Ep #57: The Myths Before Retirement

Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan

Micah Shilanski: Welcome back to the Plan Your Federal Retirement Podcast. I’m your co-host, Micah Shilanski. And with me, as usual, is the amazing Tammy Flanagan. Hey Tammy, how’s it going?

Tammy Flanagan:        I’m doing great, Micah. How about yourself?

Micah Shilanski: It’s another day in paradise. We got summer in Alaska. I’m going to complain about it’s too hot, yet I’m talking to you in Florida. So, maybe I don’t have too much room to talk about the heat. But it’s been really nice up here.

Tammy Flanagan:        Yeah, I think your summers are probably a lot more pleasant than the ones in Florida. We like our winters here.

Micah Shilanski: Fair enough. Those are a lot more playable.

Well, Tammy, we have some fun things to talk about today, thinking about enjoying summers, enjoying winters and doing things we want to do, but really, you and I were kind of chatting in our pre-game. And one of the things that came up, we call it the myths before retirement. We could also call this the big mistakes people make before retirement as well.

But sometimes these misconceptions we have about one, we don’t think we’re able to retire and we actually really, really are. Or number two, we think we’re really able to retire and we’re not because we haven’t put all those pieces together.

And both of those are really the same problem. It’s we haven’t accurately looked at what we have and what we want and are those lined up.

Tammy Flanagan:        Yeah, and you add that to all the different rumors that go around that create these myths, because they always have a little element of truth in them, but yet, there’s some little, little twinge to it. There’s a little bit of a misconception that can really throw you off track.

So, I think as we go through some of these things today, we want to kind of clarify some of the things we hear out there that you’re probably hearing as well, if you’re listening to people talking about retirement, because everybody’s an expert. Whether it’s a person in your office or whether it’s the person on Zoom, I used to say carpool, but I don’t know if anybody’s carpooling anymore.

Micah Shilanski: Well, I was at a party actually, 4th of July party. It was kind of funny, and I came up with crosstalk, and someone, I don’t think knew I was there, knew who I was going through it on the federal employee side. But they started talking about The Windfall Elimination Provision. So, of course my ears perked up.

And they started explaining how it worked and I was like, “Ooh, yeah, no, that is actually not how it worked; your spouse’s income has nothing to do with your Windfall Elimination Provision.” But she was speaking with authority and confidence going through something. And I think she had the best of intent that was there, but all of a sudden, there’s this disinformation, misinformation that’s out there.

So, we really got to step back and say, number one, who are we getting our information from? Is it really a trusted source?

And number two, it’s trust, but verify. As much as I would love to say what Tammy and I are saying as gospel and you can take it to the bank, it needs to be trust, but verify. If we say something, man, the odds are really, really high it’s accurate.

But I tell all my feds before they go to retire, if there’s something unique about their situation, Tammy, same with you; I’m pulling the benefits, I’m pulling the rules, I’m pulling the regs, and I want to make sure this stuff is in line so that they’re in the best position possible.

Tammy Flanagan:        Exactly. There’s a lot of people who want to answer questions via telephone call, I’d rather do it via email because then I can pull that reference. I can give them the reference to whatever it is that they’re asking about, in addition to putting it in my language.

And that way they’ll not only hear it from me, but they’ll also see it in the regulation and see how that changes the meaning to them. Because sometimes, when you read that reg, you miss one little word that could change the whole meaning.

So, I try to like spell it out clearly because there are really easy ways to make mistakes here because things are very nuanced. There’s dates that matter. Anytime Congress changes the laws, it’s before this date, it works this way. After that date, it works another way. It’s crazy.

So, yeah, it’s hard to find someone who really is well-versed, besides you and I, of course, in all these things.

Micah Shilanski: Shameless plug. Right, right.

Tammy Flanagan:        But we kind of live and breathe this stuff and some people just don’t have the experience. They’d love to be able to be helpful.

And I think what’s the worst thing, is when you find someone who acts as an authority and they really don’t have the experience or the depth of knowledge and they can really lead you astray. So, I think that’s really good advice to trust, but verify.

Micah Shilanski: So, there’s a couple of things that you need to be thinking about and all this theme “trust but verify” is going to go into this two years before retirement, which is such a key time that we need to think about because we’re all going to be in there. We’re all going to be two years from retirement at some point in time.

But it’s this thing about what do I think I know, is it actually true? And then stay tuned to the end, because we’re going to talk about some mistakes that people make, deal breaker mistakes that you really got to watch out for.

But Tammy, if we had to summarize and say two broad categories, I would probably say the big mistakes that people make is financial and mental would be the two big categories I put together. What do you think?

Tammy Flanagan:        Oh, I totally agree. Even though I kind of have perpetuated the myth about the best date to retire-

Micah Shilanski: And I blame you as often as I can when that comes up.

Tammy Flanagan:        You can certainly lay it on me. But I agree. I always say to people, I say, “Before you can even think about setting a date, you want to really understand what it takes to be financially ready to go.”

And then also, have you really thought about retirement? Have you really thought that you really are ready to leave your job? Just because you’re old enough and have enough service, maybe you love what you’re doing. Maybe that’s where your social circle is. You don’t want to be disconnected from that too soon unless you’ve really prepared for it.

And I have to also say on the other side of that, is that no one can really prepare for something they’ve never done completely. So, give yourself time after retirement, six months, a year, two years, to really fall into a rhythm and find out what your retirement’s really going to look like.

But there is a little bit of mental preparation, it could be very helpful.

Micah Shilanski: Tammy, and that’s really what I love about this 12 months at least, ideally, two years before retirement, is that we’re rehearsing retirement, we’re practicing retirement.

And I will even go as far as to changing up where clients are getting their paychecks from. Instead of you’re getting your paycheck every two weeks from the federal government, we’re actually put that in an outside bank account. And we’ll give you one paycheck a month because that’s what it’s going to look like in retirement.

And we’re going to simulate retirement as much as possible because I want — and that’s not so much for the financial reasons, that’s a lot for the mental reasons that’s going to be there because now, I’m thinking about it different.

To your point, if I’m saying, “Oh, on this magical date, everything changes and it’s some date in the future,” I’m really not going through it mentally. But if all of a sudden, I change my pay, ooh, you want to talk about getting sensitive. Changing how money’s going into your checking account. Now, all of a sudden, I’m paying attention to things differently and I’m looking at it with a different lens.

So, even though it sounds silly, some of the things we’re going to suggest, give them a shot because it’s been proven to work at least with our clients.

Tammy Flanagan:        Yeah, and another thing too, is communicate to your spouse, your significant other to make sure they know what you’re thinking you’re going to do in retirement.

Because it’s so funny that you find couples don’t really realize that … like my husband too, I don’t know how long he’d been planning to move to Florida, but I didn’t find out about this till about two years before he retired. He might have been thinking about this for the last 36 years.

So, you want to really communicate to your spouse what you’re thinking, what you’re visualizing, and to assure them that things are going to be okay, because everybody has a little trepidation moving into retirement, both on the financial side and just feeling disconnected to their familiar world.

Micah Shilanski: Yeah, I love that point. So, let’s dive into it first. Let’s tackle the financial one first, because really, I’m just being lazy. This is the easy one. This is just math. Even though it can seem daunting, most of the daunting stuff that I find is the mental stuff, Tammy.

The financial stuff generally we can work through, but it’s the mental change. So, we’re going to save that to the later part of the pod. Is that alright?

Tammy Flanagan:        Oh, yeah. Yep.

Micah Shilanski: Alright. So, are you financially ready to retire? A couple of big questions that are going to come in here; number one, how much do you want in retirement income? Not just what do you need, how much do you want? And this is really how much are you spending.

And so, where does this go wrong? People don’t figure in the every single month, there’s unexpected expense. Tammy, I don’t know about you, but every month I have an unexpected expense.

Whether it’s the washer or the car or Costco had this really cool thing on the shelf end that I need for this summer — there’s always something every month. And so, I got to have that factored into my budget.

Also got to have my trips factored in there as well. Great, I love to go to Hawaii. Because I live in Alaska, I like to go to Hawaii in January. I need to factor that in. And that’s the same with a lot of my clients. So, I can’t just look at my monthly spending, I got to step back and say, what are all of those things? And I got to look at it honestly.

Where people make mistakes and say, “Oh, when I retire, I’ll spend less. Oh my God, you don’t understand, I don’t need my wardrobe in retirement. So, I’m not going to spend that money. And my commuting dollars, I’m not going to spend as much as well.”

Okay. Well, now, with gas at $6 a gallon, maybe that’s a real argument, but before, it definitely wasn’t. And the wardrobe’s not necessarily a huge dollar amount item that we think is going to be different. So, how do we balance these and how do you look at it, honestly?

Tammy Flanagan:        Yeah, or I love the one where it says, “I just paid off my car so I got my retirement car.” Like you’re never going to have another car again, in the next 30 years. Or like with the clothes one, so you’re not going to wear clothes after retirement?

Micah Shilanski: Well, that’s a different type of retirement, but fair enough.

Tammy Flanagan:        There are some communities here in Florida that go that route. Florida’s a good place to do it.

Micah Shilanski: I love the car comment that you had brought up. So, what I recommend to my clients is I always want you making a car payment. Now, that doesn’t mean you’re paying off a loan, but that means maybe we’re putting money in a bank account because guess what, Tammy, to your point, you don’t have your last new car unless you’re maybe 90 and I could still argue it then.

So, we always need to be setting money aside from a cash flow basis for this.

Tammy Flanagan:        Yep, that was our rule, the whole way through our marriage. And I’m so grateful, my husband had this idea was that; we don’t buy a new car until we can trade our old one in and have the cash in the bank to buy the new one. So, we never really paid the interest, but we always were making that car payment. We always set money aside.

So, that’s doable for sure. And you’ll be glad you did it because it’s such a sense of relief knowing that, “Hey, we can go buy that car that we want. We’ve saved up for it. We know what we need.” And it also sets a limit on how much you can spend.

Micah Shilanski: Yes. Versus going to the dealership and being like, this is how much I’m going to spend, whatever they say I can afford. That’s a great one.

And this kind of ties into that question of large expenses as well. So, this is another area that you really got to think about, is what other large expense or once in a lifetime expenses are you going to have?

“Well, Micah, I’m retired” — these are the comments that I get nervous about. “Well, this is a once in a lifetime expense.” More often, they’re not right. They may change a little bit, but they’re not a once in a lifetime.

So, we got to look at those honestly; is this truly a once in a lifetime and I need to carve money out and I’m going to put money in a separate account to pay for this? Or is this more going to increase my lifestyle? Now, it’s going to cost me more every single month.

And again, these aren’t bad. The only bad case that’s here, Tammy, in my opinion, I’d love your feedback; is when we don’t talk about it, when we don’t discuss it. And some spouse has a different idea and then six months after retirement, they’re spending all this extra money that you didn’t budget and account for.

And now, it’s like, oh … you can’t see my eyes, but my eyes are like bulging out of my head. It’s like, “Oh no, this is a red flag. This is a giant problem, that’s going to be there.”

Tammy Flanagan:        Yeah, it’s not like Las Vegas where you can just roll the dice and hopefully, whatever the dice should come up comes up, because this is something that really does require some forethought so that you don’t move into retirement and have any regrets because that’s the worst thing that can happen.

You don’t want to think that, “Oh, I’ve retired too soon.” Or, “I waited too long and I missed all those years. I could have been enjoying myself because I thought I didn’t have enough money, but yet, I have plenty.”

So, it can go both ways. Like I think you mentioned that before as well.

Micah Shilanski: And this also comes in the fact about spousal benefits too. This is a question we get all the time and maybe we should sit … I know we’ve done separate podcasts on it, but probably worth addressing again, because this goes in the financial side of it. But God forbid, but if you pass away, do you need to leave a survivor benefit? Tammy, what are your thoughts on that?

Tammy Flanagan:        Yeah. Well, first of all, consider the fact that when you elect a survivor benefit and most times we’re talking about a spousal benefit. So, if you’re electing a spousal survivor benefit, that does reduce your retirement by 10%, which I think is why so many people try to find an excuse, not to do it because there are only 10, 10 percents in your whole retirement.

So, it is a pretty substantial reduction. But remember, that’s reducing your retirement. It’s not a withholding, so it’s reducing your taxable income, and it’s not irrevocable. So, if your spouse should predecease you, then you can restore that reduction back to the full amount of your retirement.

And that can play at a double edge meaning. Meaning that let’s say I’m married and my spouse is also … let’s say we’re both federal employees, because we have a lot of these tandem couples where federal workers are married to other federal workers. And we’re both retiring about the same time, we both had nice careers about the same salary, same length of service. So, why in the world would we need to provide each other a survivor benefit? If I have my retirement, he’s got his retirement, I think we’re all set.

Well, if neither one of you took a reduction, so now, you’re living on two unreduced retirements, two social security checks. Now, the two TSP accounts, they’ll merge into one if one spouse predeceases the other. But keep in mind that those two social security checks, one’s going to drop off.

So, even if they’re only $200 apart, just that larger one’s going to continue, the smaller one’s going away. And that could be a loss of $2,000 a month, sometimes 3 or $4,000 a month income.

The other benefit is your FERS or CSRS retirement. If you didn’t leave anything, that whole check disappears day after the person passed away. So, what I like about leaving each other survivor benefit is that we’re both taking a 10% reduction while we’re both living.

So, now, we’re living on less to begin with, which has to be in the plan. But then, when I die first or when my spouse dies first, that surviving spouse gets to restore that 10% back to their retirement. So, there’s a 10% increase right there.

And then, I’m going to get half of my spouse’s unreduced benefit for the rest of my life. And that makes such a big financial difference in your income and requires so much less being withdrawn from the investments once one spouse passes away.

So, you have to really be careful about not underestimating the value of that election, because it is huge.

Micah Shilanski: Yeah, and virtually irreversible. So, this is a huge decision that you’re making.

So, how do we try this? So, one of the things that I like to do, again, simulating retirement as much as we can in advance. If I have a client that’s really pushing back on me and says, “You know what, Micah, my spouse can live on less.” I always love that because it’s not I’ll live on less, it’s my spouse can live on less by the way.

So, “My spouse can live on less when I die.” “Okay, great. Let’s simulate that now.” They’re like, “What do you mean?” I said, “Well, let’s go ahead and reduce your income, so your pension’s going to be 3000 a month. It’s going to turn into a pumpkin. Let’s not even worry about social security right now. Let’s just focus on your pension going away.”

“So, right now, I’m going to start taking $3,000 a month out of your paycheck. So, 1,500 per paycheck, and I’m going to put it an outside account that you can’t touch.” “Whoa, whoa, whoa, Micah, we can’t do that now.” Well, what’s the difference? You could die today. You could die tomorrow. If we don’t know when we’re going to die, let’s start that now.

Now, if we can’t do that today, I’m going to push back and say, you know what? Maybe this isn’t right that we don’t leave a survivor benefit because if we can’t afford it now, what’s different about later.

So, some of the excuses, Tammy, I hear is, “Well, my house is going to be paid off, when I’m retired it costs less to live.”

Okay, the house may or may not be paid off, great news is that’s math. We know the date that sucker can be paid off, and I don’t really buy it costs less for the spouse to live.

Sure, you’re only buying one airplane ticket out of two, but there’s still other things that come up with widows and widowers that it’s not like they see a 50% reduction in spending.

Tammy Flanagan:        No, you don’t want to lose 50% of your income because then, you’ll become one of those widows who may have to move in with their kids or may have to sell the big house and move into a condo or an apartment.

So, I’ve seen so many people and unfortunately, it’s mostly women in this past generation because not only do women sometimes outlive the husbands, but they may not have been the primary breadwinner in the family. And again, we’re talking about last generation, this generation coming up, it can go both ways.

So, just really look at that with open eyes because I’ve seen so many people mistakenly believe that just because my spouse has a retirement, they don’t need a survivor benefit, without even doing the math or running the numbers.

Micah Shilanski: Right, yeah. You absolutely have to look at that. And again, try it. There’s a difference in theory versus reality. In theory, the numbers work and in reality, live with it for the next six months and let me know how it actually worked for you. And if it does, well, perfect. I was wrong, you’re right. I love it.

And now, you’re going to be just fine, we can opt out of that survivor benefit, fix the healthcare issue. There’s that one that’s going to be there. We talk about that on other pods.

Tammy, let’s go into real quick, before we switch to the mental gear of your game with it. Is let’s talk about some boy, comments that I dread clients making right at retirement, is that okay?

Tammy Flanagan:        Yeah, that sounds good.

Micah Shilanski: This has happened to me, so maybe this is my fault. But this has happened to me twice in the last year. Normally, doesn’t happen. So, twice is a lot for me out of all of our clients. But one of them, we are getting ready for them to retire. They’re retiring in a month or so. By the time we met, everything has been lining up, it’s been great.

We’re planning on them having $7,500 net income a month to live on, which is pretty much 100% replacing their current income. They’re living on it, they’ve been living on it, great, we’ve been simulating retirement. Life is good. Everything’s great. Wrap up with the meeting, it’s good.

As I’m walking them out the door, Tammy, she turns around and says, “You know, Micah, because of inflation, I don’t think 7,500 a month is going to cut it, we really need 10,000 a month.” My jaw about hit the ground. Unfortunately, I didn’t have a good poker face on that one.

And I was like, “What are you talking about?” She’s like, “Well, inflation’s high.” I said, “Inflation’s not 50%. We don’t need a 50%, more in retirement income for an 8% inflation.”

But all of a sudden, in her mind, because she was retiring, she then created all of these once in a lifetime expenses that she wanted to do that we hadn’t discussed in the past. And we had brought up this question.

Now, this is potentially a deal breaker for your retirement, because now, all of a sudden, you’re taking out so much more. They don’t have the money to live on 10,000 a month. They can live really happy on 7,500, but 10,000 is way too much for many reasons.

So, you got to be really careful with those questions.

Tammy Flanagan:        Yeah. You do because that translates to $30,000 more income a year, which if it’s not coming into pension or social security, you’ve got to have another half a million tucked under the mattress somewhere.

Micah Shilanski: Yeah. Because you got to think about taxes, because more than likely it’s coming from a taxable account.

Tammy Flanagan:        Oh yeah, maybe 750,000 tucked away.

Micah Shilanski: Exactly. It’s even more money. So, as long as you have that extra money, you didn’t tell me about, now this works.

The other thing that has come up as well, is when people get emotionally attached to certain things. And I find this out with like the homes that kids grew up in. “We had a home for 30 years, our kids grew up in this home.” And then the kids leave the house, which is great.

They go out and get a job, but then they say, “Hey, I want to come back, and I want to buy my house that I grew up in.” That’s a sentimental attachment for the kids. And so, now, I have a couple that’s retiring. The whole plan was for them to sell their house because they’re going to build another one than lower 48.

Here comes along the kid that says, “Hey, in the next 5 or 10 years, I might want to buy that house. Is it okay if you hold onto it for me?” And the dad says, “Yes.” And my mind’s about to explode. I’m like, “No, no, no, we need this 400,000 to build your new house. There’s not an extra 400 grand laying around.”

But now, he’s emotionally tied to this house and he wants to help his son out. And his son has an emotional attachment. Now, the odds of the son actually buying this house are virtually zero, statistically.

But now, we have this confluence of this mental anguish between the client and the financial side. And we really got to blend those two and really got to understand, what are our needs and what are our means, and can we really provide for them or are we doing something that’s going to devastate our retirement?

Tammy Flanagan:        Yeah, it’s almost like you have to do one financial planning session where it kind of makes sense and everything’s coming together, and then meet a month later saying, “Okay, now what do you really want?”

Micah Shilanski: What did you not tell me?

Tammy Flanagan:        Yeah. Now, that you’ve had a chance to think about it, what did we leave out? Yeah, and I always think it’s funny too, when I hear people say, “Well, I need to retire at 59 because that way, I’ll get the first supplement. If I wait until I’m 62, I won’t be getting the supplement. I’ll give up that wonderful benefit.”

I’m like, “Well, wait a minute, that’s beside the point. Can you afford to retire at 59? Are you ready to retire at 59?” The supplement is just there to provide a bridge to 62, but there’s no collar on it. It’s just a small benefit realistically.

So, I don’t think that’s an important reason to retire before 62. I think the important reason to retire at any time is because of going back to those first two things; am I financially ready? Am I mentally prepared?

Micah Shilanski: That is a huge part of it. You got to come back to those basics and you got to put those together.

So, we talked about the financial, let’s get a little bit more … now, all of these have been mental things as well, if we think about it.

Tammy Flanagan:        Yeah. They’re all related.

Micah Shilanski: They’re totally related. One of the big questions, Tammy, I want to know with my clients, what are they going to do next?

Tammy Flanagan:        Yeah. One of the things that people can do, and we encourage this too — not so much me, but we have other presenters that more address that transition to retirement; what are we going to do. Is if you’re going to start a hobby in retirement, why don’t you start it now?

Make sure you enjoy doing that. Make sure you want to spend 30 hours a week doing it. If you can’t stand to do it on Saturdays, you might not like doing it that much in retirement.

I know my sister-in-law, she was a crafter, she made beautiful jewelry and she did stain glass. She went from different types of crafts, but she was very talented, did a good job. And every once in a while, they’d do a craft show and she thought, “Oh, once I retire, we’re going to just travel the country, go to craft show to craft show.”

She realized real quickly after retirement, how much work that is and how much harder that was than her full-time job. And so, she’s made a change in plans, and that happens. Sometimes, you have to change directions, just like anything else in life.

But really, think hard about, what it is you’re going to spend your time. Maybe you want to work part-time, maybe you want to do some consulting. So, you can factor that into your financial plan if that’s a realistic objective.

So, yeah, thinking about life after retirement. There’s a good book, it’s called Transitions, and it’s written by William Bridges. If you can find that book on Amazon, it’s really a good one that addresses this idea of making a list, and what are some of the key things to think about as you’re planning that transition.

This is like going off to college, getting married, leaving home for the first time, this is a major life transition.

Micah Shilanski: And Tammy, who is that book written by?

Tammy Flanagan:        William Bridges and his wife contributed to it as well. But William Bridges is the main author.

Micah Shilanski: We’ll throw up a link to that on our website as well, planyourfederalretirement.com/52. This is a 52nd episode. So, we’ll put a link on there, if you need to come back to that.

I love that thought. One of the things that comes up sometimes with my … not to sound too sexist here, but I get this issue more with men than I do with women. I think women can change and adapt a little bit easier than guys can.

But is your identity; how much of your identity is wrapped up inside of what you do, especially the higher you go up on the ladder, the status, the more your identity kind of wraps around that.

And how are you going to transition out of that? When you’re someone really important, when you go to the agency and you show up for work and you do this and you retire, and you go home and unfortunately, you’re nobody important. And that’s 24/7 — how is that mentally going to affect you?

How are you going to transition between that? And don’t think I’ll deal with it at the time, you need to have a plan, you need to have a hobby. You need to have a second career. You need to have something that’s going to bridge you into that.

And women have this too. I see it more in men, but women can have this too, the higher up they go on the ladder. And so, we really got to be thinking about smooth transition.

Tammy Flanagan:        That’s where we find all the retirees on the HOA boards, because that still gives them a position of power and they can still have a three-ring binder that’s tabbed with all the important things in the neighborhood that’s going on. So, don’t become one of those people because that’s annoying, but yeah-

Micah Shilanski: Yes, it is.

Tammy Flanagan:        It’s okay to be just the neighbor down the street, you don’t have to have that title anymore. Your identity is more than just the title you held.

Micah Shilanski: Very much so. And this also leads to what is your spouse going to do? One of the things some of my clients will joke that we do more marital counseling than financial planning, because money’s emotional.

And then now, we have to have the bridge between husband and wife and say, “Okay, let’s make sure we have this clear communication that’s there.”

But also, what is your spouse going to do? What is your spouse going to do when you’re home 24/7? Now, my wife is a stay-at-home wife, she raises our kids. She home schools our kids, she does amazing. And when I have extra time off in the house, I disrupt her entire schedule.

So, this is happening while I’m working, much less, when I’m retired from that aspect of things.

So, how is that going to work in your life when you’re there 24/7? This doesn’t mean work until you’re dead, that’s not it. Let’s have a plan, let’s have a discussion. Let’s bring the spouse in. Let’s talk about these things and create a plan for success. Otherwise, you could create a lot of marital tension and that’s why there’s more and more gray-haired divorce.

Tammy Flanagan:        Yep, that’s for sure. Yeah, always have a separation because you don’t want to do that. You don’t want to step on somebody else’s territory because hey, if my spice cabinet is just fine the way it is, you don’t have to come in and label everything and alphabetize it.

Micah Shilanski: That’s right. The other thing Tammy, I’m going to say on this, and I know we’re going a little long on this one, but there’s a couple other good points I think to mention, is don’t feel pressured to retire.

There’s two sides to the equation. I want my clients to go for financial independence, and in our world, that means they have the ability to retire; they’re three days away from retirement.

So, everything is set up the way they need to, they’re set up where they can retire. But guess what, if they’re still getting a lot of things out of working a lot of mental reward, that’s okay. They don’t have to retire.

I got one, 86, he has plenty of money to retire. His wife at 68 has actually already retired, but he is still working because he enjoys it. He’s writing books, he’s doing things he really enjoys to do.

Okay, that’s awesome. Let’s just make sure that’s a cognitive choice and that’s not what we’re defaulting to, because we’re scared of the alternative.

Tammy Flanagan:        And I’ve seen so many people at seminars who feel like the office is pressuring them to leave. Like they’re dropping subtle hints and that is so wrong. Don’t do that to your coworkers because they might be working for a whole different reason, not just the money. Like you said, it might be where their social circle is. It might be giving them purpose in life.

So, until they figure out what they’re going to retire to, it’s a scary proposition.

Micah Shilanski: Amen. Alright, Tammy, this podcast is all about action items, not just great banter between us, but we love it. Number one, we have some really ambitious goals, we shared this before, to get more and more information out to federal employees.

Tammy and I deal with bad information all the time and misinformation that federal employees don’t understand their benefits. That’s the reason we have these ambitious goals, to get great information out there. And we only do that with your help.

So, hit the share button. Yes, this is going to your personal email, copy and paste it in your federal email and share it. So, you don’t have to share out your personal one, but send this information out; give us five stars on iTunes, Spotify, et cetera, to make sure this message is getting out there.

Alright. So, there’s our selfish plug. Now, we’ll get into the other action items.

Tammy Flanagan:        Yes. So, what I was thinking of is in order to make these numbers work, in order to really understand the financial piece of it, is to really get a good estimate. Because those estimates you get from the agency may not have everything on them.

They may not have any tax withholding and you might live in a state that taxes your retirement. It might have a hundred dollars withholding for federal tax on that estimate, but you’re bringing in 7,000 a month in retirement, that’s not realistic.

So, do some tax planning, make sure all your insurances are being withheld from that estimate. Because sometimes, they’re left off just for whatever reason to really make sure you’re looking at the net income from not only your FERS and CSRS benefit, but Social Security and TSP as well, depending on what you’re going to do with that TSP.

Micah Shilanski: I love it. The other one I’m going to add to that Tammy, live on that retirement income now. So, you just did the exercise about getting that gross income to net, which is fantastic. Now, start living on it.

If you’re a couple years from retirement, find out if this is the real number. And if every month, you’re reaching into savings and having to pull more money out, then don’t say “I’ll spend less in retirement,” address that now, and say, “I need to, re-spend less now or I need to increase how much I need for retirement.” It’s one of those two things.

Tammy Flanagan:        It’s almost like your net income has to come up to the level or down to the level of your net income in retirement. So, sometimes, it means you need to work a few more years and save more, which means you are learning to live on a little less. So, that way, by the time you retire, you’ve leveled up. You’ve brought that net income back up to your net retirement income.

Micah Shilanski: I love it.

Tammy Flanagan:        Or more would be great.

Micah Shilanski: Or more, that’s always great. But have that realistic number. Don’t be the person that walks in, that thinks they’re going to have $20,000 a month in income when you’ve only been living on $9,000 a month for the last 10 years.

I mean, that doubling is not going to happen just because you want it. We got to have a realistic plan that’s here, that meets your goals and your needs.

Tammy Flanagan:        Absolutely.

Micah Shilanski: Perfect. Well, Tammy, as always, this is a blast. To our listeners, make sure you take care of those action items and until next time, happy planning.

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