Summary

In this podcast episode, Mike Hunsberger and Amy discuss the unique aspects of retirement planning for military retirees, focusing on the importance of understanding pensions, social security timing, and investment strategies. They emphasize the need for a thoughtful approach to financial planning that allows for a fulfilling lifestyle post-retirement, while also addressing end-of-life expenses. The conversation highlights how military retirees can enjoy greater financial security and flexibility compared to their civilian counterparts.

Chapters

00:00 Understanding Military Retirement Planning

03:34 The Importance of Social Security Timing

06:08 Investment Strategies for Retirement

09:34 Designing a Fulfilling Post-Retirement Life

12:32 Financial Security and Lifestyle Choices

15:08 Planning for the Future: A Roadmap to Retirement

Takeaways

• Military retirement planning is unique due to pensions.
• Social security timing is crucial for maximizing benefits.
• Investment strategies should consider long-term growth.
• Retirement lifestyle can be designed around personal goals.
• Income security allows for more spending freedom in retirement.
• Planning for end-of-life expenses is essential.
• Military retirees often have more financial options.
• Understanding your numbers is key to effective planning.
• A fulfilling post-retirement life requires thoughtful design.
• Financial planning can help achieve desired retirement outcomes.

Links

Schedule a consultation with Mike

Schedule a consultation with Amy

Transcript

Mike Hunsberger (00:00)

So Amy, today’s podcast is going to be a little different. If you’re good with it, we usually provide basic education on specific things. The other week we did VA home loans. We’ve talked about the DOD, FSA. So today I wanted to talk about something a little more conceptual on the planning side that I’ve been thinking about recently as I

work with more and more military clients that are approaching retirement or who have recently retired and trying to figure out the ultimate retirement plan. So, and really this can extend to anybody that’s got a pension, especially if it’s kind of indexed to inflation that, you know, probably useful to them also. So, you good with that?

Amy (00:51)

Yeah, that sounds really intriguing. I’m excited.

Mike Hunsberger (01:27)

But I mean, like I said, the more I work with clients who are getting that military pension, I see that really once they turn on Social Security, once they’re eligible for that and we figure out when that makes sense to turn on, pretty much most of their planned day-to-day spending is covered. That’s all their essential spending, which I consider

their food, their housing, their transportation, their medical and their utilities. You know, that’s all covered. But then even, you know, the level above that, that’s the nice to have, you know, vacations, you know, going out to eat all those things. You know, they’ve got enough income coming in. And, you know, that’s a huge benefit. And I think it can really change.

you know, what that time between military retirement and ultimate retirement is. So you also see that with clients?

Amy (02:38)

I do. what’s interesting is a lot of times what I see with clients is they might also know that when social security gets turned on, those expenses are covered. So they’re very anxious to turn it on. So I spend quite a bit of time, not with all clients. Usually it’s a pretty easy sell for the client where one spouse is the main breadwinner.

They are often also the older spouse because often it’s the male and you so It’s usually easy. It’s an easy sell to wait for that person to wait until 70 It’s harder when That’s not really the case when it doesn’t work out like that to still convince people that at least one spouse should wait until 70 So I think this topic of like, you know Getting to 70 is a really great topic to talk about because it’s so important for for our type of clients

Mike Hunsberger (03:34)

Yeah, so, you know, and we’ve done, I think we did a couple shows on social security claiming and how that all works. So if you’re kind of confused on those logistics, definitely go back and listen to a previous, those previous episodes. But yeah, like you said, maximum benefit is at 70, know, spousal things and survivor benefits that can be tied to the.

Whoever’s getting the bigger benefit so understanding that’s key, but you know and and again Talking day-to-day expenses if you’ve got other things that you want to do you know buy the second home or you want to leave a big inheritance or you know not or but you

need to figure out your long-term care plan, know, can that be covered by just that income that you’re going to have guaranteed or, you know, do you need something else to cover that? But you probably don’t need that, you know, two million dollar war chest again, unless you’ve got other expenses that you’re trying to cover. You probably need a smaller, you know, you could need a smaller nest egg than

than somebody that doesn’t have that pension coming in and has to live off that principle over their next how many years and they don’t know how long that’s going to be. thoughts around that.

Amy (05:10)

Yeah, I mean, I agree. you know, and the idea isn’t, you know, Mike, I don’t think, Mike, you’re saying that, you know, you don’t need to worry about saving for retirement and things like that. It’s just that, you know, the way that military retire me retirees can or should think about their retirement is different than the average civilian person who isn’t going to have a pension and might have smaller, a smaller social security check. Right. Did I get that right, Mike?

Mike Hunsberger (05:40)

No, exactly, exactly. It’s it’s don’t want to plan. But, you know, having this understanding can be, you know, freeing, if you will, give you more options where, you know, if you take care of those things, you figure out what your kind of buffer is that you want to make sure you have. Add on the inheritance, add on the long term care. OK, we’ve got this manageable amount of money that

you know, we can say, yes, this is what we hope we have, you know, need to have at 70 and feel really, really confident in the plan. And, you know, you don’t need, again, that, you know, multi-million dollar thing that’s going to also be providing you that, you know, daily income to just live. So, yeah, that’s a great point. And so

You know, looking at that, coming up with that kind of number, how does that change in your mind how you get there, know, how you get 270 or again, whenever you’re going to claim Social Security?

Amy (06:53)

Yeah. Well, I mean, I think, like I said, a lot of what I spend time with on the stuff that I spend time going over with clients and kind of trying to sell them on is this idea that they should wait for social security. And the reason I am able to do it oftentimes is because you can very clearly see, you need money at the beginning of your plan until social security turns on.

You need a teeny tiny bit of money usually until long-term care starts kicking in. So there’s this big gap. And so when you start thinking about like, okay, what does that mean? Well, we have to have money for the end of year expenses, which tend to be big because that’s the long-term care stuff, right? But what it means is that, you know, there’s a good chance that you already were saving some things. That means that there’s a big bucket of money or some, some amount of money that can stay pretty aggressively invested.

because if you’re in your 50s and 60s, that’s still, you know, hopefully 20, 30, 40 years away. So I think that’s one big point. You know, people are ready to get very conservative when they retire. But the idea that you have these big expenses near the end of your plan and things that are at the beginning of your plan, some amount at the beginning, getting to age 70. But in between age 70 and whenever the end of your stuff’s

or end of life stuff starts happening is kind of this space where you don’t need to rely so heavily on your portfolio. So I think it has big implications for thinking about how you invest money, not just where you’re going to get money from.

Mike Hunsberger (08:35)

Yeah, 100%. Yeah, don’t have to, like you said, don’t have to be as potentially conservative because, you know, oh, it’s got a, it’s got a last type thing. If you’ve got, you know, hopefully 15, 20 years between 70 or, you more, if you go all the way back to retirement until you hopefully need that long-term care money, you know, long gap where growth can, you know, take

take a lot of that need away. definitely good there. And I find just it gives you, in my mind, more options to retire earlier or change how you want to live in your 50s and 60s. Because again, you know you’re set further out once you turn on that.

Okay, if you have been a diligent saver, that can open up some opportunities, either to maybe work less in your 50s and 60s because you’ve got your nest egg that could continue to grow. You drop from the crazy 50, 60 hour a week job to, I’m going work 30 hours a week and just, you know.

be more balanced in my life that you may not have had previously with either the military or that second career when you’re still trying to make it. how about thoughts on those type of options?

Amy (10:17)

Yeah, I think it’s a huge deal. And I think though, one of the things to keep in mind is that if one of your goals is to retire in your 50s, and I know a lot of military people really do hope that maybe when they retire, can, if not fully retire, retire and do the job that they wanna do for fun. I’ve got clients that they wanna be divers.

Like they just want to go do dive training or, know, just they want like this fun job that might not pay a lot of money. But what that means is you have to be really thoughtful about where you’re saving your money. So, you know, your retirement accounts are fantastic for financing things after you’re 59 and a half. It’s a little expensive if you’re, if you’re retiring before 59 and a half, you know, and just, you know, being thoughtful about how you structure.

your investments in the taxable. So if you’re not saving in retirement accounts, then you’re probably saving in brokerage accounts and being thoughtful about what those investments look like is really important. But I think, you know, like probably the most fascinating part of this discussion, I think is actually not the financial stuff. It’s, you know, designing a life and that you want and how you’ll feel in that life. you know, what do you think? What do you think?

it looks like for somebody who has, let’s just say, done it perfectly. Nobody’s perfect, right? But let’s just say for the person who has managed to pull off about as perfect as possible, just talk about the advantages that they get to enjoy when they’re set up to finance life between whenever they fully retire and getting to age 70.

Mike Hunsberger (12:03)

Yeah, so I’ll throw out a couple examples, actually. One, a good friend of mine, also another, ⁓ six, retired a little bit, I think like six months before I did and, you know, went to work, still live in DC, went to work in the, you know, follow on job doing business development, you know, making good money and worked.

I it was about two or three years and was just like, you know, I’m not having fun. is love the military, but this stuff isn’t for me and still has some kids that I think his oldest now is in junior high or his youngest now is in junior high and has one in high school and one in college. But he decided, hey, I’m I’m going to retire. I’m, you know, just hang it up. I’m going to be.

⁓ you know Mr. Mom for those of you old enough to remember that movie and stay at home take the kids to school each day running to their practices all of that stuff his wife’s still working I think full-time but you know at least part-time and you know just he’s like no we’ve got enough not worried about it so ⁓ you know that’s what he he wanted to do and he’s doing it check in with him

semi-regularly and just ask him, hey, how’s it going? Still retired. He’s like, yeah, I’m still enjoying it. And he says, hey, I may do something again once his youngest is in college and there isn’t all of that to still do, you know, again, but it’d probably be more of a part-time or, you know, lifestyle gig. You know, I’ll say it also personally for me, we’re starting the business.

You know, this was one of the things that, you know, being planners, I had it all mapped out and like, okay, yeah, we need to get to 70. I’ve got some money saved, you know, I can put the business in place and, you know, make that as, you know, small or large and control how much I want to work. You know, so right now I’m not expecting to grow this into, you know, a monstrosity, you know, with

tons of planners and want to be a billion dollar firm or anything like that. I’m just looking to help people be able to retire when they want to and live their life. So, yeah, I think I think it can give you options again if you understand your big picture. And that’s why I think it’s important to really dive in and know your numbers and know what that looks like.

for the very long term and then it may open up more options that you weren’t thinking of.

Amy (15:08)

Yeah. And I think, you know, besides just, you know, maybe retiring when you want, and that might be early for a lot of people. You know, let’s say like you, you continue working until what I’ll call a more traditional age, you know, whether that’s 62 or 65 or 67. The difference in lifestyle that you undertake when you do retire could very well be huge because you have the security of knowing that your basic expenses are going to be covered.

And you’ve financed the, what you expect to be your end of year, not finance, but you’ve already saved and are invested for your end of life expenses. So the kind of lifestyle that you enjoy, even if you’re the person who didn’t, you know, you weren’t able to retire early, maybe you weren’t that far on top of things. ⁓ or that’s not what you want, but the kind of life lifestyle that you get to enjoy, ⁓ is very different. If you’re not worried about how you’re going to come up with.

all of your living expense money when you’re 73 and 75 and 82 because most of that stuff is pretty well covered. So you can, you know, not be irresponsible, but certainly pursue your dream. So if you want to go on a cruise to Antarctica, you can probably get on a cruise and go to Antarctica and not worry about the fact that you’ve got to use some of your portfolio. Again, like Mike said, you got to know your numbers, but there’s a good chance, you know, if you’re a military retiree with a pension.

and you’re going to have a nice social security check when it starts at 70, there’s a good chance that you can do more things than maybe civilian counterparts can do.

Mike Hunsberger (16:46)

And there’s a lot of studies, I’m sure you’ve read them, that say that having that income just allows you to spend more. And most of those people are actually happier in retirement because, again, if you’re not worried about it, you’ve got that paycheck coming in just like when you were working. You know, like clockwork, it’s, you know, the first of the month, you’re going to get that

retirement check and then you’re going to get your social security check typically mid month. you know, having that just makes spending, you know, easier for folks versus if it’s all in that 401k as a civilian, you know, unless you kind of annuitize it or do something else, folks get concerned. You know, we’ve had some, you know, the market is not always going to go

straight up, you’ve got the ups and downs. if you’re looking at your balance and you’re starting to spend out of that, can be kind of unnerving. But if you’ve got that income coming in and you know it’s going to be there the next month, like you said, if you want to do that cruise or you want to go on that trip, you’re able to do it.

Amy (18:11)

Yeah. Yeah. I mean, I just think, you know, just to wrap it up is, you know, to keep in mind that, you know, take a look at your pension, take a look at what life is going to look like when you start drawing social security, figure out how much you need for those end of life expenses, and then get, you know, serious about what you’re able, the lifestyle you’re able to enjoy without being, you know, don’t be reckless.

but you don’t have to be quite as conservative. So I think that’s where a lot of really good financial planning can come in, whether you’re doing it yourself or you’re getting some help with somebody.

Mike Hunsberger (18:50)

Yeah. And the other nice thing is, you know, between whenever you say retirement or, know, maybe it’s, you know, partial retirement and you’re working less. The nice thing is knowing that 70 day, once you have that, or when you’re going to take social security, it’s now defined time. So if you’re going to retire at 60 and you know, you’re going to turn on social security at 70. Well.

you can map out your expenses and go, this is a 10 year. It’s not unknowable if I need to generate $50,000 a year for 10 years. OK, that’s half a million dollars. You can have that set aside, you know, index it to inflation, do all that. But that’s a known a known number that you can definitely plan for versus, again, more of the.

unknowns, longevity things that if you weren’t covered by a pension and Social Security, get all the more tricky for figuring out.

Amy (19:59)

Yeah, I think this is, I think this has been a really important conversation for folks. I hope they, you know, start thinking about what retirement looks like maybe a little bit differently, the glide path and things like that. Been a great conversation. Mike, did we miss anything?

Mike Hunsberger (20:15)

No, I think that pretty much hit what I wanted to talk about. So I’m glad we could do this more, I guess, non-technical, more thought pieces podcast. So it was great talking to you.

Amy (20:32)

Good to talk to you, Mike. I’ll talk to you next time. Bye bye.

Mike Hunsberger (20:34)

Okay, bye bye.