She Didn't Plan to Retire at 62. Here's How It Happened.

Today we're trying something a little different. We're going to walk through a real retirement story in chapters — and as each new detail comes in, we're going to react to it the way a financial advisor would. Fran is 62, she figured a lot of this out on her own, and she's only now sitting down with a professional for the first time. Let's see what we find and what we might do differently from here.   Helpful Information: PFG Website: https://www.pfgprivatewealth.com/ Contact: 813-286-7776 Email: [email protected]   Disclaimer: PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.   Marc: Today we're trying something a little different. We're going to walk through a real retirement story in chapters. As each new detail comes in, we're going to react to the way a financial advisor would for Fran. She didn't plan to retire at 62, and here's what happened. So let's talk about Fran's story.   Hey everybody, welcome into the podcast. This is another edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth. And if you need some help, got some questions, want to reach out to the fellows, give them a jingle, or I guess not a jingle, but find them online at pfgprivatewealth.com. That's pfgprivatewealth.com. Of course, you can call them at 813-286-7776. We'll have details in the show description below if you'd like to get ahold of them. And we're going to talk about this kind of a retirement story here today, guys. Kind of break this down a little bit, so we'll get started in just a second. But Nick, how are you my friend? You doing all right?   Nick: Yeah, doing pretty well. Thanks.   Marc: Good, good. Good to have you here. Good to chat with you as always. And John, how are you, my friend?   John: I'm doing okay. Summertime started for the kiddos, which means I get to sleep in an extra 30 minutes.   Marc: Oh, there you go. Little extra sleep is always good. Exactly.   John: So it's good, yeah.   Marc: Well, let's dive in. Let's start with this chapter breakdown. So guys, we've got this story again, kind of a real case study here. So who is Fran? Whoever wants to do the setup here. Tell us a little bit about the story here.   Nick: Yeah, so I'll go ahead and start. So Fran, 62 and single, spent 30 years teaching in public schools kind of up north and decided wanted a change. So about five years ago, she moved south, rented a home, picked up a full-time admin job at a local office, and kind of did it from the standpoint in the sense of it wasn't something that she loved or had always wanted to do. It was just kind of stabilize, get a job, earn some income, and be able to cover bills and figure out what she wants to do.   Marc: Gotcha. And that's fairly normal, right? A lot of people are going down to Florida, doing this snow bird thing. And so for a first time situation, somebody walking in, like you're reviewing this case for somebody who's coming in saying, "Hey, I'd like to talk to you about getting some help." What's a couple of things from just the story setup that stands out to you?   Nick: Yeah. As somebody who kind of helps people plan for a living, I start to twitch a little bit just from the standpoint of it seems like the decisions being made are a bit on a whim and there's not necessarily kind of a broad based strategy put in place. So for example, seeing somebody that had retired as a public school teacher, most likely there's a pension involved. And we'll learn that she had waited on the pension a little bit, but was there an opportunity to take something sooner or not? Obviously with her being under the age of 65, then there's going to be costs associated and probably substantial costs associated with healthcare. So that's something that would factor into the job opportunity that she was looking for.   In this case, she had rented a home, which in situations like this oftentimes does make sense dependent upon where she's coming from, but we don't know if she had sold a previous house or had rented before and then came down to rent as well. So we've got kind of variability and costs associated with a home. And then just getting a better understanding of what other sort of assets are in play and/or what's the game plan, maybe like post 65 are all things that would help us from a planning perspective.   Marc: All right. So let me jump in and do the next piece for you. Kind of a turning point here in the story. A few months ago, guy's, Fran's office restructured. She was offered a new role, more training, longer hours, not much more pay as a single person whose paycheck covers everything, taking on more of roughly the same didn't make a lot of sense so she walked away and unfortunately she got let go, not exactly by choice but not exactly against her will either. So I guess when somebody lands in Fran's position, retired before they planned as well, Nick, as you mentioned, what's the most important thing to get some clarity on? How do you proceed in a situation like that? Now you find yourself without a job.   Nick: Yeah, this tends to be a tricky one and we've kind of run into this where, and it seems like it's happening more. We've seen this more in the last 12 months where people in their early 60s with the expectation of working a few more years and are sub 65, so have to deal with cost of healthcare and that sort of thing have been downsized, and there's substantial difficulty whether they're like a quote unquote highly trained or more specialized position, or in like France position, somebody that had done that previously and had shifted into a role that was maybe not as dynamic as had been and the other way. And so again, kind of having to adjust to whatever's going on and the situation being dictated to her versus maybe being in the driver's seat and having more options on what to do as she moves forward.   Marc: Yeah, that's the risk I think, to your point about not planning, is you're not in the driver's seat, or the catbird seat, right? You're kind of reacting to things on how they go. To that point, what she did next is started drawing Social Security right away at 62, right? So locked that in that early. So you're taking that what, 30% haircut right off the bat there?   Nick: I believe so.   Marc: Yeah. So she also picked up a part-time job at a gym she goes to. Nothing too demanding, keeps a little extra money coming in. So her monthly picture is now looking like 1,450 in social security, about 800 from the gym job, but 1,600 going out in rent before anything else. So how do you react now?   Nick: Yeah, see that's kind of the tough thing at that point, what do we have? 2,250 in income coming in from the social security and the job and a huge percentage of that is just going out just to cover rent.   Marc: Yeah, not utilities, just rent. Yeah.   Nick: Right. Not utilities, not food, not car insurance, not gas, a lot of different things.   John: No vacations.   Nick: Yeah, no vacations, not doing the things that maybe she wanted to do. And so this makes us rewind a little bit even further back, and in retrospect kind of look at as an example. So a conversation with somebody like Fran that we would have probably had if we had met her early on, knowing how dynamically an extra few years of working at a job that has a pension related to it, like a teacher.   So we might have had discussions and kind of doing some projections on maybe even a couple extra years as a teacher and then spending summers in the south, what that could have done to kind of ease her way into it and maybe break up the monotony of what she had been doing over a period of time, making sure that she really understood the impact of taking Social Security at 62 would have.   It's like in this scenario, she doesn't really have a whole lot of other options unless she would have found another full-time job. And what we start to kind of see is that if at that point in life, if somebody's kind of let go and after a few months they haven't had an opportunity to find another position, the freak-out factor really starts to kick in and they want to have something coming in no matter what and ... Go ahead.   Marc: No, I was going to say to that point, you mentioned the Social Security, right, or excuse me, the pension earlier, she's just basically getting by with what she has. What she hasn't touched, and I guess that's where it gets more interesting and I wanted to kind of tee that up since you mentioned that earlier. She hasn't touched that teacher's pension, which she hasn't started yet. 1,100 a month is going to be available but at 65, so you still got a three-year window there, right? But also the 403B with about 210 grand in it that she hasn't touched. So now you can kind of start to factor some of that stuff in. So I guess right now she's basically living paycheck to paycheck. So now you get a bit more of the fuller picture. How does that start to shift some things?   Nick: Yeah. And one of the things that we will see is that people, their normal reaction will oftentimes be to avoid using any sort of investments just because they like the idea, or there's like a psychological aspect of not touching their money, where taking Social Security at 62 is still touching your money. It's just kind of in a different way. So kind of laddering these things together and knowing that she had some money kind of set aside, we probably would have looked at potentially supplementing the income for a year, maybe two years with the money in the retirement account.   Letting the Social Security grow a little bit more, then kicking that in and then having the pension kick in where then that would give an opportunity to take a little pressure off the retirement funds, and stop withdrawals for a few years and let that grow back. Because not only does somebody lock in a lower amount when they take Social Security early, but now they just have less money for things like the cost of living adjustments to kind of compound on in the future and that sort of thing. The big takeaway of what we see here is the fact that there wasn't necessarily a retirement plan put together from a financial aspect.   Marc: Right. I mean, she's 62. Even a little planning a couple of years ahead of time might have helped a lot, right?   Nick: Yeah. Yeah. There definitely would have been an impact on what could have happened. And the thing that also happens when we have this sort of conversation, anytime anybody's going to make a substantial career change, like somebody like a teacher, for example, they have some of the best job security there is, and kind of being in the private world and shifting from being a teacher to the private world, it can be a little bit of a culture shock.   And just understanding that you can be let go and/or the dynamics in play can be substantially different. And so just that predisposition to what sort of field she was in probably didn't necessarily lock in the risk taking of uprooting, moving, and even how delaying that a couple of years could have had most likely a pretty substantial positive impact on the plan, and maybe freed her up to be able to not have to work part-time for longer or have all these other variables that she's not in control of.   Marc: Yeah. And I think ultimately for me, like what I see on stuff like this is she figured out a lot of parts on her own, and that counts for something sure, but the difference is always like instead of doing it, reacting at that moment is doing a little bit of planning just goes a long way, right? I mean, you could still build one even in this situation, but ideally the sooner you can, the better. We're not talking necessarily 10 years out, although that'd be great too, but don't just wait until the last minute and then just react to stuff.   Nick: Yeah. And the reality too is that in the short term, even though there's a lot of moving parts kind of in that range of losing the job and shifting to part-time and taking the Social Security, really where the pinch will be felt is 10 years down the road when inflation really starts to kick in, things are feeling more expensive.   Marc: That's a good point. It feels that way now, right?   Nick: Yeah. Yeah, for sure. And so it's like that thought process of like, well, hey, the increases I'm getting on my Social Security, and maybe for her a pension, aren't really keeping up with where things are going, maybe she didn't have the opportunity to work for very long at the gym even and can't find any other job and she's just now her lifestyle, her expenses, John mentioned the opportunity to be able to travel, do the things that she wants to do. Some of those things may have been taken away, and some extra more kind of detailed planning to ... Because those are the sorts of things that we would show as situations that could happen for somebody and making sure that there's contingency plans and plan B, plan C if, hey, if these things happen, where can we go? How can we adjust?   Marc: Yeah. I mean, stress testing different scenarios is a huge part of going through the retirement planning process with an advisor so that you can ... I mean, she probably wasn't expecting to lose that administrative job and having to go to the gym job, right? So life always throws things at us, so you want to make sure you got a strategy and a plan in place before you pull the trigger and go moving, or retiring, or whatever the case is, especially if you're getting close to it, especially again, 60, 62, that kind of thing.   So as always, if you got questions, need some help, reach out to the guys. If her story sounds anything like something like you're facing or could be facing, make sure you take the action now and start talking with qualified professionals and see, just sit down, have a conversation. They're complimentary often. Most places do that, just to kind of see if they can help you out and if it's going to be a good fit. So reach out to the guys, have a 15-minute chat, pfgprivatewealth.com. That's pfgprivatewealth.com or call 813-286-7776. And that's going to do it this week for Retirement Planning Redefined for John and Nick. I'm your host, Mark. We'll see you next time here on the podcast. Don't forget to hit that subscribe button. We'll catch you later.