Episode 42 – Baby boomers: final advice for retirement
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. Today we’re continuing our generational conversation. We’ve got two DRS team members who are both in the baby boomer generation – close to retirement. We’ve got Jim and Elisa who are here to talk about how they’re approaching this big life transition. So welcome to the podcast.
Elisa
Thank you.
Jim
Good to be here.
Jenny
Great. So first to start off, maybe just tell me a little bit about what age you plan on retiring and maybe share how many years you are away from that milestone.
Elisa
Hoping to retire at 65. And that’s about five years away. So hopefully, as long as the health care does not go up too high, we can do that.
Jenny
Nice. Very good.
Jim
And I too have targeted 65. I’ve even actually announced my date. July 1st, 2028. So that’s how close I am.
Jenny
Very nice. So we know that a lot of those big questions around retirement is the big question of what are you going to do next? Jim, do you care to share? I know you’re particularly passionate about this subject.
Jim
Oh, absolutely. As you know, my job here at DRS is going out and talking to people about retirement. And one of the things I will share with them is: nobody retires from anything, you retire to the next thing. And that’s not something wisdom that I came up with that actually was shared to me by a former DRS Bob Redfield, who also did the same thing that I’m doing now.
So, I tell people to give that thought. And one day I woke up and realized, “oh, I’m my own audience. So, what am I going to do?” And, luckily, there’s some things that I’m doing right now that I’ll be able to carry with me into retirement. Many people know I’m a huge fan of musical theater and I’m currently appearing in a show.
And guess what? I’ll continue to do that, through retirement, so that will be a lot of fun. I’m also a member of several organizations that fill my free time and I have a sneaking suspicion they’ll take a little bit more of my free time when I’m retired. So, the idea is that I’ll be busy.
Also, my wife and I are planning on doing some traveling. So, we’ve got that squared away. It will be a full retirement, that’s for sure.
Jenny
Nice. Very good. And how about you, Elisa?
Elisa
Oh, I have grandkids. And then I’ll be spending a lot of time with my grandkids. I think five of them now, four of them are over in Rhode Island. So maybe we’ll have some traveling going on and I’ll be able to get my husband out of his little part time job he’s got working at the schools, and we’ll both go and probably some more quilting and stuff. Yeah, I’m going to make sure I’ll be busy.
Jenny
Yeah, that’s good. That’s what it’s all about, right? Is making sure that you’re busy. And Jim, you speak a lot to this, where people get 1 or 2 years out of retirement and they’ve relaxed and they’ve enjoyed themselves. And then they go, “oh my gosh, what am I going to do now?”
Jim
Yeah, I actually have a friend who actually did that. He retired from the military and he figured he’d spend his first year playing golf, and he did that and he never improved his game. So, he went into business with his daughter, and that didn’t work for him. As fate would have it, somebody showed up to buy the business that he and his daughter created.
And the opportunity for him came at Boeing, of all places where the 777 was created. And he became a test pilot for the 777, a test pilot and a training pilot. So that worked out very well for him. And after he did that for five years, he was ready to retire. And now he is a member of some of the same organizations I’m a member of.
And so, he’s very active and that fills his time. And it’s great to see him in this quote unquote, ‘second retirement.’ But again, that goes back to the comment I made earlier that you have to give as much thought to what you’re going to do post-retirement and beyond just the money.
What’s going to get you out of bed every morning? And much as we have purpose when we’re working, we need to have similar purpose when we’re retired.
Jenny
Yeah, definitely. So as retirement is approaching on the horizon for you both, are there things that you’re finding yourself that you pay more attention to that maybe you haven’t in the last 10 or 20 years, like housing options and medical coverage? Elisa, let’s start with you.
Elisa
Medical coverage is a big thing because the state pays a lot of it now. And when I’m retired, I’m going to have to cover that other cost. So it’s, something I’m looking into ahead of time. I look online at the Health Care Authority and looked at some of their estimates for different plans and looked at my estimate for what I’ll be getting for my retirement benefit, and then just kind of penciling out what goes where and how the budget’s going to go.
And that’s kind of important. I even looked into a little bit of the Social Security benefit there to see because my husband took his early, I think I can hold off and take mine after 65. Yeah. Got to look at all your options out there. This is the time to do that before you’re there.
Jenny
Yeah. That’s good. Yeah. And you said you’re about five years out from retirement. So, this is a good time to start looking at those options.
Jim
Yeah. Health care is going to be the biggest expense that anyone’s going to have in retirement. And yes, it’s important that you look at that because there’s a reason why people are retiring at 65. Because at 65, for the most part, that’s when most people are eligible for Medicare. You know, there are people who do retire early, but they also know that they’re not eligible for Medicare.
So hopefully they have other plans in place to help them with that because health care isn’t cheap as Elisa alluded to. It becomes a bit more affordable when you become 65. But guess what? You’re also paying Medicare Part B premiums. So, you’ve got to make sure you cover that too.
So, it’s like I tell people all the time, you know, retirement is a math equation. You know, you have your income, which is your pension, your Social Security. And what you’re doing for yourself. But you have those expenses. And health care is a big one. The other big one, obviously, is housing. What are you going to do with your house? Some people will have their house fully paid for some people have it almost paid for.
But along the way you have to give consideration as to where you’re going to live in retirement, right? Laura and I made the decision that the house we’re living in now is going to be our retirement home. So, guess what, through Covid, we started getting everything in order, new windows, new roof, new fence.
One of the things I’m doing is changing the footprint of the lawn, because I don’t want to mow that much lawn anymore. So, there’s that. You know, the fact that our house is a one-story house and that’s perfect. One of the things that I’ve learned over the course of time is that the number one fear that people have is falling.
And if you can minimize that by going to one story footprint instead of a multiple story footprint, I’m not saying to eliminate that, but you, that’s something you have to take a consideration. Because I have friends who are seniors, who have two story homes, and they can only use one story of their house because of, you know, physical limitations that have happened over the years, that sort of thing.
So, you have to give some consideration to your house. You also have to give consideration to your car. Is this the car you’re going to drive in retirement because you really want to have car payments in retirement? You know? So, make those decisions now. So that way you can get some of those big-ticket items out of the way.
And of course, the biggest way you can impact that also is, if you’re involved in either DCP or if your employer doesn’t provide DCP, but they provide some sort of savings program, whether it be another 457 or whether it be a 403 (b) plan, if they work at the schools, doesn’t hurt to save. It doesn’t hurt to save.
Jenny
Yeah, right. Starting now.
Jim
Oh absolutely. I agree. And I, you know, it’s never too late to save for retirement because even though you may not accumulate a whole lot, you’ll accumulate enough to maybe mitigate some things. And maybe you set your targets for, okay, I’m going to use this money for new carpet and flooring as an example. Or for that new car, you know, that kind of thing.
Jenny
So, with both of you being in the baby boomer generation, how do you feel like that has given you an advantage or a disadvantage in preparing for retirement?
Elisa
I think that I’m kind of a later baby boomer, so I’m seeing the other people that I work with go out and all the problems that they’re having or the things they’re looking at ahead of time. One of our members, about a year before he retired, went and bought a new house down where he wanted to live, and he had that all planned out before he started retirement.
Another one recent retiree. He’s looking at life insurance and the options on the Medicare, the part C and D and the importance of knowing who to go to for that because everybody’s out to sell you their insurance. So that’s helpful to find somebody that knows a lot about that or has figured it out and pick their brains.
Jenny
For sure. We could probably even put in a good plug for VEBA.
Jim
VEBA stands for the Voluntary Employee Beneficiaries Association. Yeah, you know, it’s easy to take your sick leave, you know, and I don’t blame anybody for taking sick leave. But the cool part about VEBA is that you can take your sick leave balance (now, obviously not 100% of it) and move that move it into the VEBA account.
That’s a tax-free transfer. It accumulates tax free. And when you withdraw it to reimburse you for health care related expenses, it comes out tax free. This is a fantastic resource. And I get it. Everybody says, “well Jim, what about the fact it’s only one for four?” In other words, for every four hours of sick leave you get you have only one hour, you know, that moves into the account. Well, the fact of the matter is, nobody gets dollar for dollar for sick leave unless they actually take it. Right? And if you can mitigate health care cost, I think this is a great thing to do.
One of the cool things about being a boomer is — and it’s almost sad — we’re pretty much the last generation that has a pension. Yeah. If you work in public service, like all of our colleagues do and I’m going to make a bold statement: Jenny, you’re probably much younger than I am.
Jenny
It’s not a bold statement. It’s okay.
Jim
But, you know, you’re fortunate that you’re in a public service job. But, even take a company like Boeing as an example, you know, they don’t have a pension anymore. Okay? So, we’re fortunate enough that we have pension as we’re progressing time, you’re seeing more and more companies get away from the idea of a pension plan.
So, we have a pension though. So, it gives us a huge leg up over people. I think I read something like 14% of the working population will retire with a pension. In other words, gather together nine of your friends folks, in all likelihood, only you are the only person in that circle who has a pension. So, think about the advantage that you have by having a pension.
So that’s really cool too. Also, late 70s, early 80s, that was the advent of the IRA. And so, we got conditioned to save money in IRAs. And then of course, when we started taking these jobs, you know, we got conditioned into participating in DCP. And so we’re conditioned to do all that stuff. You add the pension. Yeah, I’m not going to say we’re head and shoulders above everybody else…
But I think we have an advantage in the fact that time has been on our side. The big thing now for people coming in, especially if they don’t come into a pension related job, is to really take advantage of savings programs, because if you don’t, you know, you’re probably not going to have a sustainable retirement or you’re going to have to work a lot longer than you thought you ever did. And that may or may not be how you want to spend your life.
Jenny
So, this is a great segue. Do you have any advice for people who are your age, or especially people that are younger, who are starting to think about retirement?
Elisa
Just plan ahead. But yeah, if your company offers the retirement, think about what your spouse will do. If you do leave before them. In our system, if you have it set up for your spouse to get the continuing benefit after you die, and that person dies first, you can raise your benefit back up to the one lifetime option. It’s good both ways.
Jim
I often tell people that retirement is a math equation. Income minus expenses equals net. So, start doing your math equation. What is your source of income going to be? In public service, it’s typically pension, Social Security and what you do for yourself. And if you happen to work for a group or an entity that doesn’t participate in Social Security.
What does the Social Security replacement plan look like? And hopefully you participate. Hopefully you get a good grip on that. That’s your income side. And then you have your expense side. Again, we talked about health care, housing. And you know there’s some things that to go up on price like health care. But some things are probably going to go down. Like for example, wardrobe is probably going to go down if you’re one of these people goes into the office on a regular basis, you have a work wardrobe.
Well, that work wardrobe is probably not going to increase. Your food budget will probably go down as an example. But there are things, so you have to look at that. And then all of that together is your net. And your net has to be greater than zero because if it’s not greater than zero, you have number one, you don’t have a sustainable retirement.
But number two, you have to figure out how to make that net greater than zero. So that’s the first thing you have to look at. What is your math equation? Get the math equation right. Because it’s either going to be one of three things can happen. One, you say “yes I’m right on.” Two, “it looks good, but I need to make some minor adjustments” Or three, “oh no.” You know, it can be a cold bucket of water. And you know you want to get in front of that now instead of, you know, the 3 to 6 months in advance of your retirement when you’re sending an application into DRS and… you want to get that done now. And so, it’s important that you really understand your math equation, then everything else will fall into place.
Jenny
Yeah, I really love that example that you gave about how you were looking at your house and your car and what are those things that you can do to minimize your expenses in retirement. Whether that’s paying off your car or your house or putting value into the house. Elisa, any final thoughts?
Elisa
It’s true. Yeah. You want to be by your family that you know and love, and you’ll have more time for. Stay where you are or figure out a cheaper way of living. It’s a big quagmire.
Jenny
Well, thank you both so much for coming in today and sharing some advice for our baby boomer audience.
Jim
Absolutely.
Jenny
Good takeaways.
Jim
You bet. Thanks.
[music outro]
Disclaimer
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