#134 Retirement Readiness: The Secrets to Knowing You’re Truly Ready

Micah Shilanski 00:28
Welcome to the Plan Your Federal Retirement podcast. I’m your co-host, Micah Shilanski, and today we’re going to be getting into five missteps, five mistakes, five things that go wrong when you’re planning your retirement. And I guess these are things that we consistently see time and time again. And the great part is, most of the stuff is all preventable if you can see it coming. So to dive more into detail with this, I invited back on the podcast my father, FLoyd Shilanski, with over 40 years of working with clients side by side, hand in hand, doing this to share a lot of that wisdom. Pops, welcome back to the pod.

Floyd Shilanski 01:11
Well, thank you. I sure appreciate being here and sharing some of my knowledge. Or is it my wisdom? Which one is it?

Floyd Shilanski 01:18
is it okay?

Micah Shilanski 01:19
We could Google knowledge, but wisdom, on the other hand.

Floyd Shilanski 01:23
It’s a tough one, yeah.

Micah Shilanski 01:24
Pops, You know the difference between knowledge and wisdom, right?

Floyd Shilanski 01:27
Someone once told me that’s a simple explanation. Knowing that a tomato is a fruit is knowledge. Wisdom is don’t put it in the fruit salad.

Micah Shilanski 01:36
Amen, that’s 100%. So we’re going to talk about what not to put in the fruit salad of your retirement. All right, that was a hard segue, but, but I’m trying here. So we want to get into these different areas. And pops and I were kind of jamming on this a little bit pregame, working through different mistakes that we see. There are themes of different mistakes that we see. And so we’re going to go through this kind of the slowly roll up to the big one, the big one, we’re going to make it, you know, nice and big in your mind. And the good news is, once I say it, everyone’s been Oh, yeah, that totally makes sense. Those are the ones to be careful of, by the way, because the minute we say something, oh, no problem. I got this taken care of. Look, there’s a reason I’m bringing this up. Is because this is something we see time and time again. And pops, one of the things that you love to say is it’s not what you think you know or think it’s not what you don’t know that’s a problem. It’s what you think you know that just ain’t so. And this is the area that bites people in the butt. So I want you to really listen to these. And if you think I got it in the back, how would you take a deeper look? Pull that back just a little bit, and let’s dive into some details on.

Floyd Shilanski 02:39
you know, Micah, when I was in the, before I got out of the military, we’d always ragged at the senior enlisted officers. We call them road guards, ROAD, retired on active duty. And at the time when I was in the service, I kind of resented it. But today I talk a lot of our clients about that. I kind of want you like to be retired on active duty. Let’s get used to this before all of a sudden you’re in and up to here, and you’re not really ready for it.

Micah Shilanski 03:06
All right? So the first mistake, or I guess, the fifth, we’ll do a countdown here. The fifth top thing that we see in this is when retirement goes wrong, is you’re not mentally ready to retire. And this can seem like a little thing right now. This is that you’re fed up with your job, you’re ready for the next thing, but you may have checked in the box financially. We’re going to talk about that one later, but you’re mentally not ready to make a change.

Micah Shilanski 03:32
100% Yeah, I kind of think so.

Floyd Shilanski 03:32
And we saw that in the fork in the road that was issued out we were planning to retire in the next seven, eight months anyway, but when they offered that fork in the road, it’s like, oh, I can’t do that. I can’t do that, you know. And from like, five different clients that we’ve talked to, and most recently in that live seminar we did up in Anchorage, you know, people would come in and say, I didn’t think I’d be going out like this, and I’m going, Wait a minute, you’re going to retire in nine months anyway, they’re just giving you an opportunity to go a little quicker, what’s the difference? Well, to them, their mindset. It wasn’t my it isn’t my choice. Now I’m being forced in this corner to do that. And do you think that might affect you mentally?

Floyd Shilanski 03:50
Yeah, you bet 100%.

Micah Shilanski 04:01
So what’s one of the ways that we can fix this one thinking ranges, not in exact times, right? So with my clients, one of the things, a couple things I try to get them to do, is to think of a range of when they would like to retire. When is the soonest that you would like to be able to be retired, financial independence, and then saying, Go backwards, right? No, you don’t get to retire. You have to keep working, all right? But it’s the soonest that you would like to be able to retire, and then how many years are you okay working? Now, this seems like a little thing, but when we create a range, all of a sudden, now, clients are like, All right, well, I could retire if I wanted to, but I still want to work and we can still fill this. This out a little bit, but when the rug penny gets pulled out from underneath them in retirement is forced a little bit sooner, they were already mentally thinking about it. And this is a big change. Going in from working every single day to being retired every single day is a big mental shift. So dad, to your point about the road guard, the sooner we can mentally start transitioning to this while we’re working right, still working, still getting your stuff done, etc. But you’re mentally exploring this retirement. You’re mentally seeing yourself there, the easier that transition is going to be.

Floyd Shilanski 05:23
You know, Micah, it’s like you and I, we both approach planning very similar. Get to the same results, but a little different in the presentations. Hopefully you’ll agree with me that we like to start like five years out, and in that five year period of time, if you’re not ready, let’s get you financially ready to retire, and two to three years out, we want you living on what we project that FERS pension to be, what the supplement is going to be if you’re going to get it, or Social Security. Let’s see if we can get that spending in that range. So that way, if an opportunity comes, or if these things happen that, hey, it’s time to exit, you already know you can do it. Because I think I know my biggest fear is if I quit working and I don’t get a paycheck. How you going to pay all the bills? Now it’s a mental thing, and that’s what we have to get through. So many times I put two objectives up for my pre retirees. You know, one is a monetary number, okay? And the other one, or I guess, yeah, monetary number. The other one’s monetary, but in expenses, so the size of the TSP, size of the assets, revenue coming in, and then you expense it, and so many times when we walk off…

Micah Shilanski 06:27
Pop, hold on not so fast, you are going way too far, you’re going into things right now, is that where we’re at?

Floyd Shilanski 06:32
Well, you asked me to get taught, okay, okay. I’ll slow down.

Micah Shilanski 06:48
All right, that’s a tease. That’s a tease because there are things that we do to talk about kind of leading up to that one a little bit, all right? So the fourth mistake that we see when people are getting ready to retire is they don’t have a daily game plan, right? And this is going to build into the cash flow a little bit in the future. But what’s your daily game plan going to be like? How do you stay relevant? How do you keep on talking? What’s your social circle going to look like, right? What are those things that you’re going to do? Because you’re used to getting up and going to work, you’re used to this commute, you’re used to picking up your coffee, used to all of these other things. Now all of a sudden that stops. What are you going to do replace it to stay in a good mental health?

Floyd Shilanski 07:14
How many times have we heard that Joe or bill or Sam, they keep coming around in the morning to drink coffee from their old shop, and then they hang around the coffee pot just to visit because they don’t know what to go do. I’ve got clients that were in the inspection arena, and they happen to see a truck doing an inspection. They’ll pull over and talk to the guys, because it lets them anchor themselves back versus Okay, that’s in the rear view mirror. Let’s look out the front windshield. What’s next? What? What are we going to do? Whether it’s volunteering, travel or, I don’t know about you guys, but my wife’s got a honeydew project that’s 13 years long. So once I’m retired, she says I know exactly what you’re going to do.

Micah Shilanski 07:54
Yeah, these are important things, though, right? What’s your day to day look like? What’s your long term going to look like? What are these things that you’re going to do? I love to see calendars that are lit now. What’s the bucket list? The big thing I go back to my clients, is it’s not so much about a money thing. It’s an experience and memories thing. What experiences do we want to have? What memories do we want to create while we still can and then, pops, that kind of leads into the third mistake that we see people make is they’re getting pre retired, right? So they’re getting ready to retire, and they go into it with the wrong investment plan. Now this doesn’t mean all of a sudden they move, they’re going to C fund, S fund etc. Right, but you have three different stages of money in your life you have the first stage, which is the accumulation stage right I got to grow, I got to get enough right your maximum TSP to put money in the Roth you’re doing all this other stuff and the money is growing. Then it gets to a point where we’re getting closer to financial independence, and says, Okay, I’m moving from accumulation to preservation. I changed the type of life that I’m in from a growth strategy to a preservation that means I should probably change how I’m invested. And then we go from a preservation stage to a distribution stage right, which, again, when we make that shift, this is a different investment plan that we need to be looking at. What got you here will not get you there in retirement. That doesn’t mean what you’re doing is bad in the accumulation phase. You’re doing what you’re supposed to, stuffing money in, letting it grow for the long term, etc, but now you have to use that money in retirement. And I see two big mistakes here, Pops, and I love to get your feedback on this is, is the first one is that people get too conservative too quick. They’re like, Okay, I have enough. Move everything to the G fund, right? And boom, it’s there. Okay, well, the short term, that’s going to feel really good, but you have this nasty little thing called inflation, which is really going to bite you in the butt in about 10 years, and the G fund just isn’t going to hack. It doesn’t mean the G fund’s bad. It’s really good at what it does. Outpacing inflation is not the main focus of the G fund. There’s the two conservative, and then you also have the two aggressive. That says, Hey, I’m going to just keep everything invested. I’m not going to make any changes. This work really well for me. I’m going to keep it all in the long run, which works great, until one or two things happen. One, you need money, or two, the market goes down in retirement. Now we don’t have a plan for it.

Floyd Shilanski 10:05
You know, Micah, as you’re talking about that, I can remember Feds that after the towers went down and, you know, in 2000 or Oh, one, the whole comment was, Oh, my God. You know, my two of my 401, case, become a tool. 1k, I can’t retire. So they’re focused on that number, but to set the owner, ratchet back just a little bit, everything you we just talked about doesn’t have hard cliffs. There’s not a day that you make this adjustment. There’s not a day you go from conservative to moderate, right? And the third thing, there’s only one thing that mandates we take money out of these plants. And the government decided that for us, didn’t they?

Speaker 1 10:43
they?

Micah Shilanski 10:44
That’s right, the RMDs – required minimum distributions between 73 and 75 you have to start taking money out, whether you want to or not.

Floyd Shilanski 10:52
And how many times have you I know, I see it all the time that my my retirees, they take this money out, and they’re really excited, and they got bumped into a higher tax bracket, and then they’ve got to go back and they start paying higher for Medicare costs. And it’s a confounding thing, because they weren’t prepared for it. They didn’t think about it. Got plenty of money. But isn’t that a horrible thing? Too much money creates another problem, a taxable problem?

Micah Shilanski 11:13
These are things we have to be ahead of, right? So getting in front of all of these things, that’s all we’re having the podcast, right? We want you guys to share this with so many other federal employees, so you can see these mistakes coming, and don’t just kind of brush them off, saying This won’t happen to me. There’s a reason these made it to our top five list. We see it time and time again, and we want you guys to avoid it. So being proactive on your investment plan, not reactive on your investment plan. All right, that leads us to the top second mistake that we see pops, and this is one that we’re spending more and more time working with our clients on, more and more time thinking about. And it’s not really on the financial aspect, but it has a big financial impact. And that’s what is your age in place plan. Did you know that OPM rejects 20 to 30% of the federal retirement applications that come in due to errors. One of the most common errors that we see working with clients is not understanding our RSCD date, our retirement service computation date, which is how much time you have that actually counts towards your retirement. Just a hint, it’s not the SCD. It could very well be different than just your service computation date. Misunderstanding this can lead to costly mistakes in your entire retirement planning. Our free guide on how to verify your RSCD is going to help you understand the different types of service computation you have and how to accurately determine and check with your HR in a very critical way to make sure you have the right RSCD for planning your retirement. To download this free guide, go to our website. Follow this link below that you’re going to see. So make sure you get the most accurate information on your federal employee benefits. Get the facts and avoid costly mistakes. Download this guide now and secure your retirement until then, happy planning.

Floyd Shilanski 13:01
You know Micah and we tell, I tell my clients, you know, when you’re when you retire, you’re going to move, or you’re going to move, I’m going to go home, or you can go back, but hardly sell them. Can you go back home? One, two. And this is where I get a lot of pushback. You’re going to have at least three more moves in your lives once you build your retirement home, because you’re going to get everything you wanted, and then all of a sudden, you’re going to downsize or right size, and then, because of age, you may want to move closer to family. How do you get prepared for that? And I know we talk a lot about, you know, long term care, you know, and that doesn’t mean by an insurance policy. Long Term Care is, I believe, aging in place, and that’s part of the estate planning role, and it should be a major part of that third stage of your retirement plan. You know, Micah, we go from go go. I’m retired, I’m traveling, I’m doing this. I’m doing all of this. Then, perhaps medically or age wise, we go slow. And then there comes a time there’s a no go time. And before we get to no go, we want to make sure we’re you’re able to age in place as you want it to be. Not like the kids Micah wanted to be from mom and dad, but like you want it to be, I think that’s something no one spends enough time talking about.

Micah Shilanski 14:08
If you don’t want me to decide your care, you shouldn’t have put my name on all those documents. Well, all right, we gotta redress that. No, but you pop you bring up some really good points, right? Which is, what is that age in place plan? Do your kids know what that age in place plan, and not just the long term care side. I want to back this up before that, right? What are you doing now, physically to make sure you’re taken care of, right? Finances is great, because you can delegate a lot of the financial work in order to be done. Fitness, you cannot. Your health, you cannot. That’s 100% on you. You can get coaches, you can get doctors and get things to say you need to do. But so much research is coming out, more and more, and let’s talk about Alzheimer’s, right? A lot of Alzheimer’s reports are not coming out as diabetes, type three diabetes, pro and con with this. One thing with type three diabetes is a lot of it’s preventable. Yes, there’s some gene work that’s and I’m over my skis here. I’m sure there’s some doctors listening. This is like, it’s not exactly right, so the grain of salt here, right? But there’s some genetics that make you more predisposed than others. But other aspects of this is it’s it’s self induced. Is what are we doing to take care of our own health care? And pops, you were reading the study earlier today, earlier this week, that the health you have between your 50s and 60s, whether it’s good or bad, you will get that benefit, or you will pay that price for your health in your 70s and 80s. So now and again, you’re not getting younger than you are today. What are you doing to commit to your health? You’re doing all this stuff to commit to your finances, to make sure you’re financially taken care of. Well, if all this in your financially taken care of, but you’re not in a cognitive or a physical place to go do the things you want to do. Is that really a good position to be in?

Micah Shilanski 15:46
without

Floyd Shilanski 15:46
Without a doubt? And I think you see that. Well, I know we see it in all the advertisements that are going on today. You know, whether it’s health clubs or increased protein or I was reading the New York Times this morning. I know, don’t shoot me for that paper, but I was reading the times, and there’s a lot of conversation about how seniors should be exercising more, and whether it’s for the cognitive side or just to help them age better as they move along. You know what the reality is? There’s a high probability many people listen to the podcast Micah, are going to live 10 to 15 years longer than their mother or father did. That’s right. So average life expectancy, by the rules today, is gentlemen, we’re going to pass away at 80.6 years. And good news or bad news, the spouses and the ladies with you come to live five more years. Okay, that’s the average. But when we flip on the other side of the average, 100 plus, 103, 105 and in fact, a lot of the software that we, you know, put things through, they used to stop at 77 and I hate the last one I looked at Micah. It was running projections out to 105, because they think that might be the future that we’re going to deal with.

Micah Shilanski 16:51
Hey, Pops, did you see that article that came out that says you should go on like a fitness side that you know it’s better for your mental health and physical health if you work out with your son three to four times a week? No, I thought it was your girlfriend or your wife. I didn’t know you didn’t see the sunlight. I’m gonna go write an article real quick.

Floyd Shilanski 17:09
I’m looking outside. I don’t see the sun, so…

Micah Shilanski 17:14
But no, these are important things, right? What is that fitness plan that’s between you and your bride, right? You and your spouse? And how are you going to have that? How does that fit into this picture? And this is, in my opinion, a lot to do with finance, because the better physical you are, the better mental capacity you have, the better decisions that you’re going to be able to make. So this aging plan, and not a lot of advisors are talking about it, right? We all want to, but it’s like, how do you put your arms around this? And so this is really, really important. All right, Pops, and that kind of leads us to the number one thing, which you were alluding to earlier, right? Because it’s always our go to, because this is the heartbeat of retirement. And you guys, our listeners, always know what that means, cash flow. Cash flow is the heartbeat of retirement. But pops, there’s a couple of words that whenever a client or a new client says these, I get a little concerned. What are those?

Floyd Shilanski 18:06
You know, I deserve this. You know, I worked hard, and this is my reward for those 34 years I put in, putting up with it. You know, I deserve this.

Micah Shilanski 18:15
Or the other, flip of it is I earned, deserve and earn, you know, back and forth,.

Floyd Shilanski 18:19
And I call it head trash that’s all wrapped up here. We’ve got to kind of set data aside, because you’re where you’re at, you’re at, you know, wish I woulda, coulda, shoulda, you know, I got the t shirt. You know, I should have done that a long time ago, but we did. We’re here, so now, as we’re here, let’s get ready for that next staage. And that’s where I was laughing on before, is like, I, you know, I want three to five years of reserve set aside, and two to three years before you actually say I’m done, I’m retiring. You’re living off that projected retirement income. So we know what the gap is that we talk so much about. Micah, how do we fill that gap? Is it going to come from Social Security? Is there come from the TSP? I’m going to move to a place, you know, that’s less expensive to live all these conversations before you go. Adios, I’m done. I’m gone right off to the sunset.

Micah Shilanski 19:05
And of course, when I when I hear this, I deserve this. There’s a comedian that was out there, excuse me, who it was right now, but he has this whole bit about when you drink a little too much, or he nails it like when you’re just drinking a little bit, and you’re fine, and you have a little bit more, and you have that last beer that you know you shouldn’t had, right and then all of a sudden, that last one, it just hit the scales, and now you’re going to get sick. Walks through that process. We all know what that’s like, but he stops in the middle of this bed. He goes, but remember, you deserve this, you know, because that’s how we justify getting into drinking too much, and that’s how we justify getting into spending too much as well.

Speaker 1 19:40
It’s

Floyd Shilanski 19:40
I deserve the RV for $300,000 I deserve that, you know, mansion, you know, I can afford it.

Micah Shilanski 19:46
Yeah, right. And you know, sometimes you’re in a financial position that you can do it and rock on more power to you. But if you’re not in that financial position, be really, really careful, because this could be a death nail in your retirement. Because, again, we’re solving for longevity as well. So be really careful with that. And as we get into cash flow, really important, I like to break cash flow a couple things with cashflow. One, you should know what you spend on a monthly basis in round numbers. I don’t need it to the penny. And you should know the top three to five categories in where you spend your money. I don’t like budgets. I don’t like the B word. People generally aren’t happy talking about it. And a budget is reviewing everything we did last year, right? And no, there’s nothing I can do about money you’ve already spent. So I want to talk about cash flow planning, looking into the future and going forward. How are you spending money? I always like to break those down into five categories, household, travel, entertainment, medical and kids, kids or grandkids. They’re just expensive, right? So they’re kind of their own little category. It’s a great. How much do we spend in each of these? And there should be a range. And what generally happens is, when we’re not tracking it, we put everything on one credit card, one credit card, one month, is $5,000 over what we normally spend. And then when I kind of ask clients about is what happened? Let’s just, oh, well, we had to buy some tickets to go down south, but goodies, we had a companion fare, so that’s amazing. So how much were the tickets? Was $1,100 plus the companion fair. Let’s say it’s 200 bucks. It’s 200 bucks. So it’s like, okay, so you spent $1,300 but you’re $5,000 over what you normally spent. Where the other $4,000 go, right? And what happens when you don’t separate out the expenses? We kind of point the finger on the one thing that’s not it. And so really what I like is this is this is a nice accountability tool, and I use it personally myself, between my wife and I, and to say, Are we on track? And sometimes we’re not, but we got to look at it and say, Great. How do I get back on track next month?

Floyd Shilanski 21:33
One of my challenges I have when I work with the feds and we started going to the planning process, I always ask that question, tell me about your monthly expenses, and out come the spreadsheets. Out come the quick and runs, and I turn it upside down, and I’d say, okay, but tell me what you spent. Well, no, it’s not well mentally, we gotta you should know that. I wanna say you got you should know that. All right. And there’s a little exercise that I do. I take the tax return and here’s your gross income. Call it 100,000 you pay taxes and Social Security. It was 30 or 40,000 so you stressed 100 minus 40 is 60. That’s $5,000 a month, okay? And you told me you only spend in three where’s the other 2000 at? Now that’s just a 30,000 foot view, right? But when you get into it and you peel the pieces of the onion back so many times, they simply don’t know. It used to be, I got a line item for, you know, the internet, the telephone, groceries, and now they say, Well, my visa bill is this? What do you mean? Is this, right?

Micah Shilanski 22:30
I put all that stuff in that visa bill because I want the air mile, pay the points.

Floyd Shilanski 22:33
Okay, exactly. And to your point, all of a sudden it bumps up. Well, I’m not, well, we’ll rationalize it. Well, I deserve to go do that, right? And it gets paid off. But all of a sudden that $3,000 credit card bill is 35, 38, 41 -5000, oh, my God, for what I got 20,000 on this 20% interest credit card. What do I do? Go get a loan from your TSP, right? No, we got to fix the problem!

Micah Shilanski 22:59
Right? Yeah. So those are the things to really look at, right? And we’re not dogging you on your spending or anything like that. We just got that. We just kind of have an honest conversation about a is what it is. But if we’re planning on longevity for retirement, kind of pops and nice goals into the other advisors in our firm is we want to keep you happily retired. If we start seeing these things come up, we need to hit the pause button say, Hey, are we on track for this? Is this something we need to adjust our spending to? Are we off track? Are we on track? Where are we at with this is really, really important. Well, pops on this podcast is all about action items for our listeners, about what things can they do this week to be better prepared for retirement. And what I want to say is we went through five major things that we see, starting at the bottom, it was, what goes wrong with retirement – you’re not mentally ready. Then we went into, what’s your daily gaming plan? We retire. What’s your investment plan, what’s your age plan, what’s your cash flow plan, pick one of those five, right? And say, How am I going to dive in this a little bit more, maybe repeat, listen to the podcast on that section a little bit more, and start just generally, writing out kind of what that plan is going to be for one of those sections.

Floyd Shilanski 24:05
You know, Micah, and then I encourage them, get someone home accountable. That’s our job, right? But if Sure, if you don’t log on and book an appointment withMicah, or myself or one of the other advisors, get someone to hold you accountable, because it’s easy if you’re not accountable, to let it slip. Well, I get it tomorrow. Well, I’ll do that next day. Well, I’m too busy right now, are my stress levels here, or the bottle of win is calling me. It’s easy to do that, but if we have someone that calls you not text, you pick up the phone. Hey, Micah, have you done this yet? Have you done that yet? Have you done that yet? You have a tendency to go you don’t want to lie to them, so you have a tendency, more of a propensity, to do those things.

Micah Shilanski 24:41
100% Well, Pops, thank you so much to our listeners. Make sure you share this podcast. Send it out our goal to help another 1 million federal employees with their retirement, and we cannot do this without your help. So thank you so much, Pops, thanks for joining us until next time. Happy planning. Happy planning.