ProFeds Founder, Chris Kowalik, lays out the 8 planning principles that can help federal employees take control of their financial future.
Key takeaways:
- The timing of when you’re taking action
- The decision making process (and what happens if you don’t make decisions)
- Taking ownership of your future
Additional resources:
- Local workshop locations and dates: FedImpact.com/attend
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Transcript of this episode:
Originally released on 3/1/2024
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There is a lot that goes into planning to retire from federal service, but have you ever felt like sometimes you can’t get out of your own way or that your mindset might need a little bit of tweaking to be able to get retirement just right? Well, if so, you are in the right place because today’s episode is all about using these eight principles to inspire you to take control of your financial future.
Hi, Chris Kowalik here of ProFeds, and welcome to the FedImpact Podcast, where we offer candid insights on your federal retirement. You guys know this show is all about helping you to get clear on what you want retirement to look like and taking action to make it happen.
With the extensive number of workshop training sessions that we do and the follow-on work that we do with federal employees, we have tens of thousands of employees each year that we get to see firsthand some of the challenges that those feds have when it comes to preparing for retirement.
The 8 ProFeds Planning Principles
And quite often, we find that this has little to do with money and way more to do with mindset and how we’re thinking about decisions that we’re making. In today’s episode, we’re going to talk about some of those underlying planning principles that can really help feds to just take control of their financial future so that retirement happens for you, and it doesn’t happen to you.
Many of you listening are still actively employed with the federal government, and you probably have a lot on your mind about what you can do to make your future great. That is exactly what today’s episode is all about. That high level, we’re going to talk about the timing of when you’re making decisions and taking action, the decisions themselves, and the decision-making process, and frankly, what happens when you don’t make a decision at all. And then finally, taking ownership of your future. Those are the themes of the eight principles for today.
Any resources that I talk about, I’ll be sure to include those in the show notes, and for anyone looking for training and more help on their individual situation, we’ll show you how to do that here at the end of the episode. So, stay tuned. I would ask if you like what you are hearing and what we’re bringing to you in these episodes. Please share this with your friends and coworkers who can benefit.
Also, if you take 30 seconds and leave a quick review on your favorite podcast platform like iTunes, Spotify, iHeartRadio, Audible, Amazon Music, or YouTube, we’re on all of them. That other federal employees have an easier time finding this podcast and upping their game to retire ready like you, I would greatly appreciate it. And by hitting that subscribe button on your favorite podcast platform, you will get new episodes delivered right to you when are released.
Planning Principle #1: It’s never too late, too early or too often to plan.
I will share with you the longer that you wait, the more painful it is. You’ve probably heard the old proverb, when is the best time to plant a shade tree? And the answer is, 30 years ago, if you want the shade today, you had to have taken action a long time ago so that the maturity of that tree could get to a point that it offers some shade, right? You’ve probably heard at least some version of that proverb.
We see too often that people give up on themselves. They give up on themselves really early when they have a lot of time ahead of them. Like, oh, well, I don’t really have the time or maybe even the expertise to start planning now. I’ll wait until I’m closer to retirement. And then they also give up on themselves at the end, where they say, oh, man, there’s nothing I can do now to fix things, and I don’t believe either of those are true.
We see folks who have one foot in retirement, and they’re trying to figure out life insurance planning, right? It’s really hard to do that late in life. But on the flip side, the 30 or 40-year-old that has a long way to go to retire, they think, gosh, I have so much time ahead of me. I’ll do that later. The earlier you take action, the better off you are because you’re putting time on your side.
Nobody ever says, gosh, I’m so glad that I waited to start planning, right? Starting as early as possible will get you the very best results. But wherever you are on your retirement journey, it’s never too late to at least make progress.
Progress is way easier to make when you’re younger. It’s further away from you, which is why it makes it so much easier to make that progress. If you are later in life and you’re trying to make some of these decisions, the progress isn’t going to look the same as when you did it when you were younger, but you’re at least moving the needle.
There’s at least something that you can always do to tweak and modify that retirement so that you get more of what you want. I never want people to be discouraged because they feel like they’re too young or too old, or they’ve already done some planning, so why bother going back and revisiting it?
This is an iterative process. We continue to go back and back and back to keep tweaking these and get closer and closer and closer to the actual retirement that you want.
Planning Principle #2: When you know your numbers, your financial decisions become obvious.
You’ve got to get clear on your numbers to be able to make informed and deliberate decisions. If you have no idea what the numbers tell you, you are going to have no idea how to make decisions. If you bury your head in the sand and you say, I think retirement’s probably going to be all right, I think the government’s probably figured some of this out and it’ll be fine.
That’s not really the way this goes. You have to know your numbers because that’s going to inform you of the decisions that you are making. If I told you that if you retire today, you could maintain your standard of living based on the assets, based on all the things you’ve done to prepare to retire, and that that was based on real numbers, you would feel great about submitting your retirement application.
But at the same time, if I told you, hey, listen, we ran the numbers and the lifestyle that you were hoping to be able to have in retirement, that standard of living that you wanted, you’re not going to be able to maintain that based on your numbers.
I hope that that information is equally valuable. It might not be what you want to hear, but it’s hopefully equally as valuable to you because now you know the numbers aren’t lying. The numbers are speaking to you, and because we’re willing to take the time to figure out what those numbers are and to do what we call stress testing your retirement based on all the years that you have to go in retirement and the assets and the income and all that that you have, how are things going to look?
Can you live the life that you want? And I hope that you can, but hoping is not enough here. We’ve got to really dig into the numbers so that you know what decisions need to be made. Do you need to save more? Do you need to spend less?
There’s all sorts of financial decisions that could be made, but if you do not know your numbers, you are flying blind in retirement, and that’s not fair to you or anyone else around you because you’re not doing so from a place of real numbers to get it right.
Planning Principle #3: You are free to choose, but you are not free from consequence.
Every decision that you make yields an outcome, even when you make no decision at all. Every single decision that you make has an outcome, even if we don’t like it, and when you make no decision at all, that’s making a decision too, taking no action. Here’s the deal, though. When you take no action, it likely doesn’t yield the outcome that you wanted.
It’s just the default. It’s the status quo. If you let someone else make those decisions, right? By virtue of you not making one, what you get will probably not be what you want. We always have to be thinking, what actions am I taking? What decisions am I making that will affect my life, my family, and the others who depend on me? What does this look like? And if we take responsibility for the choices that we make, good or bad, then we can choose to be in the driver’s seat of our own future.
In this case, we’re talking about retirement planning, but this really goes into effect in all parts of our life if we’re really being honest with ourselves about the consequences of the choices that we make. We are free to choose, but we are not free from consequence. We have to always be thinking, what effect does the decision I’m making right now ultimately have on me?
Planning Principle #4: If you don’t make a decision, someone will make it for you.
Now, that someone might be the government. If you fail to make elections, when you go to retire on certain portions of your benefits, some of those decisions are going to be made for you. That might be by the IRS. That might be by OPM and your agency. If you fail to make decisions, there are defaults that are established.
That also might be your family being required to make decisions. Maybe you’re ill-equipped or have passed that your family’s ill-equipped to make the decisions because they don’t understand the consequences of those decisions, but someone’s going to have to make those decisions for you, and you might not like it. Frankly, I would rather you be in control of the decisions and make them for how they serve you and your family the best instead of waiting for those decisions to be made on your behalf.
A really good example here is for those of you who have the Federal Employees’ Group Life Insurance, if you fail to make a decision about what you want to have happen to your life insurance in retirement, the default settings for the basic A, B, and C are that they reduce in coverage. Some go all the way away. A complete full reduction of those benefits and others go almost all the way away, and that is down to 25% of their value.
And if you really needed that life insurance, maybe you’re uninsurable, you have some health conditions that will keep you from being able to get life insurance out in the private sector, and that was your only chance to have it. If you fail to make an election, the default is that the vast majority of that coverage goes away. So, we have to think about these things and be proactive in those decisions.
Planning Principle #5: It’s okay to not like the government’s solution to your problem.
But you still have a problem that needs a solution. Listen, you guys have some really great benefits. My husband just retired from federal law enforcement. I understand the benefits maybe from a little bit different angle as a spouse, plus, of course, the work that I do here at ProFeds, but I’ll tell you, it’s okay not to love the solution that the government has created for you. How could they possibly, meaning the government, how could they possibly make the best decision for the millions of active federal employees and, frankly, the millions of retirees out there?
No, standard election is going to solve perfectly for the needs of all of these different types of families who are in all sorts of different financial circumstances. But we have to understand that the solutions that the government has set forth for these life insurance policies, protecting your pension, long-term care solutions in the event that you need, some long-term care, things like saving for retirement through the TSP, all of these have good elements to them.
The question is, do they continue to serve you and your family well in retirement? That’s a big, big question. Do these benefits continue to serve you well in retirement? And I’ll tell you what flavor of these benefits, which choice are you making about how these benefits behave.
And I’ll tell you, you are fooling nobody if you say that the government has just figured it all out, and it’s amazing. That is not how any employer-sponsored plan works, even when you work for the largest employer in the United States. They have an acceptable solution for a lot of people, but it’s not the end all be all, I promise you.
You would be very, very wise to look with a critical eye on all of those pieces of your benefits that you have to make those decisions that you have to make so that you get the very best out of those benefits that you possibly can based on your situation, and it might not be the default that the government has set for you.
If you don’t like the government’s solution to your problem. It doesn’t mean you don’t have a problem; it just means you don’t like the way the government’s trying to solve it. Then, if that’s you, then you need to look out perhaps to the private sector to start solving some of those problems on your own.
And a little unknown fact that a lot of folks are surprised to hear, the vast majority of the government benefits that you enjoy are underwritten by private carriers. You probably know that your FEHB plan is underwritten by private carriers because it’s obvious when you are selecting them, right? Blue Cross Blue Shield, Aetna, Kaiser, whatever the program is that you’ve selected.
But did you also know that your life insurance is underwritten by a private carrier? When you die, that check isn’t cut by the U.S. Treasury, or your agency, or OPM. It’s cut by MetLife. Don’t be afraid to go look out to the private sector to see what other types of solutions might end up serving you and your family better in retirement, because, frankly, these benefits are a private product in a government wrapper. So don’t be afraid to go look out to other solutions.
Planning Principle #6: The hard conversations are always worth having.
But get ready to get uncomfortable. Even if you’re talking just to yourself. See, here’s the deal. When we’re talking about something as important and as big as retirement planning, we have to be willing to have the hard conversations. We might get a little bit of that icky feeling.
Sometimes we have that hard conversation with ourselves of what am I willing to live with? What do I really want out of retirement? How’s this going to work? But having those conversations with yourself, you have to get real. Be real with yourself first, and then you need to be able to sit down with your spouse or perhaps your children, or anyone else that’s involved in the financial part of your life and try to figure the real end goal that you have for retirement.
Sitting down, perhaps with your spouse, figuring out what does retirement really look like? We have to figure this stuff out on your own as the employee and understand how this is going to affect your spouse as well. But don’t be afraid to ask for some help on that journey, and we’re going to talk about that here in a moment. But trying to figure all this stuff out on your own can be a little bit tough.
Asking for a little bit of help guiding the conversation and figuring out the things that you don’t even know to be worried about. That is a huge part of all of this. But the first things first, you’ve got to get clear on the conversations that you’re having with yourself or your family and make sure that you’re being honest with yourself in that conversation. That might be uncomfortable conversations about what happens to my family if I die?
What happens if something happens to me and I need someone to take care of me, to bathe me, to dress me, to feed me? Those are all uncomfortable conversations, but boy, they are so worth having and making sure that what you’re doing with respect to the elections that you’ve made for your government benefits, and frankly, any other private solutions that you’ve put into place are really aligned with the ideals that you have about what retirement is going to look like.
Planning Principle #7: Retirement is complex—seeking professional help is admirable.
Guys, even the very best athletes hire coaches to guide them on their journey. I think a lot of people, for some reason, think that if you ask for help to get something like retirement right, that somehow you failed yourself or you’re less of a person, and gosh, I honestly believe that couldn’t be further from the truth.
I keep coming back to this idea of athletes. We see the strongest athletes in the world have coaches because they need a guide on their journey. They’re the ones out running the race. They’re the ones out throwing the touchdown. They’re the ones out, whatever it is, whatever sport you want to think about, they’re the ones on the journey, but they have somebody guiding them along the way. They need someone outside of themselves to say, listen, you are on the right track, or maybe we need a couple little tweaks here.
And sometimes, hey, you’re really going the wrong direction. We need to get you back on the path. Having some help is admirable. Don’t be afraid to ask for help if you need it. We’ll link to it in the show notes about how to request some help. We’ve got financial professionals who specialize their practice and work with federal employees and their families to get these decisions right.
We’ll show you here in just a moment how to be able to get connected with one of them if you need a little bit of help.
Planning Principle #8: Nobody should care more about your retirement than you do.
Let me say that again. Nobody should care more about your retirement than you do. We’re here to help you to be the hero in your own story and figure a lot of those things out, but not me, not your agency, not your spouse, not your children, but you, you have to care about your retirement, and the fact that you’re listening to this episode tells me that you want to get this right, but it’s so easy for us to feel like victims of things that have happened in our life, so we feel victimized by the things that we’ve been experiencing in our life, or maybe we were wronged with respect to money.
We lost a lot of money, or we made some bad decisions, and things just went down a bad rabbit hole. We might’ve lost a lot of money in the TSP when the market took a tumble. We got out of the life insurance program and didn’t realize we couldn’t get back in, and now some bad decisions were made.
Whatever it is, we have to own it and say, I care about my retirement, and I’m going to do something about it to get it right. And when you put yourself in the driver’s seat of these decisions and you are willing to take responsibility for all of your decisions, you get to become the hero in your own story.
It’s not your HR department. It’s not OPM, it’s not TSP, it’s not the IRS, it’s not any of these agencies out there. You get to be the hero in your own story because you are the one willing to figure out all the details, make the appropriate decisions based on real numbers, and you get to reap the benefits of a great retirement.
Again, that’s not to say that you don’t have some help from professionals, but you’ve given yourself every opportunity to get it right. So, so important, and I hope that these eight planning principles really help you to maybe serve as a filter for the decisions that you’re making and how you’re showing up to conversations about these benefits.
Listen, today’s topic is important, and I’m glad that we had a chance to dig into some of those details about the eight planning principles. But like most things, when it comes to money, and mindset, and your future, this is only a small part of what you need to know to be confident as you step into retirement.
After all, our job is to help federal employees take action. It’s not enough just to know about these benefits. You have to do something about what you’re learning. We teach retirement workshops throughout the country with a very specific mission of helping feds to bring together all of the various parts of their situation to see more clearly what things look like in retirement and the very real decisions that need to be made today to make that happen.
Wrap-up
Remember, it’s never too late. It’s never too early, and it’s never too often to plan. If you have not been to one of our workshops, or if you need maybe a little refresher if it’s been a while, or you want access to the show notes for today’s episode, we’ve got that all laid out for you.
Here’s how to get it. Pull out your phone and text the word podcast to (224) 444 6144. We’ll make sure that you get access to both the show notes and all of the workshops that we have so that you can find one in your area. Of course, we’ve got lots of webinars and other podcast episodes, lots to be able to get, and we will make sure that that arrives right to you as soon as they are released. Again, to get that text the word podcast to (224) 444 6144, and we’ll send that right away.
Keep these eight principles in mind as you think through your plans to retire. The money that you need for retirement is as important as the mindset that you need to get there.
Well, that’s it for today, folks. I hope that our talk about these eight planning principles 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 if you haven’t already, please subscribe today so you’re sure not to miss an episode.
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