Hello, and welcome to the Life By Design podcast, brought to you by Strategic.This podcast is all about helping you live your great life.Hello, and welcome back to the Life By Design podcast.I'm here again with Mike McGraw, Senior Advisor and Partner here at Strategic, and today we're going to talk about teachers and getting ready to retire."I'm, I'm 55," or, "I've had my 30 years," or, y- depending on what tier you're in."I'm getting ready to retire.Uh, now what?"Yeah.We're back, and-so yeah, that, that's a lot.Th- there, there's complicated decisions- Yeah.to make, because there is what's called vesting, which means you are in the system, you have that pension available to you.It might not be the maximum amount that you could get, but it, it is something.Mm-hmm.So, where we see that most often is maybe teachers who had a career change and decided they wanted to enter into the teaching realm, and maybe entered into the retirement system a little later in life.Yeah.Um, so they're, the, the age 55 is still important, but the th- the years of service they might not have, which- Hm.as we mentioned last time, is about 30 years to get that full benefit.So, um, that's where we want to have these conversations to make sure they are planning and making the best decisions when it comes to what that monthly pension income is gonna look like in retirement.Yeah, and, uh, you know, for our listeners, if you're, if you've been listening for a while, uh, you've heard me say this before, but I'm gonna say this for our new listeners.Uh, one of the things that, since I've been here, that has been a wake-up call for me, and I've heard w- a wake-up call for people we've talked to, are, are 2 things really.Uh, 1, when we think of retirement, we think about that day, that age, 55, or 62- Yep.or 65, or whatever it is, there's like, "I just, I gotta get to that day."Mm-hmm."And then I'll be good."Mm-hmm.And what we don't think about is, "I'm gonnaI could live 'til 95," right?Right.And I need to have money to support me 30, 40 more years.That's right.Um, and then the second thing is taxes.Oh, yeah.Like, you're still paying taxes on Social Security.There, you still have, you know, required minimum distributions that you have to take out of these retirement, uh, vehicles to make sure that the government's getting their piece and getting taxed.Sure.You know, so, um, that's something I really want to talk about today, Mike, with you, especially for teachers, is, you know, I think, as someone who's had family, you too, and you, and, you know, you were a teacher- Mm-hmm.it's like, "Okay, I'm done.I'm gonna go, I'm gonna go live my great life."That's right.And I think we need to think about, "Okay, what does that actually mean?"That's very, that's right on, and you mentioned that, that age 55, and, uh, uh, that is a milestone birthday for teachers, um, those certainly who began teaching maybe right out of college or in their early, early years and have maintained that through, through, throughout the years.And age 55 is considered retiring early, um, in the eyes, certainly, of Social Security, and, um, so now what?Uh, so there's a lot to unpack when you think about health insurance.Um, health insurance, there are, that varies by school district.Okay.So that's all dependent upon the contract and the negotiations with the union, and not to get too into details there, but, um, 'cause that can get messy- Mm-hmm.I've been a part of that, but, uh, that's all negotiated and, and part of the contract.So that varies by, so there's no defined, um, here's the health insurance that you're gonna have in retirement.That's all based on, um, where you, where you spent your, your career and where you worked, and so, uh, but fortunately, most contracts do have something in there that provide coverage through retirement- Hm.um, until that age 65 where Medicare comes into play, and a lot have spousal coverage as well.Um, so that's the fortunate benefit when we think about the state retirement system or teacher's retirement system versus, say, you and I wanting to retire at 55.Um, we don't have that ability to have health insurance coverage, and it's very good health insurance at a very, uh, reasonable cost versus going out to the New York Health Exchange, uh, to go get private insurance coverage- Yeah.because if you do retire before 65 and you don't have that benefit, then you're on your own, and you have to go get your own health insurance, and that can get costly.Right, 'cause like, Medicare and all that's not 'til later in life.Right, at 65.Yeah.So the 55 and 65- Right, you got 10 years.are big ages.You got 10 years-and, um, but like I said, fortunately, um, most teacher contracts ha- and state contracts have that built in, um, to, at varying degrees.Yeah.And then also, you know, I think too, um, for those of you listening that maybe you work at a school, but you're, you're not a teacher.Maybe you're an administrator or, or in a differentyou, you have a different contract as well- Yep.that you need to pay atten- you have a different union most likely.Right.Uh, so, so, you know, don't listen to this and go, "Well, I work at a school."Yep, yep.You know, make sure you read your contracts- Yes.'cause they're all different.Uh- Right.and so, you know, one of the things too is benefits, those benefits for a spouse, you brought up spousal benefits.Mm-hmm.Um, in death and, and how that covers, and I know you had a story about that as far as someone that we helped here, uh, but with life insurance and how that all works with benefits.Yes, so, so to backtrack a little bit, as a member of the retirement system, you do have coverage in both disability and death benefits.Mm-hmm.Um, so that's, that's another nice, nice perk that you have within the system, um, but unfortunately, if, if there is a death, thenand, and there's a surviving spouse, then that pension-is impacted because if you, in your mind, were thinking, "Our retirement years are gonna look like here's our s- stream of income.One of those streams is p- is a pension."Mm-hmm.Well that will, that will be gone i- i- if, if the, uh, spouse that is part of the retirement system passes early.Mm-hmm.Um, there's a death benefit built in though, so kind of a, a life insurance, uh, part of the, the retirement system.Um, but in the case that we had with, with a client here, uh, the, the husband retired a few years before the, the wife, and she was part of the retirement system.And they were concerned that if she were to pass away in the 2 years that she was still working and being a part of the system, then that pension benefit would be gone.Hmm.And so we worked with them on getting, securing a life insurance policy for those 2 years.Um, it was relatively inexpensive based on what it was securing them for.Yeah.And thankfully she survived through it, and now they're living a, a great life in retirement and having that pension benefit be part of their streams of income.But there's a, uh, when it comes to the planning, again, you never know what's gonna happen, what life's gonna bring.So doing that, that planning work, partnering with an advisor to make sure that no matter what situation arises, we are covered and, and we'll be able to, to live that life that they want to live in retirement.Yeah.And again, you know, it's just, uh, as someone whose spouse is in the system, uh, it's one of those, like, I don't want to say myths, but it's just, like, one of those conversationLike, "Oh, s- you, you're a t- you got state benefits?"Yeah."That's very good.All right."You know?Um, but I think it is smart to really look into what, what that means.'Cause, uh, I'm a victim of this, my own, uh, ignorance I guess, is that, like, I was like, "Oh yeah, we're set."Right.Like, you know?Um, and it's just-interesting to think about, oh, maybe it's, it's great, right?I don't want to downplay what it is, it- it's very, very good, but it's maybe not as all-encompassing as- Right.as w- you think when you get into that.Right.Yeah.Good point.Yeah.Um, so yeah, Mike, I think the other thing we want to cover today too is cost of living.Sure.And kind of how that affects, uh, retirement and all of this.Right.Yeah.So similar to Social Security, uh, state pensions do offer a cost of living adjustment or COLA.Uh, so every year, you do get a little bit of bump in your, uh, monthly pension that you see coming in.Um, it's based on probably topics that, uh, Doug Walters has talked about with the, uh, inflation numbers and the, the, the core inflation.And so it, it is tied to, um, that, uh, depending on, uh, there's a minimum amount and a maximum amount.I think it's 1% to 3% that you could see, uh, as an increase in your benefit.Again, similar to Social Security.Mm-hmm.Um, but as we know, life gets more expensive.Your, your grocery bills go up over the years.And your insurance bills go up over the years.So that is another built-in, uh, benefit that m- some people may not know.They may say, "All right.I'm retiring.This is the amount I'm gonna get in year one, and that's the amount I'm gonna get every month for the rest-" Hmm." of my life."That's not the case.Um, they, there is a cost of living adjustment built into there.And, and so I think that might be a good transition into those options.Yeah.So now I'm 55 or I have my 30 years in, IWhat do I choose?Because you get that list of your options, and I think there's between 10 and 12 options that you have.Well, it's- And that can be very om- overwhelming- Yeah.if you're making this decision on your own.Um, and depending on if you're married or not, uh, that's really, again, another benefit to working with, with an advisor to make sure that they're taking into account your entire life picture, your entire balance sheet, your entire lifestyle, to make sure you're making the best decision- Mm-hmm.for th- for your family and for, for you.So just for my benefit, um, and those who don't know, I, INot specifically what each one of those choices are- Sure.but w- like what's, what are the choices- Sure.roughly and, like, why are they different?Sure.Yeah.So it's essentially based on, are you single or do you want there to be a benefit for a spouse should you pass early?Mm-hmm, okay.Uh, so those are essentially the 2 options.There areThe, the, the 11 other options are kind of built into the, the spouse and do you want benefits to continue.But bottom line is, I can choose a benefit that I'm going to receive for the rest of my life, and should I pass away, the benefit stops, versus it's going to be a lower benefit, but I can choose, should something happen to me, my spouse will now receive either a lower, the same, or a higher benefit, uh, for the rest of their life.So that's where it's important to take into account, do they have other assets?We talked about saving into those supplemental plans- Yeah.like a 403or a 457.Those play a factor into what decision is best for, for me.Okay.Let me ask you this too.So something that just came to my mind was, okay, I meet those 55 requirement, whatever, okay?And I decide this, it's time, you know, but maybe, like, I remember as a kid, like, a lot of teachers coming back as substitutes that had retired, right?Sure.So how does that affect that decision as well and, like, going, like, "Okay, I'll, you know, I'll just substitute or part-time," or what- whatever that looks like?Sure.So it, it most likely won't have any impact on your benefit.Mm-hmm.So you, you retire- Most likely.Uh, there's an asterisk.Everybody's different.Always.Yeah, yeah, yeah.Um, but yes, wethat is very common.You, you see teachers who put in their time, they're ready, and then either they wantthey have such a great relationship with the people that they worked with- Mm-hmm.they don't, they didn't want to lose that, so they come back and substitute teach- Mm-hmm.which is great because little bit less pressure and little bit less to, to worry about from grading and all those things.Um, but theyit, it gives them a little bit more income too in retirement.So we do see that, quite often.Hmm.And, and not just in the, the, the teachers or state retirement world, but in anybody who retires, one of the biggest things is keeping their mind active.Yeah.Um, so that gives them that ability to still do what they love, which is help kids and, and educate kids.And it's still giving tha- them that engagement.Um, but it does give them that supplemental income as well.Yeah, that's alwaysyou know, 'cause you always hear that story about-"Oh, the teacher was so great.The school asked them to come back"- That's right."for some"You know?So you can do that.Yeah.Eh, potentially.You can do that forever.Yeah.Yeah, you can work- If you want.Yeah.Uh, yeah, I mean, I think we covered most everything.Mike, you feel like there's anything else?No, I, I think just, again, going back to talking about why people get into teaching- Mm-hmm.um, this is a benefit.So we here at Strategic have benefits, health, the 401.Um, but it, it, it's, it'sthe benefits are great, partnering with an advisor, ensuring that from day one, as you enter the workforce in either a state system or a teacher system, ensuring that you're doing the right things and, uh, making sure that planning for that- Yeah.the end in mind.We say that a lot, you plan for the end in mind.Um, but ensuring that you're doing everything because it can get complicated and even- Yeah.dealing with like a t- a contract.Yeah.Uh, that gets complicated.So ensuring that you're making all the right moves, taking the steps to, to put you in a place where you can retire, whether it be the 55, 30 years, um, but you're in a good spa- good spot to live that great life.Perfect.Thanks, Mike.You're welcome.This podcast is for educational and informational purposes only.Please see the full disclosure in our show notes for more information.