Federal retirement expert, Chris Kowalik, offers insights into where federal employees should not be seeking advice from – and where to go instead.
- The difference between “seeking information” and “seeking advice”
- The 5 government entities where feds should never go to for advice
- Where feds should go when seeking advice on strategy to maximize their financial situation
- Local workshop locations and dates: FedImpact.com/attend
Hi, Chris Kowalik of ProFeds here and welcome to the FedImpact podcast, where we offer candid insights on your federal retirement. Of course, this show is all about helping you to get clear on what you want so that you can get the retirement that you’re looking for.
As the owner of ProFeds, I have a team of speakers who go out to deliver the training in our full day retirement workshops. But that means I don’t get as much classroom time as I used to with the Feds. But this past week I had a chance to travel to the Raleigh Durham area. And I was back in front of a great group of Feds who came armed with their great in-depth questions. And while some of their questions were about how benefits worked, most of their questions were really asking for advice on what to do. Things like what decisions to make, what the consequences are, and wondering what else they haven’t thought of. So I knew this was going to be a perfect episode for this week’s podcast.
Today’s topic is going to be all about the idea of seeking advice. Specifically, where you should not go to for advice and why. Now here, I’m not talking about the “self appointed office expert,” right? That person in your office that thinks they know what everybody should be doing. That’s for a different podcast. Here, I’m talking about government agencies and the people you talk with there, who many feel should have the answers that you need. To give a kind of high level of the podcast that we’re going to go through today. First, we’re going to talk about the difference between seeking information and seeking advice. Then we’ll talk about the roles of these various places like the Office of Personnel Management, your HR department, the TSP, Social Security, and the IRS.
We’ll talk about things you can and should ask them and what you shouldn’t ask them, no matter how tempting it might be. Of course, for any of the resources I mentioned today, they will be in the show notes and we’ll show you how to get connected with us if you’re looking for some additional help.
As a company who delivers retirement training to federal employees, we hear an awful lot of complaints about how little help some various agencies are when employees need that help. Oftentimes the employee has been bounced around. They’re frustrated. They can’t seem to get a straight answer from anyone. Or worse, they get an answer that’s wrong or not complete, or just doesn’t fit their situation. So it’s hard to say, which is more harmful, right? Making decisions without important information or making decisions based on bad information. So I felt compelled to set the record straight today when it comes to working with different agencies. Let’s talk about the difference between seeking information and seeking advice.
When we think about seeking information here, we’re just talking about the data, the data itself, things like what are the rules, benefits calculations, what forms to use, what the processes are, things like certifying your service, right? Those are all normal things that we’re seeking information on. It’s very objective information. They’re just the facts. But seeking advice is different. Asking things like which choice should I make? What are the pros and cons to the decisions that I have in front of me? How does this benefit affect other parts of my financial life? Those are all more subjective questions that we ask and certainly there’s strategy involved in those.
So when we think about the entities that you might go to looking for help, specifically OPM, your HR department, TSP, the Social Security Administration, and the IRS. I want you to realize that each of these agencies have a very critically important role to play in getting the information that you need to make decisions about your benefits, the information. But if all we needed was information, everyone would make great decisions because in our world today, we do not lack information or access to information. It’s everywhere we look. If these agencies have information we need, why shouldn’t we go to them for advice? Well, the reason is that the role that they play is only to provide the bare information. They’re not there to give you advice. In fact, they’re specifically told not to do so. So I’m not suggesting you don’t seek information from these places. I’m simply suggesting that when you’re asking for advice, you’re going to at minimum be underwhelmed, but probably more irritated because you won’t get what you’re asking for.
Let’s take a look at the types of things that you should be asking these places. And we’ll compare that to what you should definitely not be asking them.
We’re going to start with OPM and your HR department. I’m going to put these together because as an employee, you’re not permitted to work directly with OPM. You’re going to work with your HR department. Of course, once you’re retired, OPM will be your point of contact, but these share a lot of roles here. A question that you should be asking, say of your HR department, things like what are the different types of life insurance available under FEGLI? What do they cost while I’m working? And how does the coverage and cost change in retirement? Very fair questions to ask. But questions you should not ask, which one’s better for me? Is this a good deal? Is it enough coverage? Is it the right coverage? And are there other options? Not fair to ask that of HR. A different topic that you should ask about. How much will my pension be if I retire at these various ages? But you shouldn’t ask, will that pension give me what I want to live the retirement that I want? Hmm. How on earth would they know that?
Next question. How much will it cost me to get credit for my temporary service or my refunded service or my military service? That’s just information. But what you can’t ask is it financially worth it to make a deposit for that time? That’s not their place to give that piece of information. That’s advice.
Let’s move on to the Thrift Savings Plan. A question that you should be asking of TSP, things like what are the different funds I can invest in through the TSP and how much am I allowed to contribute? But what you don’t ask is which funds help me reach my goals? Are the choices of funds that I have too risky or too safe for my age and my situation? Should I use the TSP to pay off my mortgage? How will taking money from my TSP affect my Medicare premiums? Oh gosh, those are important questions, but one that the TSP isn’t going to be able to answer.
Another question that you could ask is what are the tax options I can choose from in the TSP? But what you don’t ask is, well, which one’s better, Traditional or Roth? Will this affect how other income I have and how that’s taxed? Should I convert some of the Traditional to Roth? And when is the right time to do that? Should I do it all at once or over many years? You can see where I’m going with this. These are strategy questions, not information questions.
The next agency we’ll talk about is the Social Security Administration. What you should ask of them is how much can I expect to get from Social Security if I start taking at various ages? What you don’t ask is which one is more advantageous? Should I take it at 62? Should I wait until my full retirement age? Should I wait all the way until 70? Should my spouse and I take Social Security starting at the same time? Is it better if I draw money from the TSP before I draw money from Social Security or vice versa? Yikes. All super important questions and ones you should be asking, but that’s for advice, not information.
And the last agency we’ll talk about is one that many people don’t go to for advice. And that is the IRS. Now we work with a lot of IRS employees and they’re fine people, but I know that this is not typically a place that you would go to expecting for friendly advice. Things that you should be asking of the IRS, What are the tax regulations? That’s their function is administering tax regulations.
Another question would be what forms do I use to file my taxes? Those are very fair questions to ask of the IRS. But what you don’t ask of them is how can I leverage the tax code to my advantage? Are there strategies that put me in a more favorable tax situation now, or later in retirement? Is it smart to convert some of my money that I have right now to the Roth option or should I leave it in the TSP, in the Traditional side of TSP? Again, all great questions. You’re just asking the wrong people.
Letting these agencies off the hook
In a way, I want to let these agencies off the hook, because if everyone believes that these agencies are there to give customized advice, then they’re going to be underwhelmed. They’re going to be frustrated. In reality, these agencies aren’t supposed to do that. And if they do it, likely in an effort to try to help an employee, it’s often bad advice because these people are not equipped to give advice like this for three really important reasons.
Three reasons these agencies should not give advice
One is they don’t your full financial situation. The second is they are not licensed to provide this advice to you. And the third is they are not responsible for the outcome. Very, very important.
Who should you ask advice from
We’ve talked a lot about what places you should not be asking advice from, but who should you be asking this advice from? Well, this is not a trick question. It’s a financial professional. These are professionals who are licensed to provide advice to you. They look at your bigger financial picture before shelling out recommendations that ultimately won’t be in your best interest.
Now we can talk about the pros and cons of working with a financial professional in a future episode, but know that the answers that you’re likely needing require a depth of knowledge and strategy that simply is not available at the places we discussed earlier: OPM, HR, TSP, Social Security, and the IRS.
So the next time that you get irritated that your HR specialist isn’t quite giving you what you need or that rep at TSP seems really unhelpful, remember that their role is not to give advice. It’s simply to give information. And if what you’re hearing from these places sounds like advice, remember that the people you’re talking to don’t know your full financial situation. They are not licensed to give that advice. And they are certainly not responsible for the outcome.
So if this podcast has opened your eyes to some of the questions to ask and the strategies that are available to give you a leg up in retirement, you would likely benefit from attending one of our retirement workshops.
And of course we have a network of financial professionals who we work with that help answer all of the strategy questions that I mentioned today and many, many more. If you want the link to be able to find a retirement workshop in your area and be connected to a financial professional if you wish, please pull out your phone and text the word PODCAST to 224-444-6144, and we will send you that link right away.
Again, if you want to come to one of our workshops, if the idea of working with a financial professional to get some of these strategies in place makes sense for you, please text the word PODCAST to 224-444-6144, and we’ll send that right away. All right. To wrap up our session, here are some things to remember about seeking advice. When you need help, think carefully about what it is that you’re really needing. Is it information or is it advice? If it starts with things like, should I, is it best to, is there a strategy to, chances are you’re asking for advice and not information.
So please use agencies like OPM, your HR department, TSP, Social Security, and the IRS to get all of the information that your little heart desires. But when you’re looking for advice, know that these are not the right places to go. You need to seek the advice of a licensed financial professional.
That’s it for today folks. I hope that our talk about seeking advice versus seeking information has been helpful to you as you think through all of the various aspects of planning to retire. Stay tuned to the FedImpact podcast to get straight answers and candid insights on your federal retirement. And of course, if you haven’t already, please subscribe today so you’re sure not to miss an episode.