis. So we've chosen to do things differently here. And the reason that we this approach fails most of the time, is because it doesn't take into consideration that there's a difference between distributing wealth and accumulating wealth. There's a difference between saving money, putting money back on your balance sheet and spending money in retirement. 

And we really have to approach retirement planning from a different way, we can't keep doing the same thing that we always did the same way we always did when we were in our working years, we have to approach it differently, because of those risks that I've talked about. So I'm going to show you and kind of walk you through why it is different. Why is distributing wealth different from accumulating wealth. And by way of an example, I want to compare this to climbing up and down a mountain, right, which is which we like this comparison, because it's it's very typical of a person who is working and trying to retire one day. We're on the way up the mountain, they're taking their income, and they're turning that into net worth, they're saving money back on their balance sheet. And ideally, they reached the top of this mountain one day, right, they reached the top of the mountain, they decided they're going to retire and they start to go down the mountain, they're going into retirement, and now what are they doing? 

Well, they're taking their net worth. And they're turning in that turning that into cash flow, they're taking their net worth and turning it into income. So this is an entirely opposite goal. At the end of the day, they are polar opposite. And there are economic factors that are always at work that we have to deal with. Let me give you an example. If we were planning to climb up and down a mountain, we would have to deal with gravity, right? Gravity would always be there, it would always be present. And it's gravity, right. But how we approach it how we deal with gravity is very different when we're going up the mountain, and then when we're climbing down the mountain. And the same thing is true in retirement, there are economic forces that are always there. And we react differently to them in retirement than we do in our working years. 

So let's walk through these risks. And we're going to talk about the difference. How these risks affect us in retirement versus in our working years. The first thing that we're going to talk about is mortality, the risk of death, right? So in our working years, it's very clear that the risk is what if I die too soon. So I'm going to use myself as an example. I'm 37. I'm married. I have two boys who are four and seven years old. So the risk that I face right now is that if something happens to me tomorrow, and my income stops, the financial impact that's going to have on my family, right? So that's a risk that we have in our working years. Something that I've worked to take that risk off the table. But in retirement, this risk does a complete 180. 

In retirement, it's not about dying too soon, the risk is living too long. Outliving our resources. It's the exact, it's a same risk, but with affects us differently. Right. And so we have to address that we have to make sure that we address this idea of living too long in retirement. What about from an injury and illness standpoint? In our working yours, what's at stake again, is we lose our income, we lose our paycheck, right? Something happens to me tomorrow. I can't get up and go to work tomorrow, my income stops, right. That's a risk that I have in my working years. But in retirement, it's completely different. It's not that my income would stop, because that's not what happens in retirement. In retirement, your income continues to go on. So it's not the loss of income. It's the threat of expenses. It's the costs associated with becoming sick or injured along the way.

That can be the thing that erodes our assets over time. So same threat, but it impacts our balance sheet in very different ways. What about market volatility? Market volatility is always present. Like I said earlier, look at the last year, right there, no, and no one really likes the ups and downs that we have in the market. But when we're in our working years, if managed properly, that volatility can actually be our friend. It can be the thing that helps us have a better rate of return. In retirement, though, it can be the thing that causes us to run out of money, right? It can be the economic force that causes we have threats over stability in our retirement, right? Because we've got what's called sequence of return risk. And we're going to look at sequence of return risk today. And I'm going to show you really what that looks like. 

So we're going to come back and talk about that one. What about tax deferred vehicle? You know, when we're in our working years, putting money in an IRA, a 401k, a 403B, a 457. These can feel like the best places to save $1. Because we're saving on that tax, right? We're deferring that tax to the future. But when we're in retirement, it can feel like the worst place to spend the dollar, because every dollar that comes out is taxed at our highest marginal rate. Okay, so that again, every dollar that comes out of those tax deferred vehicles, is taxed at our highest marginal rate. So while it can feel like the best place to save $1, it's the worst place to spend $1. And I know it because when I am meeting with clients every single week, and helping them get ready for retirement, and helping our clients that are already in retirement, and I can tell you from experience, that clients in retirement, the last place they want to take money from is their retirement account, because they don't want to pay the tax. 

And then especially we talk about required minimum distributions, and you get to 72. And the IRS says, you've got to take money out of these accounts, whether you want it or need it. Clients all the time are telling me, why do I have to take this out, we don't need the income, I don't want to have to pay the tax. What do I do with this money now? Those are all the things that we work through in our planning process. Okay, the next threat that we talked about is inflation. Now inflation, we call this the silent thief, because it erodes our purchasing power over time. We all know that, you know, I use the analogy, milk is gonna cost more tomorrow than it does today. But it's slow, incremental changes, it's not big, sweeping changes to inflation, usually, right. And so that's why we call it the silent thief. Because all of a sudden, our income may be at one level, maybe, you know, whatever it is 100,000, whatever your number is, and it starts to feel like less and less and less.

Because of this, our purchasing power is being eroded, we're not able that dollar is unable to go as far because of inflation. So when we're in our working years, how we combat inflation is we earn more money, right? We get a raise at work, we get a promotion, we change jobs. That's how we combat inflation when in our working years. In retirement, though, we end up spending less money. When we're on a fixed income in retirement. And when the cost of goods and services go up. We're forced to spend less just to maintain our current net worth and our current balance. So what it means is because these challenges are different, going up and down the mountain, right, we need a different strategy, we need a different approach to retirement to succeed. Different than the one that we may have used in our working years. And this is really an approach that we've refined over the last 45 years. And we've developed kind of a set of rules, if you will a playbook on to help our clients find optimal balance in retirement, let's talk about that. Let's talk about what it looks like in retirement so that we can combat these risks.

The first thing that we want to do is try to mitigate and take those risks off the table. So we're going to we're going to talk about that today. And and how do you do that, what were some tactical things you can do to mitigate some of those risks that we talked about? Because it's really these risks that cause people pain in retirement. It's not really usually like underperformance of the market, or the inability to deal with, you know, unexpected events, that that's not what we find, we find it's really, our ability to mitigate those risks that causes us, or our inability, I should say, to deal with those risks is what causes us the most pain in retirement. And we really want to address that, you know, those risks, not only the ones that are that are broad and economic in nature, the ones that affect everyone, right, like market volatility, for example, inflation, but we also want to deal with the ones that are very specific to you, like living too long or becoming sick or injured, right, we want to make sure that we address those risks. 

And the next thing we want to do is we want to take a look at what's your cash flow allocation? What's your income stream in retirement going to look like? Everyone wants to talk about asset allocation, right? How are your assets allocated? We don't want to start there. We don't want to start with asset allocation. But we want to start with cash flow allocation, what's your cash flow going to look like in retirement? And we want to understand that allocation before we start talking about assets. Right? So we start, we look at it at cash flow allocation, we want to make sure that you've got liquidity, true liquidity. Liquidity that's not required to give you an income in retirement. That's how we define what true liquidity is. It's the liquidity that's free from the requirement to provide ongoing income. We want to make sure you've got liquidity on your balance sheet. You know, I was just talking with a client the other day. He has quite a bit of money in checking and savings. And we talked about that right? How do we have balance here? How do you have enough in checking and savings to feel comfortable? Right? 

What's your, I always call it your happy number. What's your happy number, what number and checking savings money market CDs, makes you feel happy and comfortable. And then let's design a plan where you've got the liquidity that you want, and need in retirement. But then we also have to make sure our money is working for us, right, we can't have all of our money in a checking and savings. Or look at CDs, CDs are earning next to nothing these days, right. So the days of just parking all your money in a CD and earning the interest are gone. They do not exist in today's market, because interest rates are so low. So we want to have liquidity. But we also have to have balance there to make sure that our money's still working for us. And then we also want to minimize taxes. 

Strategically minimize taxes, not just in one year, not just here we are in 2021. So let's reduce taxes for this year. But how do we strategically reduce taxes over a long period of time. So those are really what we want to look at. This is really kind of how we see people have balance going into retirement, we manage those risks, we want to have some cash flow allocation, we want to have liquidity. And then we also want to minimize taxes along the way. So these rules really allow us to create financial balance and have a an optimal structure for retirement. Let's talk about what that looks like. For us we find that a balanced structure, it begins with that liquidity question. It begins with making sure that you've got assets on your balance sheet that you can get your hands on, if you need it or want it. An asset that's a buffer to the stock market where you don't have so much market volatility, right. 

So we want to start with this liquidity discussion. And from there, when we start talking about your cash flow allocation, we want to make sure that you have guaranteed streams of income in retirement. These income come from many different sources. Could be a pension. Could be Social Security. But we want to build out what is your income and retirement look like? And what's your retirement baseline, we call this your retirement baseline, whatever your guaranteed streams of income are. So we want to take a look at that, what's your baseline for retirement. And then on top of that, we want to have some other buckets for variable income, right. So let's say we want to have some discretionary spending in retirement, most people do. 

So we want to make sure we've got a bucket that's had some variable income for you, so that you've got discretionary spending. And the other thing we want to do is we want to have another bucket that's for growth, we want to have this bucket for growth, because we want to be able to offset inflation in the future. We want to be able to offset taxation. We want to be able to have another asset, if we get sick or injured along the way, right. This is a bucket that's for growth. It could also be for legacy, if legacy is important to you. But really, it's to help us combat those those risks we talked about earlier, living too long, becoming sick or injured, inflation and taxation. That extra growth bucket really helps from that standpoint. So what we want to do is, ideally, we want to have these buckets as we approach retirement. And this is really part of our planning process, right? Is a series of conversations and our planning process with clients is a series of conversations about where they are today, and how do we get them to this optimal structure. 

So I'm going to share with you a little bit about our planning process. And then I want to dig in to this, really dig into this 4% rule, this traditional approach to retirement planning that we see. And we're gonna do some case studies and take a look at that. Really quick, I'll tell you a little bit about our planning process. So first, when we're meeting with clients, we have a philosophy discussion. This is our philosophy around money and your philosophy around money. We go through some data gathering, getting some high level data about where you are today. e want to talk about your goals, your concerns, when it comes to retirement, what do you really want your retirement to look like? I have a series of questions that we go through with clients, I'm going to bring those up at the end. So you can kind of start thinking about what do you want your retirement vision to look like? 

And then we really have two distinct conversations. We have that protection conversation about how do we mitigate risk, right, how do we take those risks we talked about earlier off the balance sheet. And then we talked about cashflow. Part of that is that cashflow allocation, what does cashflow really look like for you in retirement? Along the way, when we're going through our planning process, we may make some recommendations along the way. And it's really our client's job to decide if they want to implement and and to what degree. And then of course, if someone does become a client with us, we want to have regular reviews with our clients to check in and make sure, see how are things going for them. So that just gives you just a general idea a little bit about our planning process and how we talk about these risks and take them off the table.

So now I want to do this case study, I want to do a deep dive into this traditional approach to retirement because we started off and I was telling you about this traditional approach to retirements called the safe withdrawal rate. Sometimes you hear that sometimes you hear it as the 4% rule. And what I want to do is see how does that really play out in someone's retirement? What does this really look like for you? What risks are involved? And how do we mitigate some of those risks? And we're going to use we're first going to use a Monte Carlo simulation. Let me go to Monte Carlo. So first of all Monte Carlo simulations if you've never seen them, I call them like the spaghetti models. You know, have you seen those spaghetti models for like if our hurricanes coming and it shows like the gazillion different ways that our hurricane might go? That's very similar to a Monte Carlo. Monte Carlo is just going to run certain variables. And it's going to take a wide range of variables and try to figure out what's the most likely to happen given those sets of parameters. 

So I'm going to walk through, we're going to take a look at this Monte Carlo using this 4% rule. And we're going to apply a little bit of stress to it. We call it stress testing. So we're first going to look at what does it look like from a baseline and then let's apply some stress to our plan and see how it stands up. So, again, we're looking at this 4% rule. So we're going to assume that someone has a million dollars invested, again, this is going to be invested in some sort of mixture of stocks and bonds, and we're going to take an income off of that we're going to take off 4% income, so we're gonna take 40,000 out per year for income. And for inflation, we're going to use us 3% inflation. So we're taking 40,000 out per year. And we're going to increase that slightly to adjust for inflation. And we're gonna run this for 25 years, that's what I typically see with these Monte Carlo simulations is about a 25 year study period, that would take someone who was 65 till they're 90. 

Okay, and then we're gonna say that we've got this asset is in a moderate portfolio. That means, again, it's in a mixture of stocks and bonds. And with a moderate portfolio, it's gonna be about 60% stocks and 40% bonds. So we're gonna first take a look and see what does this look like? How does this look in retirement, excuse me, if someone was to have a million dollars invested in this moderate portfolio, and they were going to take out 40,000 per year. Okay, so this looks pretty good. Let me explain what you're seeing here. So again, I said it was a spaghetti model. So you're seeing these are all the different possible outcomes that could happen with your portfolio. And this blue line is, you know, kind of the average or the most likely scenario to happen. And look what this is showing us. It's showing us that over a 25 year period, you know, you've been taking out this 40,000 per year, adjusting for inflation, and at the end, you have more money than you started with. Right. So it looks pretty good. And one of the things that I look at when I'm looking at these is this simulation failure rate. So this is asking, or this is saying, what's the percentage? What's the likelihood that this scenario would fail? And right now, it's less than 1%? Right? So it looks pretty good. It's .58%. 

Looks pretty, pretty successful. But what we have to understand when we're looking at these Monte Carlo simulations, is that what did they consider to be success? What is the algorithm? What is the Monte Carlo saying is success in the scenario? Well, they actually assume that if you their success is if you have $1 left in the account, they consider it a success. So you get to the end of your 25 years, you've been taking out your 40,000 and then adjusting for inflation, you get to the end of 25 years, and you have $1 left. That's what they consider to be success. Now, where, what the what the issue is with this, right is this leaves out some some key factors, some major concerns around this strategy. 

For example, you know, most people want to leave something behind, maybe they have a spouse, maybe they want to leave something to children or grandchildren, or to the causes they care about, or you know what maybe they want to make sure that they don't get to the end of 25 years and have no money. Right? So we're going to go back, and we're going to apply some some stress, we're going to stress test, this idea of using the 4% traditional approach to retirement. Because these Monte Carlo simulations, what I find with them is they're used to give investors a sense of confidence and their overall investment strategy, and overall competence on the success or failure of that strategy. But you can't just look at this in a vacuum, there are too many variables. And there's too much at stake to get this wrong. Right. 

So let me go back. And we're going to plug in some legacy values. So let's say we do want to have money leftover. Let's say we want to have, instead of, we don't need to have a million dollars left over, but maybe we want to make sure we have $500,000 left at the end of 25 years. Okay. And we also know that we have taxes, right? There are taxation is is a very real thing in our in our world in our society today. And obviously, we have the threat of higher taxes in the future. But I'm just going to use a 20% tax rate on this. And we also know that if we have investments that are again, invested in stocks and bonds. Our assets are invested in stocks and bonds, there's going to be a fee, there's going to be a cost for those investments. So we need to actually need to add that into the mix as well. Right, we need to make sure we're showing a true and accurate representation of what it looks like for us. 

So what I'm going to do is I'm going to recalculate and we're going to see what this looks like. Okay, so now what happens so now we have a 54% chance of failure. We have a 54%, a little over half of literally a 50% chance that at the end of 25 years, we have no money left in our accounts. Right. So now we have a higher probability of failure. And that's the issue sometimes with these simulations is that they're very sensitive to the input. So you can make it look really beautiful, right? You can make it look great and make it look like all rainbows and unicorns and butterflies. But that's not real life. So we've got a stress test it and we've got to add these things on. So let's go back because I like I said, these simulations are very sensitive to these inputs. And so I just want to show you too what happens here. So what happens if we get into retirement and, and inflation is no longer just 3%. But it's 4%. 

Because I don't know if you've been reading it in the news, but you know, inflation is a concern, there is a concern that we're going to have rising inflation, higher inflation come roaring back, because of what's going on right now with our economy due to the pandemic, right. So inflation is a real concern. So what if we get into retirement? And it's not 3%? It's 4%. What if tax rates go up in the future? If you were on my webinar two weeks ago, on tax diversification in retirement, I talked about this. Right? I talked about how we're actually in historically low tax rates right now. And it's very likely that tax rates go up in the future. And then what if we live longer retirement, people are living longer and longer? Right. So what if we now have 30 years of retirement? Not just 25? What does that look like? 93% failure rate? Right? 90, almost 94% failure rate. So when you're thinking about your retirement, do you want to go down this path? Do you want to use something like the 4% rule to fund your retirement where you've got a 93-94% failure? 

Let me give you this example. Let's say you know, as people were starting to get vaccinated, right, hopefully, you know, travel restriction started to lighten up, we started to travel again, and go places. So let's say you know, you've been waiting to be able to go on this vacation, you want to wherever it is, you want to go, right, you want to go overseas, somewhere tropical, you want to go somewhere else in the United States, there's so many great places to visit here. But you're gonna travel, right, you get on that airplane, and you're all buckled in. And the, you know, you've all gone through all the safety procedures, and you're getting ready for takeoff. And the pilot comes on and he says, ladies and gentlemen, we're about to take off on our trip today. But we have a 94% chance that we're not going to make it there. We have a 94% chance that we're not going to make it to our destination. What would you do? Would you stay on that plane? I wouldn't. Right? 

What about earlier when we looked at it was 54 or 55% failure? How about that? Would you stay on the plane then at the pilot's like, hey, we have about a fifty,  you know we have like a 50-50 shot of making it there. Would you stay on that plane? What if it was 25%? Or 20%? Probably not. Right? So sometimes we don't think about that. And in terms of what does that retirement look like? These are very real risks that we have in retirement, inflation, taxation, costs, fees, living too long, these are all things that impact us. So there are some things that we can do to mitigate this risk. So the first one that I'm going to talk about, it's not my favorite, but it is an option. One option is you could take less money from your portfolio. Right? Again, it's not my favorite option. I'd rather structure another way. So you still have the income that you want, and mitigate these risks at the same time. But yes, spending less money is an option. I hear that sometimes for people that say, well, I'll just spend less money in retirement. More recent studies do say that that safe withdrawal rate, that safe withdrawal plan, it's not a 4% rate anymore, it's more like two to three. 

So let's look at that. Let's drop it down to 30,000. And let's see what that looks like. Okay, 58, almost a little shy of 60% failure rate. So it's better, right? We did, we definitely took some risk off of our plan by dropping that income. Right. The other thing that we may want to look at in our plan, and we're going to talk about this a little bit more to is one thing that we need to make sure that we have in retirement is we need to have another asset need to have a buffer asset on the balance sheet to offset this risk to offset the risk of market volatility and running out of money. Okay. This also means that we really need to take a deep dive and look at what income streams you will have in retirement, especially those guarantee streams of income. Because the more guaranteed streams of income you have, the less pressure it puts on your other assets. Right? So that's when we get to take a look at that to have your overall plan. Remember, we talked about that optimum balance, right? 

We got to look at cash flow allocation where your retirement income stream is going to be in retirement. And that's part of it, how do we alleviate some of the pressure from our portfolio. And that's one of the ways that we can do that. Right? If we want to make sure we've got some income there. And we've also have this other another asset, that buffer asset on our balance sheet that's not correlated to the stock market that's not tied to the stock market. So that we've got some resources available for us. Now, one of the questions I get sometimes when I'm going through this with clients is the question of why, why is it that we've got you can even see here, this model portfolio, right, it's showing that we're, we're earning about an we're averaging an 8% rate of return 8.06. 

That's what that means. That's what the average rate of return is. Average rate return for this, this portfolio. Well, and if we're only pulling out 3 to 4%, why don't we have a better outcome than this? And it's because of something called sequence of return. It's not just that you get a 7% rate of return, or an 8% rate of return, it's the order in which you receive those returns that matters most. So we're going to go I'm going to go and show you what this looks like, we're going to take a look at sequence of returns. Because sequence of return risk is a very real thing. You know, when we're talking about this 4% rule, a lot of the way that it's addressed, again, this idea that we are taking these fixed, consistent withdrawals from a bucket that variable an inconsistent, that challenge is all the more difficult due to the expectation. 

Due to the way that that idea is presented. Because the idea that's often presented for this is yeah, oh, you've got this asset, you've got this retirement account, these investments, we're going to invest in stocks and bonds, it's going to be in a 70-30 portfolio, it's going to be in a 60-40 portfolio and look at here. Look at history, it's averaged about a 7% rate of return. So we're going to factor that in to our assumptions. And then you're just going to take like 3 to 4% off the portfolio every year. So you're going to be just fine. Right? That's the most common approach. That's what we hear. That's the most common approach to retirement. The problem with that approach is it assumes the math is linear. It's assuming that you're getting that 7% every single year, day in day out that there's never a bad day. 

That's not real life. Right? That's not really how the market operates. Right? So again, if we did, if we did get the 7%, year in and year out here, we'd probably be pretty good. So let's take a look at it. So we're gonna look at this 30 year study period, we're going to look at again, we have our million dollars. Forgot a zero. We're gonna say we're taking out $40,000 from the portfolio, and we're going to use an annual increase again, for inflation, that 3% number. Alright, so again, here, we're assuming a 7% rate of return. And we're using a fixed rate. So you can see over this 10 year period every year, year in and year out, you're getting 7% rate of return. It never has a bad day. What does it look like? Well, it looks pretty good, right?

I mean, this strategy is pretty simple to understand. It's very appealing, it looks pretty good. Look at that. After 30 years, you still have you've got you started with a million, you've been taking 40,000 out and now you have over 2 million in your portfolio. You're doing pretty good, right? It looks good. The problem is that that's not how the market reacts. So the math says, you have more money in the end. Unfortunately, the reality is that when we're managing withdrawals from a portfolio, it's not that simple, right? Real life returns are not 7% every single year, in fact there are 1000s of different combinations of returns that we could see, to get us to still average 7%. 

So I'm going to go back to the sequence. And I'm gonna say random, what if we had a random sequence of returns? What does that look like? This looks like here. We've got some bad years. We've got some really good years, right? There's again over a 10 year period of what we're looking at right now with different hypothetical rates of return. And you still average 7%. This is more likely what it feels like in retirement, because you have ups and downs, right? We're all used to seeing the ups and downs in the market. So how does that impact our retirement? So I'm going to click recalculate. Okay, so you can see here, this is showing the ups and downs that we feel in the market. This is more representative of what real life looks like. So instead of 2 million at the end of the rainbow, right, the 2 million at the end of 30 years, you've got a million. So math linear masters, we have 2 million, but this real life random assumption of return gives us a very different result. And the main issue here is, is that we don't have control over our rates of return. There, you know, we can manage portfolios, and we can tweak portfolios, but at the end of the day, we don't really have control over our rates of return, right. 

And what I can tell you from studying this for the last 10 years, that the worst thing that can happen in retirement, is that you step off into retirement. And we have, we have negative returns, we have back to back to back with negative return. That's the worst thing that can happen in retirement. Right. In fact, there are studies that show that if you suffer a big loss, five years before retirement, or five years after retirement, you will not be able to recover. We call that the retirement redzone. That's the 10 years before. And that is the 10 years after retirement that we are the most critical, right? So now I'm going to recalculate. Because if and we're going to look and see what this outcome is, if we started off with some negative years. Yeah, very big difference, right, in our outcomes. Instead of having 2 million, right, the math says we'd have 2 million in the bank, the market may say otherwise. 

The markets may say that we have a negative that we're in the red that we've got. The worst case here would be that we've got a negative 600,000 at the end of this 30 years. So the issue is here is that we don't control our return. And the order in which we receive those term returns is everything. It will make or break you. And there are things that we can do to mitigate that as well. One of the things we want to do is we want to build some additional tactics around the portfolio around or plan to mitigate the sequence of return risk. One of the things that we talked about earlier, we could again, we could consider taking less income from the portfolio that can help that can help us mitigate that risk. Okay, it also means we need to have look at having a buffer asset. An asset on the balance sheet is not correlated to the market that we can turn to, to get returns when we need them in those down year, or at the very least having a bucket that can then come in when we have depleted a certain asset.

And again, this for me also confirms again, that we really need to look at what those retirement incomes are going to be for you look at that retirement baseline, and to know about the guaranteed streams of income, because it's going to take pressure off of your portfolio. So I know I have gone through a lot of information so far today, looking at these different risks that we're going to have in retirement, but I'll tell you retirement should be a time for you to enjoy it and have fun. And go do all the things that you want to do in retirement. You want to travel when we when we have the ability to travel more by all means go travel, you want to pick up that hobby, pick up that hobby, you want to go volunteer, retirement should really be about you enjoying the things you want to in life, right. So we've got a couple things. And I'll email these over to you that we go through some vision questions that we go through. When we're talking to clients about what what is what is their vision for retirement look like? What do they want retirement to look like? 

So I'm going to go through these kind of quickly with you to kind of start get you to start thinking you may want to jot some of these questions down. And but I'll email these over to you as well. So the first thing we want to think about when we're going into retirement are the relationships. The people in our life. Who are the people in our lives that a that we want to spend time with? Is it kids grandkids? Do we have aging parents we need to talk about, we need to take care of? Will we need to support them in any way. These are the relationships that people. Are their friends that we want to reconnect with? Who are you going to be spending your time with in retirement? Right? So we want to, we want to talk about the relationships, the people in your lives. 

We want to talk about housing. Right? Will you stay in your current home? Will you downsize? Will you move to another city and state? Our client this morning, I was talking to her. And she moved she downsized a couple years ago, she's currently living in a townhome and she said, yes, this is my forever home, right? I purposely downsized, I sold the big house and moved to something smaller, it's easier to take care of and I plan to be here for as long as possible. I have some other clients we were just talking about last week, who they live in Tallahassee, but their children live in Chicago. And so they're like, yeah, they're going to retire. It's about two and a half, three years from now. And so they said, yeah, when we retire, we're gonna move to Chicago. Our kids live there, our grandkids, we want to move and be closer to family. So housing is important to think about where do we want to live in retirement? 

Lifestyle. I love asking this question. How do you see your future when every day is a Saturday? Right? Like right now, if you're still working? Your Saturday and Sunday is when we do all the things right? We go shopping, or we go golfing, or we meet our girlfriends for lunch, or whatever it is that we do a lot gets packed into Saturday and Sunday. Well, what about when everyday is Saturday and Sunday? What do you want your life to be like? How do you want to spend your days when you have this newfound time? Right? What are the things that you always wanted to do, but life got in the way? I said earlier, are there organizations you want to volunteer for and help out with, right? These are all the things you got to make sure that you're not retiring from something, but you're retiring to something. 

We have a client who's over 90 now. And I remember a couple of years ago, I called him, it was time for us to have one of our review meetings. And so he's 90 years old, and he says, April, I have got to quit some of my social obligations, I have no time on my calendar for the next three weeks. And I just laughed. I just love this picture of him. He's so vibrant, he's got so much energy, he is always giving back to people in the community. And spending his time in that way. And I just loved that is 90 years old and tells me his calendar is too booked for the next three weeks. You've got to get rid of some of his social commitments. Right. But that's important. It gives him a sense of purpose, it gives them something to look forward to and to do and feel like he's still providing providing value in this world. 

Healthcare. This is probably the number one concern that we talk about. If you've been on our webinars about Medicare, we go through a whole thing about health care. If you haven't, go to our website, johnhcurry.com. Go to the podcast section, and listen to any of the podcasts on Medicare, we do a whole deep dive into Medicare. So really, we want to look at how much are you spending on on healthcare? And are there any healthcare concerns that you have right now? Anything that you any known concerns that may impact your future? 

Of course, we want to look at financial when we're talking about our retirement vision. How do you earn your money today? Do you have any debt? Will it be paid off by the time you retire? How much money are you putting into savings? And then also having a spending plan for retirement. I don't call it a budget. Okay. But I do call it a spending plan. We want to have, what's our plan going to be? How are we going to distribute assets in retirement? And how are we going to spend money in retirement? 

So I want to say thank you again, to everyone for joining us on the webinar today. I hope you found it impactful. I know we went through a lot of information, but we really covered these key financial risks that you're going to have in retirement, some things that you can do to mitigate those risks. We talked about Monte Carlo simulations, if that 4% rule really work in retirement, right. We talked about sequence of return risk and how can we mitigate some of that as well. And then we really want to start somewhere retirement, we want to make sure you have a plan for what is your retirement going to look like in the future? What do you want your retirement to be? That's the most important thing. 

And then the next thing from there, once you have a clear picture, what you want to look like, how do we make sure that you get there, right? We do that by taking a look at where you are today financially and we see if those two match up right. Does your goal for the future match up with where you are today. Do they match? Okay, are you on the path to get there? Or are there some things that we need to change along the way. So on that note, I'd encourage you on the call, you can schedule a time for 25 to 30 minute phone appointment. This would be a time for us just to talk again about any goals you have when it comes to retirement planning. Concerns when you have retirement planning as well. So, again, I hope you guys enjoyed the webinar today. And please feel free to reach out if you've got questions if there was a specific part of the presentation that you've got questions on. We're happy to help. And yes, I hope you guys have a great day and hopefully we'll talk soon.

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. 

2021-119824 Expires 5/2023

How to Pay for Health Care in Retirement

On this week’s episode of The Secure Retirement Podcast, April Schoen joins us to discuss the best ways to pay for health care in retirement. We detail the key considerations you need to remember when it comes to Medicare, and go over how to create your detailed plan for what is usually the number one concern for anyone approaching retirement. We have an episode packed with valuable information to have at hand when you enroll in Medicare.  

We chat about transitioning to Medicare, as well as:

  • Exactly how to enroll in Medicare

  • Common mistakes people make with Parts A and B of Medicare

  • Who needs to enroll in Medicare and when

  • How private insurance works with Medicare

  • And more

Mentioned in this episode:

Transcript:

April Schoen: Hello, everyone, and good afternoon and welcome to our Medicare webinar, today. We're going to be talking about how to transition to Medicare, specially from a group health insurance plan. My name is April Schoen and I have with us on the call today, John Curry, author of Preparing for a Secure Retirement. Hey, John.

John Curry: Hey, April. Hello, everyone.

April: So glad that you guys could join us I'm going to give um, I usually like to give just like a minute or two. I know some people we jump in on here we had, I think John over like, last I looked about 85 people had registered for today's webinar. So I know sometimes it takes a few minutes for everybody to get in. So while we're doing that, I want to go through just a couple of housekeeping items. First, I want to let you know we are going to record today's presentation. 

And so that it usually takes a couple weeks for that to be prepared. But we will have this recorded and have it available for you. If you don't have it handy, grab a piece of paper and a pen like I have here. Then we're going to be going through a lot of information today on Medicare. Some things like a little checklist, if you will, that you need to be walking through as you're getting ready to transition to Medicare, we're going to talk about how much you should be looking at from a budget standpoint for Medicare. So lots of information. 

So just have a piece of paper a pen handy to jot down any notes, or any questions you may have. Now, we're going to be going through the presentation, we're gonna have a lot of information to cover. When John and I, we were just talking about how when we used to have live events. And so we had our live seminars, and we would do them on Social Security and Medicare. And they were always over an hour long. They were an hour and a half. And so don't worry, we're not going to be keeping you an hour and a half today. We're going to kind of condense it down and give this information to you. A little bit about you know who we are. John has been in the financial services industry for its 46 year on you're going on 46 years, right, John?

John: That's correct. 46 years, September last year.

April: So John has been helping clients with retirement planning issues like Social Security and Medicare, IRA rollovers, required minimum distributions and inherited IRAs since 1975. A lot of change the last 45-46 years. And there's a lot of lessons that we've learned along the way about what really works for people and what doesn't work for people when it comes to retirement planning. I've been working with John, almost seven years coming up on my seventh anniversary working with John. And I worked with a previous firm in Tallahassee before that for about four years as well. So we really do specialize in helping people get ready for retirement. And that's why we're having this webinar today to talk about Medicare. John, I know you'll agree with me when I say that healthcare tends to be the number one concern that people have when they first meet with us. When you say that's true?

John: Let me jump in. It's either one or two. So let me tell you what we see, folks, if you take a look at a seesaw, some people the number one fear is how do I cover my health care costs in retirement? And for others, number one is I'm worried about running out of money. And I like to ask them, are you worried about running out of money or running out of income, because there is a difference. Properly designed in you're planning, you may run out of money, but you should never ever run out of income. So and that's not a topic for today. But this whole issue about transitioning to Medicare, I've done it, I'm 68. So a lot of what we've covered today I've already been through. So I will jump in every now and then along with April and share some experiences that I've had, and maybe even offer a little tidbit here or there.

April: Yes, I hope that you'll share your experience. I know you're collecting social security and on Medicare. So I think that's some good information for those on the call to have. And one thing I like to point out too, is that our our team here so it's not a one man show or a one woman show. We've got a great group of our team. So you've got Zac Hirschler and myself are here in Jacksonville. And then in Tallahassee, we've got John Curry, Audie Ritter and Jay Wolfe. So again, we've got a great team of people around us to to help our clients navigate these complicated issues. 

And on that topic too, before we get too much into the presentation, make sure that you've got our contact information, I know some of you may have to jump off the call early, because that does happen, because everyone's busy. So if you do as well make sure you have our contact information, I'd recommend those on the call that we schedule a time for a phone appointment. This would be a good time for you to discuss any goals or concerns that you may have about retirement planning, our especially about Medicare. We get this request a lot to about having a copy of the PowerPoint slides, because again, there's a lot of information that we're going to go through. And yes, we can send you over a copy of the PowerPoint slides. 

If you'll just send us an email, you can email me or you can email John or really anyone on the team. And we'll get you a copy of those of the PowerPoint slides after the presentation. Alright, let's get started. So we're going to really talk about today is transitioning to Medicare, and how health insurance works when you leave your job. So this is all going to be about health care planning around your retirement. So when we think about health insurance, we think of them in different silos. So right now, if you're still working, you may be getting your health insurance through your employer or through your spouse's employer. So your your health insurance comes is tied to your employment. And when you retire, you may go into one of these other silos for your health insurance, which if you're over 65, will probably be medic Medicare. 

And if you're under 65, you'll most likely get some individual health insurance, which we're going to talk about a little bit later, too. So that's why we're having this webinar today is a really talk about how to transition your health insurance, from your employer plan to Medicare. And we know we hear it all the time, it can be very disrupting, to go from your employer sponsored health insurance plan, and do something else like Medicare because it feels completely different. And it's challenging. It's tricky. So that's why we're going to cover that information today.

John: That's an understatement, by the way, because people say well, no big deal, once you start having to go in and present two or three cards, instead of just your employer proof of insurance. I'll touch on that when it's appropriate.

April: Yes, it is. It's very different. And I get it. It's very, it's very scary, and to be quite honest with you. So that's why we're having this today, we want you to have information so you feel comfortable about what health insurance is going to look like for you in retirement. So this healthcare challenge the challenges around health care and retirement, we really think of these as three separate issues. So first, we want to make sure that you have a smooth transition from your employer health insurance to Medicare. If you have a smooth transition, this means you're going to avoid late enrollment penalties, you're going to avoid having any coverage gaps when you go from one insurance to the other. 

And you're also going to make sure that you have adequate coverage because Medicare doesn't cover everything. So you're gonna want to find the right insurance to fill in the gaps and also cover your prescription drug coverage, excuse me cover your prescription drugs. The second issue around health care planning and retirement is we want to make sure that you have an understanding of the potential costs, especially what are those costs going to be for you that first year of retirement. Because while you're working, your premiums are most likely being subsidized by your employer. If you pay a portion of the premiums, they're coming directly out of your paycheck. So you may not even really be aware of exactly how much you're paying. But once you retire, you're on your own, you'll be paying the premiums yourself. 

And so we need to make sure that you have an appropriate budget for that. The third issue is that you want to start thinking about lifetime healthcare expenses, including chronic care. So as you age through retirement, health and health care costs are going to go up due to just normal inflation when it comes to health care. So we in one hand, we need to just plan for having higher expenses down the road. The other thing is as you age, you may need more care or you may need more prescription drugs and so that can also cause your healthcare expenses to go up. So the amount you budget for that first year is probably going to go up in the years ahead. So we want to make sure that we, we take a look at that and have a plan for it. John, let me pause there before I kind of get into more about the agenda we're going to cover. So from your viewpoint, what do you see about these three issues that that we just mentioned?

John: Well, I know you're going to cover in more detail the proper way to get ready to transition to Medicare, but I just want to go ahead and set the stage now, folks, so you can hear it first. And then you'll see the slides that will help. The big issue for me was, when do I retire? And I went into Medicare Part A and age 65, when you have to do it, but I was covered under a group plan that has 20 or more employees. And I didn't want to retire and quit working. So I stayed under the group plan for two years. Then I transitioned over to Medicare. But I will share what happened when I went on the Medicare website, I had to explain, as best I could, why I was not enrolling in Part B. So Part A, I had to then fill out this section that said I was under a group plan, and I was deferring Part B. 

Some people I know personally have messed that part up. And they ended up getting a Medicare Part B premium taken out of their social security check before they thought they would. So that's important. But it's also very important understand that your healthcare costs for the first year, are probably going to be quite a bit higher than you anticipate. I know for me, it was an that and I'm pretty good at this. I had it down really well. There were a few little things, that surprised me. And then the coordination, April, of giving medicare, a medicare supplement and the drug plan. That all those pieces needed to be coordinated. And then I had to make sure that when my coverage ended on the group plan, that I did not have a gap. And what you said earlier, I didn't want to have a penalty. 

And I certainly did not want to be without coverage considering I've had open heart surgery back in 2008. So obviously, if you have any health situations, pre existing conditions, you cannot afford to have even one day with a break in coverage. So I would just leave it there for now that I can come back in when appropriate.

April: That sounds great. Yeah, we're going to be covering through some of that. And you know, and John, too, we're going to talk about some of the mistakes that we've seen people make like you just mentioned. So we'll get into some specific details there. Try to help everybody. Okay, so here's, let's talk about how we're going to tackle these issues. So the first thing we're going to talk about is, is how does Medicare work with employer insurance. You know, we showed earlier, Medicare having its own separate silo from employer insurance, but there can be a little bit of overlap. 

So we're gonna make sure you understand how that works. Second, we're talking about who is to enroll in Medicare, and when. We'll cover the circumstances that dictate when you need to enroll in Medicare. We're going to talk about how to enroll in Medicare. It's very easy I promise you, and we'll discuss how private insurance works with Medicare to make sure you've got that adequate coverage. We're also going to go through a sample budget that can help you create your own. So really, I'll tell you too our overarching message here is gonna be to make sure that you have a plan for how you're going to pay for health care in retirement. That's the main key issue. So let's first get to about how Medicare works with employer insurance. 

John: April, may I step in for a moment? 

April: Yes of course.

John: Folks, some of you, I bet you money are sitting there going okay. John and April don't work for Medicare or social security. We don't even sell a medical plan. So why do we care about this? Here's why we care. Personally, I've been doing this for almost half a century. That's a long time. And the more I do it, the more I realize how little information is getting to people, which is really strange, because we've got so much information available to us, we get paralyzed with it. So the material that we're covering today and in future webinars, is to help you identify the issues that most people who call themselves retirement planners or financial planners don't even know about it much less understand it. 

So this is something that out of necessity of helping people over the years I've had to learn and grow, as my clients got older, our oldest client's 102. Other clients in their mid 90s, late 90s. So I have benefited tremendously from people asking me questions, and everyone's experienced the same thing, so we just want to take what we know, are facts and get them out there to you. Don't expect you to remember every bit of it, but it lets you remember, okay, I remember April and John talking about this, and maybe we can help you.

April: That's right. Good point. Okay. All right. So let's talk about coordination of benefits. When you do have a group plan, you're still on a group plan and with Medicare. So let's talk about how health and how healthcare bills get paid. So right now, if you're working, or you're on some sort of group plan, your doctor sends your bills to your health group health plan, and that's how they get paid. When there are two separate insurance companies, though, if there's two insurance companies are involved, such as a group health plan, and Medicare, there is a primary payer and a secondary payer, their primary payer will pay up to its limits. And then the bill is sent to the secondary payer. 

So if you're still working, and if you're covered by a health plan that covers 20 or more employees, that group health plan pays first, they're the primary payer. If you're also enrolled at Medicare at the time, which means you would be over age 65. If the bill is not fully covered by your group health plan, then Medicare will pay its portions up to its limits. But here's what's most important about this table is if you're covered by a health plan that covers fewer than 20 employees, if you're on a retiree plan, or if you're on Cobra. So in those situations, Medicare actually pays first. And the other plan is the secondary payer. But in order for Medicare to pay, it must, you must be enrolled in Medicare. And if you aren't enrolled in Medicare, and they're supposed to be the primary payer, well your other insurance may not pay the bills either. So effectively in that case, you wouldn't have any insurance. So that's why it's so important that you enroll in Medicare on top. 

So let's talk about who needs to enroll in Medicare and when so we're going to walk through some different kind of case studies and different circumstances about when you enroll in Medicare. So first, let's talk about if you're under 65, and you're still working. Well, there's nothing for you to do for Medicare, yet, you're not eligible for Medicare until you turn 65, which can be a big concern, I understand there's different things that you can do, which we're going to get into if you're under 65. But nothing for new for Medicare until you're over 65. If you're under 65, and retire, again, you're not eligible for Medicare yet. So you'll have to get your insurance from a secondary source. Perhaps if you are married, you might be able to go on your spouse's group plan. Or maybe your employer offers some sort of retiree plan. But if that's not the case, if you do not have spousal coverage, or retiree coverage, then you can buy health insurance on your state insurance exchange. And then you may or may not get a subsidy depending on your income. 

So that's a topic. That's the insurance exchange is a little different topic, we're not going to get into details about that today, we're really going to be focused in on Medicare. But if you're under 65, and retired, that is an option. So now let's talk about if you're working and your over 65. So it gets a little more complicated here. So if you're over 65 and still working, the first question you want to ask is does your employer plan cover 20 or more employees? That's the first question. So if the answer is yes, if your employer covers more than 20 employees, then you can stay on your employer plan and you can delay enrolling in Medicare. However, you should talk to your Benefits Administrator to see if you need to enroll in any part of Medicare, especially ask if you need to enroll in Part A. Part A is is what we've been paying into throughout our working career. So usually it is free. And that is what provides hospital coverage. And a lot of times that hospital coverage through Medicare can be better than your employer plan. 

So just talk to your Benefits Administrator if you're still working and over age 65 to find out if you need to enroll in Part A at 65. One little caveat here is if you have a high deductible plan and have an HSA, you definitely want to talk to your Benefits Administrator about this, because you cannot enroll in Part A and still contribute to an HSA. So just want you to be aware of that if that is your situation, if you have an HSA, you cannot be enrolled in Part A and still contribute to an HSA. So that's one of the things that you're going to want to take into consideration. All right, let's go back to this question about if you're over 65 and working, and does your employer plan cover 20 or more employees? So we saw that if the answer was yes, you may delay enrolling in Medicare, but you should talk to your Employee Benefits Administrator. But what if the answer is no, what if your plan does not cover more than 20 employees? If that's the case, then you must enroll in Medicare at age 65, in order to have complete coverage and avoiding any penalties. 

So if you remember that table that we saw earlier, if your plan covers less than 20 employees, then Medicare is the primary payer. And they'll pay first on any sort of, you know, healthcare claims. But in order for them to pay, you have to be enrolled in Medicare. And you want to also make sure you're enrolled so that you can avoid any of those late penalties. So the number one thing here, if you're over 65 working, but your plan covers less than 20 employees, you're going to want to talk to your Benefits Administrator to find out how your insurance works with Medicare. Because your health insurance at work may change a little bit. Unlike the insurance you had before age 65. Your insurance after age 65 is designed to coordinate with Medicare. And you may want to keep that employer plan for some supplemental coverage to kind of fill in those gaps that Medicaid doesn't pay. But since Medicare is the primary payer, you definitely need to make sure that you enroll in Part A and B. 

As a reminder, we had a webinar two weeks ago where we went through the basics of Medicare and went through all about Part A and Part B, D and C coverage. So if you've got some questions about you know, what are these Parts A and B that April and John are talking about? Let us know we did record that webinar as well, and we can get that sent over to you. But Part A covers hospitalizations. And Part B is what covers doctor's bills and procedures. Now, drug coverage works a little bit different. If your employer plan offers coverage that's at least as good as Medicare's, then it's considered credible coverage by Medicare. And you don't have to enroll in a separate prescription drug plan. And your company will give you a letter stating that. They're going to give you a letter saying hey, yes that certifying that the plan that you're on is considered credible coverage. 

However, if it's not credible coverage, then in this case, you're also going to need to sign up for some part of Part D to have drug coverage. And again, this is all for people who are if you're over 65 and working, but your employeer plan covers less than 20 employees. So when you are when you turn 65, whether you're working or you're retired, we would recommend that you call social security administration and ask them about enrolling in Medicare. So we would recommend that you call them and find out if they suggest that you'd run any parts of Medicare. If you're working and covered by an over 20 employer plan, then they'll most likely say no, they shouldn't be saying no. And we recommend that you make a record of that conversation, jot down the date and the time and the name of the person that you spoke with, and a summary of the conversation. And then keep that for when you eventually do enroll in Medicare. 

There have been cases where people get wrong information about when to enroll in Medicare. And if they don't enroll in time, then they get late penalties. But if you were given wrong information by someone from the Social Security Administration, then you can ask for them to waive those penalties. That's only if you get bad advice from someone at Social Security Administration and not from anyone else. If you're not working or you're covered by an under 20 employer plan, then the Social Security Administration is going to say yes, you need to go ahead and enroll in Medicare. So what are these late enrollment penalties that we keep talking about? So late enrollment penalties if you do not enroll in Part B when you're supposed to, you're going to have to pay an additional 10% for every 12 months that you should have been enrolled. So for example, the Part B premium for 2021 is $148.50. So if you are getting charged a late penalty, you're going to have to pay an additional $14.85 per month this year for Medicare. And then next year, if premiums go up, you have to still pay another additional 10%. 

So that goes on. And that goes on for the rest of your life. It's not a one time thing, this late penalty goes on for the rest of your life. That's why you're you're probably get tired of hearing us say how important it is for you to enroll in Medicare on time. One little note we want to bring up about Cobra because this is where we can see some issues there too. So earlier we saw on that chart that Cobra pays secondary to Medicare. And sometimes it's quite common for someone when they retire. If they retire and they're under 65. They may go on Cobra for up to 18 months after leaving employment. The thing to remember here is that Cobra is not considered an over 20 employer plan. And so you still have to follow the general rules for enrolling in Medicare to make sure that not only do you have coverage, adequate coverage, but that you don't have any late penalties. 

Some people have come off of Cobra after 18 months and found that they couldn't go into Medicare right away. They had to wait until the next general enrollment period. And that caused a delay for them to have coverage. So again, it's very important to enroll on on time so that you don't have any gaps in coverage. And to avoid those late enrollment penalties as well. How to enroll in Medicare? Enrolling in Medicare is very easy. You can go directly to the Medicare's website, you go to medicare.gov. And there's a button right on the first screen about applying for Medicare. If you are receiving Social Security benefits, when you turn 65, you're going to automatically be enrolled in Parts A and B for Medicare. And again, you will only decline Part B if you're covered under some sort of group plan that covers 20 or more employees. You can also call the Social Security Administration as well to enroll in Medicare.

John: I want to make a quick comment there. It is easy. Even I did it. I was able to go on to the thing and get registered. And then I'll share my experience with that. About three days later, I got a telephone call from a gentleman walking me through and making sure that I understood I did not enroll in Part B. And did I understand that? And I said yes, because I have a group plan with more than 20 employees. And I will continue on that for about another year or two. So they do follow up. And they do ask you questions to make sure that you knew what you're doing. And we've had clients tell us the same thing where they got a phone call. So it's very important that when you go in and just realize you are going to get a follow up call.

April: Yeah, I mean, we've heard nothing but great things about some follow up and making sure that things are done there. So they do a good job with that.

John: Yes they do. I think social security and medicare folks do a good job. I think sometimes criticized a little too harshly. I do understand sometimes you'll call and get one person to answer another person or another. But for the most part, those folks do a very good job.

April: They do, they do. Alright, let's talk about how private insurance works with Medicare to make sure that you have complete coverage in retirement. So even though Medicare is a government program, it's based on private a private insurance model. So that means it's got deductibles, coinsurance amounts, and it doesn't pay for 100% of your care. And then the prescription drug coverage, which is Part D that uses private insurance to provide the actual insurance. So enrolling in just Part A and B for Medicare does not finish the job. You're going to also want to find some private insurance to cover your drugs, drug coverage, and then also probably cover some of the deductibles, coinsurance amounts for hospitalizations or doctor's bills. So like us say there are some gaps that Medicare doesn't cover and that's where private insurance comes in. 

So the first thing you want to do is see if you have any employer or retiree insurance that will work with Medicare. If so you may want to keep it. And again, just on that drug coverage, make sure that it's credible coverage according to Medicare. And that means it is at least as good as a Medicare's basic drug plan. The plan is going to know if it's considered credible. So you don't have to worry about that they'll know if it is, and most probably are, but you may find with some high deductible plans that they don't have the right coverage for you for the prescription drugs. If your employer or retiree insurance is not available, then you're going to have two choices, you can take out a Medicare Supplement policy, which is also called a Medigap policy. And you can pair that with a prescription drug plan. The other option is to go with an all inclusive insurance, which is called a Medicare Advantage plans. Advantage plans are like HMOs that involve a network of providers to deliver your care. 

So just one note here, when you're taking out, you're looking at a Medigap policy or Medicare Advantage plans, you do still have to enroll in Parts A and B. These are just additional coverages to fill in those gaps. Here are some key considerations for you to think about. When you're deciding which way for Medicare, you're going to go. Are you going to go with original Medicare, which means you have Parts A and B, where you add in a Medigap policy and a prescription drug plan? Or are you going to go with a Medicare Advantage plan. So the one thing you want to check on is, can you see your current doctor, you may want to keep with your current doctor, there may be some specialists that you want to make sure that you still have access to so make sure whichever whichever way you go with Medicare that your doctor can be seen. 

Again, those Advantage plans can have a network that you have to see doctors or specialists just in your network. So you want to double check that before you make that decision. The other thing to look at is how much will you be paying for your prescription drug coverage? Prescription drug coverage can get a little complicated. I know John, you can share experiences with us. The main thing is, is that these drug plans vary widely between the different plans, because they all have a specific list of drugs that they cover. So you may have to change your plan every year, depending on which prescription drugs that you take, or if the plan makes changes as well. John, you want to share your experience?

John: I do. I'll keep it brief. But I had I'm on my third plan D. Third year of quote, retirement. Okay, so I know technically I'm retired, but I'm not retired I, I had a situation last year where medication, I'd been paying $40 a month for. My part, jumped to $400 a month. 400 just for that one prescription. Four prescriptions, but just that one. And so it became very clear that it came time to look at the drug plan to find a plan to cover that particular medication. I was shocked at the comparison. I knew there was big differences, but you would think it would be fairly consistent. But each plan D provider has their own list of medications they cover and what percent. So it's very important that you don't forget that and you just you check it every year. I have my representative that did my Medicare Supplement policy. Take a look at that each year. Now let's go through it. 

And then the question is, do you do Original Medicare with a Medicare supplement and your own plan d? Or do you use Medicare Advantage that April was talking about. I looked at both. For me, for the lifestyle I want to live and be able to do I wanted the ability to see whatever doctor I wanted to see. Didn't want to be worried about being out of quote territory right out of network. And I also didn't want to be hampered by wanting to travel. But a lot of moving parts to this. Part of what we help people get clear on is okay, talk to us about your lifestyle in retirement. We need to know that anyway because it's going to determine how you're going to fund it. How will you fund your desired lifestyle? And part of that funding will go into the budget here in a minute. You'll see that health insurance is a chunk of that. And it goes up every year. Every year, the costs get higher.

April: That's right. Thank you for sharing. I know we've had other situations too John where a doctor recommended that prescription drugs change or trying a new medication, but that wasn't covered under that drug plan for that year, so they have to wait until open enrollment, change their plan to be able to go on this, this new medication. So that drug plan, you've got to review it every single year. Okay, what are some other considerations? One thing we want to look at is monthly premiums. And also, we're gonna give you some examples in a few minutes. But we want to urge you not to just look at premiums, you got to kind of take it all into consideration, yes, what the monthly premium is important, but how much is your other what how much are your deductibles and your co payments? 

How much is all of that going to add up to as well, because if you make the decision just based on picking a plan that has the lowest monthly cost for you the monthly premium, it may cost you more in the end and having some other higher co payments or deductibles. So first of all, we also want to look at too is what are some other out of pocket costs that you might have? We just mentioned, co payments for doctor's visits. And there are other services that are not covered under Medicare, like dental, vision and hearing. Those are not covered by Medicare. So you have to make sure that you've got a plan or a budget for those items as well. So how much can you be expected to pay after going into Medicare? So we're going to take a look at this. 

As we mentioned earlier, if you're on a group plan, your employer is probably subsidizing your premiums. And you're cost sharing, right. You're sharing the cost of that health insurance with your employer, those amounts are taken right out of your paycheck. So you may not be aware of how much you're paying for health insurance right now. So you want to first look at that, how much are you currently paying for health insurance? And then starting to take a look at what is it gonna look like in retirement? So when you know, or is it something where you're going to be paying more in retirement, or are you going to be paying less. So different expense items, you've got monthly premiums, we're gonna look at that. And then also the other out of pocket costs, deductibles, co payments, coinsurance, and then any of those non covered non covered services as well. 

So the base monthly premium right now for part B for 2021 is $148.50. And that's per person. And we talked about this in our last webinar, but I think it's important for us to cover it again. Medicare has something called an income related adjustment amount. And what that means is if your income hits certain thresholds, you're going to have to pay more for part B, and for Part D, okay? So if you are, if you file single and your income is under 87,000, or if you're married and your income is under 174,000, then you're just gonna pay the the regular premium for Part B, and then whatever your drug coverage is, but if your income is above those amounts, then you're gonna have to pay an extra premium. So we call this an extra tax, because as your income is increasing, then you're going to have to pay more for your Medicare premiums. 

We find this a lot. You know, sometimes we hear people say when they first retire, oh, my income's not going to be in one of those brackets. But it can be easy to get there once you're over age 72. And you have to start taking out required minimum distributions. So at that point, the IRS is going to make you start taking money from your retirement accounts. If you have IRAs, 401k's, deferred comp, 403b's, anything of those of that nature. And that income gets added on top of your current income and can push you into these higher levels. So John, I'm thinking about our client several years ago, they they took money out of their IRA to fund a big trip, they were going on a big trip, and they took some money out of their IRA, and it pushed them over the limit. And so they then got a notice from Medicare pay your income was above these limits, and you're going to have an extra premium to pay. 

Now Medicare does a two year look back. So when they're doing the the what's your premium going to be for 2021 they're looking at your tax return from 2019. So that's important to note too. It's a two year look back, it's not current year, they're looking back the last two years. And they'll look at that every year. So let's look at some ideas about some different premium amounts here. So first, we're gonna look at a monthly premiums for supplemental coverage. So we just talked about what the Part B premium will be the $148.50. Here's an example here though. If you did go with original Medicare, meaning you sign up for Parts A and B, you could have a Medigap policy of around $200. That's an average. And then also your drug plan could be around $40 per month. If you compare and contrast that a Medicare Advantage plan, that could be around $50 per month. 

But again, Medicare Advantage plans, you really want to look at what are those deductibles and everything else that will be in that plan. Out of pocket cost, you've got co payments for drugs and doctor's visits. And you've also got your non covered services like dental vision, hearing, and any sort of like alternative care, like acupuncture or chiropractic visits. Some Medicare Advantage plans do cover, you know, you can get an all inclusive plan through Medicare Advantage plans that have dental and vision hearing. And again, you want to make sure that you choose the plan that's right for you, that covers the services that you need. Here's a sample budget that we might look at here of a monthly premium. So you've got Part B at $148.50. You've got a Medigap policy at $200 a month and a drug plan at $40 per month. So that comes to about $388.50 per month. And that's an that's per individual. So if it's a couple, you're going to want to double that. 

Okay. Let's take a look at now we've talked about monthly premiums we talked about earlier to that there's that's not just all that you're gonna be paying for it in retirement, you're going to have these other costs. So let's take a look at a sample of a first year budget for premiums and out of pocket costs. So you know, this is just a starting point, your your healthcare expenses in retirement could be more could be less, but we really just want to get the conversation started. So what we're looking at here, are those monthly premiums that we just looked at came to $388.50. Okay, how much is that going to be? We've got an average of some out of pocket costs for prescription drugs, for dental vision and any other care that you might need throughout the year. That comes to about $6200 per year. Again, that's a per person number, right. 

And, again, this is your just a sample budget, we just really want you to start thinking about what your own costs will be, and making sure that you have a plan to pay for that. Now let's talk about transitioning to Medicare. The main thing here you want to look for is that you want your Medicare to start first of the month that you turn 65. Okay, that's the key there. And again, back to that we already talked about earlier about who needs to enroll and when. So about three to five months before you turn 65, you really want to be researching what your options are, you want to find out if you have a employer or retiree insurance available to you and understand how that insurance is going to work with Medicare. If you're keeping your employer retiree insurance for supplemental coverage, make sure you enroll in Parts A and B and ask if you need to enroll in Part D to make sure it's got credible coverage. If you're not keeping employee or retiree insurance, then decide if you need to have a Medigap policy paired with a prescription drug plan or Medicare Advantage plans Medicare Advantage plan, you want to shop for plans and choose and apply one that is going to fit your needs and make sure that you have the right effective date about when that coverage needs to start. 

So once you're on Medicare, the other thing you're going to look at here is this is something you're going to want to review every year in the fall. We talked about earlier about reviewing those drug plans. But you just want to make sure that in general, whatever Medicare plan, you're on that you review that every fall, you can see premiums go up, you can see networks change, things like that. So you just want to make sure that you're reviewing your coverage every it open enrollment, which happens in the fall. So you can decide if you're going to stay in your current plan or do you need to switch to something else. If you decided to go than Medigap policy, the policy itself won't change. 

But the drug plan with it might. And so again, we talked about that earlier, you just want to make sure that your drug plan covers the prescription drugs that you're currently taking. New plans go on the market every year. So you just want to make sure that there's anything out there that's available that's going to help put you in a better position. And then of course as things change, too, there's something that comes up that John I see that we want to make sure we'll make sure we get that out to you. John, I know we've covered a lot of information. And we're kind of coming up here on the end of our webinar, any thoughts that you have before I summarize?

John: I had a thought went through my head a moment ago, you're talking about and seeing that visual of the prescription bottle alone, the lifesaver there, that preserver, you know, healthcare costs are very high in this. And there's a lot of debate about it, among politicians, you know, should you have Medicare for all should you have Obamacare or whatever. But the truth of matter is, it comes to us as individuals to take personal responsibility. To take the time to understand what's available, design a plan that fits us. And I'm just amazed at the number of times people will come to us, especially those who want to retire before 65. And they have no game plan for their health insurance. You will ask the question, what is your what is how will you pay for your health care in retirement? And sadly, a lot of people don't. And they're dealing with misconceptions, usually, because of a well meaning friend told them what they were doing. And they thought, well, I'll just do the same. 

You can't approach it that way. It's like on the  retirement income planning side. And so we have over time, our process is to look at everything. Something as mundane as your car insurance and your homeowners. Your health insurance, like we're talking about today. Your legal documents. Your life insurance. All of this is important on the protection side, before we even think about assets, and liabilities and income streams and budgeting. But all this is part of it. This struck me that, you know, if you did not have your coverage set up properly, and you were sick or hurt, you could destroy your savings investment plan or retirement account. How many times have we seen people, April, that had to take money out of their retirement accounts, pay taxes, in some cases, penalties, because we had to pay health care costs for themselves or an adult child even that lost their job, they're back home. 

So there's just so many moving parts to this that I just would encourage everyone listening today, watching this. Schedule a telephone call with us, let's just talk about your situation, I call it having a conversation. Let's just have the conversations. And everything may be perfect, something may pop out that we can help you with. But that's really it for me just understand this is a complicated subject. And like most things in my career, had to get involved in learning more about it because people ask questions, and then I had to do it for myself. You know, they say experience is the best teacher. And we've got the experience. Some of it good, some not so good.

April: That's right. That's right. Yeah. And I would just echo what you said, You know, I think this is, you know, we talked about earlier about health insurance being a silo, you know, healthcare in general. And retirement is a silo, it's only one piece of the puzzle. It's, it's a critical one, it's one, we've got to figure out how to plan on how to pay for health care and retirement. But it's only really a small piece of the puzzle. So I echo what you say, said, John, I think you're on the call. You've got some questions, you know, I know we, we try to cover as much as we can, we can't get to every individual situation. So I'd recommend we set up a time and have a call and kind of go through that. 

Any questions or concerns they may have? Well, and that kind of wraps us up today for our presentation on transitioning to Medicare. Before we get off, I do want to tell you, we have another webinar that we're continuing on this series about Medicare. We had so much interest in December, I think we had over 100 people sign up for a webinar in December. So we definitely knew that there was some interest in Medicare. So we've got another webinar coming up on February 18th. And we're going to be digging more into how to pay for healthcare, how to avoid those penalties, especially from that IRMA, the income related adjustment amount. So we're gonna get into some strategies there with everyone about about Medicare, how to pay for it, and how to avoid that IRMA tax as we like to call it. All right, well, thank you, everyone, John, any last minute. Any last words before we sign off?

John: I appreciate you coordinating this. And folks, I hope you've benefited today and pick up the telephone and give us a call or send an email and let us hear from you. And just a reminder that if you want a copy of the presentation, request it. We're just not gonna send out to everybody willy nilly. If you want it, we'd be happy to provide it to you. Thank you.

April: Thank you everyone. Have a great day and we'll talk soon.

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. 

2021-116815 Expires 4/2023

How and When to Claim Social Security Benefits

This week, I’m joined by fellow North Florida Financial advisor, April Schoen, for a live seminar on Social Security. Over the course of the seminar, we're going to be talking about how social security works, what you need to know around the program, different payment scenarios, and also issues that surround the program. April and I have over 50 years of combined experience in retirement planning and we’ll be using that knowledge today to discuss Social Security with retirement in mind.

We dive deep into how to claim Social Security benefits, as well as:

  • How and why Social Security was formed

  • How Social Security is funded today

  • Where to see your statement to view your current benefits and earnings history

  • Spousal, widow, and widower benefits

  • The big changes made in 2015, including restricted application

  • And more

Mentioned in this episode:

  • Call the Tallassee Office at 850-562-3000

Transcript

April Schoen: Hello, everyone. I'm so glad that you guys could join us today. I'm sitting here with John Curry, author of Preparing for a Secure Retirement. Hello, John.

John Curry: Hi, April. Hello, everyone.

April: And today we're gonna be talking about social security. And we're going to be going into about the program, how does social security work, what you need to know about the program, different claiming strategies, and then also some issues around the program. Before we even get started there. Let you know a little bit about who we are. 

My name is April Schoen and as I mentioned, we have John Curry on the call with us today. John and I both are advisors with North Florida Financial. North Florida Financial was started about 50 years ago, and they're headquartered in Tallahassee. That's where John's located. And we've since grown, we've got locations from Jacksonville, all the way over to Louisiana, into Southern Georgia, Alabama, down to Tampa and Orlando. So I'm actually sitting at I'm in Jacksonville today. So I just love this technology, how we can all connect and don't have to all be in the same area. Right, john? 

John: Absolutely. As long as the technology is working properly, correct?

April: That's right. We had, we haven't had a couple of issues before with webinars. So fingers crossed all goes well, today, we can only

John: You know, we'll have more issues in the future. That's just the nature of the game. Yeah, just get over it and move on. Right?

April: That's right. That's right. So before we get into the content, a couple housekeeping items for you, if you don't have it, grab a piece of paper and a pen like I've got here, there may be some questions that you have as we go. We won't have time today for any q&a at the end, like we would normally do at one of our live events. When John and I were doing live seminars on Social Security, Medicare, and other retirement planning issues, our seminar's about an hour and a half long. And usually we have to kind of stick to a pretty tight agenda and schedule there to make sure to go through all the content, and especially have questions at the end. 

So as we're going through the presentation, if you have any questions, jot those down and then send an email over to me or to John, and someone on the team, we'll make sure that we get back to you about that. There may be some things as we go through, you want to drop down some to do's. So we're going to talk about some things you should be looking at on your social security statement. So you might have some to do's that you want to look at as well. And then there may also be a topic of discussion that you want to have with us. So just again, I suggest having some paper, some pen, because we're going to go through a lot of information today. Okay, a little bit about us and our team. So I always like to say you know, it's not a one man show or a one woman show around here. We have several members on our team. So you've got me and John. And then we also have Audie and Jay and Zac as well. 

So Audie and Jay are in Tallahassee with John and then Zac is in Jacksonville here with me. Before I go in, and we start really started digging into the the webinar content because I know some of you may have to jump off the call a little early. And if you do, I would recommend that we maybe schedule a time to do a phone appointment. This would be at 25-30 minute call for you to discuss any goals and concerns that you may have around retirement planning. So John has been helping clients with retirement planning issues, like Social Security, Medicare, IRA rollovers, required minimum distributions, inherited IRAs since 1975. 

What we find to be most important though, is that there are a lot of lessons that we've learned in the last 45 years of helping clients when it comes to retirement planning. And so we know what works and what doesn't work for people, and we can share those with you. So we're going to talk today we're gonna mostly be focusing in on Social Security. But that's only a small piece, if you will, to the overall retirement planning discussion that we have with clients. So we'll touch on some of that.

John: I will take a moment and share with everyone your background and then I want to make a comment before you get into the material.

April: Yes, thank you. So I am I have been working with John and our clients at North Florida for about six and a half years coming up on seven. And I worked with a previous firm in Tallahassee before that for about four years. And throughout my career, I've really focused on working with people, mostly helping them with retirement, I would say I was telling someone this morning that majority of people that I meet with and John meets with our people who are about one to three years from retirement sometimes earlier than that to five to eight years from retirement. And these people want to make sure that they have all their ducks in a row, right, and they're ready to step off into retirement. 

So that's primarily the group that we serve. And I'll take that a step further and say that we primarily work with people who are retiring from the Florida Retirement System, they're FRS members. And as I mentioned, I worked with a previous firm for about four years before I came to North Florida. And that's all we did. We worked with employees at state universities throughout Florida. And so they were FRS members. So I became very familiar with the benefits offered to people under FRS. Now, John, throughout his career as well, has primarily worked with members of the Florida Retirement System. Right, John? 

John: Correct. 

April: And so we've found some really good synergy and working together with both of our experiences to help people. And John his I'm gonna, I don't want to tell your story, John, but I will, that your father and your grandfather both retired from was it Department of Transportation, right?

John: That's correct. Over in West Florida, Defuniak Springs.

April: Mm hmm. So you are very familiar with the benefits that are offered to FRS members. And then also some of the common questions or concerns that they have too because you lived it through your parents and your grandparents.

John: Well, as a friend of mine put it I am, I grew up in a state employment family. So I understand the issues, both the retirement side, but also the day to day stuff. And because I have literally 45 years of doing that, I feel like I'm on top of it. And even though I have clients from all areas, and all walks of life, my number one passion is helping people in the Florida Retirement System.

April: Well, maybe we'll circle back and kind of talk about some of those key issues today. What we're going to be talking about when it was our presentation day on Social Security, we're going to be talking about how social security works, what you need to know around the program, different payment scenarios, and then also issues around the program as well. So let's, let's roll up our sleeves and get to work. So let's talk about how social security works, first and foremost. I think most of you on the call may be familiar with how social security works. But sometimes there is a little bit of confusion around this. So we'll kind of go through this together. Social Security was started back in 1935. And it's funded through the taxation of wages. 

Those of us who are paying into Social Security today paying into the trust fund are the ones who are paying the benefits for the beneficiaries today. So that we're gonna circle back and talk about that later, because that also comes in to some of the issues around the program when it comes to funding, but through taxation of wages, that goes into the trust fund for Social Security, and then that is what pays the current beneficiaries for Social Security. You can see here that the average monthly benefit now this was as of January of this year, was about $1500 per month. $1,503 is the average monthly benefit, again as of January of 2020. So those numbers get updated every year. 

So coming up in 2021, we'll have a new presentation with some new numbers for everyone about the different numbers that will change periodically. So we're going to go through some of those today. How do you qualify for Social Security. So you have to earn what's called Social Security credits. So as we're working, we earn credits for Social Security. And this is what allows us to qualify for Social Security benefits and Medicare benefits as well. When you've earned 40 credits, you're able to qualify for both Social Security and Medicare, you could earn up to four credits per year. So for most people, if you have worked for about 10 years, 10 years, then you qualify for Social Security and Medicare. There are some earnings limits, you do have to make a certain amount to qualify. 

But again, for most people, if they have 10 years of working history, they qualify for both and their spouse too would qualify for Social Security and Medicare. How is your benefit determined? Your benefit amount? That's really what it comes down to when we're talking about social security. We want to know what's your Social Security benefit going to be at the different ages that you can claim? So you know, you've got your full retirement age. We're going to talk about a little bit later about claiming early as 62 are deferring for as long as, as age 70. But how that benefit is determined, is Social Security averages your highest 35 years of salary. And if you do not have 35 years of a working history, then they're going to average zeros in for any year to get you to 35 years. 

Very important there. So when depending on your work history, you may want to double take a look at what so security has for you for your work history. And see if you've got your 35 years, if there are any zeros in there that might benefit that might change to when you're thinking about taking Social Security. That's one of the things that we want to take a look at there. But yes, they it's based on your highest 35 years of salary. And then if you don't have 35 years, they'll they'll put a zero in there for you. I would recommend going to the Social Security website and taking a look at your statement. They used to mail paper statements, and they kind of got away from doing that. And so the best way to look at your benefits now are to go online and set up an account. You can go to ssa.gov, or social security.gov. And you can take a look at your benefits. They've got some different calculators on there as well for you to take a look at. 

I will say too if you haven't registered on the social security website before, we would recommend that you at least set up an account. Because we've heard of some fraud that happens people try to go in and create a you know username for you if you haven't done that already. So I went I went in a couple years ago and created mine so that I can go in and see too. And you can see a couple different things. You can see what your earnings history is. So it's really it's kind of neat to see what the earnings history is what's been reported to Social Security. There's not usually too many issues with that. But it is good to double check and make sure all that looks accurate. And then you can see the different benefit amounts as well. Again, looking at what your full retirement ages are claiming early furring and then also what would be available to any survivors as well. 

Let's keep talking about the pros and cons about what you should know around the program. The first thing is when you were born determines your full retirement age. So if you were born between 1943 and 1954, your full retirement age is 66. If you are born 1960 or later, your full retirement age is 67. And if you're born between 1955 and 1959, they are bridging the gap between 66 and 67. So yours might be 66 and two months. 66 and six months, again, depends on when the year you were born determines your full retirement age. And when you activate your benefit, when are you going to start taking Social Security determines what amount you will receive. So we're going to talk about an example of someone's full retirement age was 66. And if they waited till 66, to claim Social Security, they would receive their full benefit. Sometimes we call it the FRA the full retirement age. If they can, you can also claim it early. So you can claim it early as 62. But if you claim it early, you're going to have a reduction in benefits. And that reduction is locked in for life. 

Sometimes there's there's a lot of confusion and misinformation about this. Some people think that if they take their benefits early at 62, they're going to give them a reduced amount for a few years. And then at 66 it'll change to their full amount. And that is not accurate. What you started at is what it's going to be locked in at. So very important when you're looking at your different calculations. We're also going to talk about what's called delayed retirement credits, because you can delay past full retirement age, and social security gives you an increase for every year that you delay past your full retirement age. Now everyone's situation is different. There is no right or wrong answer there is no one size fits all, or a rule of thumb. 

So I always say John's heard me say this before. I'm not a big fan of rules of thumb, because who's thumb are we using? Are we using my thumb or using John's thumb or using your thumb? So rules of thumb to me don't always work. It has to be very individual to your situation. And there's a lot of things to consider when you're thinking about if you're going to claim early or if you're going to do so john here, I was thinking we could just kind of talk through this a little bit about maybe reasons why someone would take it early, why they should delay taking Social Security, and other items that people should take into consideration when they're thinking about when to take Social Security.

John: Well, let me jump in for a moment, because I know you'll cover some of this in slides coming up. But let's just take each one of them. If you're going to consider taking your benefits at 62, to understand that if you earn more than 18,000 of earned income, you're going to have a penalty. So for every $2, you earn, above that 18,000, you're going to lose $1 benefit. We have people April who still don't know that. And then we have people, like you said just recently, we had someone who thought they could take the reduced benefit. And then once they reach full retirement age started to full benefit. So there's a lot of confusion about it. 

Should you take the benefit at age 66 in this example, or wait to 70. In my case, I started mine at age 66. April and I had several discussions about it, I've had the pleasure of looking at literally 1000s of plans in my 45 years of doing this. And with the time value of money, I decided I'd rather have the income now. Now, some people should wait until 70. Why? In my case, I have other savings investments, life insurance in place. So the life insurance would be to take care of people that I love and care about and either my death. I just recently advised a gentleman wait until 70, he did not need the income. Now he could wait by waiting until 70. Since he has zero life insurance, none, then the survivor benefit would be a higher number. 

So instead of like on the screen getting $3,000 per month, his widow would have almost $3800. So it depends on your individual situation. April is correct in stating that the one size does not fit all with this. I'm sick and tired of the advisors telling people take it as 62 to because bankrupt, you get all you can. Well, I got news for you, if the system were to go bankrupt, they're going to cut back on all of our benefits. There is a wealth of information on the website for Social Security, I would encourage you to read the trustees report for yourself. Most people will not do that. Because they get boring, or other than geeks like us that enjoy that stuff. It probably is. Which leads me to one other thing, the concept of who not how, April. 

And people ask us how do I do this? How do we do that? And you know, maybe that's the wrong question. Maybe the right question is who can do this for me? Or do this with me. So our job is to help you where you want to go. We have a lot of experience and focus on getting things done. Just went through some therapy yesterday, in fact, for vertigo. Well, I could have done exercises myself and hoping it would work. But I went in, young lady solved my problem in one hour session. And so who versus how. We know how to do it. So let us be the who that helps you if you want help with Social Security, Medicare and other issues involved in retirement. But those are my comments here because I'm sure you're getting this. If not, I'll jump back in.

April: Yeah, no, I think you're right. All of those are things to take into consideration and you just hit on a couple of key areas there. Will you continue working? That's a big thing. Even if you're at full retirement age, why are you going to continue working? 

John: Like me.

April: Like you. That's right, exactly.

John: On paper, I'm retired. I'm getting Social Security pension. I don't want to fully retire. I want to keep working as long as I am creating value and I'm relevant and I'm helping.

April: Right. And, you know, for everyone to get into that individual situation. You know, John, we were meeting with some clients earlier this week and one couple plans to work to about 68. But when they retire, that's it. They're done. Right? There's they're not going to do any sort of work after that when they leave. They're both their jobs. Ones retiring from the state one does not work for for government. And when they retire, that's it. They're done. There was another gentleman who he's got the potential to do some consulting. So he's gonna retire and then he'll probably do some consulting, what that looks like yet we're not sure, but he's got that option available to him. So it just kind of depends again, on your individual situation. You've got to consider your health. Right that's that's a big part of it as well, about when to claim. We can talk through your health. 

John already mentioned about depending on your other assets, and are we concerned about survivor benefits, those are some reasons why you may delay and again depends on other income streams that you may have in retirement. Do you have a pension? Or is the rest of the retirement planning burden on you, the individual to have the income that you need in retirement? So those are the things that we all look at when we're working with clients and going through what we call a retirement rehearsal, where we show you exactly what it looks like financially to retire, and we play what if. What if we did this? What if we took it early? What if we take it at full retirement age? What if we take it at age 70? What are your different pension options if you have those available? What does that look like from a retirement standpoint? 

And then we also talk about how to distribute assets. So if you've got, you know, retirement accounts, you know, maybe you have a 401k or a 403B or deferred comp, maybe you have some investments outside of that, and walking through, how are you going to have what's your plan for distributing those assets in retirement. So that's what we do, working on retirement rehearsal with clients.

John: And we have a number of clients who have either the optional retirement plan with the University System, or the FRS investment plan, which is a bigger, because now when you retire you have to pick the right social security option, determine when to do Medicare, but also how do you select the right income plan for you, based on. All of this is going to be addressed. Sadly, most people wait until the last minute, they're in scramble mode. So but I'm impressed with the number of people who registered for the webinar, I think we had like 60, I thank you said. So that I'm pleased to see that because we see ourselves as educators first. And if we can help people, then they're ahead of the game. And every time we do these, we just we get a full house, either live in the training center here or webinars. But anyway, I know, you got more stuff to cover so ahead.

April: Yeah, no, that's a good point. So let's just kind of keep going here. And we'll we'll circle back on some of these other key issues for people. Now, again, we talked about this a little bit, but you do have delayed retirement credit. So every year that you delay past social security and past your full retirement age, Social Security is going to increase your benefits 8% per year. They'll actually do it on a monthly basis. And so it's .67% per month. So let's say your full retirement age was 66. But we're going to work six more months, they're going to increase it by that many months that you delay taking Social Security. But it is an 8% increase, if you delay. 

I also want to point out too, if you're still working at this point, let's say you are, the couple we were talking to earlier this week, John, they're going to be he's going to be full retirement age next year at 66 and two months, but he plans to work to 68. He has a couple things that are going to be increasing his social security benefits. Not only is he going to get the 8% increase for delaying taking social security, but he's still working. So he's still paying into social security and his earnings right now are continuing to go to increase what his monthly benefit is. So this all comes back to are we going to be working? Are we not going to be working and all those other factors that we talked about earlier as well, especially when it comes to looking at these delayed retirement credits. On your benefit, you're going to see your different benefit amounts. Now you're going to see what happens if you take social security at 67, and your full retirement age 66-67 or somewhere in between. 

If you take Social Security early at 62, or you wait until 70 for your full retirement benefits. You're also going to see on your statements, what amounts would go to your survivor. And we're going to talk about survivor benefits a little later, when we're doing the retirement rehearsals for clients, we're going to ask for copies of your statements. If you're married we're going to ask for both so that we can take a look and walk through the scenarios of what it looks like. Maybe for one of you to start claiming, the other to delay. What about spousal benefits? There's a lot of different things to consider about the claiming strategies. We're going to talk a little bit about those today. 

So you know what they are. But that's why we would ask for copies of statements so that we've got your accurate numbers in front of us. There is a cost of living adjustment for Social Security. It's not guaranteed every year, but there is a cost of living adjustment. So the COLA the cost of living adjustment is tied to the CPIW which is the consumer price index for urban wage earners and clerical workers. This is not the inflation number that is often quoted in the media. So first. know that. But if there is an increase in the CPIW then you're going to see a cost of living adjustment for your Social Security benefits. 

For example, in 2020, the COLA was 1.6%. But there have been years when we've had zero cost of living adjustment. That was back in 2000, we actually had two years back to back 2010, 2011. 2016 was also zero. And then 2017. Right after not having a cost of living adjustment, you got a pay increase of .3%. Most people told me it was like almost insulting, you know, the the .3, not really giving them a cost of living adjustment or having a zero there.

John: That did not cover the cost increase on Medicare.

April: That's right. And so you have to take those things into consideration, too, about Medicare. Medicare premiums once you're over 65. One of the other common questions that we get about Social Security is taxes. How much will the tax be on social security? So, taxes on your Social Security benefit, depend on two things. One, it depends on your filing status. Are you filing as an individual or joint return, and then also, what is your combined monthly income. So your combined monthly income is a calculation, it's your adjusted gross income, plus any non taxable interest, plus half of your Social Security benefit. That equals your combined income. 

So we're gonna walk through both scenarios about if you file as an individual or a joint return, and what that looks like. Individual filing status, if your combined income is between 25 and 34,000, then 50% of your benefit will be considered taxable. If your combined income is greater than 34,000, then 85% of your benefit will be considered taxable income. We can help you with this looking at tax returns, John and I are not CPAs. But we review enough tax returns, we can help you if you need some help. Looking at the tax side of things. If you're filing a joint return, and your combined income is between 32,000 and 44,000, then 50% of your benefit is considered taxable. And if your combined income is over 44,000, then 85% of your benefit is considered taxable. You can have taxes withheld from your monthly benefit. Some people don't realize that we had a client a couple of weeks ago we're meeting with and she was actually she actually got penalized from the IRS, because she was not having taxes withheld from her monthly benefit. So just make sure that all of that is in good order when it comes to your taxes. Now let's talk about if you decide to continue working and taking social security. 

We talked about this a little bit earlier. But you can see if you're if you claim early at 62. And you're still you have any sort of like you have earned income over for 2020, it's 18,240, then your Social Security benefit is going to be reduced by $1 for every $2 above that limit. Now this 18,240 number, the earnings limit changes typically every year. Every year, that number goes up a little bit. So we just have to pay attention and have the accurate numbers. So that's why we talked about it's important to know if you're retiring and 60 do Are you still going to be working? And what's your income going to look like from that. If you take it in the year that you turn your full retirement age, any wages above 48,600, your Social Security benefit is going to be reduced $1 for every $3 above the limit. 

Now, John, we just had this case, and we were talking about with a client, because he is going to be full retirement age in August of next year. And he's working. And he's considering starting social security in January. So we had to walk through this very thing with him making sure that looking at if he was going to have a reduction in Social Security benefits, what would that be? Or was he going to be in good shape and not have any kind of reduction there. So again, all part of what we want to look at when clients are getting close to retirement and social security. Now if someone waits if you wait till the month that you reach full retirement age, there's no earnings limit. You can continue to work you can get your Social Security benefit and there's no earnings limit. 

So in his case, if he waits until August of next year when he turns his full retirement age, they don't care how much money he makes, he can make a million dollars, and he's not going to have any reduction in his benefits. It's only going to be between January and July that we have to pay attention to there in his case. Okay, let's get into some different payment scenarios with the program. The first is spousal benefits. So as we talked about earlier, when you have 40 credits for Social Security, both you and your spouse are eligible to claim a benefit or social security, and the spousal benefit equals half of the other spouse's benefit. Sometimes, you know, John, we find that it's easier if we use like numbers for this scenario here. 

Let's pretend for a moment that you and I were married, and you're spouse A and so your Social Security benefit is $1,000 a month. And let's assume that I have a lower record. And so maybe my spousal benefit is only $250 a month under my own record. I would qualify for a spousal benefit equal to half of yours. So in that scenario, I would qualify for a spousal benefit of $500 to get me to half of what the higher earner's record would be. So spousal benefits, higher earner gets their record their earnings, and then a lower earnings spouse, it's either going to be whatever they qualify their own record, or half of their spouse's, whichever is higher. And Social Security has what's called deeming roles now. And so if they'll automatically give you the higher of the two, of course, I always say double check, make sure that they're giving you the right amount. We always want to trust but verify. But they do have deeming rules where they should automatically be giving you the higher of the two. 

There are widow and widowers benefits as well, which, as a widow or widower is equal to the higher of the two records. You don't get both you don't get yours and theirs but you only get the whichever one was higher. So in that case, again, let's assume that my record my my benefit was $500. And John's was $1000. And John passes away, I'm going to receive $1000 from Social Security, not just the $500. So there are widow and widower's benefits, we can help walk you through these different payment scenarios as well. And depending on the different survivor benefits, I'm not going to spend a lot of time here because it can get a little complicated, because it's not just do you have a widow or widower's benefit, they're also going to look at if you have any income as well. But you can claim a widow or widower's benefit early. Can be even as early as age 60. But again, it depends on if you have other sources of income that are coming in as well. So we want to pay attention to that. 

Let's talk about divorced spouses. If you were married for at least 10 years or longer, you still qualify to have a spousal benefit under your ex spouse's record, even if you're not married to that person. And as long as you're still not married to that person. But as long as you're married for 10 years, you will qualify to have a spouse or record under your ex spouse, each of them have to be at least 62 years old to start claiming, and the hire record spouse if they remarry, let's pretend that they've remarried. 

You taking a spousal benefit on our ex spouses record does not impact their benefits at all. Doesn't impact their new spouses benefits either. Death has some different rules to go through when it comes to, you know, divorced spouses, but we can walk you through that if that's your situation. There were some major changes to Social Security back in 2015. In fact, john, those were some of the fastest changes that we've seen get passed through, right.

John: It's the fastest I've seen in my career. 1975 to 2015, I've never seen Congress come together and put aside their partisan views and make decisions so quickly. And it's gonna happen more because this is a very touchy subject. There's already some things brewing, that if there's time when you get into some of the issues I'll address that I've been reading about and studying. But you're right it's the first time we've seen something move this quickly. The last time we saw was 1980s when social security was totally overhauled back then. '83.

April: Two things happened. And when they past these changes in 2015, they were phasing out what's called the restricted application and they got rid of that file and suspend. I'm not going to spend any time on file and suspend today, because you would have had to have already qualified and done that with social security as of April 30 2016. We are going to talk about the restricted application briefly. But you had to have been 65 by January 1, 2019, to qualify for the restricted application. So if that's you, we should take some time to talk about that, again, you've got to be as it must have been 65 as of January 1 of 2019. 

So what the restricted application allows you to do, again, you've got two spouses, it would allow spouse A to defer taking their benefits, but take a spousal benefit from their spouse's record. So again, let's pretend that John and I are married, and he is the higher record spouse. What he would do is he would not take social security at full retirement age. And he would defer that until age 70, until you know, the maximum age for Social Security. And the meantime, though, I would take my record at my full retirement age, so I'm getting my benefit, and he would be getting a spousal benefit under my record. So this is one of the things that they are phasing out. So it is a claiming strategy, a very popular one. But you had to have been 65 by January 1 2019. 

To take a look at that. Now let's get into some of the issues around the program. You know, one of the main issues that we have with social security is the number of workers that are paying into Social Security. It's assuming that we're going to have the number of beneficiaries continues to grow, that are collecting Social Security. And so as that number grows, the ratio of workers to beneficiaries is shrinking over time. And that's putting more pressure on the trust fund to be able to pay out current benefits. The trustees are where they change this year. Sometimes it's you know, 2032, 33, 34. But it is projected that if social security, there are some changes aren't made, that the trust fund will be exhausted by 2034. And in that case, social security would only be able to pay 75% of current benefits. So for every dollar that you're receiving on Social Security, would be reduced that to 75% of that. That is obviously an issue with the program, we do think that they will make the necessary changes to make sure that that doesn't happen. 

And there are a lot of things that have been proposed over the years to do that. It could be that they start raising the claiming age from full retirement age like they've done before, from 67 to later. They could go away with people claiming early. That's a claiming as a strategist, some of they've talked about. Increased taxation for social security as well. So a couple different ideas that have been proposed for these changes, as we talked about with again, with the issues like John was saying, it's subject to political agendas. And then also it's this change that CPIW we talked about for the cost of living adjustment, which is something that we believe they should change at some point as well. But yes, the political agendas. It definitely becomes Social Security becomes that political football, it seems very often.

John: There was talk just this week about using CPIE based on elderly. If that happens, you're going to see lower cost of living adjustments. This is the kind of stuff that as I've gotten older, throughout my career, people would come to me with ideas. What do you know about this? What do you know about that? I didn't know. So I started learning. And that's the benefit of having clients that are ahead of me that are 100 years old, late 90s, early 90s, etc. It forced me to learn this at an early age, and you're benefiting by doing the same thing, Apirl. So we have the experience of dealing not just with our own planning, there's literally 1000s of people who will  be benefited by helping them over the years. We benefit because we learned something new. We can now share that information with other pepple by doing these webinars.

April: That's right. All right, let's recap what we've kind of talked about so far. So how social security works. It's funded by the taxation of wages, they average your highest 35 years of wages to get your benefit amount. You've got to have 40 credits for you and your spouse to qualify for Social Security and Medicare. And we recommend that you read your statement, what you need to know about the program, full retirement age depends on the year you were born. 

Also, when you start taking Social Security effects what your benefit amount will be, there's a cost of living adjustment, but it's not guaranteed every year, you may have to pay taxes on your benefit. That depends on what other income streams that you have. And if you plan to continue working in retirement, really want to pay attention to those earnings limits. And that all go that goes back to when do you start taking social security as well. There are different claiming strategies. You've got spousal benefits, widow or widowers benefits, survivor's benefits, divorced spouses. And then we also talked about the options with those delayed retirement credits and spousal benefits that that are being phased out. 

And again, you got to be 65 by January 1 of 2019 for those. And then issues around the program, funding, you know, that's something we all know, and we've heard about with Social Security. There's definitely a political agenda. Can be a couple political agendas. And then also, you know, it's not really an issue with the program. But it may be an issue that impacts your retirement is that Social Security was never meant to replace all of your income. So you have to have other income streams in retirement, whether that's a pension or assets.

John: April, let me jump in here, please. When, if you go back and you listen to the video of it. But the quote from Franklin Roosevelt was that we never intended to replace all their income. You have to remember when this was started, it is actually started back in 1933. First benefits was paid '35. We were just coming out of a great depression. Social Security was designed to be a way to give people a livable income. And some of the things that have been kicked around that are being rethought today, because of the pandemic and the economic crisis is creating. Economic crisis, meaning for some people who've lost their jobs, or other people who are very well, when people say the economy's in the tank, well, it depends on what you mean. Some businesses are doing extremely well. We're doing a webinar here, companies that are doing this type of service are flourishing, they're doing very well, because people are having to work from home. 

But one of the things that was proposed in Congress before was to stop allowing anyone to take social security at 62. I was just reading an occupational journal just three nights ago, that one of the big changes was, wait a minute, we can't do that now. Because so many people who've lost their jobs, claiming Social Security is 62. So what impact would that have on people who are in trouble? Another issue was do away with (inaudible) for your Social Security tax, that one we will probably see happen. Around $30,000 is the cap. Medicare is unlimited, we'll probably see these tests go higher taxable wages, or have another option to limit benefits in retirement, based on an earnings test. If you make over a certain income, then you have a benefit. 

So are all of these I can give you a long list. I think maybe next time we do a social security webinar. We try to stay away from political stuff. But if it's something that is potentially out there, but those are just some of the things. I want to make one thing clear. I am not someone who likes to deal with fear very well. I don't like it when someone uses fear tactics only. Someone tell you take your benefit now because the system is going bankrupt. I think you need to challenge that person or persons. It's not going bankrupt. There might be a lower benefit but if we as Americans keep saying I don't want to give up my benefit. If we don't do something to make it smaller. Like that.

April: Okay, John, anything else you want to add before we close out here today because we've gone through a lot of information.

John: The only thing I want to add is for everyone, I would encourage you to continue being curious through learning about this. When you see articles about it in a magazine or newspaper read it. I get questions about calls, we get surprised getting money. Most of the stuff that's out there we see it because we research and study. But I would encourage you to take advantage of a telephone appointment with no cost or obligation to do that. To chat with you. Most of the time in those conversations something will come up the person didn't even think about, and we're able to help them. And if we can help you, we'd love to know hype, no pressure. If you'd like to chat with us, please do.

April: That's right. And so we like I said, we would recommend that call, we schedule a time for a 25 to 30 minute phone appointment. And that'll be a time for you to discuss any goals or concerns that you have when it comes to retirement planning. You can do that a couple of ways you can reach out to John and I directly by email or by phone. To schedule a phone appointment, you can call our main office number, which is located in Tallahassee at 850-562-3000. Again, that's 850-562-3000 and ask to schedule a phone appointment, you can do that with me with John, or with anyone on our team. So with that, I just want to say thank you for taking the time to join us today on this webinar about social security. We hope you found it impactful. And hopefully you'll join us on our next one on Medicare. Yes, John.

John: April, just remind them of the date, even though you'll be getting the email but just put  this one the calendar.

April: Yeah. So it's gonna be December Wednesday, December 3 at noon will be our next webinar on Medicare. And as soon as I did mention, this has been recorded being recorded and will have a replay available. It does take a couple weeks for that replay to get posted to the our website. But as soon as we have the replay, we'll be sure to send that out to you.

John: And one last item, a shameless plug for checking out our podcast because on the podcast is a wealth of information. So if you've not done that, please. We have a series of 8 podcasts that have been produced that will be coming out regarding planning specifically for members of the Florida Retirement System.

April: Right. And you can find all of that on our website at johnhcurry.com. That's johnhcurry.com. All right. Thanks again. Have a great day.

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. 

The Social Security Administration has not approved, endorsed, or authorized this presentation. Contact the Social Security Administration for complete details regarding eligibility for benefits. Guardian and its subsidiaries do not issue or advise with regard to Medicare.

2021-116816 Expires March 2023

Retiring From a Career in Public Service

On this week’s episode of the Secure Retirement Podcast, we speak with Bonnie Bevis, a retiree with 35 years of work with Highway Safety under her belt. She began her career as a license examiner, and shares with us how she spent her years in public service while raising three children, as well as how she occupies her retirement time now. 

We chat with Bonnie about her extensive public service career, as well as:

  • The need for a steady source of income 

  • Fixed Assets Department duties and how they’ve changed

  • Finding engaging hobbies to stay busy in retirement

  • And more

Mentioned in this episode:

  • Call the Tallassee Office at 850-562-3000

Transcript

John Curry: Hello, this is John Curry and welcome to another episode of John Curry's Secure Retirement Podcast. I'm looking forward to this interview. We just had lunch. Jay and I, Jay Wolfe and I are sitting here with our friend Bonnie Bevis. Welcome, Bonnie.

Bonnie Bevis: Hello.

John: Bonnie just retired from state government. 35 years of work with highway safety and Bonnie, if you would, please just share with our listeners a little bit about your background. Who is the real Bonnie Bevis? Where did you grow up? And then I want to get into your career. You're talking about raising kids, I don't reveal too much yet. But it was one talk about the real life of someone who spent 35 years in public service.

Bonnie: Well, I was born in Georgia and move to Tallahassee in 1966. Graduated from Leon went to TCC and FSU, worked for the state, was a driver's license examiner, quit, had children, did some private, went back to the state, and then retired after 35 years.

John: I've been doing podcasts for a long time. I've never had anyone so succinctly just sum up those things. So now we're going to unpack some of it. Okay, so you, you were telling us earlier about an experience as a driver's license examiner. Let's have some fun and share with us some of the things that you saw and experienced and I think you said you were doing that down in Fort Myers.

Bonnie: Correct. And my favorite story is always the retired policeman from Ohio. This was in 1977. So he was probably in his 80s. He knew he could drive better than everybody. We being stewards of the roads to keep them safe. We thought maybe we should give him a driving test. That made him mad. We had to give him the written test first, we caught him cheating. It took him several times before he finally did pass it we think on his own. Then we had to give him the driving test. 

Well, because he had gotten himself an attorney. He had to ride with, he had to ride with all of us, actually, all of the examiners had to ride with him. It was a very scary ride for all of us. He never did pass. Took his license from him. He continued to remind us how he was retired policemen from Ohio. He caused issues on the highway in front of the driver's license office. He turned south into the northbound lanes when he shouldn't have been driving. So he had to go to court caused a wreck in the parking lot. Didn't know who he caused the wreck with till they got into the courtroom. And it was the judge. So the judge told him that he would not get his license back.

Jay Wolfe: But out of all that he made sure to let you know that he was a retired police officer from Ohio.

Bonnie: Correct. He was very much a retired policeman from Ohio. We heard that regularly. In fact, when he was in the office, everybody heard it because he was one of those very boisterous older gentlemen.

John: So you had to maintain your cool and you're calm, try to help the fellow but at the same time, there are times when we should not be allowed to do certain things.

Bonnie: Correct. Like drive when you are a detriment to society.

John: Now you were there for five years, and then you moved you went back to Tallahassee.

Bonnie: Actually I came back to Tallahassee as a driver's license examiner. I was at the Northwood mall. Downstairs in that horrible place. Nobody wanted to show up too early. But I worked there until I was probably six months pregnant when it was like okay, I'm gonna stay home now for a while.

John: Okay, so at that time, were you still married? I can't remember

Bonnie: Yes.

John: You were still married.

Bonnie: I was married.

John: But you went through a period, talk about, you were divorced. And for a number of years you were raising children. 

Bonnie: Right. 

John: And then tell us a bit about that because I find it fascinating how many women especially with men and women that are single parents, but especially the ladies who have the power and the this the ability to just make it work. So share some of your experiences there.

Bonnie: Well, I had had my first child and I stayed married for about a year and a half after she was born. Then I had to have a place to live. I had to have a job because it wasn't working. I got hired by a friend of mine to keep books at his company. I had never done that before. But I liked it. I enjoyed the numbers. So when I quit working for him, went back to school, took some accounting classes, worked for a couple of private companies that you didn't always get a paycheck on Friday, they might, we'd write the checks, and we just tell everybody that maybe Monday, we'll have a good weekend and you can get paid on Monday. Sometimes, one of the companies got to where he'd give him, he, he gave us all $100 on Friday, and then I'd get to rewrite the checks and deduct that $100 from it. But he did at least give us enough in his mind, you know, get through the weekend, or all he could afford. But there's no benefits there, right

John: Today is as we're recording, this is December 9, 2020. And we've had a heck of a year dealing with the COVID virus. And your story, there is so relevant today, because there are pockets of businesses, industry that are in trouble. Because of the shutdowns, you have other industries that are thriving. But there are people out there who are going through the same thing. Now they've either lost their jobs, have no income, or their paychecks have shrunk, because the businesses are in trouble. And they're trying not to get rid of their employees, but at least pay them something. 

Bonnie: Right. 

John: So the experience that you went through is not unlike what people are dealing with today. 

Bonnie: I agree. 

John: And then if you're trying to raise a kid, especially a young one, a toddler, that makes it more difficult.

Bonnie: Correct.

John: More difficult. Talk a little bit about how, how did you deal with that? It had to be tough at times.

Bonnie: I relied heavily on my mother. Of course, she wasn't my babysitter, I had to have daycare because she had a job, but to have any kind of relief. And I love my children. Don't get me wrong, but you need a break from your child. And luckily, my mother would help me out there, she lived close. But you just do what you got to do. You ate a lot of hamburger back then it was cheap. It's not so much any more. Eat a lot of spaghetti. You get real creative with your hamburger. And then I realized I needed something with more security than put not getting a paycheck on payday. I needed where I got a paycheck on payday, and some health insurance. I needed benefits. So I went back to work for the state. Health insurance, retirement paid days off all the holidays when the kids are out of school. So I went back and did accounting. 

John: Okay I think there's a couple of lessons here. One, an adversity needing to go to work, because your daughters cause you to take a job that maybe you never would have considered doing books or someone. So that was a opportunity to learn something new. And that learning something new, got you back to school. And then you ended up having a career doing that new thing.

Bonnie: Correct.

John: So let's expand on that. So now you go back to work. Tell us what you did when you went back into the workforce. You went to highway safety.

Bonnie: Went back to Highway Safety. 

John: Take us through that progression.

Bonnie: And I was hired as the supervisor of the fixed assets section. Had a good group.

John: Tell us what that is. Fixed assets.

Bonnie: Fixed assets, desk, chairs, cars, we had to count all of them that the department owned. Every year, we had to account for all of them. Back then it was anything over $100. Now I think they've raised it up to over $5,000. So we were keeping up with desk chairs, chairs, trays, calculators were considered an attractive item. So yes, we had those on property too, because people might want to walk off with their calculator, which but so I kept up with all, and the cars. We bought the car, that we had a guy in our section that bought the cars disposed of the cars. And with highway safety, it was all the patrol cars. So we had a lot. We also were over the central supply. I used to call it the miscellaneous section because if nobody else did it, we got it. We had a couple of bank accounts we reconciled. We put made claims on car wrecks between department vehicles and private citizens. So if it was the private citizens fault, we of course sent you a letter and asked for you to pay for our damages. And hopefully you had insurance. So it was a miscellaneous type section. But it wasn't accounting.

John: Take us backstage a little bit behind the curtains because I'm fascinated by this. So who you are in a job where you're monitoring fixed assets like this table, chairs, equipment, automobiles. So I didn't think about that. But all that stuff has to be accounted for, doesn't it? 

Bonnie: Correct. 

John: You can't just assume that it's being taken care of

Bonnie: Right. Track it.

John: How frustrating or frustrating or how fulfilling was the work?

Bonnie: When I first got there, it was a little of both. The people before me really hadn't done their job. They they would put the property number on the piece of paper and fall it and never end property number was still stuck to the piece of paper. They never got it to the item. With highway safety, you've got the whole state. So it was from Pensacola to Miami. And if you move, John Q Trooper moves from Pensacola to Miami, he takes all this equipment with him. Well, all of those items have property numbers on them. And if they don't do the proper paperwork and send it to Tallahassee, those items are still assigned to Pensacola. They don't end up so now they're lost. Pensacola don't know where they are. 

John: Right? 

Bonnie: Miami has found items. And once you reconcile it, then you're like, okay, so now they're found plus the weapons, a lot of weapons. And when you're law enforcement you retire. Part of the statue is you get your service weapon. It's your retirement gift.

John: I didn't know that.

Bonnie: Correct. A lot of people don't. So we had to keep up with those because 20 years from now, 30 years from now. You're no longer with us, the retired law enforcement. Your child, his child has your gun.

John: Who got your fire arm?

Bonnie: We had one. We had a local Sheriff's Department call. And this gun is registered as belonging to the highway patrol. It was just involved in a crime. We had to figure out who it belonged to. And it was he was dead. And it had been passed down and stolen or who knows. But yeah, so the weapons are were a biggie.

Jay: Was that multiple weapons? Or was that just their basic, you know, just they had a nine millimeter on their side?

Bonnie: Correct. Just their pistol. Or just their service revolver. That's the only one they got. So we had to keep up with that. And we were all paper back then. Like we're moving to electronic. So as more things became electronic, of course, it got easier to keep up with. But still you're trying to get people in Miami to do paperwork that they're supposed to do. And you're sitting in Tallahassee, because Highway Safety is centralized. And everything happens at the Kirkman building. As far as accounting and all that good stuff, payroll, purchasing personnel, it all happens in Tallahassee. 

John: Central location, right? Talk a little bit about you made a comment about raising three children. And the years of difference between them. Share that.

Bonnie: My three different generations of children. I never had two teenagers at the same time, which was a blessing and a curse. It was there seven and a half years apart. All three of them didn't plan it that way. Just happened. The last one, when she got to middle school, she rolled her eyes at me about three times and I told her I said I'm not playing that game. I'm just not gonna play that game. She's like, what are you talking about? I said, go ask your sisters. So it was good. And it was bad. 

I was I look back and I'm glad I didn't have two teenagers at the same time. The middle one was very testy. She was the one that was going to test me for everything I was worth. My mother in law said, you're getting paid back for everything my son did to me. I said, you're right. I'm getting paid back. He's not because you know, Daddy and three little girls who could do no wrong. Right? She had him wrapped hook line and sinker. And she, middle school was tough. Once she got out of middle school, she turned out to be wonderful. But those three years are rough.

John: So you sorted the job, because you were divorced. How long were you divorced before you were remarried?

Bonnie: I was divorced, six years.

John: Six years.

Bonnie: Something like that. Five years, six.

John: And you lived in Tallahassee the whole time. How difficult was it to raise three children and have a career? Give us some insight into that, and a new husband had to train.

Bonnie: The new husband. Well get up in the morning, you got to get them ready, you got three little, well, for the longest time only had two because oopsy by the time she came along, the other one was pretty much grown the oldest. But getting them up getting them ready gotta brush teeth got to get dressed, got to get you to daycare, which of course is all the way in town, I got to turn around and come all the way back to work. They weren't next door to each other. It gets to be challenging, frustrating sometimes, then when you get off work, you don't get to just go home. Now you've got to go pick them up right from where you left them in the morning, they don't just show back up. So it was nice as they grew up. And it's like, oh, no, I get off work, I can just go straight home. Because they were at that point ridding buses.

John: It's interesting. Let's talk a little bit about getting ready to retire, you had your 30 years of service, you decided to go into the DROP program. You said that was an easy decision for you some people that we talked with, it's very difficult decision. They love the work, they want to say as long as they can. But they also are tempted by this bucket of money that will be in the DROP account after five years. Others who hate their job say I'm gonna get in DROP and get out as fast as possible. Talk about how you were feeling about going into DROP, and you share with us some of your insights into what people should consider if they are getting to the close to where they could go into DROP.

Bonnie: I think DROP's a great thing. The nice the bucket of money at the end is nice, you know, you're going to have a cushion. If you've been lit, especially if you've been living paycheck to paycheck. At the end of the five years, there's going to be that cushion, because they are just going to write you a check. You got retirement, the state currently pays most of the retirement for everybody, right. And then it's just five years, it's just five years and some people that go in too young do end up having to go find another job. Because the retirees health insurance is really expensive. Now, especially the family coverage, I was lucky enough to step out at the right age and go straight to Medicare so and then with the little supplement, but it's still a little more expense, but not much.

John: Well during lunch, you were telling us about that it just so happened to coincide. That when you had your 30 years, you were 60. So five more years took you to 65 for Medicare, correct. And so for you, you shared with us without us getting into revealing personal financial data in retirement, your pension and your Social Security is going to be pretty much equal to what you were earning, I think you said.

Bonnie: To my take home pay, which is what everybody's used to spend off of, right? While you're working, you're getting paid this big gross amount, which that's really what you're earning, but it's not what you're living on. 

John: And that's not counting what you'll decide to get into future with the money you had from DROP, as far as additional income. What we find interesting is people say that when they retire, they will be in a lower tax bracket. We're not seeing that. Most people when they retire, they're in the same bracket maybe a little bit higher, because they start taking their pensions, Social Security, and money in deferred comp, IRAs, whatever they did with their DROP probably went to an IRA, we're finding that their their income is not lower, in some cases is higher. So all of a sudden, they go whoops all the planning I had based on the lower tax bracket, it didn't happen, right. And now the environment we live in today with all the spending going on for stimulus. Most of us will probably be in a higher tax bracket within the next 2,3,4,5 years. 

Bonnie: Right. 

John: It may be one year, and depending upon what happens in Congress. Talk a little bit about what hobbies you had along the way. I thought was interesting, some of the things you shared about your hobbies. And I'm about to come back and tell you why I thought one was interesting, but share that.

Bonnie: I started quilting when I was a senior in high school. I don't remember what prompted it. But it was like I wanna do that. I think I had tried back before your time.

John: Let's be clear and tell everybody. Some people here may not know what the word quilting is so share it. So what is quilting?

Bonnie: Well, you take little pieces of material and you sew them together to make a large quilt. And then you've got to get your batting and your backing and put it all together like your grandmother used to do.

John: Oh, when I grew up, I have fond memories. Right now we're talking about earlier, my grandmother and her best friend, Miss Mary Calvert sitting around this big wooden frame hanging from the ceiling. They'd work all day on that. And make the most beautiful quilts.

Bonnie: I have one quilt that belongs to my oldest daughter. It was her great grandmother's. And they were, they lived in Sopchoppy. This is a really cool quilt. And it was it's called a signature quilt. And while all the men were off to war, in World War II, the little ladies sat around and made a quilt. And what they did was they each made a block. And they signed their name on it, and embroidered in their signature. And then they came together and put the blocks together. Now how Shelley's great grandmother ended up with the quilt, I don't know. But her grandmother had given it to me. So of course it;s hers. But it is the neatest thing to see the signatures. Of course, we only know one of them, which is her great grandmother. But it's just nothing matches. It's just been patterns. 

John: But just think of the time and the love that went into making that. 

Bonnie: Correct.

John: And today, we're we don't think about this so much, because we're such an instant gratification society. But you don't just sit down and do a quilt in an hour.

Bonnie: Oh no, it takes days. And you poke your fingers and you know, you've got holes in your fingers from the needle. It's, it's very time consuming. 

John: Are you still quilting?

Bonnie: I haven't in a while, but I'm fixing to start back actually pulled out. I pulled out all of my rock and roll concert t shirts the other day that I've collected from all the years. I'm gonna make a quilt out of the T shirts. I'm gonna cut the front of the shirt off and the back if there's something on it, and I'm gonna make a quilt. 

John: Cool. 

Bonnie: And I thought, well, that'll be fun. The kids can have a fun time with this with this, you know, 1972 Rolling Stones concert t shirt 

Jay: Creative way to preserve your memories, too. 

Bonnie: Correct, correct, because they've just been up in my cedar chest doing nothing. And I'm like, well, that'll give me something to do to get over COVID till we

Jay: I want to see it when you get done with it.

Bonnie: Until we go back to being real people. That'll keep me busy. And it'll be.

John: I think that'd be another podcast and maybe we'll do a video. That'd be cool. Talk a little bit about your other hobbies. You called yourself the jigsaw puzzle queen.

Bonnie: Oh, yes, I love a jigsaw puzzle. And, and nobody wants them when you're done with them. And I'm one that can't do it again. I've already done it. So I've got basically brand new jigsaw puzzles, actually started sending some to my cousin who recently lost a child and it's kept her very occupied and kept her from thinking about that. But I 2000 pieces, the table, you have a really large table, you got all the pieces. I just, I love putting jigsaw puzzles together. 

John: Growing up, my dad loved jigsaw puzzles. He got an old dining table, he put it in the corner of the room. And every time we will pass it would just be playing with the pieces. Right? And I think about that today in my work, what do we do? Basically, when people sit down with us, it's like taking all the pieces of a jigsaw puzzle. Put them together for them. So they have this vision of their retirement. Correct. And I love jigsaw puzzles for that reason, but I haven't done one in a long time. Now I'm thinking I need to go buy some jigsaw puzzles and take him out of my property.

Bonnie: There you go, I'll send you some. Okay. 

John: Thank you.

Jay: Yeah, I have fond memories of that too. Because my aunt Debbie, who is like a second mother to me. I grew up with her. And she did a lot of jigsaw puzzles. And it's one of those things where you can like you said, lay it out on the table and you don't have to get it all done right, then and there. 

Bonnie: Correct.

Jay: And kind of come back, do a little bit, leave it and slowly see how it builds. And what I thought was cool was that it always gives me fond memories of Christmas, which is appropriate being that we're in this time of year, because we would always do Christmas jigsaw puzzles. Heck would even do those 3d puzzles. I don't know if you've ever done those.

Bonnie: No I haven't.

Jay: Yeah, we took it to that level.

John: That's fun. Let's talk a little bit about your retirement plans. You and your husband Monty had planned on doing some traveling, but before we go into that, tell me how is it at home now? He has to go to work every day and you're retired. How's that working?

Bonnie: Okay, he's gotten a little more used to it because it's been you know, since the first of October. With me just sitting there in my night shirt drinking my coffee say and see ya.

John: Good day, hon.

Bonnie: But he has gotten worse about picking up after himself. Which I didn't really think he could get worse. It doesn't matter. But he has gotten a little worse. That was fascinating the other day about who did you think was gonna throw away that plate that you cut that in your nap home? Did you what he said, Well, that wasn't a conscious thought. I said, Well, but you left it on the counter. So I have noticed that he's a little less home productive, I guess we should call it.

John: I'm gonna change the subject. Okay, you had plans to travel? And you were sharing with us that because of the COVID virus, like most of us, right, that kind of halted those plans. share a little bit of some of the places you said you wanted to go.

Bonnie: Right. I've never been many places. I've been to Texas, and I've been up north a little ways, but I want to go to the Grand Canyon. See out west. Yellowstone might be pretty cool to just I'm not into getting into it with a buffalo. don't really care for bears, but the train rides through the Canyon. I'm petrified of heights. So I don't see me walking out real close to the edge of anything unless there's a large fence. But I still want to see it. You know, it's it's one of those things I think everybody should see.

John: Yep. It's awesome. I remember going with my son who was very young at the time, and we were on an Indian Reservation flew in by helicopter, excuse me a small plane, this one another's helicopter. And the the place where we were had no rails. So one of the guides suggested that we tie a rope around my son's waist and around my waist. And I looked at him like, do we need that? He said, you're gonna want it.

Bonnie: You both go off instead of just one of you.

John: Well hopefully I would be the one standing behind him and not let him go. But we still talked about that experience. He's 37 years old now. So it's just, I think it's called in our work. We call it building memories. So I've not been to Yellowstone, I want to do that. But I think that's a great trip you should take. Tell me a little bit about the other trains. We were we're both fascinated with trains. I want to go literally from coast to coast, right? You were talking about that.

Bonnie: I've looked at those. They've got all kinds of packages on the internet. Just got to figure out which company to go with.

John: I haven't done that yet. I want to do that. I just think it'd be fascinating. And I'm just to a point of where I've been on the plane once this year. 

Bonnie: Right. 

John: And that was in March. And even before the virus I just reached a point where I got tired of getting on airplanes, people banging your eye glasses with their purses in their bags and all this alright, so I just want to get on a train or get in my car or truck and just drive and just enjoy the scenery.

Bonnie: Mm hmm.

John: So tell us a little bit more about what you think you'll be doing regarding the travel. And then we'll switch gears and ask you to give our listeners a little bit of your personal advice about work. But anything else on the travel side, before we do that,

Bonnie: I really just want to see are this country

John: Same here.

Bonnie: I'm not really into going to somebody else's country. I used to think I wanted to go to Australia. But I don't like you said I don't think I want to get on plane and with COVID. We've got so much to see here.

John: Actually, I share the same feeling up to the point where I want to see this country. I've been to most states but there are several I've not been to I want to go to South Dakota, North Dakota, Wyoming. Montana, I haven't been there. But I want to do this things also, just take time out maybe once a quarter take time and just get away.

Bonnie: And just go.

John: If you said some things earlier that I thought were very important regarding advice. What I said folks was I said Bonne if you had the opportunity to give someone advice, and we're who's working in state government. And well with all of the turbulence and people saying this state's a terrible place to work and things like that. Share with us your view on that.

Bonnie: You may not get a pay raise every year. But the benefits are there and you don't really see the benefits. What the state pays for you. On the back end, the retirement the health insurance, the life insurance, the things they pay for you are worth hanging in there for. A lot of private companies, you're going to have, you may fuss about the 3% retirement that they're deducting at the state, you go somewhere else private, you may have to contribute all into your 401k. They may your employer may not contribute much, if any for you, where the state does it, 

John: Or they may hold that check over the weekend and give it to you next week. 

Bonnie: Right. 

John: Like we talked about earlier.

Bonnie: Right. There were sometimes we just didn't have the money to get paid.

John: I get frustrated when I hear people say anything negative about state employees. I grew up in a state employee family. My grandfather worked for DOT, transportation at springs, my dad did, they both retired there. And people who work in the Florida Retirement System across the board, you're doing good work that needs to be done. That all of us who don't see that everyday, like we take it for granted that those cars are taking care of themselves, you know, and not only do you have to track them, yet other people have to work on them. 

Bonnie: Correct.

John: With the things that we take for granted. You and people like you and say government are the reason those things were there for us? Well, so not only do you have the benefits but the point I want to make is not only do you have the benefits, but you're creating value for every citizen of the state. And you may not be singled out and recognized for it properly. But my hope is when we do these podcasts that we give people inspiration and let them hear stories like yours, or they can say, wow, I want to do that. I want to do that.

Bonnie: Mm hmm.

John: Anything else you would share?

Bonnie: Well, I did payroll for years, until I retired. And I really enjoyed helping troopers understand how and why they were getting paid what they were getting paid for. They always thought it should have been something different. That you're not getting shorted, you're going to get it. It's just the way the accounting system works. So you're not gonna get it today. You're gonna get it in two weeks. I enjoyed that. I liked working with the people. And then knowing that when I did retire, I wasn't going to just be retired. Relying on a on a social security check. Right there is that that retirement check that just magically shows up every month, right? By direct deposit. I don't even have to deposit it 

John: It's cool, isn't it? 

Bonnie: Yes.

John: Do you at this point? Have you been out long enough? Are you missing it?

Bonnie: No. No.

John: So you're one of those people you are able truly to retire? 

Bonnie: Yeah.

John: And just walk away.

Bonnie: I thought I was gonna miss it, more than I do. I had actually someone contacted me just this week about something. She said nobody can answer my question. And I hate to bother you. And I said it's okay. I'll help you. So I told her who to go talk to. But no, I really haven't missed it. My good staff that I had had already retired. So it's like a whole new staff and in the payroll section.

John: So it was time.

Bonnie: It was.

John: It was time to move on to another adventure. 

Bonnie: Mm hmm. 

John: Anything else you'd like to share before we close?

Bonnie: No.

John: I just want to thank you for doing this. Because the stories that we hear from people who have worked a career and then look back on some of the things that happened, it's just fun. And I want to I want to know more about the quilts that you do. And definitely we'll see some of the jigsaw puzzles.

Bonnie: Yeah, gonna get you some puzzles.

John: Bonne, thank you so much for doing this.

Bonnie: Okay, no problem.

John: It was a pleasure. 

Bonnie: Okay.

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.

2021-115531 Expires 2/2023.

Staying Open to Opportunities

Our special guest on this week’s episode of the Secure Retirement Podcast is Helen Livingston. Helen was a teacher, a high school counselor, and a principal in Alabama, and earned both her Master’s and PhD, all while raising four children. She was also an integral part of opening the Medical School at Florida State University. Helen has had an extensive career in education and continues to stay busy and active in her version of retirement. 

“It's important that you take a good clear-eyed look at your fiscal situation so that you know that you're not going to add stress to your life in retirement, because there will be enough stress. Getting old is not for the faint of heart,” says Helen.

We chat with Helen about living with passion and enthusiasm, as well as:

  • Life in both K-12 and higher education, and the changes witnessed over the years

  • The community impact of a new Medical School

  • Doctors returning home to make a difference in places of need

  • Saying YES to opportunities when they present themselves

  • Evaluating your reason for retirement

  • And more

Mentioned in this episode:

  • Call the Tallassee Office at 850-562-3000

Transcript

John Curry: Hey folks, welcome to another episode of John Curry's Secure Retirement Podcast. Today I have a lady named Helen Livingston sitting across the table from me. And Jay Wolfe is sitting here with us. Helen, welcome to our podcast first.

Helen Livingston: Thank you very much.

John: I've been wanting to do this interview for a long time. Because every time that we're sitting with you, I learn something new. You're a fascinating lady. She's always very kind, very gracious. She's tough as nails, though, I think you'll hear that come out in a few minutes. But, Helen, you retired twice from Florida State University, most recently as Associate Dean of the College of Medicine.

Helen: Correct. 

John: If you would please just kind of give us a background of who the real Helen is a little bit about your background, personally and professionally. And then we'll just take it from there. And folks, I have no idea where this next 30 to 40 minutes is going, we're just going to have fun and talk.

Helen: Well, I'm old, so I've lived awhile. I started out as a teacher, k-12 teacher, and did that for many years, and became a school counselor, I found myself after my second marriage did not work out, supporting a single mother pretty much supporting a family. And so I pursued, earned four degrees during that time. 

John: You said four? Tell us what they were.

Helen: Well, I had two masters, my bachelors, of course, two masters degrees, certification, administration certification when I became a high school principal. And then I earned went back and earned my doctorate. And I did that because I could see that as a teacher, your options were limited. So if the more education you got, then you would have more options, and as a single mother with four children, whom I had to educate, raise and keep alive, that it seemed to me that my future depended upon the education that I availed myself of. So that's what I did. 

And fortunately, it has never bothered me to leave one situation behind and move into the unknown. And I was had, I left my k-12 position, I was a high school principal for five years. And I decided that I couldn't that five years is probably as much as you could give to a 24/7 type of job like that, and survive. And I had, in the meantime gone back and was very close to getting my doctorate, I had everything done, but my dissertation. So I had an opportunity through some connections, of moving to Troy State University, in Dothan, as an administrator and working there, and I chose to leave my principal's position and go to Troy State. And while I was there, I finished my dissertation and earned my doctorate.

John: So of this you were in Alabama.

Helen: I was in Alabama, during all this time. Not during no time at work, but during this latter part. I was decided, well, when Alabama the taxes don't meet the needs of the state. They have what they call proration. And everybody gets cut. And I had in the position I had. When I was Director of Extended University. I found myself having I'd worked two weeks without a break. And I had a staff of 12 people to help me. And when proration hit, I lost all but two of them. But I still had to maintain that same job.

John: The work did not get prorated.

Helen: The work did not get prorated at all. And so I started looking for positions. And the gentlemen that hired me at Troy State had moved on to southwest Georgia. He had a position I applied for that they were getting ready to hire me. Internal politics happened and they withdrew the job offer and that would have been as a teaching developmental psychology, lifespan development, which was would have been a good job. So I kept looking and there happened to be a position at FSU in the program in Medical Sciences and I applied for it. 

My daughter live down here, outside of Tallahassee, and I thought now that will then be a nice place to relocate to. So I just apply. And six months later, I got a call from Dr. Myra Hurt, who is the director of the program, came down here interviewed and she had me on the spot. I was I was suddenly at FSU. And it was just a wonderful job. I was working in the program and medical sciences, which was the precursor to the medical school. We were then affiliated with the University of Florida, learned an awful lot had never been in medical education. So I had to come up to speed learn an awful lot.

John: Had you completed your PhD by then?

Helen: By then I had.

John: And did you have children at home?

Helen: No, thank goodness, I finally got all the four of them raised and grown and gone. So I was alone at that time. And came into the program medical sciences, thinking that that was going to be the end of my career. And it would be a nice ending, you know, interesting job. I was working in admissions. And working in the outreach program that Dr. Hurt had developed with her her colleague Thesla Anderson. And we were three of us working together in that with other staff members as well. 

She had also developed a advising office to handle pre med students pre medical advising office, and I was in charge of that as well. So during that time, learned an awful lot. And then about I had been there for about a year and a half. And suddenly, there was this proposal that began floating around to establish a four year medical school at FSU. The legislature got involved Dr. Durell Peaden, who was in the legislature at that time. John Thrasher, who was I think Speaker of the House at that time, and they began to develop this law. 

John: You remember what year that was? 

Helen: That was in 98, I think was when the first proposal because it took us about two years for the law to really emerge to create the medical school and to pass the legislation.

John: It was a great thing for our community and the university. We'll get to that in a moment. 

Helen: Yeah, and so then I was involved in that. So the law was passed in 2000. Governor Bush was governor at the time. And we, you know, he signed it into law. And we had to start admitting students to the new medical school. But we still had the program of medical sciences students that we had to finish out, had to have them complete their program and get them on to the University of Florida. It was a it was a challenge. You know, creating a new medical school was the first one in a generation. And people were not happy.

John: And you got it on the ground floor

Helen: I was on the ground floor. And there were many battles to fight. Dr. Hurt was our leader. She was the Interim Dean until we could hire one. And it was a real challenge. One of the main things was that the kind of medical school we were establishing was not the traditional school where you have a medical education, hospital, we were going to train our students in the community. The only there were two programs that did that in the nation at that time. One was in Washington state of the WWAMI program. And the other was in Michigan, Michigan State. In the upper peninsula, they had apprenticeship kind of model. 

So Dr. Hurt, looked into that. And that's how we began to develop this apprenticeship model for Florida. And, and the idea is you if you look at where patients were, they were in the community, right? There were only about 1% were in the hospitals where most physicians received their, their training. So our model was going to be based on training the doctors where the patients were. So that was that was the the glorious end to my first career and we got that up and running and I decided I wanted to retire.

John: Well, before you go there. Let's talk about the impact that the medical school had in our community and surrounding communities, because I've I remember, with my doctor Bill Kepper, he did a lot of the training helping some people with some of the doctors or students working in his office.

Helen: I mean, we couldn't have done it without the community physicians.

John: And it was amazing listening to the doctors talking about how the hope was that many of these students would go back to their communities 

Helen: Exactly right.

John: And set up practices there in the rural communities.

Helen: Exactly.

John: I was shocked at how many people have never, ever even thought about having a hope of being a medical doctor, or able to come to Florida State to go back to their local communities and serve.

Helen: And it's amazing the percentage that have gone into primary care of the graduates from the medical school at FSU. The many of the graduates, how many of the graduates have actually done that? There are many out there. And we recruited students from those rural communities. That was my first task, as, as we were founding the school was to find these these students and entice them to come to FSU

John: Tell us more about that. How did you identify them? How did you get them here? And how do you how would you say? How would you go about even possibly measuring the impact that they've had in their communities?

Helen: Well, I think, you know, now they can actually look at that and and see where our students are. And I don't have the exact data. It's available on the College of Medicine website. But I want to say that more than almost 60%, have entered primary care, and are actually in a rural our underserved community in the state of Florida. The rest of the students are slung throughout the nation, and in all of the all possible specialties. 

But our focus, and we made no bones about it, we were honest with students, we were recruiting, but this was our focus. Our training program was set up for that kind of primary care training. We want to be a good physician with who put patients first. Whatever specialty they entered, we didn't, we didn't try to influence them. But we felt that if they came from a community, that they wanted to go back to that community that those needs would emerge.

John: That's great. I grew up in a place over Holmes county called Westville. Went to high school in Bonifay, we didn't have any doctors there.

Helen: No, you do now. You have the Hawkins brothers, as a matter of fact. 

John: That's good. That's good. So talk a little bit about the recruiting process. How did you identify the people that might be good candidates?

Helen: Well, they found me if you know that, you have sort of a recruiting trip that you make to all the colleges and in the state of Florida, and I just visited every college. And I would those that were interested in medical school, or maybe something in medicine, they would find me, okay. And it's, and then you have to, then they have to they have to come with the goods, they have to have the academic prowess and the ability to, to make it.

John: So you told the story, and those who are attracted to the story came to you. 

Helen: Exactly. 

John: Pretty good. All right. Now let's talk about because you ultimately retired from that job. But tell us leading up to the you there, how many years in that role?

Helen: I was there for 10 years.

John: 10 years, and then you decided to retire? 

Helen: I did. 

John: Tell us about that. That was an interesting journey along the way.

Helen: Along with my daughter who is an artist. I had opened a bookshop book and art shop. And I thought that's what I wanted to do. And today the truth started in medical school. It took a lot out of all of us. And I had reached that age when I could retire, so I did. Things happened. And I found that retirement didn't keep me busy enough so I called Dr. Hurt, told her if she had a part time position, I'd be interested.

John: Would you share what you share with me during lunch about what happened with the business? Because our people need to hear these type stories too.

Helen: Well, in 05, we had all the hurricanes that came through Dennis, Ivey, I can't remember them all, but just a bunch of hurricanes, Katrina. That hit the coast. I think there were about four or five that came in this area and it was the year of the hurricanes. Not as bad as this year. But almost there were some really bad ones. And the entire Gulf Coast was just devastated. And that impacted my business because it was down in the Big Bend area. And so I was doing pretty well, before that happened. I looked at my bottom line and saw too much red. And I had said, when I opened the business, as long as I was breaking even, maybe making one make a lot, but doing pretty well, I would keep it open. But if I saw it going the other way I'd get out. And that's what I did.

John: One thing that I'm taking away from listening to you, that I've picked up bits and pieces during our time of working together. Is that you what you said earlier about willing to move on? Yeah, you have to be willing to cut your losses. 

Helen: Oh yeah.

John: And you have to be willing to pursue opportunities as they appear.

Helen: Well you have to look at your situation. You have to put away the rose colored glasses. And you have to you have to really be you know, look at it in an honest, through honest eyes, you have to see what's there, not what you wish was there.

John: How do you think you learn that? Because you're pretty strong person when it comes to how did you realize?

Helen: I think I came started out in the cotton fields to Southeast Alabama, if you're, if you're farming, you have to be honest with what you see. And you have to respond and react to things that are not in your control. And, you know, for some people, it makes them skittish, they are afraid to do anything. And for others, it makes them bold, and it just happened to make me sort of bold. And then life's experiences, were such that taught me that. If I, again, was honest with myself, looked at the field in a with clear eyes. I could make good decisions. Sometimes they were scary decisions. And sometimes they didn't work out the way I felt they would work out. But if you keep persevering, you can succeed. But you have to be aware of when an opportunity is in front of you and what you need to do with that opportunity.

John: Okay, now you brought up age while ago, you made the comment, because you're old. How young are you now tell us how young.

Helen: I'm 77. 

John: So here's a lady 77 years old, you're sitting across the table from where you never believe she's 77 full of energy, just full of energy period and a passion. So go back to your story about you retired, you had the business. You called Dr. Hurt again. So take it from there.

Helen: So she had in her hand this lady, you have to understand her. She's a she's a dynamo herself. And she's always thinking, and always looking forward. So when I called her, she said, Yeah, I may have something that will come up. She said, let me work on it. We've got some things going on. I was thinking part time. And I was doing some traveling at the time. And she says what when you get back, give me another call. By then she said I should know something. And so when I did call her when I returned and did call her back, she said Yeah. And this and she said let's talk about it. And she came in and she told me what she wanted me to do. So I was still thinking part time. But she wasn't. 

So she had there were several things that that she felt needed to be addressed. And she felt I had the skill set to do that. Before I had retired the first time she and I had started a bridge program, which was a transition program to help get students who might have some weak or academic background or had some difficulties that would make it they needed to beef up on some coursework, to do well in medical school, and we knew that they were the type of student that we wanted to, to meet the mission of the medical school. But when they needed some extra help, and they met the demographics and the background, rural, minority underserved kinds of communities that they came from. 

So we had started that program and it was doing well. But she and the administration at the time at the Medical School felt that it should be a master's program, but it could only be a nine month or 12 month program. It couldn't be that traditional two year program because they simply didn't have time. We had to get them in and get them into medical school. And how do you how do you make a master's degree that does that. 

John: That's what's called fast track. 

Helen: That's fast track is right. But it had to also have the rigor and the kinds of academic experiences that when you grant a master's degree, that is a true master's degree, not a watered down version.

John: Well it had to be, you had to have standards, you had to earn it.

Helen: You had to have standards had earned it had to have some had to have a research component had to have all the academic components that are necessary, because you also had to bring the students up to speed so that they would be successful in medical school. And so that was my task when I came back. And then there were, there were there was a list of other tasks that needed to be attended to that she felt that with my education background, Iwould be the one to help get those realigned so that they were fulfilling the standards that we wanted them to fulfill.

John: Nice. How long did you do that?

Helen: That was, well, again, I was thinking five years, it turned into another another 10 year, 11 years, 11 years.

John: 11 years after retirement.

Helen: Finally, I, you know, before I said, I'm wanting to retire before turned 80. So I told them, I'm going. Plus, I had identified a young man who could take my place and as Associate Dean, and I felt that he was ready, and I could walk out and not worry about it.

John: Knowing that your baby was taken care of.

Helen: My baby would be taken care of. And I wasn't wrong, he does an excellent job. Dr. Anthony Speights.

John: Can you talk a little bit about what I know you travel quite a bit.

Helen: I have I don't do so much anymore, unfortunately.

John: Well the pandemic can stop. But talk a little bit about some of the things that you've done, quote in retirement both times, and some of the things that are in the future, because we find that the most popular podcasts we do are the ones where people talk about what they're doing after retirement, because most people have a hard time retiring, and enjoying life. So talk about that.

Helen: Well, as I say, I do love to travel. I was very, very fortunate to have two sets of families. My third husband has family in North Carolina, so I visit them quite a bit before the pandemic and there he was from Ireland. And we I was able to take a trip back to Ireland before the pandemic it was last September. But really enjoyed traveling all over. I've been to China done the Mediterranean cruise, anything that puts you into a new situation and enables you to interact with people you don't normally interact with. So to me, that's the traveling is not it's the sights, yes. But it's also interacting with people who are different from me. One of the reasons I worked, we just got through work in the polls in Wakulla. County, which is pretty rural, pretty different. Of course, it was like going back home to me. I mean, I grew up rural. So this is being out with people that were like the people I grew up with was was a good reminder.

John: That just reminded me of something. Let's talk about your experience. Yesterday, you shared with us about the gentleman who was voting for the first time at age 50 having some difficulty share the bit of that story. Because I think and this divisive world we're in, I think people need to hear about how people are willing to be so helpful. Would you share that?

Helen: Well, you know, it's it's I was very impressed with the poll workers who were and the Supervisor of Elections in Wakulla County. My buddy Wells, who's just adamant that the votes counted. And anybody that came in there that wanted to vote. Their vote was going to count. So this gentleman came in he, he just had difficulty with the ballot. Tt you know, obviously, if you don't if you're not in some bureaucratic functionary job or situation where you had to fill out a lot of forms, you hand him a ballot. I mean, yeah, I know, there were samples around and so forth. But it's still different. And he just was having difficulty and we I think he had spoiled two ballots. And we were on the third. And finally, they just set him down at the table, and just helped him. Make sure that this third ballot was going to go through, okay. It didn't matter how you voted no, didn't matter what color he was.

John: That's right, comes down to what you do as a citizen.

Helen: Well is what is the basis of our whole democracy is that every person's vote is important.

John: I have some people one time at a social function, this was years ago, they were complaining it was back in 2000. Because the Bush/Gore debacle, you know, and one guy spoke at me, so I never I've never voted, and never will. And I said you obviously never served in the military, did you? He said, no, I didn't. And I said, I cannot imagine anyone not voting. Because so many people sacrifice their lives to give us that right, going all the way back to the American Revolution. Give me a break here. And but yeah, you're here you are sitting and complaining. And you're telling me you've never voted? To me, you have no right to complain at all.

Helen: I agree with you. But I think it's amazing. And you know, as divisive a time as we're living through, which is unfortunate and uncomfortable. The fact that in this election, over 130 million people voted in this election is astounding. 

John: Yes. 

Helen: And by the time they hit through getting all the votes, I think it's going to be even higher than that. And it's, you know, we should all want 100% 

John: Yes. 

Because then we get a true picture of what our country is, warts and all.

John: I agree with that. But I will, I'd rather talk about politics, but I tell you what I do wish. I wish that there were no polling allowed. And no discussion of who's ahead.

Helen: Obviously. They they're, they're useless anyway.

John: Well, that's true. But I think you should just you discover once that's done, yeah. Then we'd put a lot of TV anchors out of business. 

Helen: That might be a good thing.

John: Might be, might be. So let's talk about your future.

Helen: Okay. Yeah, my future.

John: You're a young 77 year old, you're in good health. Physically looking good. What's the future?

Helen: Well I hope to one day be able to go visit my family again, because as I was with it with a career that was very demanding, I unfortunately, didn't spend a lot of time visiting family. And now I can, and I want to do that. That's, that's what's important, I think. I also want to do some traveling again. And I don't have any particular destinations in mind. But there are some, there are some interesting places that I might want to 

John: What are some of the places you'd like to go to? 

Helen: Well, I want to, what I'd really like to is the there's a trip across Canada, that I would like to take a rail trip that I've always wanted to take. And then when I get to the other side of the, to the Pacific side, I'd like to take a trip and see Alaska. Internationally, it's funny, as I've grown older, I'm more interested in this country and this hemisphere than I am in, going across the ocean. That travel is difficult.

John: It's interesting. You say that, because I came to the same conclusion. I've been to Europe a few times love it. But I'm to the point now where I literally want to go to all 50 states. Now I don't mean just fly in and fly out. 

Helen: Go do something there. 

John: Yeah, just enjoy. And as much of it as I can. I just want to drive to drive and take into scenes.

Helen: One of the best trips I took was with my sister. And we just we we have a brother that lives in Tucson. And so and she lives in Alabama, so I drove up, picked her up. And we didn't have we didn't have a schedule. We had a map. And we headed West. And we'd say something that looked interesting, and we'd stop and tour and visit and just had the best time and of course drove my brother crazy. He was ex military. He wanted to know when where we were in when we get in there. And we said oh we don't know we're in truth the consequences tonight, so we might be there tomorrow.

John: We'll be there, when we get there.

Helen: And it was really so the driving is if you leave yourself open to stopping and enjoying plus along the way.

John: Okay. I would like for you to offer some advice here.

Helen: Oh goodness.

John: So if someone who is still working, let's say someone's listening to this, that's fairly, let's say they're in the 40s or 50s, maybe in the 60s even, but they're to the point of where they're challenged by their work. They have opportunities, but maybe there's some fear. With your background, share, a little bit of how you would counsel them to consider options in front of them. And then we'll talk about people that are retired.

Helen: Well, it's really easy to stay where you are. But it is not always the most fulfilling, nor the most lucrative. I think you have to have a clear eyed view of opportunities when they present themselves, and the courage to walk through those open doors, and not look back.

John: Amazing. So we talk with people about the dangers they're facing, threats, the opportunities in front of them, that maybe they see them, sometimes I don't see them. And also what are your existing strengths? And we challenge people, a friend and I do this all the time. He'll say, John, I need you to question my answers. I'll do the same with Steve. So it's amazing, though, that you're looking back on your career, the changes you've made, the doors are open, you could have easily said no, thank you. I have four children, I'm taking care of. I'm not doing that.

Helen: You know, one, for example of becoming a high school principal, I was the first woman hired to be a high school principal, since World War II, in the state of Alabama. It you know, because people didn't think that women could manage. They were mainly worried about the high school boys. So the boys were the easiest ones, the girls were the ones you had to worry about. And I saw it as an opportunity. I had credentials to do the work, it would have been easier for me to remain in my position as a school counselor. 

But it, it, I felt like I could do the job. And I felt that I could be a good instructional leader for the faculty. And that was my goal. And I could bring some needed changes to the programs in that particular school. And I did that work for five years. And I had one old guy that told me when I, it was quite a thing for me to you know, every meeting I went to there, just there was a there was me, and then all the other principals were men. So it was interesting being the only female in that setting. 

John: Were you having to prove yourself all the time in that environment? Were you having felt like you had to prove yourself all the time? 

Helen: Yeah, I mean, yeah, you do. And when the fact of the matter is, you know, think about those that day in time in the 90s 80s and 90s. You better be able to prove yourself and willing to do it and not take offense when you had to. 

John: More so then than now.

Helen: Oh, absolutely. So one old fella said you have to worry about the four B's that the buses, the budget, the band. And those things. If you were if you get all of that squared squared away, you'd be okay. And he was absolutely right. And ball. Athletics. Yeah. And so I took that to heart. I thought he'd been at this a long time, that was good advice, made sure that all the four B's were taken care of. And but that is it. It's a hard job being a high school principal. A very hard job.

John: I can't imagine being an educator period. In today's world. Yeah, it's at any level, any level, especially our school teachers, K to 12. Okay, let's let's counsel people who are either close to retirement, they're thinking about, okay, do I retire? Or do I stay? Because I look at myself, I'll be 68 in about a month, and I look at I don't want to ever fully retire. As long as I am relevant. I bring value, and I'm healthy and can do what I want to do. I want it. But I want to do more on my terms. You mentioned that earlier, you're living a lifestyle you want to live. So I don't want to have to go to work. I choose to go to work. And I get to pick and choose who to work with. But some people don't have that. Some people are in jobs where you do it my way or the highway. But for that person who's close to retirement, and they're trying to decide, do I stay or do I retire? What would you say to that person?

Helen: Well, I think you have to ask yourself, okay, I want to retire. Why am I wanting to do that? Why do I not want to work? I mean, sometimes it sounds like because I don't want to have to get up in the morning. I don't want to have to do this. I want to do what I do. I want to do well, you have to be I think you have to understand what the time how much time that's going to allow you. Because it's it becomes how do I fill my days? Do you have? Do you have the physical and intellectual wherewithal to fill your days? That's one of the questions, I think you have to ask yourself.

John: That's a good question. I like that. I know, in my case, I take quite a bit of time off, but I want to plan it then go. But as you know, I have a little shoulder issue and I was out of work for a while and I don't like sitting at home. Now if I've got something planned to go do that's one thing that I do, like, I like sleeping in just kind of like laying around. But I know me enough to know that I can't do that every day. I'm not there. The day may come, but I'm not there.

Helen: And I think you have to, you have to understand that about yourself. Just like you have you, you understand yourself. You understand your needs. Now I'm perfectly fine being by myself. I like my company. But not everybody is that way.

John: Let me be clear. I like being by myself. If I'm out of my property, where I'm out there by myself and as planned. That's one thing. But sitting home watching,

But you still want some sort of purpose? 

John: Absolutely. Absolutely. 

Helen: And and I think that that's another thing you have to be clear eyed about that do I do I have the wherewithal to create the kind of purpose that will be fulfilling to me because you don't want to become depressed or angry at your situation, when you're old and finished your your your work phase of your of your life. And some people just may never retire. And I think that's okay, too. I think you have to understand who you are. It's also important that you take a good clear eyed look at your, I hate to use the word financial, but your fiscal situation, so that you know that you're not going to add stress to your life, because there will be enough stress getting old. It is not for the faint of heart.

John: What'd you say earlier? Getting old is not for sissies.

Helen: No, it isn't. And and so you have you want to make sure that you you do not create more stress for yourself upon retirement.

John: Right. And that's the part that I focus on. About 25 years ago, I said I'm gonna focus on retirement planning issues, not just you, 

Helen: And you're very good at that. 

John: Thank you for that. We've got a good team. Jay, April, Audie, myself, Zack, we one thing I can't teach people is how to care. We have good caring team. And it's not just about money. No, it can't just be about how much money is coming in. 

Helen: That's why I hated to use the word finance, because it isn't that.

John: No, I'm glad you said it the way you did, because we like to ask people this question. That's great. So now you're retired, you got plenty of time? Do you have enough money to allow you to do what you want to do in that time? They go, I don't know. I say, let's find out. But I think there's a lot more. I have an advantage ove people. I've been doing. I'm in my 46th year doing this. And I started focusing on retirement planning stuff a long time ago.

Helen: And I'm glad that you exist. Because I don't want to know all that.

John: Thank you for that. But what I learned over the years is I have,  by dealing with literally 1000s of people, I have the benefit that I've learned from them. I'm thinking of people. Now our oldest client's 102. A lot of clients in their 90s, mid 90s, late 90s even so I've learned so much in working with them. Because they would say what do you know about this? I know nothing about it? What would you please figure it out and help me? Well, of course, by learning about that for that person, it allowed me to help the next person that comes along. So we take the mindset that if we can learn something new, that's great. I was interviewed yesterday for a survey. And I said, Well, what keeps you going? I said the fact that I every day I learned something new. And I get to share that with other people. So you got to be the student and you also got to be the teacher.

Helen: Well, and I think that's excellent. I'm glad you brought that up. That's important because I I think continuing to learn and continuing to be a student about things around you whether whether it's a formalized setting or not. And I think also aging and retiring sort of go hand in hand and good health and making sure that you maintain that and recognizing when you enter a situation either physical or mental. Where you need help, and then you seek that help out. And I think sometimes people retire and they just forget about all of that. And then they wake up one day and they find themselves not happy, or are they find their circumstances difficult because life continues. Yes. Even though you're retired, it continues. You know, one of the things we had here, here, we're in the midst of a pandemic. We didn't plan for that, did we?

John: No, we didn't.

Helen: And I've been, I've had a horse for 25 years that I quit riding when I turned 70. But anyway, I still had him, I had to put him down, that was unforeseen. I did not realize how difficult that was going to be for me. And saying goodbye to my old friend, was hard. And that's, that's one of the things you have to have to I think, gird yourself for and that is loss, because it will come in some some shape or form. And you have to understand the strength that you have, and your vulnerability to handle and deal with it and move on.

John: On that note, there's nothing else that I think either one of us could say that would back up, what you just said, make that any better. So let's move on. And just simply say this, I thank you so much for allowing us to do this.

Helen: Well, thank you. I've enjoyed it.

John: Same here. And folks, I hope you've enjoyed it as much as I have. I get the benefit of sitting across the table interviewing people like Helen and it's just fun. And I learn something new every time and you're an inspiration.

Helen: Well, thank you. You are, too.

John: Thank you so much. Thank you so much.

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.

2021-115530 Expires 2/2023

Approaching Retirement with a Healthy Mindset

In our ninth and final episode of our series for members of the Florida Retirement System, Steve Gordon once again hosts our very own John Curry. We discuss an aspect of retirement that is necessary for absolutely everyone approaching this stage of their life to consider, mindset, and dive into how to successfully execute John’s Secure Retirement Method.

We chat about the real motivations behind retirement, as well as:

  • The spectrum of reasons why someone heads into retirement

  • The four freedoms John continuously seeks

  • Suspending belief and judgment in order to learn

  • Managing client behavior for the long-term benefits

  • 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 for the day. And this is the final episode in a continuing series that we've been doing. It's actually the ninth episode that we had done for members of the Florida Retirement System. And we've gone through lots of different areas of concern for FRS members. So if you've missed any of those, you definitely want to go back and listen to them. You can do that at johnhcurry.com and click the podcast link up at the top. And you can find all of those episodes plus all of John's podcast episodes. And I really encourage you to listen to them not just for these topics, but but you know, they're really episodes there that I think are you'll find very inspiring about people who are doing amazing things in retirement. And so John, welcome. Glad to be here. I'm happy to soon turn the reins of the podcast back over to you. But it's been fun to turn the tables on you a little bit.

John Curry: It's been fun. And especially since we've been sitting across the table from each other instead of doing it on zoom or some other video conferencing. So it's been nice.

Steve: That's right. Well, we've covered a lot through this series, we've talked about the FRS pension. We've talked about deferred comp, we went through all the pension options. We talked about 403b plan, and an even when we had a whole episode, we had a whole episode on what age to retire. 

John: Yes. 

Steve: And I'll be honest, at age 49, I actually learned a lot from that. Because I got a little ways to go. We talked about DROP. I know that's a big concern for for folks who are in the Florida Retirement System. And then we really hit the big three at the end, we talked about Medicare, Social Security, and Required Minimum Distributions. And and those really apply to everyone. But I know those are, those are the topics that you get just tremendous number of questions on from from all kinds of folks. So today, what I'm hoping that we're able to accomplish here is really to put a bow on the whole thing. 

So folks, if you missed any of those specific topics, and they're concerning you, go back and and listen to those episodes, you can do that, again, johnhcurry.com, click the podcast link at the top. And you'll find all the episodes there. And yet today, I think we ought to just kind of give an overview. But I think we ought to start our wrap up here where we began the whole series, John, and that's talking about mindset.

John: I love that topic. You know, we you and I discuss this a lot when we're together. So let me see tell you what I see when people come to see me. For planning, I'll see one of the spectrum is somebody who is angry at work. I'll hear things like I can't stand the people I work with that can't stand the job I've got, I can't wait to get out of there. The other end of the spectrum people who come as I love the people I work with, I love what I do. I don't really want to retire. But I know at this point in my life, there's some other things I want to pursue. So what's the difference? The differences are mindset. 

See, the first person is running away from something. And sometimes I'll tell them, it appears to me that you're running away from something not running to something. The second person is running to something they're embracing something new, something challenging they want to do, maybe is volunteering at the church. Maybe it's teaching a class at some school or something. Think of a guy right now who retired and now he's teaching part time out a TCC. So what are you, why are you retiring? 

And I like to talk about the Four Freedoms apply to me that I love, relationship freedom, time freedom, money freedom, and location freedom. To me, that's a mindset. Because if I know that those everything I do, and I mean everything, you know this about me, everything goes through that filter. What's the relationship we have? Do I want to have a relationship? Am I willing to put in the time to nurture that relationship? Is this somebody I want to allow to have my time and access? And if not, why would I do that? So if you're going to retire, and just sit on the front porch and do nothing like my dad did for a few years, then that's a mindset. I don't be around people, live by myself, just with my spouse. 

And there's nothing wrong with that. And if you do that, and maybe you don't need as much money or other resources. If you're like other people I know who retire and they're constantly taking a cruise, taking vacations, then you will need more money in retirement, won't you?

Steve: Absolutely. Well, you just touched on something reminded me of something one of our mentors, says. And it's the distinction between freedom from or freedom to. 

John: Yes. 

Steve: What are you? What are you really being motivated by? And I think, I think that's important for people to really stop and pause and think about. You know, am I right now motivated? And I think throughout life, we all are motivated by both at different times.

John: Totally agree.

Steve: So are you really being driven by trying to get free from something and you mentioned job or, you know, you hate what you do, or whatever you know you're running from. Or do you have a bigger vision for what you want your life to look like? And are you looking for freedom to do that? And to me, that's the first fundamental question is to really you, and I use the phrase question our answers, right, I always ask you, when you question my answers, you asked me the same thing. That's almost really kind of the first thing you need somebody to do is in their own mind, question their own answer, and, and stop and think what's driving me here.

John: As you know, over the years, I have hired various coaches. I discovered that when I get the most value is when I, what'd I tell you when, we started this series about the podcast and helping to get a second book published. I said, I'm in your hands. Correct? 

Steve: You did. 

John: So I have to be willing to trust, have confidence in the person across the table from me and put myself in their hands. Now I have the right that if I don't agree. So Steve, I don't agree with that. Can we tweak that. And I think it's the same thing with your retirement planning, whether it's me or someone else, just find somebody you can work with. And be willing to say, I'm going to suspend judgment. I don't understand all this stuff. Don't act like you do. Because you don't. I'm still learning. I learn every day. 

You know, just getting ready to do these podcasts. Going back to the Social Security website, the FRS website, Medicare. IRS's website, I probably have about nine hours. In addition to what we've done, just going back and making sure everything is up to speed. And I learned something new every time. But to me, that's a mindset. It's the mindset of am I willing to open up, suspend belief, suspend judgment and just learn? Some people can't do it, I'll have people come in, they'll fight me all the way. And when I was younger, I would deal with that and just try to work through. And now I simply say, look, this isn't going to work. I don't have the time, nor the desire to argue with you. And do what do you call it and you get to hands on to every arm wrestle? 

Yeah, I've got too many people who want me to argue with you if you don't want me. So what's the mindset? I thought of another thing too, that I use a lot is fear versus love. Or you do things out of fear or out of love. And today our country's is there's a lot of fear. There's a lot of anger, a lot of resentment. And so what are you gonna focus on, you will focus on the fear or the people you love. Going back to relationship, then I like to think in terms of money, people are being told, well, you got to have X amount of money when you retire. No you don't, no don't you don't. It's more important to have a monthly guaranteed reliable income stream that comes in every month for the rest of your life. I have that.

Steve: Wasn't that why most of us are trying to build that mountain of cash and hit that number that we're all told on those cute little commercials that we're supposed to have?

John: Well, no. People have been so damn brainwashed. So they think that if I if I have a million dollars in this retirement account, it's gonna take care of me forever. And I'll ask the question, tell me about your distribution plan. Anyone can teach you how to save the money. That's easy. You don't need me for that. Just sign up for your 401k, deferred comp, 403b and put money in. That's great. You've done a fantastic job. You got 100,000 200,000 a million, whatever it is. Now, what do you do? How do you make this money last you for the rest of your life and your spouse's life? And then when you both die, which will happen, who gets it? How do they get it? When do they get it? All of a sudden, people go, I have no idea. I haven't a thought of it? Well, I have. I've done it for myself. And I've done it for literally 1000s of people over the years.

Steve: So we talked a little bit about mindset. You know, we've gone through all these topics that the goal of all of this of the planning that you do you know that you've kind of encapsulated in what you call the secure retirement method is to to take people from wherever they are, you know, and you can't always change somebody's incoming circumstance, because they've done what they've done wherever they are in life. But really, it's, it's to look at their goals, look at their mindset, what do they want to achieve? And then sort of take what they have and try and create that life that they want to fund the life that they want. To the extent that it's possible with the resources they have, is that a fair way of stating it?

John: Precisely. What do you have? How far will it go? So I asked people, why don't we just see what you've got, first of all, but you're talking about my process. The secure retirement method.

Steve: Well, I want to come back around to that in just a second. But I want to get folk folks kind of clear on why this, this is all so important. It's because you're sitting there, whether you're, you know, maybe you're listening to this, and and, you know, I'm 49. And so I'm not at the point where I think about retirement every day, you know, because I got teenage kids still, maybe you're listening to this, at that stage, maybe you're a little younger, maybe you're a lot closer to retirement, and this is got your attention all the time, maybe at two o'clock in the morning, you're laying there doing math on the ceiling, trying to figure out how it's all gonna work.

John: Or maybe you've already retired and you've been retired three, four or five years, and you're going oops, I need a do over. So we get that too.

Steve: So all of this is, John, I think it's all so critically important for people to be thinking about, but as we've said, on a number of these episodes, it's complicated. Like we live, we've done, what, nine, maybe 10 hours of recordings. I don't know a lot. And we've covered, this is the ninth episode. So we've covered eight topics before today. And I said several times through this, I've got a technical background, it gives me a headache. 

You know, the the picture I keep having in my mind is somebody taking a jigsaw puzzle, dumping it on the table, taking away the picture on the box. So you can't see that and maybe thrown in pieces from another puzzle. Right? Just to confuse you. Right? So it's, it's not easy. And I think one of the things that that folks need to appreciate no matter who they work with, is you need somebody that has a process to sort all that out. So I want to talk a little bit about your you mentioned your process, I want to talk a little bit about your process, you call it the secure retirement method. You've kind of designed this over the years to take into account all of these crazy puzzle pieces. And you've got the picture on the box. 

John: Correct. 

Steve: So talk us through the the secure retirement method and your process and how you help folks sort all this stuff out.

John: Well, let me first talk about why it came to be. I got tired of having to recreate the wheel every time. So somebody would come in. Next thing I got two or three hours invested and nothing accomplished. So I say, okay, it all started back in 1982. When I started after my brother died, and my brother in law died, I was frustrated because I was trying to find how to get planning done for people. That's where it started. And then over time, I actually put more, I call it a formality into the process. 

So now it's pretty simple. I focus on four steps. Number one is what I call a vision session, what's your vision of retirement. We've talked about that several times. The discovery session where we determine what you have, what's working, what's not working. And then we'll take a look at the strategy session. That's where we start looking for the strategies or financial solutions. And then the implementation session, that's where you've got to take action. In the final analysis, you've got to take action. If you don't have a will, you got to see an attorney get a well drafted. Durable power of attorney. If you don't have health insurance, or if you need to change a beneficiary, someone has to implement and take action. If there are financial products that you need, then we put on a financial product hat and talk about different products, what they do what they don't do. 

And I talked before about the good, the bad and the ugly. And when I'm going through this, I tell people, we're going to look at everything, the good, the bad, and the ugly. And I'm going to lay it out there in front of you. Now what you do with it is up to you. When we get done, you will have a written report that lays out everything we've talked about. And there's only four things you can do with this data. You can ignore it, throw it in the trash can. Do it by yourself, go to a competitor or work with us. Now, once we've done the planning, you're free to do whatever you want.

Steve: So you've really simplified the whole thing. I mean, you've got it's these four steps.

John: Yeah, but it's taken me many, many years to get there. And 1000s and 1000s of interviews to get to the point of doing that. But yeah, finally, and I don't deviate much. Now if you come in and you've got a hot topic. I'll address that. But I'll say, timeout. If we're going to engage, we got to do the whole process. And some people's, I just want to buy a product, I want to buy XYZ mutual fund or insurance. Fine, I'll do that for you. But if we do that you're missing out, because you're not getting the whole thing. But if you're, if you're adamant about it, I'll help you. As long as I'm not hurting you. I'll turn down business, if it's if if I know it's not right for you, I don't want that. I don't want that burden. Well, at this point in my life, I don't have to do it.

Steve: Yeah. And I think that's key. That's really key. So one of the things that I always appreciate about, you know, people who have studied something for a very long time, is that they, they begin to see all the commonalities. And so you may think, Well, my situation is different, you know, how, how is John's process can fit my situation. And, you know, I get clients come to me, we, you know, you know, john, I help companies with marketing, and everybody thinks their situation is different. 

But I've been doing it long enough, that I know that, that if we follow the process, you're going to get the ideal outcome. You know, because I know that the steps of the process lead us there. And that's kind of the advantage of working with somebody who's, who's really, you know, honed their their skills over time. Talk a little bit, you talked about the four different sessions, give us a little preview of if I come and meet with you for the vision session, what does that look like?

John: Well, the first question I'm going to ask you is, I want you to think ahead to the day you retire. Whenever that is five years, 10 years, 15 years, looking back, what has to happen along the way for you to be happy in retirement? And I'll have people look at me and go I have no idea. Well, we probably should start there. Because if you don't have some clarity on what you want to do in retirement, what I call the your vision of retirement, does it really matter? How much money you've got? How much time you got? If you don't have any idea what to do with the time and money? Shouldn't we start there? Tell me about your interest. What do you like to do? Love to travel, like doing this, and then they'll start opening up. So start pulling things out. Because believe it or not, there are a lot of people who they don't have a clue what they're gonna do in retirement. 

My dad was that way. He retired at 62 died at age 85. I was worried about in the first few years of retirement, he did nothing. He would go hunting and go fishing, come back home sit in front of television all day. And one of my uncle's got him involved when they went to Cherokee, North Carolina on a trip and they started doing two three of those a year. But why do you want to retire? You know, for me, you know this about me, one of the definitions of retire is to withdraw from. If you're enjoying what you're doing, you're getting paid to do it, and you're having fun doing it, why would you quit? So I encourage people don't just quit, maybe retire from the Florida Retirement System from the state or university system wherever you're working. 

But maybe you should pursue other things. Maybe there are things you want to do, that you've never done. And that's where I love the podcast we're doing because I'm sharing stories of people who retired, they did not retire from the social network or the environment. They're still being productive. People ask me when I'm going to retire one, but on paper, I'm retired. But as long as I'm relevant, and people want me, and I'm having fun, I'll keep doing it. As long as I'm healthy and can do it.

Steve: I love that. And I really, you've you really kind of encapsulated this whole thing where we started with with mindset. So you know, for folks who are listening to this, and, and I mean, the natural. I think the natural reaction for a lot of people is that look, this is just too complicated. I'm just gonna put it off. What what's at risk?

John: Lifestyle. Your family's lifestyle. One of the saddest things I see. You see somebody who's got a good chunk of money, maybe it's their DROP account, which for most people represents the largest chunk of cash they'll ever have in their hands. And I'll see them make decisions with that. Like, I want to buy a brand new motorhome. So I'm gonna take the money, lump sum, pay all the taxes, and go buy a motor home, or buy a second home without analyzing other ways of doing it. So they lose all the money to taxation, and they lose the growth on that money. Economists call it opportunity cost. So I pay $60,000 in taxes, I didn't just lose $60,000 I lost all the earnings I could have earned and that money had it been invested. So I see that. 

Then I'll see people who make decisions that works for them because they're aggressive, but upon their death, then the spouse is left with very little to take care of themselves. I see people taking retirement option with the pensions, that's probably not the one they should have taken. But the key thing, the risk is, number one, your lifestyle could suffer. Now, the outside risks are taxation, inflation, interest rate risk, stock market risk. They're suffering, we financial advisors call it sequence of return risk, if I'm taking money out of my retirement accounts, and the markets doing great, okay. But what happens if you have 2000, 2001, 2002, three years in a row back to back losses, and you're taking money out? That was such a big issue that Congress even acted, Congress changed the distribution amounts from from your retirement accounts, required minimums, they went from a factor of 16 to 27. To take some of that pressure off. 

And then fast forward 2008. If you have money in stock market, S&P 500 was down 38%. 38 points. Excuse me, 38%. So now you're in a position of where holy cow, I got through this, I came back, and then I lost money. And all of us had that. I mean, if you were invested, you lost some money. And it came back, if you had staying power. Sadly, though, another risk is running away. People who lost money, sometimes they panic, and they move the money over to a checking account or money market account or a savings account or a CD, and it's not in the game. So the one word I come up with is behavior. The key word is behavior. I don't, I don't manage money, per se. I manage people's behavior. I listen to you about what you want, and then I help you go do the things necessary to get it done. If you engage with me, and we work together. And I want to be clear on something there. 

One of our mentors talks about there's 7 billion people on the planet. I don't need all 7 billion people on the planet. And the only people I care about are the ones who have decided that they won't be in their world. I will work my fanny off to take care of that person. Any critics criticize all the want. Doesn't matter to me. But my people and you've heard me talk about my flock, I have an obligation to protect each and every one that wants me. And I will fight for you. I will fight with you. But when you give up, I give up. That's my mindset. As long as you want help, my team and I will help.

Steve: John, for folks who are listening to this, and maybe they've listened to other episodes in the series. And they they're at a place where maybe they don't know what to do next. What would you recommend that the folks do as a next step?

John: Well, I think the next step is if you've liked what you've heard, and you like to have a conversation, we start with a telephone appointment. Low key, no pressure, no hassle. And we just we just talk. We find out our real fit, should we get together? And if if so then we either get together face to face, or we do it by computer and online. And you can see my screen, we walk through it that way. And we go to work. Had two new people come in last week who said hey, we're ready to go. But in both cases, I started with a telephone appointment. And they can do that with me or someone else on my team.

Steve: Okay. And so what's the best way for them to get on your calendar?

John: The best way is to call my office in Tallahassee. 850-562-3000. 850-562-3000. Or they go to my website, johnhcurry.com. johnhcurry.com.

Steve: Perfect. You know, John, we started this episode off with mindset. I think getting getting these issues solved begins with getting clarity, getting, you know, getting your mind clear and focused on what you want. And, and so you've given them that that clear next step. And folks, I encourage you to go back and you know and listen to these episodes. I encourage you to have that phone conversation with John, you know, and see if it's a fit, and see if he can provide the kind of help that you need. Now, John, you work with folks, not just here in Tallahassee, but all over the state of Florida and in other states as well, is as that right?

John: That's correct. And it doesn't matter if you're listening to this and you are not a member of the Florida Retirement System, or have family members that aren't in FRS. Doesn't matter. Social Security, RMDs, Medicare all that stuff applies to every person who's working. And we just want to do a series that we know that FRS members have to face. And I deal with that every day. So, but anyone would benefit from and the truth is the younger, the better, you've been kidding about as young as you are not worried about social security and all that stuff too far in advance. 

But if I can get in front of someone who are in their 40s, or 50s, and get them on a path, when they get to retirement, it's gonna be so much better. And you know, the beauty of my work, Steve? I know for I'm 67 be 68 in just a few months, December 9, and know that the work I've done, people will benefit long after I'm dead. That's my legacy. There will be people that will benefit 30, 40, 50 years into the future from work that I've been doing.

Steve: I love it. Well, this has been fun. Thank you for allowing me to hijack the podcast and interview you through all this.

John: You're welcome. Thank you for doing it. It's been fun.

Steve: It's been a pleasure. So folks, if you're catching this and you missed the other episodes, or you just want to go back and find them, you can go to johnhcurry.com/podcast. Or go to johnhcurry.com there on the homepage and click the podcast link at the top. And you can also find these on your favorite podcast app. So if you're an iPhone user, you can find it on Apple podcasts if you use an iPhone or any other platform, Spotify, Google podcasts, whatever your favorite podcast app is, you will find it there. And you certainly can listen on John's website. So John, thank you again, give everybody the phone number if they want to stop and call and book an appointment. Where do they get you?

John: 850-562-3000.

Steve: Excellent. Thank you my friend. Thank you for everybody listening. We'll see you in the next episode. 

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, 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. 

2020-113401. Expires February 2023

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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