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You may have a calendar full of birthdays and business dates, but do you know what age-related milestones have the biggest impact on your financial plans? Or how to reap the financial rewards as you enter retirement?

Keeping track of financial dates is the easiest way to make sure you don’t retire too early (or miss any deadlines overworking your stay).

In this episode, you’ll discover what dates are significant to your retirement plan and how to ensure financial independence for you and your family with each milestone. 

Show Highlights Include:

  • How to protect decades of retirement savings through your calendar (and why these dates save you in highly problematic periods). (1:36)
  • The five retirement-related conversations to have in your 50’s for protecting your investments, taking contributions, and avoidingavoid paying penalties. (7:24)
  • How to enter your 70’s without giving Uncle Sam too much of your retirement money (and how much RMD to take out). (14:02)
  • Using the “Francis Bacon” strategy to conquer your retirement deadlines and protect your family’s finances (with each year that passes). (17:11)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are at whatever stage in your career you are in, in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at ONE Fire and Police are dedicated to ensuring you take control of your finances and build the life you deserve. Before we get started, you want to find out more about me or any of my team members here, you can go to our website at PensionAttention.com or give us a call at (805) 409-8150. Before we get into this week's episode, I want to thank each of you for listening each week here on Pension Attention, and if you haven't downloaded it or subscribed, you can go to our website at PensionAttention.com, click on the media tab. And again, you can download it, subscribe right there, or you can download and subscribe the Pension Attention podcast on any platform that you would download a podcast, whether it's Google podcast, the Apple app, Spotify, SoundCloud, and leave us a comment. We'd love to hear how we're doing. [01:29.0]

And today on Pension Attention, I want to talk to you about significant dates, specifically significant dates in your life, whether it's personally or professionally, you know, if we researched today's date, we'd almost certainly learn that something historical or probably significant took place on this day. Maybe even several important things took place today. And I'll bet for some particular listener today, today, somehow is significant. Today may hold a special meeting, but for others, it's probably just another ordinary day holding really no particular significance. Now over time, we all experience life events. We'll all add to our list of significant dates, dates that are personal and belong only to us. We all have significant dates in our lives. So, as you think of your life, what are the significant dates in your life? Those important dates, ones that make you pause, make you remember significant moments. You know, for many of us, there are probably birthdays, yours, your spouse, your children, maybe a wedding anniversary, maybe your parents' anniversary too.
There might be the dates of a job promotion or job changes. And I'm sure that there are a few dates making sad events too funerals, divorces illnesses, deaths. In essence, these dates become our own personal calendar of we'll call it meaningful life events. They Mark milestones and achievements, and sometimes disappointment, a mixture of joy and tears. It's all part of life and in some ways, it helps put things in perspective, all laid out in a timeline that has shaped us into who we are today. [03:09.4]

We might lament over opportunities missed or celebrate, let's say in ambitious victories, but each of us have tempered in our own way through what life has given us. Each has left its mark. And just like you, I to have important dates that are forever etched in my memory, some are personal the death of my grandmother, my marriage, to Veronica, the birth of Brooks and Kate, those are my personal ones. I also remember significant business milestones, none of which frankly stands out more prominently in my mind than the days of 2008, I'll call it. Now, I'm paraphrasing FDR here, but a year that will live in infamy. And any of you listening, who were invested in the deferred comp plan or any sort of portfolio that had stocks will remember this time period. And by the way, even if you weren't invested in the stock market, you felt that time period, the great recession as it's become known. [04:08.5]

In 2008, you know, the whole U.S financial system nearly melted down. It was one of my first few years as a financial advisor. So, you can talk about the notion of putting hair on your chest, right. In that year, markets dropped by an average of 40%. Some declined even further unemployment rose, GDP fell, I mean the whole gamut happened, right. And the American psyche in particular, and as many of you listen to each week and those of our clients that are listening know, I get into the psychological aspect of money and investing because it's so prominent in everything that we do. And I will say that the psyche of the American people slipped into, I would say a state of economic depression. Remember just seven years earlier, 2001 specifically following September 11th, 2001 terrorist attack us economy had suffered its seventh worst decline of history. Well, we've become known as the tech bubble. For the second time and less than a decade come 2008, I witnessed personally people who were close to retiring, losing a significant portion of their retirement savings that were coming to us and coming to me for advice about what to do. Savings at that time to them that has taken them 30 or 40 years to accumulate and after three or four decades of doing all the right things, economic disaster struck, and in many cases forever altered the hopes and dreams that they had held for their retirement years of their life. [05:32.5]

So, for me, the 2008-2009 period was a life-changing event. A lot of it professional, but also a lot of change personally. I got closer with my clients. I really wanted to sit on that side of the table because I too was going through the same things that my clients were going through in 2008. No human in America was really devoid of what was happening in that time period. Yes, there's time periods where the big get bigger and people profit in certain areas, but the reality is we all had a setback in that time period. So, I think we all saw a humanity event going on and lot like we're seeing last year with COVID we're in this together kind of a thing. And in particular, when I'm talking about significant events for me personally, I remember 2008-2009, because I was so in tune with what my clients were doing. And we were able to save a lot more than what the markets were doing. In fact, I had a comment one time from a client in 2008-2009, where she looked me dead in the eye and said, you sucked less than most. And I'll never forget it was the largest backhanded compliment I've ever received, but I share that story because it was amazing because what we can do, what good active portfolio management can do in time periods of high volatility and tumultuousness matters. [06:48.4]

And it mattered in particular at that point for a lot of people that were close to retirement, literally at retirement’s doorstep. So yes, it had a profound impact on the way I thought about my business, my services to my clients, and it took my business in a different new direction. I became almost obsessed with finding a way to help the average American take control of their money and fight a system that was frankly rigged in the favor of some of the big guys. It seemed like this classic David and Goliath struggle I was dealing with and I just love taking that on and that's still to this day, I'm able to do that for our clients. And in writing this for this week's episode, it also made me think about the milestones on our journey to retirement. Again, both personal and professional, but I'd like to take a minute and ask this question for today's episode. [07:37.8]

I want you to ponder a slightly different question than I asked earlier. Do you know what the significant financial dates are on your life? We talked about the person on the professional, but let's talk about the significant financial dates in your life and you probably going, Brad, what are you talking about? So let me explain. Well, let's think about it for a minute after years of working and setting aside and savings to your defer comp plan, maybe liquid savings in your cash account, or maybe from another brokerage account. You're now getting 5, 10 years, 15, maybe 20, 25 or 30 years on the job, your retirement is finally, you know, not as distant as you once thought. So, over the next few years, it is critical to make a strategic shift almost in the way you think about in manager resources in order to ensure again, what I preach heavily in our practice here at ONE Fire and Police ensure financial independence for you and your family. The transition from active duty to retirement is actually spread out over several years during this transition period, we need to make a variety of decisions. Some of which are irrevocable. We'll talk about that on different podcasts and episodes. And if you haven't sat with an advisor to go through this, when it comes to drop entering, you can give us a call at (805) 409-8150. Again, you can go set a time with myself or one of our advisors as well. You can to our website at PensionAttention.com and set some time because there are significant decisions that we'll make for each of you and some are revokable and some are not. So, it's good to know what those are. [09:05.7]

And these decisions I'm mentioning, right, they include choices, maybe some for social security. A lot of you don't have that, but there's are 40 quarters in there and how that will impact that. Medicare kind of conversations between the ages of 55 and 65, depending on your subsidy and those environments, other retirement programs that you may have outside of the deferred comp plan, and then the deferred comp plan VC, SK, bank hours, how all of that plays into some of these significant financial dates. And mainly the financial dates has to do largely with let's talk about drop first, right. 25 years on 50 years old, a lot of people don't know that. So, to drop enter, you have to have 25 years on, this is for tier five, 25 years on and be the age of 50. It's not an, or it's an and, and the way drop works, right? If you listen to how does drop work episode nine on Pension Attention, or if you've heard me talk at stations, it's a five-year program. You can't go any longer than five years technically, but you can definitely go shorter. And we'll talk about what that means for your retirement plan on top of, or in addition to your deferred comp plan, your vacation time, your sick time, your bank hours, any other brokerage accounts or assets you have out there, spousal retirement accounts or investment accounts that are out there. It all goes together in this cohesive plan to formulate the decisions we make around these significant dates. And there are a few choices that we'll make in retirement transition period. So, let's review a few of these important retirement dates as we talked about age. [10:33.9]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the drop program? Go to www.pensionattention.com to find out how we can help. [10:50.1]

Okay, so what do I mean by that? Now I just hit on one that's big, 50 years old. So, for drop again, 25 years on the job and 50. So from an age perspective, that's important to know. Now, other than wanting a sports car, let's say at age 50, you become eligible for drop. So, it's important for us to understand how that works with regards to your retirement plan. Again, in addition to defer comp plan VC, SK and other areas of investments, it also allows you to catch up on the deferred comp plan. So instead of being at your current 19,500 of deferred comp plan, max contributions, you're able to do, what's called catch-up an extra $6,500 getting up to around $26,000 for contribution. And which we'll talk about so much today, but we can go through it, there's all through a three-year period where we can catch up even more than that. So, age 50, for those of you active right now, it's actually a big age. And let's talk more about that if you'd like to how it relates to your specific planning. [11:52.7]

And as we continue this timeline, the next significant date in our lives becomes 59 and a half. Now it's important for every first responder to understand that the employment retirement income securities act IHRSA has a code in there that if you retire post age 50, you are not subject to early withdrawal penalties, which is something important to note when it comes to the age of 59 and a half. Now, for those of you listening, what that actually means is the deferred comp plan, which is an IRC internal revenue code, sub 4 57 section plan state that if you retire post age 50, after the age of 50 years old, you're not subject to early withdrawal penalty they mentioned, however, it needs to stay in the deferred comp plan. And so, for many of you who are rolling it out into an IRA or other areas or advisors that are out there talking about it, shame on them because that is not how the code law works. It needs to stay in the deferred comp plan itself to be able to have that veil, if you will, of early withdrawal penalty. So it's important to know how that plays into age 59 and a half. And for those of retire, let's say age 56, 57 58, which we see a lot of here at ONE Fire and police, those that are attaining that age of 50 51 52, depending on when their years of service are on, we see a lot of 57- and 58-year-olds leaving. And so that extra year and a half is really important as you understand how drop works as a rollover and your deferred comp plan. So put 59 and a half becomes an important insignificant date or age if you will, but it may not be as significant depending on your need for distribution. So again, this is where it comes into sitting with your advisor, talking with your specific plan and making sure it's cohesive around your outflows, how pension is involved with that, any other income that's coming in, whether it's rental income or otherwise it's important that it all goes together again in a cohesive plan. [13:53.0]

So those are just a few significant dates in our financial life, as I mentioned, and we need to prepare for those, but there's also some that comes in our seventies. So, we kind of skipped over the sixties. Now, again, there's some important dates in the sixties. I'm not going to talk about too much here, but obviously FRA full retirement age, those of you that will be receiving social security, we will have a large conversation on that, but a lot of you don't receive social security. So, it's important that we make sure we plan for that. But if you do, or if you have your 40 quarters in, we will talk about that. If you have a spouse that has their 40 quarters in you, we'll talk about that and that will largely be in your sixties. Let's move over to our seventies for a second. [14:34.4]

So, what happens when we reach age 70? Now at that point, you reach maximum social security. So again, just to finish out the sixties, you're going to finish the maximization of social security. Again, for those of you that have social security or will be receiving it, whether it's you or your spouse, we will talk about that. And if you wait until age 70 real quickly, you would receive delayed retirement credits like 8% per year and a cost-of-living increase. And so, we'll go through all that. But do you know whether or not it's the best thing for you to do, and that's important for you to talk about. So, if you do have that as important to mention that to your advisor. And what is so significant about age 72, can anyone tell me? So, this is the age when you must begin taking what's called required minimum distributions, otherwise known as RMDs from any, and this is what they call it ‘Qualified plan assets.’ So, what does that mean? Qualified plan assets essentially means anything tax defer. Let's just break it down that way. So, your deferred comp plan, yes. Drop, yes. And if you roll either one of those into an IRA, yes. So, we have those that are gonna be subject to uncle Sam, basically saying, okay, if you haven't taken it yet, you need to take some. Now you might be thinking Brad, well, what if I am taking distribution will I still be subject to RMDs at currently aged 72? [15:51.2]

The answer is yes, depending on your RMD amounts. Let me describe what I mean by that. If, for example, your RMD is said to be $10,000, by the way, as your advisor, this is something that we track for each of our clients. So, we will help them make sure they don't miss it because by the way, missing an RMD payment is a 50% penalty. So, if you have a $10,000 RMD, it's a $5,000 penalty if you miss your RMD. So again, using my example, if your RMD is 10,000, but you are taking a thousand dollars a month, so your total annual is $12,000 a year. You won't have to pull more in that year. Now, conversely, if your RMD was $10,000 for that year, and you're taking 8,000, we would have to make sure we distribute that other $2,000 to make sure that we hit our required minimum distribution. So, as you can see from age 50, all the way through age 72, we must make some important financial decisions. And these are again, what I was calling your significant financial dates. And, you know, I'm sure that all of your looking forward to enjoying an active and comfortable retirement, and again, free to hopefully ideally pursue your dreams, revival, passions, you know, meet new opportunities. And in order to do that, you'd ask yourself, have enough information to make these decisions on certain dates that really could alter my financial independence and impact my family. [17:19.6]

That statement right there is important for anyone who's not working with an advisor, if they can answer those questions, great. If you can't seek out that professional to help you walk through those significant dates, especially the significant dates and your financial future. If you want to reach out to us, you can give us a call at (805) 409-8150. You can also go to our website at PensionAttention.com and you can set a time with myself or one of our advisors here to go through your retirement to sure you're on track to live that happy and healthy retirement. I mean, I would think that question, I pose again, the, do I have enough information to make these decisions on these certain dates that really could alter my financial independence and impact my family? I mean, aren't these dates important enough to investigate your options? It would make sense to me to seek out, help in making these decisions. I think it does and I bet you do too. You know, whether you seek out help from me or someone like me, you're far more likely to make better informed decisions on the significant financial dates of your life. I want to restate that. Whether it's me, Toby here, or any of our advisors at ONE Fire and Police or another credentialed fiduciary that knows your plan. If you seek that advice, you'll be better off, I fully believe that. [18:39.8]

And if you're listening right now and you're in that retirement transition period, that right around drop entrance, or maybe in drop, and you don't want to make any missteps, you want to make the right decisions, right for you and your family and, and those who make the best decisions or armed with the best information. As philosopher Francis bacon once said, knowledge is power. We've heard that let's utilize it. Remember as you approach retirement's doorstep, you know, the stakes are high. I mean, missteps are, aren't great and sadly, they're quite common. So that's why I've been such an advocate for nearly 20 years and what I do as a financial advisor and what we do as a firm in making sure that we're out there in the community with our clients, talking about what we know so well, we deal with every day to help advise our clients through their accumulation phase, that active duty for each of you listening and into that retirement. You know, this is the first time that you'll retire. It sounds crazy, right. [19:37.3]

Sometimes when I'm at a station, I'll say, has anyone retired in here before? Now, I remember one guy rose his hand and said yeah. I actually had 10 years on in the coast guard, so, I was technically retired. And he was right. But the reality is we haven’t a retired before, so this will be the first time that you retired. But with my clients, technically I retired like hundreds of times. It's kind of crazy when I say it that way, but it's true. And I've seen all the mistakes and I've helped countless people. People just like you listening, avoid these pitfalls. We as a firm have gone through so many retirements, that's become a part of our DNA. It's how we're able to have that experience. That Sherpa, as I mentioned before, as to why a financial advisor is so valuable to clients, they've been there. They know the landmines to avoid, especially ones like myself and Toby and our team here that know the department's plan like the back of our hands. And I firmly believe that if we plan the significant financial dates that I'm referencing here today of your retirement and your life correctly, your calendar of significant dates will be filled blessings and good luck. And I want nothing more for each of you listening for each of our first responders for all of our clients at ONE Fire and Police, that's what we want here and that's what we strive to do. [20:58.0]

I want to thank you for listening to pension attention today and before acting on anything discussed today, remember to speak with a financial advisor near you about your specific situation. And again, if you'd like our help visit us at PensionAttention.com or give us a call at (805) 409-8150. Next week on Pension Attention, I’ll be going through what is an actuary now, right there. You might be thinking, I have never heard that word before Brett. I want to go through with you and why it relates to your retirement plan. I'm looking forward to it, but until then stay safe. [21:31.5]

The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [21:55.2]

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