PODCAST EPISODE 137: Playing Offense & Defense in Retirement

As a federal employee preparing to eventually retire from federal service, you may not know the importance of playing both offense and defense in this game called retirement. Today’s episode will look at planning for retirement through the lens of an offensive strategy and through the lens of a defensive strategy and what it looks like if you have no strategy at all.

Hi, Chris Kowalik of ProFeds here, and welcome to the FedImpact Podcast where we offer candid insights on your federal retirement. Now, this show is all about helping you to get super clear on what you want retirement to look like and taking action to make it happen.

So last week I was in an entrepreneurial coaching session at Strategic Coach, a group that I’ve been part of for several years, and we covered this idea of playing offense versus playing defense in our business. And a long time coach colleague named Joe Polish was there, and he made a comment that we kind of batted around for a little while that really stuck with me.

And his comment was, “Are you playing to win, or are you playing to not lose?” And I couldn’t help but feel this strong connection to you guys, right? The feds that we help every day and how these two ideas can help you to be better prepared for retirement. So I knew today’s episode needed to be on offense and defense, and are you playing to win or are you playing to not lose?

Today we’re going to talk about some of the offensive strategies that feds can use as they’re preparing for retirement. And along with that, some defensive strategies. We’ll break these down to really show you the difference between them. But then there’s a whole other category of strategy that infuriates me beyond belief, and that is having no strategy at all. We know that that can’t be the way we approach retirement, and so we want to make sure we’re playing both offensive and defensive, but the idea of having no strategy can’t be on the table for us. If you’re a listener of this podcast that I don’t stand for that, and we’ve got to get some strategies in place.

Of course, any of the resources I mentioned today will be in the show notes, and for anyone looking for training or more help on their individual situation, will tell you how to do that at the end of the show. So stay tuned.

So there I was in my entrepreneurs’ group. I’m surrounded by incredibly ambitious business owners, and they’re all super committed to making a huge impact in this world. And our conversations are typically about big goals and the steps we take in our businesses to make the most out of the work that we do for our respective audiences. Of course, you’re my audience, so I want to make sure that I’m helping you to the very best of my ability. But when I think about the conversations I typically have with these entrepreneurs, we’re always asking how can we stack the odds in our favor to win? So that we have a chance to make a bigger and bigger impact for the audiences we serve.

Offense & defense in business

The theme of our discussion this week was all about playing offense and playing defense in our businesses and what that really looked like in real life. We can talk about offense and defense, but what does that really look like? Well, the polarity of the conversation was this… On one end of the spectrum, it’s what can we do to grow our impact? Get our businesses bigger, expand our products and services? How do we reach more people who need our help? And then the other side is, what can we do to protect our businesses? Things like how do we protect our intellectual property? How do we improve customer service to retain more clients? Those types of things. So both of those ends of the spectrum are incredibly important. And I want to be clear that as business owners we value both the offense and defense.

And let me put something out here just so that we’re all really clear. When we say offense, that’s typically painted as being really proactive, and most of the time it is. But defensive or playing defense is typically painted as being reactive, and that’s not always the case. And so we want to make sure that we have a good, healthy understanding of what each of those phrases mean so that we’re clear that we’re not talking about being on the defensive where we’re reacting to things that have negatively happened to us, but how do we prevent negative things from happening in the future?

During this conversation that I’m having with my coach friends, we’re ultimately looking for the advantage. The “odds,” if you will, if we’re going to use kind of the sports analogy. We want to know that we’ve put ourselves in a position to win. That’s really when I thought about you and the (sometimes overwhelming) steps that you need to take to put yourself in the most advantageous position in retirement. In other words, how do you use offensive and defensive strategies to ensure that you’re getting the very most out of your retirement from federal service?

Offense & defense in sports

Of course, football season is upon us. In fact, as I record this episode, I can hear cheers and whistles coming from the TV in the other room as my husband gets a few games under his belt on this beautiful Sunday evening here in Chicago. Now, some of you aren’t much into sports, so I’ll keep the analogy to a minimum here so that the real impact isn’t lost if you’re not a huge sports fan. But regardless of the analogy that we choose, the polarity of offense and defense is very obvious. In sports, of course, the offense typically scores the points and defense tries to keep the other team from scoring. That’s the idea. And although it’s always more complicated than that, that’s the basic premise.

But when it comes to planning for retirement, that same concept can be used. The offense tries to increase the money you have to live the life that you want in retirement, and the defense tries to keep other entities from taking your money. Now, if only it was that simple, right? Because the lines between offense and defense can get a little bit blurry when it comes to money.

Sometimes a particular financial strategy that you might use looks like an offensive play today, but it’s really designed to be a strategic defensive move many years down the road. We’ll get more into that in some of our examples.

Some financial strategy examples

So I want to dig into just a couple of examples that I’ve chosen to show you how the offensive and defensive plays really happen, and then what it looks like when there’s no strategy at all.

Example #1: Deciding to retire

Let’s talk about the kind of high level decision about retiring. I’m not talking about the specific day you’re going to retire and all the complexity with that. I’m talking about you deciding it’s time to go.

OFFENSE: If we put our offensive hat on, if you’re using an offensive strategy, you’re going to stress test your plans, you’re going to run all of your numbers. You have a very specific defined date that you have determined based on all of your numbers. You have a really good sense of what’s going to be coming to you in retirement.

DEFENSE: The defensive play, or one of them would be, well, what do you do if it takes OPM a year to pay you? You did all your numbers and even if they were all spot on, what happens when there’s a little bit of a wrench thrown into the plan? We have to be thinking about that. It’s not, do you retire or not? It’s do we have a plan to back up the perfect strategy that you’ve built? And again, we know no strategy is perfect out there, but if you’re doing all of the right things, you’ve got all your numbers, you’re on it, you’ve stress tested everything so that you feel really good about what you’re looking at, but something out of your control, like OPM taking a year to pay you, steps in. Now, what do you do? Where’s the defense there?

NO STRATEGY: Here’s what having no strategy looks like. You’re pissed off at work and you just decide to quit. But the idea that you have no strategy, you haven’t run your numbers, you have no specific planned retirement date because you’ve thought through everything and you have no backup plan, can’t be the answer here. Or you might think that maybe you’re fine at work, but you think, Well, gosh, I’m eligible now, so I might as well go ahead and retire. That’s the government saying it’s okay for you to leave, but it’s not the government saying you’ll be fine. And so having no strategy really puts so much at stake without you having any clear path of what you’re doing. And remember, I say all of this with love. I want you to have all of this under control before you step into retirement.

Example #2: Investing

The next example that I’ll use is investing.

OFFENSE: On the offensive strategy, you have a plan to capture market gains and increase your investment balance. Presumably that’s in TSP or an account similar to that. But you have a plan to invest and that money to grow and grow and grow, which is great.

DEFENSE: The defensive strategy is knowing what to do if you need money from that account and the market just tanked. How do you take money so that you can live your life without jeopardizing your offensive strategy of building your investment balance? It’s a yin and yang. It is how do we make both of those things happen at the same time? How do they coexist? Having a plan to capture market gains and what to do in a down market.

NO STRATEGY: But having no strategy would be like some willy-nilly approach to investing, and here’s what kills me. You’re not really sure if you should be aggressive or conservative, but invariably you pick the wrong one at the wrong time. You suffer from FOMO, that “fear of missing out” every time the market takes off when you’re on the sidelines and you went to cash, you went to the G fund. But on the flip side, you also have huge regrets when the market tanks and you’re, “about to retire,” and now you’re scared you can’t, right? That’s because you didn’t have a strategy. There was no plan in place to get it right.

Example #3: Taxes

Next example are taxes.

OFFENSE: On the offense side, you’re going to develop a strategy that allows you to create different buckets of money that are taxed differently. And the goal here is that you minimize your tax burden throughout your whole lifetime.

DEFENSE: The defensive strategy is when you need the money, knowing which bucket to strategically take it from when your tax situation (or the tax code) changes in retirement, and that way you don’t pay more tax than is absolutely necessary. Offense and defense have to play together to make that whole strategy work.

NO STRATEGY: But what does having no strategy look like? Well, you kind of wing it, and then you complain that you’re getting killed by taxes in retirement, and doesn’t the government know that retirees can’t afford all these taxes? We’ve got to get our head out of the sand and be thinking about what we have control over now and what we can put ourselves in control of later and do those two things. That’s the offense and defense.

Example #4: Life Insurance

Last example that I’ll give is life insurance.

OFFENSE: The offensive strategy is where you decide early that your income and your ability to provide for your family is important. And so you put the correct kind and the correct amount of life insurance in place.

DEFENSE: The defensive strategy is you make sure that your family knows where the money is and who to call when you die. And in this strategy, kind of a little bit of a perk here, you’re also guarantying that this money goes to your family tax-free, so they don’t have to worry about that. And so what a nice little perk. If we’re using our sports analogy, this is blocking and tackling at its finest for your family after you’re gone.

NO STRATEGY: But as far as no strategy, gosh, we see this all the time, “hmmm…I’ve never really thought about that much.” Or worse, you decided it was a waste of money, but in the back of your mind, you’re thinking, “God, I hope I make it long enough to not leave my family in a world of hurt, but it’ll probably be fine.” Nobody wants to actually live this way. You’re fooling yourself if you think you’re getting out of here alive. So think about these types of things, and I’m not suggesting that everyone needs life insurance. I would argue that the vast majority of people probably need some version of life insurance. But the idea here is that we’re putting our business hat on and we’re thinking, what are the advantages that I can go for? And what are the threats that I have to my business, in this case, my family, that I can protect against? Offense, defense. But ignoring both of those things where we have no strategy at all, is likely not a very smart move.

Observations

I want to make a couple of observations about this concept. First, most people are good at offense or defense, but they struggle being amazing at both. Both are incredibly important no matter what game you’re playing. Amazing quarterbacks are rarely great defensive tackles. And likewise, you don’t want a linebacker playing your wide receiver position either. All are important, but each of them have very distinct jobs with very unique skill sets to get that job done. So we have to use both. We can’t just put our offense on the field for the whole game. That’s not the way it works.

Know the rules of the game

But in order for the offense and defense to work well, we have to know the rules of the game and how we’re going to keep score. Now, in a sports game, this is super clear. There is an unwavering objective, and that is score more points than the other guys before the clock runs out, right? Nice and simple. But in retirement, the objectives aren’t quite as clear cut. If you want to win the retirement game, we have to know what your goals are so we know how to use the offense and defense effectively when it comes to defeating the other team.

The “other team”

Let’s talk about who the other team is in this example. The other team is made up of politicians, the tax code, inflation, down markets, unexpected expenses, and a slew of other hooligans trying to come after your money. How do you protect all that you’ve built from being taken from you? How do you do that? Well, we have to play both the offensive and defensive side of the game, but even the most talented of athletes, they still need a game plan or it’s going to be pure chaos.

Can you imagine sending your offense out on the field with no strategy? You’re not calling any of the plays, everyone’s just like, “Well, go out and have fun.” Same thing with your defense. That doesn’t make any sense on a football field. It doesn’t make any sense in real life in retirement either.

This strategy in retirement

So how does this come to life in the world of financial planning or preparing to retire? Using our sports analogy here, plays are made by the programs you choose to participate in. And how you leverage each one of those programs determines whether it’s an offensive or a defensive move. For instance, the Thrift Savings Plan is a program that the vast majority of you participate in, but how you leverage it matters. Do you go Traditional or Roth? Do you max out the TSP? Do you put just your 5%? Do you go aggressive? Do you go conservative? That’s what’s going to determine whether the TSP is either offensive or defensive, or maybe a combination of both for you.

Who calls the plays?

So who calls the plays? Well, ultimately you do. You’re in charge. This is your future. But last I checked, you’ve never retired before, so you might not have a very good sense of what you’re up to in this game. You’d be wise to have a good coach, right? With offensive and defensive strategies to get you ready for the big game of retirement. This is way bigger than a Super Bowl. This is a whole life’s worth of Super Bowls to get to retirement and stay there. That coach is a financial professional who does this day in and day out. And although you’re only going to retire this one time, the other team, remember the politicians, the tax code, inflation down markets, unexpected expenses.They’ve all been through this many, many times, and without a game plan, you’re likely to lose because you didn’t see it coming.

The Mayhem guy

I had this vision of the Allstate commercial featuring that mayhem guy and the destruction he causes all around him that you’re left to figure out on your own if you’re not protected, okay? It’s a funny commercial, but not very funny in real life.

I want you to win

Going back to the question from my coach friend, Joe Polish, “Are you playing to win or are you just playing to not lose?” I want you to win. If that’s one thing that you take from all of the podcasts and webinars and our workshop that you’ve attended, I hope it’s the true belief that I want you to win this game of retirement. None of what I’m sharing with you today is designed to scare you, but in a way it is.

You don’t get the retirement you want without taking action to make it happen. In this case, we have offensive and defensive actions to equip and protect yourself in retirement, okay? It’s incredibly difficult to do this on your own. Very, very difficult. So get a coach. We have a network of financial professionals who work directly with ProFeds, who understand working with federal employees. You guys have an odd group of benefits, there’s all sorts of special rules that apply to you, and it’s important that you’re working with somebody who understands how all of that works. Please don’t try to do this on your own. And remember, play to win, not just to not lose.

Get to one of our workshops

If you have not been to one of our training sessions yet, or you need a little bit of a refresher, please, please do so. And if you want access to the show notes from today’s episode where we’ve got the transcript and the links to all of our resources, please pull out your phone and text the word PODCAST to 224-444-6144.

We’ll make sure that you get access to all the show notes and a link to all the training that we have that’s in person in your local areas. Again, to get that text the word PODCAST to 224-444-6144, and we will send that right away. And as a bonus here, we’re talking all about defensive and offensive strategies and using a coach to make sure that you’re taking advantage of all of that. You have an opportunity for some one-on-one help following the workshop if you ask for it. You can see all those training dates available by, again, texting the word PODCAST to 224-444-6144, and we’ll send that right away. As an alternative, you can go to FedImpact.com/attend and see all of our open workshops available for registration.

Wrap-up

So just to wrap up, both offense and defense are important to any game, I would say, especially the game of retirement. But remember, each one requires a different skill set at different times. That’s why having a coach can help you leverage both the offense and the defense to give you quite an advantage in retirement. And remember, play to win and not just to not lose. That’s it for today, folks. I hope that our talk about offense and defense has been helpful to you as you think through 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 as always, if you haven’t already, please subscribe today so you’re sure not to miss an episode.