by Chris Kowalik of ProFeds
Everyone can use a good pep talk when it comes to financial planning. Getting started is often the hardest part. Frankly, this can be a pretty overwhelming topic for most of us to face.
Most of the time, people simply don’t know what to do to take the first step and get moving. Any time we add in federal benefits to the mix, it becomes even more overwhelming. Sadly, when we get confused or things just seem too complicated, most often we end up taking no action at all, and we know that can’t possibly be the right answer.
Financial planning really has two core parts. First is the simple math of planning. These are the cold, hard facts; the way numbers work, knowing that you must set aside enough money to save for the future, as well as planning to have the money that you need today. That’s kind of the easier, more concrete piece of financial planning. The second part about financial planning is the mindset. This is the emotional side, and we often see this come into play when we think about the stock market, the fear and the greed that runs the stock market, and the ups and the downs.
Why don’t federal employees get started sooner in life?
I see several common themes among federal employees. They’re similar in many ways with the challenges that the larger civilian population has. They have many of the same concerns as an average baby boomer out there, just with the different kind of complexity involving their federal benefits. Part of my job as a retirement trainer is to help people to come to terms with these various challenges and face them head-on, so they can have the retirement that they’ve always imagined.
When it comes to this financial planning piece, let’s first start with the emotions. What I typically see with federal employees are people who are ashamed that they haven’t done more. They’re embarrassed that they’re in the position that they’re in, maybe because of some of the choices that they’ve made throughout their long careers. They’re frustrated because they know they should have done more, but they’re also overwhelmed. They’ve got so much to think about. They’ve got a job. They’ve got their family. They were on furlough for a while. They didn’t get pay raises for all those years. They’re overwhelmed, just wondering, “What am I supposed to do?” Then the biggest challenge is that they’re scared of making a mistake.
When we look at all of those emotions, those are challenging in and of themselves, but if we kind of flip that coin on its side and say, “Well, what’s the other side of those emotions?” to see how you might feel once you begin to tackle the financial planning goals that you have. One thing that we share in our retirement workshops is that we want employees to feel empowered with this information. We don’t want them to be scared or overwhelmed. We want them to be empowered.
We also want them to feel competent, that they know what they’re looking at, and they understand the consequences to the decisions that they’re making. Of course, we want them to be eager and excited to retire. We don’t want them to approach retirement with kind of dipping one toe in the pond. We want them to be ready to jump off the diving board and do a big cannonball into retirement. We want them to have fun transitioning into that part of their lives.
Part of that fun is knowing that you’re poised to take on retirement. You know what’s coming. There aren’t any surprises, and you can rest assured that you’ll have the retirement that you hoped for.
Even when folks can get past that scary emotional part of financial planning, they can still be overwhelmed by the fact that they’re busy and they let their schedules get in the way. When it comes to being too busy, I have some words of encouragement for everyone. We’re all too busy, but it still has to be done. We’re all going to have to prioritize this as something that’s important to us. The sad reality is that most Americans spend more time planning a family vacation than they do planning for retirement.
Retirement is a part of your life that may last several decades, so we want to take the time to make sure that we’re being mindful of all those decisions. We don’t want folks to wait until they’re “ready” to plan for retirement, because you’ll never find that perfect condition or time to start, and before you know it, retirement’s here. I see these folks stepping into retirement at our retirement workshops and they’re like, “God, where did the last 20 or 30 years go?” We always want to make sure that folks are working to plan on purpose. We don’t want this to be some fly-by-night retirement plan that we put together. We want there to be methodical steps that we’re taking along the way.
When we think about procrastination, sometimes we’re intentionally procrastinating about something and we can see it when we do it, and other times it’s disguised. Procrastination can get the better of all of us. A year or 10 years pass and then we wake up and our kids are grown and we’re about ready to retire. Many people say, “You know, I’m going to get to this. Let’s talk in the spring.” If we’re here at the beginning of the year, “Hey, I really want to get started, but let me file my taxes first.”
We reach back out in May or so after taxes have been filed, and we hear, “Oh, yeah, I really want to do this, but this is kind of a crazy time. The summertime will be better for us to talk about this. I’ll have more time then.” We call back in the summertime, “Hey, let’s help you out.” “Oh, summertime’s kind of crazy. Give me a call back in September.” We call back in September, “We’ve got the end of the fiscal year. Things are really crazy. Give me a call back in a couple of months.” Then we have the holidays and then the next natural time is, “Give me a call after the first of the year.” Soon enough, a whole year has passed, and nothing has changed.
We always want employees to know that the earlier decisions that are made are usually the best ones. Your health and your age are going to play a big factor in the value of the financial-planning decisions that you are making. Things that I think a lot of folks are familiar with are issues like life insurance. If you truly need life insurance, which most people do to some degree, you have to be healthy enough to qualify to get it, and you want to be at a young enough age that the premiums are reasonable. The earlier you make those decisions, the better off you are.
Procrastination does have a profound impact on the end result, and even with the best intentions, the years can pass by before we even take action. I imagine some of our workshop attendees who are close to retirement wish they could just rewind the clock and do everything over again.
Avoid the “trap.”
Another very common thing that I see in our retirement workshops is when the light bulbs come on for people, and I call this the “trap.” It’s the trap that the government benefits look so good while you’re working and for so long in your career they’ve been great, that most employees never just take a peek into the future to see how things are going to change. Oftentimes, if you could see how your current benefits will look well into the future, you would make some very different decisions today.
We want people to put time on their side. Don’t fall into the trap where you just think the government has a monopoly on good ideas and it’s perfect. Of course, math, that we talked about before, the power of compounding when it comes to investing and saving. The more time you put on your side, of course, the better. You know the old adage; most people don’t plan to fail. They simply fail to plan. We really run up against that in our retirement workshops.
The topic of financial planning can really be daunting in and of itself. If we could all just get that peek into the future, perhaps it would let us know exactly what we should be doing today. Now while we don’t have that crystal ball, we can make some general assumptions about what we want our future to look like and use that at as a starting point to make progress.
Nobody wants to be scared or overwhelmed. I would encourage you to act now, so you can start feeling great about your financial planning instead of dreading it. The sooner you start, the better off you’ll be.
TRAINING AVAILABLE FOR FEDERAL EMPLOYEES:
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ABOUT THE AUTHOR:
Chris Kowalik is a federal retirement expert and frequent speaker to federal employee groups nationwide. In her highly-acclaimed Federal Retirement Impact Workshops, she empowers employees to make confident decisions as they plan for the days when they no longer have to work.
As the developer of dozens of highly-regarded retirement planning materials for federal employees and the creator of the FedImpact Podcast, Chris has also analyzed the challenging retirement scenarios for thousands of federal employees – helping them to avoid costly mistakes, and highlighting opportunities for them to gain greater financial security in their retirement years.
Chris’ candid and straightforward nature allows employees to get the answers they need, and to understand the impact these decisions have on their retirement. After all, if what you thought was true wasn’t, when would you like to know?