On this week’s episode of The Secure Retirement Podcast, April and I break down my new book, “The Secure Retirement Method for Members of The Florida Retirement System.”
This episode will benefit anyone who has a job or is looking to retire one day (even if you aren’t from Florida).
As mentioned in this episode, “What we bring to the table is the ability to ask you questions you’ve never thought about and sometimes we question your answers. We all have a blind spot and need to be challenged sometimes.”
Listen as we break down:
What's your baseline for retirement?
The four sessions of the Secure Retirement Method
The four options of the Florida Retirement System—and how to coordinate your option with everything else you have for retirement
Tax considerations in retirement—how can you make decisions today to control your tax future
The number one best (tax free) way to take care of those you love
And much more
April Schoen: Hello, everyone, and welcome. Good afternoon. My name is April Schoen. And I am sitting across the table today from John Curry. John is the author of two books, but his most recent book is the Secure Retirement Method for Members of the Florida Retirement System. Hey, John, welcome.
John Curry: Hey April. Good to see you literally sitting across the table.
April: I know it's nice, you know, to be able to sit across the table after doing everything virtual for so long. Well, before we get on in today's presentation, I got a couple housekeeping items for you. So first of all, let you know that today's webinar will be recorded. You'll be able to find the recording of our webinar on our website. You can go to johnhcurry.com. And on our website, you're going to find some links to previous webinars, you're going to also if you go to our podcast section of the website, you're gonna be able to see all of our podcast recordings.
So that's where we put any webinars that we've recorded and put it on the website, as well as interviews that we've done with members of the community. And also some interviews that John and I have done mostly around retirement planning topics. So if you haven't checked it out, I highly suggest you check out the podcast section of our website. So we've got some really fun ones on there. John, the one that I love is our our clients who sold their house bought the RV, traveled around the United States for two years. That's probably my favorite.
John: Mine too. And the question is, what does retirement look like? You know, we'll get into that what I call the freedoms in retirement. Four freedoms in a few minutes. But what good is retirement if you don't have something to do. And I have people all time ask me, are you retired? Yes, I am retired on paper. What does that mean? It means that I'm still working, but I'm not working as much. And just so you folks know, April and I have a business relationship with where we're partners in the sense that we do a lot of work jointly with our clients.
And that's important to me, because in the event of my death, disability, or I decided to fully retire, I wanted to make sure all of our clients were taken care of. We now have that. That's been proven. Because the last four months because of my surgeries, the team has stepped up and taken good care of clients. So I just wanted to say that right up front, because I appreciate what you've done, what you're doing. And I'm ready to go when you are.
April: Well, thanks, John. I appreciate that. Yeah, we have a wonderful team here. So we'll make sure we're going to make sure everybody knows who the team is too. So you know, I think John, before we get into today's presentation, it might be helpful for those on the call to know a little bit more about us and kind of what we do, just in case you're so kind of new people to our world that maybe have not met us before. So typically, what John and I do and our team is, we work with people who are getting ready to retire, and many of them are members of the Florida Retirement System, which is why John's new book, very timely, very appropriate, right.
The Secure Retirement Method for Members of the Florida Retirement System. And our clients, whether whether they're with the Florida Retirement System or not, you know, they have a lot of the same questions when it comes to retirement. Many of our clients, they have a challenge or a struggle with that they've been so focused on their family, on their careers, that they haven't had the time that they would like to really devote to their finances, you know. And so they can feel frustrated. And a lot of times, you know, John, they're anxious really, when it comes to retirement.
There can be a little bit of some anxiousness there for them as they want to make sure that they're making the right decisions for their future. Because it's very important, we're talking about the rest of their lives here, right. But they just don't know how to get started. So what we do is we help them understand a lot in a short amount of time. A couple of meetings and sometimes even one meeting help them get some clarity, so that they can make better decisions and feel confident about what they're doing. And the end result is that they have systems in place. They have a plan in place. They are confident that their money is actually working for them and that they're on track to reach their goals.
You know, recently we met with a couple that's getting ready to retire and they've really done you know, up to this point everything themselves. But the getting to this next phase. When they're about to step off into retirement, they really wanted a second pair of eyes to make sure that they were making the right decisions. And in one meeting, we were able to help them have clarity and confidence. So that they knew what they had, what was working, what tweaks needed to be made, and that way they knew everything was going to be good. And they will be able to enjoy like that next phase for retirement.
John: We see that a lot. And I've been doing this for 46 years. And what I tell people, what we bring to the table, is the ability to ask you questions you've never thought about. And sometimes we question your answers. You've made your mind up. So we question that and all of a sudden, you go, whoa, wait a minute, there's stuff here I'm missing that I did not know about. We all have that. We all have these blind spots, because we think we know what, because we read something somewhere, or a well meaning friend told us something. But we need to be challenged sometimes.
April: That's right.
John: You know, you and I do that to each other. Our friend Steve, we do it with each other. He'll even call me and say hey, I need you to question my answers. I'll call him say Steve I need you to question my answers. What does that mean? It means I think I know it, I'm clear but I need to be challenged. And make sure. Most people don't want the challenge. See they want to just kind of drift along. But if they'll sit down with us, we can help them get a clear path. We can't do it all in one meeting. But we can get a path. And then we can move forward if they're interested in solving whatever issue they have.
April: That's right. Good. Well, John, that brings me to a good question. And I'm gonna go to the next slide here on our presentation. So hopefully those of you on the call on the webinar today, you guys have your your book in hand, when we emailed out about the webinar, we also included a link to request your book. So hopefully those got to you. Maybe some of you, I know, we know that some of you already received them started reading through those. So if you don't have it, grab the book. So we're gonna reference some different pages in it. If you do not have a copy of the book and you'd like one, you can contact our office to request your book. You can actually go to our website too, to johnhcurry.com/FRSbook to request it, or you can email us or call us. And we'll make sure you get get a copy out to you.
John: Let me jump in there. I've had some people order the book through Amazon.
April: Yes.
John: And I have people say, well, why would you give away a book that you could sell, and we do sell them. But this is, this book, we'll get into why I wrote it in a minute I'm sure, but I'll touch on now. This is my gift to members of the Florida Retirement System. I'll get into why later as we get into our story more.
April: Yeah. So John as we move on to the first questions you beat me to it. One of the first questions I was going to ask you, John, was, could you share with us? You know, what, why did you write this book? What really drove you to to writing the book?
John: Well for those who have the book, or would get later, on page 10, I talk about this. I grew up in a state employee family. Dad worked for the state of Florida. My grandfather worked for the state of Florida. They both worked over at the Defuniak Springs, Florida Department of Transportation office. And they didn't get much advice, and they got some bad advice. Both on when to take Social Security and which pension option to take. And the thing that really hit me was when my grandfather died, his pension died. He did not leave a guaranteed income to my grandmother.
All she had was Social Security. So I realized then that something was up. And I'd been in the business for a while. I started in 1975. And because of growing up in that family, I just took that somehow I just walked on to the fact that that group of people, members of the Florida Retirement System needed help. So that has become my specialty. Do I work with other people of course. Doctors, lawyers, building contractors, you know, everybody out there. But that's, that's the story of why I got started.
April: And any other, there are probably people on this call or when they hear it later on the podcast, John, you bring up a good point there that are not members of the Florida Retirement System. So we want to make sure that you know that even if you're not a member of the Florida Retirement System, and this was in our email, but make sure you know that the information that we're going to go through today will really impact will you benefit anyone who has a job, who's looking to retire one day.
Maybe you have some money in retirement accounts, but really anyone who's looking to retire one day, right. Because we're gonna go through and talk about taxes, when should you retire, Social Security, Medicare requirements, required minimum distributions. So we're really today gonna kind of cover a lot of different topics when it comes to retirement planning that are covered in the book in our session today.
John: On the back cover. The first thing I did is this. I made sure that people knew who it was for, but anyone who reads this will benefit, because what we said. But here's the key. Most people will not read a book. So this is designed, you can see sit down and read it in 60 to 90 minutes. You can read it the start to finish, and you get a clearer understanding of the key issues that you'll be facing in the future or now. And then if you'd like to know more, we'd be happy to assist you with that.
But if you never come to me with us, the book is our gift to you, because, because of my story about growing up and seeing what's happened, and then 46 years of doing business with members of the Florida Retirement System. And like I said, doctors, lawyers, janitors, all kinds of people that are clients. I help anyone that wants help and you the same philosophy. All it takes is a good attitude and be willing to be coached.
April: That's right.
John: Let's talk about some of our guiding principles.
April: Yes.
John: Let's do that. On page 11 of the book, I write, put in here. As a matter of fact, why don't you cover those?
April: Yeah. So here's kind of some guiding principles, what we what we talk about with our clients every day. So we want to make sure that you protect what you have. I don't know about you, John, I do know the answer. But I'm going to say it anyway. Is that I don't know about you, but it you know, it's hard to get it there, right? We work hard to accumulate what we have, and we want to make sure that we protect what we have, right? No matter how old you are, you know, I'm 37, you're 68. So you know, there's definitely a couple couple years between there. But I even know, at 37, I don't want to lose what I have, right? So protect what you have. At the same time, we want to grow your assets.
We want our money working for us. We don't want it on the sidelines. Think about today's interest rates and how low that they are, right? So we want to make sure that we're growing assets, we want to make sure that what you have is going to pay you an income. And an income we talk about here, we want it to be guaranteed, and we want it reliable. And that's when we get into what's your baseline for retirement, those kind of two ideas. Having a guaranteed and reliable would be like your whatever income streams are, is going to be your baseline for retirement.
And then, you know, we also want to make sure, we're big on this, is planning before products. Meaning that the way that we operate and work with our clients, we want to make sure that we do the planning first and foremost. That means having a clear understanding of what's important to you and what you're trying to accomplish. And then we can take a look at where you're currently positioned. And do those things align or are some changes needed? But I'll tell you, you John, you know this, but we've done this long enough that you do the planning right, the products are secondary, because it becomes very clear, very evident what's needed and what's not needed. If you do the planning right.
John: Totally agree. And I have seen circumstances where our work with clients, they'll have an inferior product in place. That with the right strategy and planning that product can be improved to help them. The product itself is there. So let's say it's a 401k. I've got my 401k or deferred comp for the state of Florida, but maybe they are not utilizing it properly. So maybe they are invested too aggressively for them or not aggressive enough. So I looked at a 401k is a product. So how do we now make that work for you. And that leads right into the next one, the price of misinformation. A lot of people are giving information.
They mean well, but they're not informed properly themselves. I've had people, I just had a thought and I hadn't thought of this in a while. I was getting my teeth cleaned one day, and the hygienist was talking to me about a mutual fund that I should put money in. This was 30 years ago. And she was in her 20s, you know 30 years ago, 38 years old. Not 68. I asked her do you know what I do for a living? She said no. I said I'm in the investment and the insurance world. Investment may be great for you, but it'd be terrible for me. So you can get misinformation where people do it intentionally. Or people do it because they don't know any better. I won't beat that to death so we can move on. But the price of misinformation is this. It can cost you your retirement.
April: That's right.
John: May have to come out of retirement.
April: So John, before we get to talking about the pension options, let's talk a little bit about the secure retirement method for members of the Florida Retirement System. And I also think in here too, we should talk about the scorecard because the scorecard is part of the book.
John: Absolutely. Okay. You want to cover that or you want me to do it?
April: Yeah, no, I can go through this part. So here's kind of what we look at. We recommend this is a system for you to follow. So whether you work with us, you do it on your own, you work with someone else, this is a system that you can follow. So the first thing that you want to do is you want to take a look at what is your current situation. So we call this the vision session. This is where we look at your current situation. And we talk about what are possibilities and opportunities for the future. From there, we want to do a discovery session. And this is where you do an analysis of your current financial situation. I cannot say that word today, and you create a baseline to build on.
So when we're talking about retirement, what we really want to look at here are what are your income streams going to be in retirement, and that's what we consider your baseline. From there, we want to go to a strategy session. Now this is where you're going to have a concrete plan a step by step plan. This is when we talk about having systems in place and a plan in place to help you reach your goals. So we want to go through and do a strategy session and talk about specific tools that you can use. And then you want to do with implementation. So this is when you now you've chosen maybe a team you want to work with, maybe you're going to do it on your own, you've chosen your strategies.
And now it's time to move into the implementation phase, which is to actually start implementing some of those things in your world. If you guys have the book in front of you, you can go to page eight. And that's where you're going to see the scorecard. Now the scorecard is great. It's 10 questions, and you can rate each question from one to 10. One being I completely disagree with the statement and 10 being I completely agree with the statement. So the scorecard can help you understand kind of where you currently are.
It definitely goes with that vision session of understanding where you currently are. If you don't have the book in front of you, and you want to go to johnhcurry.com/scorecard, you'll be able to get a copy of the scorecard there. We have one that's for members of the Florida Retirement System and then one that's not for members of the Florida Retirement System. So you'll be able to access that right there. So that's johnhcurry.com/scorecard.
John: Very good. By the way, as you can probably tell, folks, this is not scripted. We're following the book, but we're in a situation where other than what you see on the screen, that's what we're referring to and to the book, because we're not trying to give you death by PowerPoint.
April: No death by PowerPoint today, I promise.
John: Some of things April, we should tell them we'll cover in detail. Some we'll give a big overview. And then they can get the book read through it, or call us for a telephone focus session.
April: That sounds great. Alright, John, so chapter one is all about the pension. So let's talk about this and the four options that they have available under the pension and which option they should choose.
John: Very good. Well, on page 15, let me just say I get into a bit of background about the Florida Retirement System. I won't spend a lot of time on it now. But I will tell you that the FRS was created in 1970 and that was an attempt to bring all the various plans together. And then in 1975, it became non contributory, meaning that the employee paid nothing into it. And then in 2011, that was changed yet again, to where every employee must put in 3%. So if you want to learn more about that, that's the opening part of chapter one. But what we're most concerned about is the four retirement options. Which would you choose?
So let me just give you a brief overview of the four. And you'll find those on pages 19 and 20. I'm just going to give you a quick overview. There are four options. Option one is what we call a life only option. If I take that option, and I die, the very next day, there's no more money to anyone. It dies with me. Option two is very similar. It's a lifetime income with a 10 year guarantee, meaning that I get the income as long as I live, if I live five years and die, whoever is my beneficiary will continue getting that money for five more years. After 10 years, though, so if I live 10 years and one day, and I die, there's nothing to anyone, just like option one. Option three is less income and is guaranteed not only to me, but also to my spouse if I'm married.
So if I'm getting 1000 a month, I die, then my spouse would get the same $1,000 a month for as long as she lives. When both die no more money. Option four is a little different and is somewhat complicated and we find a lot of confusion on it. People come to me angry about this option. Option four gives you a little bit higher income than three, so it's less than two higher than three. But upon your death, your beneficiary, your spouse only gets two thirds of what you were getting. And if your spouse dies first, your benefit is reduced down to two thirds. A lot of confusion on that. And we've seen this firsthand, people have made these choices.
So what I'm gonna say there is, picking an option is not something you should just say, I've got my mind made up, that's it. It should be coordinated with everything else you've got. My grandfather didn't do that. He took option one because it was the most money when he died, no more income for my grandmother. My dad, just the opposite. He took option three, because it paid him for life and my mom for life. And that was a good choice, because it paid them for a total of 25 years. However, each of those men had done proper planning, they both would have better retirement, and their wives would have been taken care of much better.
April: That's right. And for those of you which we're going to talk about DROP next. But when you elect and you go into DROP is when you're going to make your pension option. So.
John: And the clock is running.
April: And the clock is running. That's right. So just know that, that when you when you elect to go into DROP, that's when you're going to select your pension option. So if you're in DROP already, you've already chosen. And that's when the clock starts. So when John mentioned about option two gives you this income for life for you, and has a 10 year guarantee that starts when you go into DROP. So if you stay in DROP for the full five years, when you come out when there's only five years left in that guarantee.
So we do see some confusion around option two. And we do see some confusion around option four as well. A lot of people think that that reduction would only apply to their spouse, meaning when they die, the spouse gets two thirds. And as John mentioned, that's incorrect. That that reduction happens no matter who passes away first. So it's just these options, it's very important to understand how they work and how they're going to work with everything else in your financial world, like Social Security, and also other assets.
John: And then the last one on the screen is your decision. On page 26. I have a couple of paragraphs on that. Just take your time, study the options, coordinate it with what you have in place for your life insurance, your savings, your investments, your retirement plans, such as IRAs, deferred comp, etc. And that's our specialty folks. We focus on that every day.
April: That's right. But alright, let's get into talking about chapter two here, which is going to be about DROP. To drop or to not to drop that is the questions right? So let's talk about this a little bit. First, John, for those, maybe they haven't made the decision yet. And should they go into DROP?
John: Well, I'll give you my view first, then you can jump in. The first question I ask people is do you love your work? I love my work. Do you? Do you enjoy working with the people you work with? I love working with these people. I love my job. I love the people I'm working with. So then why would you retire? Are you retiring to something or retiring from something? So many people come in and see us because they are tired of where they work. They hate working there to get they'll talk about going through to DROP. I say why would you go into DROP? Because I want to get all that money.
So I want to put up with it frustration and aggravation for five more years to get it. Then you have others who say, look, I love what I'm doing. I don't really want to retire. But I also see this is an opportunity that while I'm still working, I can accumulate more money for my retirement. I say that's correct. Are you sure you want to retire at the end of five years? And how many times have we seen clients who say I wish I hadn't done that. Because they were not ready to retire. So the first question is, do you really want to retire? If so, when? Are you going to take the DROP, retire and then go on to something else which we see people do.
April: We see that a lot.
John: So I say the question of DROP or not comes down to your lifestyle and what you want to do going forward. I think that's a question that has to be discussed and beat around a little bit.
April: I also think that and we don't have time to go into this today. But to go into DROP or not. I think it also depends on how many years of service they have. So we have some clients that maybe don't have a full 30 years with the state of Florida. We've got a client right now who's 62. And we looked at it both ways. And for her it made more sense for her to just continue working as long as she can, and then just retire and not go into DROP. So it's definitely not a one size fits all. It's got to be individual, it's got to be a personal decision. And based on all these other circumstances, how many years of service and things like that too.
John: Absolutely. And I will refer to the last bullet point here already a DROP employee, you need to know on page 30. We touch on what happens when you come out of DROP. That people who were surprised April that they have to pay income tax on that. So every dollar that goes into the DROP account, that is retirement money, when you take it out, you're going to pay taxes on that money. So here's a question for you. When you retire, will you be in the same tax bracket, a lower tax bracket or higher tax bracket. If you are in a higher tax bracket, then all the deferring that you did whether be it DROP, deferred comp, IRAs, 401ks, step accounts in the business world, doesn't matter what it is. You may find that you are paying more taxes. So rarely, rarely do we see people who retire and they're in the lower tax bracket.
April: Rarely. So the other day I was meeting with a client who's going to retire in a couple of years. And she made the comment, she's like, well, I'm going to be in a lower tax bracket, I'm gonna pay less taxes when I retire. And so we looked at it. And I said, I don't I don't know if that's true. So we'll kind of get in this because we talked about taxes. But it's kind of interesting, because we look at it and her income is actually going to be higher when she retires. And we see that a lot. So then we start walking through it, and it's like, no, you're gonna actually have more income in retirement than you do today.
John: And how many times have we seen people shocked. And they say wait a minute, you're telling me that I can retire? And I have no loss of income? Actually, you will have more income. When you start taking into account in so many cases that you have, you're forced to pay what we call RMDs, which we'll get to that. But in chapter three, we're going to talk about, you already touched on it, on some of the tax tax considerations. And so let me touch on that since I'm already on it. Make decisions today to control your future. So what will happen in the future with taxes? I don't know. I can tell you this. I've been doing this for 46 years, almost a half a century. Tax rates go up, they go down. Why is that?
On my wall there, I have my diploma for my master's degree in financial services. When I was working on that we had one entire course not a class. One entire course, on understanding the history of income tax, but also how the federal government uses that to control our actions. They reward and they punish us. But with the tax code, most people don't even know what the tax bracket is. Lady the other day, she says I'm in a 22% tax bracket. I said, well, that's your marginal bracket, but your effective bracket, I showed her how to do it. Take your taxes divided by the gross income, and she was at a 14% effective tax bracket.
So you can't spend too much time on this. Understanding what I have today, project ahead, doing the retirement rehearsal, we call it, and we can show you the impact of taxes, inflation, market changes, whether it be up or down. We can marvel that. We can't promise you what's going to happen. Never made that kind of promise, never will because I don't know. I don't know what mine's gonna look like 10 years. I know what it's planned to look like though. And I know that certain things are in place that give me the reliable guaranteed income that you talked about earlier.
April: Correct. And, you know, we're gonna talk about these how these plans work, which are, you know, we spend an entire webinar just on taxes. So, we have a webinar we do on tax diversification in retirement, and the entire webinar is all about taxation, and all about how you can have different accounts in your world and your plans and how they're taxed differently. So we go over taxable, tax deferred and tax free in that webinar.
John: I want to touch on one more thing that most people we see, don't know about. Most people we see, especially if they are widows or widowers, they say I'm gonna leave all of this retirement money, to my children, and they can have it for their retirement. Well, the tax laws changed. And now if you leave money behind in a retirement account, to a non spouse beneficiary, they have to take that money either immediately, or they can defer it for 10 years or take income out over 10 years. But at the end of year 10. that account has to be closed. And that means they're going to pay tax. Most people we see do not know that. So I would simply say that it's not just about today. It's like the very first bullet point. Your decisions you make today will affect your future. And there's some things you can do to control that.
April: Just last night, I was meeting with a client that's one of things we were talking about. She's gonna retire in 2024. So we were talking about a plan for her you know, she's gonna have a, her pension, she's retiring from the state. She's gonna have Social Security but then talk about a plan, about what you know, at what order will she take income from other accounts, right? Well, she's taken her retirement accounts, she's got a Roth she has some other investments, what order will we take these from? And one of these we took into consideration, John, was her two children. So we had the conversation, okay, if you don't think that you're going to spend all of this and you may or may not, but if you want to say hey, I may want to leave some of this behind which are the best assets to leave behind?
John: Correct.
April: So we take that into consideration as part of her income planning and what that's going to look like for her.
John: I've done that myself, I have, I happen to believe that the best way to take care of legacies for people I love and care about is with my life insurance. I just made some changes on my life insurance beneficiaries. I know beyond the shadow of a doubt, I die money goes to those individuals tax free. I will spend all of my retirement money, and then I will leave my legacy behind tax free. And I use some of my retirement funds to fund my life insurance premiums. That way, I'm taking something I'm gonna pay taxes on anyway, April, and I'm using it now to create something that's tax free, which is pretty cool.
April: It's cool. That's right. And I get it. Taxes, we could talk all day long.
John: And we do.
April: And we do. That's right. Okay, let's go to chapter four, John, because I think this one is extremely important. You know, all the other stuff about Social Security and Medicare and taxes is all well and good. But I think this is one of the probably most important chapters.
John: Well, I'm going to jump all the way over to page 51. And let's skip the first several pages in this chapter. The first few pages. And I'm talking about the four freedoms, because to me, retirement reflects on these actually life, to me, is based on these. Time freedom, money freedom, relationship freedom, and location. And I'm just gonna give you my view of that. People can fill in the blanks for themselves. I see people who talk about retirement. Why? Well, because I can't stand working anymore. I want to retire.
Okay, good. If you have more time, you will need more money, because you have more time to go to the mall, go shopping, do whatever, right? You go, yes. I said so what good is time if you don't have enough money? What good is money if you have no time to enjoy it? What good is money if you have no relationships to enjoy it with? And they look at me and go what? I say think it through. I see people who are so focused on investing and having a quote number to retirement? What are you gonna do with it? I don't know. Who you gonna do it with? Where will you do it? Location. They go I don't have a clue.
No one's ever asked me these type of questions. So think in terms of, we're different in the sense of how we plan for retirement. Most people in our business will say how much money you got? Even just see TV ads, you know, radio asked if you have X amount of money, we'll help you, if not, we won't. We're different in a sense of okay, what does retirement look like for you? Who are the relationships that are important to you? Locations. Are you going to live in Tallahassee? Are you going to travel? What are you going to do? And then time and money have to be there to take care of that. The four freedoms. There are more, but those four we focused on.
April: I know, I think it's extremely important. Yeah, like you said earlier, we, we always talk about not retiring from something but retiring to something. I think that's more important than even what the numbers look like. What are you going to do in retirement? You know, it's a major shift for us when we go into retirement. You know, one, most of us if you know, you've got a career, 30 years plus, that's a long time that we've had devoted to a career. So now what? Now that you're not getting out and have this job, using air quotes job to go do, so you know, what's next? What are you going to do? So it's just as equally as important.
John: Then you have people like me, who are not allowed to retire.
April: That's right. Who are not allowed.
John: You won't let me retire.
April: I will not let you. Not true! I let you retire for your birthday. You know, nice, long retirement weekend.
John: Yes, that's true.
April: I told you I'd see you on Monday. But yes, but this is just as equally as important as anything else. As all the other things.
John: Let me get one more thing. Retiring for the wrong reasons I touched on it earlier. But let me hit this real quick. Why are you retiring? We see people who retire and then they regret it. They retire because they're getting pressure from the spouse at home. And then they get home and now you're around that person every day. I had the pleasure back in the 80s. I think it was '84 or '85, I believe, to go down to Daytona to do some workshops for people in a General Electric thing. And I got to stay for three days at a time to watch all the presentations. And I saw a presentation where these couples are brought in who had retired. Some like a year or less, three to five years, 10 years, plus.
It was interesting to hear what, and at the time it was all the men had worked, the women did not in this case. And it was funny that the wives said to a person, I didn't really know my husband, because he got up every morning went to work. And I began to do what I do. And here all of a sudden I got this man in my house getting in my way all day long. That was the thing that came out and some people were getting divorces after being married for 35, 40 years. It was crazy. So the question is, you know, don't retire for the wrong reasons. Don't retire just because somebody says, well, you're 67 years old now. Get your Social Security. You're 66 it's time to retire. I'll shut up on that, because I can talk about that all day long. And enjoy talking about it.
April: That's right. Okay. So if we go to chapter five, we're going to talk about Social Security. Now, this is also a subject, we just did a webinar not too long ago on Social Security, but we will have an entire webinar and seminar on Social Security. So this one, we get lots of questions on. So let's talk about this one, John, and kind of your thinking on the book here about when to start taking Social Security.
John: Well, you got people who would actually argue with you about this. I would just tell you what I did. I took it at age 66, full retirement age, why? Why didn't I wait until 70 and get the 8% increase each year, to have a 32% increase? I took it because if I looked at the time value of money, if you look at it over an actuarial period, there's not that much difference. There's a difference in income per month. That money received over your life expectancy is not that much difference. It can't be because it's a pension type of calculation that the actuaries with Social Security calculate. And they assume age 84 for for a man or woman in their calculation. At this point, they can change that.
They have over the years, over the years. So do you defer it? Do you take it right away? I will say this, and we'll jump ahead what happens when you die there. If you do not have, quote, enough, unquote, whatever that means life insurance for yourself, then you may want to differ so that your surviving spouse would have a higher income. You want to touch on that because I know you've worked on that a lot with ladies to make sure that they're alright because you do a lot of financial planning for women.
April: Mm hmm. Yeah. So I guess John mentioned that part of what we want to do is when we're looking at when to take Social Security, we have to take into consideration with everything else that you have, right? What other income streams are you going to have? Do you have a pension? I you did, which pension option did you choose? Other assets as well. So like John mentioned, I do work with a lot of women, when it comes to retirement planning. And so we talked through several different things, actually.
So we could have, you know, we could talk about ex spouse benefits, we can talk about widow and widowers benefits and how those work. So we have different benefits we want to look at. I have a client right now, her husband passed away. So what we're going to do is she's going to take her her survivor benefit under his record, and the later she'll switch to hers. So it's all about kind of the timing and the planning for that.
John: How many times have we had ladies who did not even know about the widow's benefit? And we refer them to Social Security and they got a nice chunk of money.
April: More times than you would think. So it's very, very important.
John: This I've intentionally kept brief, in the book because there's so many moving parts, like we just said, but I will refer people to page 61 for the tax considerations. We still see people who think that Social Security is not taxed. It is taxed. At one time it was not but that for a long time ago. In 1983, when the Reagan administration pushed and made a lot of changes in Social Security. So we started seeing cost of living adjustments. You saw the wage base increase, though. I was, simple to say, join us for one of our social security webinars. We spend the entire hour on that. We'll get back to having live events come to one of our seminars, here at our office, and you'll see a whole lot more on Social Security.
April: Sounds good. I have one more question on Social Security that I want to ask you.
John: Okay.
April: Because we get asked this all the time. Will Social Security ever go away?
John: My answer is no. I don't think you'll ever see it go away, you will see it take a different form. If there's talk right now in Congress about how to make a change, because they can't keep paying for everything that they're proposing. So we're going to see changes in what it will look like. It may be a, it might be an earnings test. If you make a certain amount of money, you get less money. But in my view it will not go away.
April: In my view too is that I'll mention this because I would I would wager that people on the call are probably closer to retirement. I don't think that they're if you're closer to retirement, I don't think your Social Security is going to be impacted.
John: I think if you're 60 or older, you're okay. Again, that's my view because I remember the Tax Act of 1986 when Congress went back in time retroactive and made changes. And that was the first time they did. And it was one of the reasons that the whole industry, real estate industry had so much trouble in the 80s because they changed the tax rule. And that can change Social Security.
April: They can. Yes, but I think you're right. I think, you know, if you're, like John said, you know, late 50s, 60 or older, or you shouldn't see too many drastic changes along the way. Someone who's younger, like I said I'm 37. I do think that I'll probably see some sweeping changes to Social Security over over my lifetime. But I still think it's going to be there.
John: Absolutely.
April: Yeah. Let's talk about Medicare next, because I would say Social Security is probably one of the most, you will get the most kind of questions about Social Security. And then probably from there, we get questions about Medicare.
John: I want to jump in on that before you cover that.
April: Sure.
John: Because I know you do a lot of the Medicare webinars on this. I am someone who has benefited greatly this year because of Medicare and having a supplemental policy. Because the surgeries. Some people knows and some don't. I'll just give a brief overview that because of having some blood clotting issues, because of stints in arteries in my leg and I had to have a lot of surgery done, which led to an amputation of the right leg above the knee. So I have learned rather intimately how Medicare works. What it will do, what will not do. So, I'll turn it over to you, April.
April: Yeah, so in John, like John mentioned, John's on Medicare, so he's got some great perspective for that. Here's kind of the basis for Medicare. I'm gonna try to keep this short because as John mentioned, we do host, you know, hour long webinars on this. Medicare is broken down into four parts. You've got Part A, which is hospital insurance. This is what you've been paying into while you've been working. When you go on to Medicare, you're going to have some choices. you are going to go with original Medicare, which means you get Part A and B through Medicare.
And then you're going to add on a supplemental plan, which is also called a Medigap policy, which covers any of the gaps in insurance because Medicare doesn't pay for everything. And you'll also add on a drug plan. So that is what we would call Original Medicare where you get Part A Part B, and then you add on Medigap policy and you add on Part D for prescription drug coverage. An alternative way to get Medicare is through a Medicare Advantage plan. This is like an all in one plan. You're going to have like one health insurance through one company and it's going to cover everything. It's going to have Parts A and B it's going to cover some supplemental, and it's going to also have the Part D for the drug coverage as well.
What I would say about the Medicare Advantage plans is what you're going to usually find with those is that they do typically have some restrictions or they'll have limitations. You'll have a specific geographic area that they cover. And you may have a network of doctors that you have to see. So pros and cons to both. Original and looking at Medicare Advantage plans. But that is something you want to make sure you do your research and that you fully understand both ways to get Medicare and how it's going to impact you.
John: Yes. And some of that will come down to what type of person are you? Mindset wise. For me, I went with Original Medicare, because I wanted to know that I was covered no matter where I was. And some things I'll pay a little bit more for, some things that I've paid less. But it was important to me to have that overall full projection if you will.
April: That's right. And so that is something we can help you with too. We are not licensed to sell Medicare plans. So we don't we don't sell any Medicare plans. But we can at least help you understand what your options are and kind of talk through those things on Medicare.
John: And when you say Medicare plans, let's be specific, we don't sell any type of Medicare supplemental policy. And that may change in the future. But at this point, we have chosen not to do it.
April: That's right. Okay. Let's go to chapter seven, John, which is going to be on required minimum distributions. This is kind of goes hand in hand with the taxation piece that we were taxes that were talking about earlier. But yeah, let's go to chapter seven and talk about required minimum distributions.
John: Well, on page 77, we'll get into some detail about how this works. So let me just hit a quick little thing here about what what RMDs really are and required minimum distributions were not designed, because the IRS loves you and wants to make sure you have an income for life. It is there so that Congress and the Department of Treasury can receive the money in the form of taxes. So you let this money grow all these years. And now they're saying, okay, at this age, which was age 70 and a half, now it's age 72. For people who are under 70, so you have to pull money out whether you need it or not. And we have a lot of clients say, well, who is that I don't need this money.
I don't want this money, because I have to pay tax on it. Sorry, the tax law says you must take it. And if you don't take it, there's a whopping 50%, five zero, 50% penalty on the amount you did not take that you were supposed to take. So this is a big deal. And in the book, I touch on it some. And I'm of the opinion that, frankly, they should do away with that. With all the money issues, we keep hearing about that Congress has. Why wouldn't you simply say, look, you got the money there, God bless you. We'll get the money later when you take it out, and just leave it alone. But that's not going to happen, because they need the money.
April: They would solve a lot of problems though they would get rid of it on some cases, on some some cases.
John: And earlier I touched on no more stretch IRAs. Why don't you spend just a moment on that on page 79. And just talk about what a stretch IRA is, and why it was so important, because you've dealt with that, especially with some, some of our clients' adult children.
April: Yes. So um, the Secure Act was passed at the end of 2019. And that's what made changes to both required minimum distributions and increased the age from 70 and a half to 72. But it also made changes to how beneficiaries handle when they inherit retirement money. Now, if you inherit retirement money, you inherit, let's say, an IRA from a spouse, there's no changes from that. So my husband's name is Brian. So let's say, Brian, pre deceases me and I inherit retirement money from Brian. He had an IRA. So I as the spouse, get to inherit his IRA, as if it's my own, and no changes there. It's now my own IRA, and I just have to follow whatever required minimum distribution rules are at that time.
So no changes there. Where the stretch IRA comes in, is if you inherit IRA or retirement money from a non spouse. So most common, we see it's parents leaving retirement money to children. They could also be siblings, it could be a friend, right? You inherit retirement money from a non spouse, okay. So what are the rules, what did the rules used to be and what are the rules now? So it used to be that you could do what's called a stretch IRA. So as I mentioned earlier, I'm 37. Let's say I inherit an IRA from my mother. In the old rules, I could stretch that IRA over my life expectancy. Meaning that I would have to follow a schedule from the IRS, I'd have my own RMD, I'd have to take every year, even the 37.
But it'd be a very small amount of the account that I'd have to take out every year. So small taxable income to me, but I can really stretch that IRA over my life. That's where that term comes from. Now, what the rules are, they say, I can no longer do a stretch IRA. And so if I inherit money from a non spouse, I have 10 years to liquidate that account. So I can do it all today in one big lump sum. I can take it in small pieces. I can do in the 10th year. Right now, the IRS doesn't care when you take it, but it has to be liquidated within 10 years of the person's passing.
John: And it goes back full circle to what I said about RMDs. Why did they change it? Because they want the taxes. They do not want you to be able to quote stretch it over a 30 or 40 year life expectancy here.
April: We have a client who passed away several years ago, and she had three daughters. And they are all in their 20s. Now this was pre Secure Act. So they I just met with two of them this week. They have their inherited IRAs. And they have to take out a small portion less than about 2% of the account right now based on their age. Now that will go up every single year. But it would have been very different had they been under these new rules and had to liquidate in 10 years.
John: So let's talk about something that a lot of our clients will do with RMDs. We have people say like I'm going take this money out. What do I do with it? Sometimes I say take a vacation, you've not had a vacation in 10 years. Take a vacation. Go spend it, enjoy it. For others, we have clients who will come in say look. I want to do some things to take care of my children and my grandchildren. We have a lot of clients who actually use their RMDs to fund life insurance either on themselves, or on their adult children or grandchildren. In my case, I have life insurance for my grandchildren.
And I love that because I can just visualize sometime in the future, I'm long dead and gone. And they're sitting there and I'm thinking about my grandson Michael Jr. Oh, wow. Look what my granddaddy did for me. I have something here that I can use the rest of my life. Or you can take the money and invest it in the insurance doesn't appeal to you. Put it in some investment plan, do something with the money, give it to charity, and there are special rules on that. Some things you can do to save on taxes. There's so many moving parts to this, that again, we could go on and on. But you've covered the big pieces.
April: Yeah, and this is just goes to show you have to keep up with this stuff. Because they made those changes at the end of 2019. They were very sweeping big changes that kind of got swept under the rug. And so you have to pay attention to this kind of stuff.
John: That came through rather quickly, too.
April: It did. Happened fast. Okay, so let's, let's hit this, as we kind of come here and kind of talk about the conclusion and wrap up for the book here. So we talked about this earlier, I'm not going to spend too much time. But we did talk about how the secure retirement method for members of the Florida Retirement System, you can also use this same method if you're not in FRS. Obviously, a lot of these will, same principles will apply. But you want to look at having, talking to me about where you are today, you want to look at your current financial situation, do a baseline for the future. And then you also want to have a proven process and plan to help you get there and reach your goals.
John: Something, April, that should be mentioned. Just yesterday, I spoke with two people who are married to somebody who works for the Florida Retirement System, within it. But they're not. And it's funny. One's an attorney, and one's a building contractor. And both of them said to me, I'm reading the book first. Because this information is so valuable. And I've been reading part of it. I said well you can read in one sitting if you take 60 minutes. They said I don't have 60 minutes. So one of them, but they attorney was tell me he'd read half of it. But he made a comment about I don't have a pension. And if you don't have a pension plan, this is even more important. Because how you guaranteed lifetime income? So one of the things that we would encourage you to do is sit down with spouse, sit with us if you're interested in our planning process, and we'll help you coordinate those two.
April: That's right. I agree. Yeah, like, like you said, it's great information right there doesn't just apply if you're in the FRS, it can really apply to anybody. And it's important for all of that for sure. Okay, we have a great team here. We mentioned it earlier, we have a wonderful team. It is not I always say it's not a one man show, and it's not a one woman show. We definitely can't do this without our wonderful team. So we have Zac Hirschler, and we have Jay Wolfe, also on our team. We are just so you know, John and I are located here in Tallahassee, Jay is also in Tallahassee with us. But Zac is in Jacksonville. So I lived in Jacksonville for the last three years. And I lived in Jacksonville for the last three years. And then I recently moved back to Tallahassee this year. So both of us are here. But then we've also got Zac over in Jacksonville.
John: And speaking of that, we also should mention, we have clients all over the country, and all over the state of Florida. So you don't have to live in Tallahassee to work with us. We do a lot of work with people around the state and country. Zoom meetings, telephone appointments. So if you're in Miami listening to this, we're available if you want to talk.
April: That's right, yeah, we have clients all over the country. I was just talking to a client earlier this week that she's in Italy. So, she's spending some time over there. So it's fun We do wherever. So as we mentioned, if you have not received a copy of your book, you can get it through Amazon, the Kindle or paperback version. You can also email or call us to receive your copy, complimentary copy from us. So just let us know where you'd like us to send it and we can get that in the mail to you.
John: If you want to spend money, that's fine. But I'd recommend you get it through us.
April: That's right. Very easy to do. And we'll make sure we get that out for you. And also say to for those of you on the call. We recommend scheduling a time for our 25 to 30 minute phone call. We call this our focus session. We've actually had some people who requested the book already, call in and request their focus session. You can see that on page 93 of the book, we talk about the focus session. But what we do in here is we're going to talk and go through and talk about your opportunities and concerns. Talk about your future. And really in about 25 to 30 minutes, we can usually determine what the next steps are. Help you get some clarity and around what you have in your world. And then we can also decide, hey, does it make sense for us to have another call, or meet face to face if you're local, things along those lines. So those are great, an easy 25-30 minutes.
John: And it's low key. No pressure. My view is don't work with anybody who gives you high pressure. Our philosophy is if we're a good fit, we'll know it. If we're not, we'll know that too. And if we're not, we're part on a friendly basis.
April: That's right. And I think, too, because, I, we get this question about the focus session. You don't need to prepare anything. So sometimes people think like, oh, I, I'm not organized, I don't have all my data, and you do not need it for the call.
John: So what is it people need to bring?
April: They need to have an open mind and a willingness to learn. Pretty easy, right? So we just ask, yeah, just you know, come as you are. And we'll have a quick 25-30 minute conversation and decide kind of what it would look like from there.
John: And face to face, it typically will have as much as an hour, hour and a half. But for the telephone appointments for those who just want to get an overview. Then, telephone works, first step. But if you know you want help, you know you're ready, then schedule a full blown appointment.
April: That's right. Yep, and we can do it by Zoom too. Perfect.
John: Anything else?
April: John, I think this is great. I think we've covered a lot of different topics. Kind of given like an intro to the different topics that are covered in the book, and that we go through in our other webinars. John, anything else you want to add before we sign off for the day?
John: I just want to say thank you for putting this together. Because the book is helpful. But as my friend Steve Gordon says, you got to get the information out there so people benefit because someday, I'm not going to be here and all this stuff that's in my head would disappear. So thank you for the help getting it out there.
April: That's great. You know, I think this was wonderful. We've gotten a lot of good feedback. So I hope every one of you enjoy your day and I hope we see you on some future webinars and talk to you all very soon. Bye.
John: Goodbye.
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.
2021-127540 Expires October 2023.