ProFeds Founder, Chris Kowalik, reveals the real truth behind why financial advice for federal employees often comes from the “self-appointed office experts” at the proverbial water cooler.
Key takeaways:
- Why water cooler experts can be dangerous (and sometimes helpful)
- What to do when you are getting advice about money from a co-worker
- Why you might feel compelled to take their advice
- What to do once you have the information (before you take action
Additional Resources:
- Local workshop locations and dates: FedImpact.com/attend
- To be introduced to a local financial professional: FedImpact.com/request-to-meet
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Transcript of this episode:
Originally released on 8/13/2024
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If you’ve been working in the federal government for a while, no doubt you’ve met the water cooler expert. You know, that self-appointed office expert who thinks they know everything about what everyone else in the office should be doing, especially with their money? And while I think most of these people are very well-intentioned, chances are you should think twice before taking their advice at face value.
Hi, I am Chris Kowalik 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 super clear on what you want and taking action to make it happen.
Agenda on Water Cooler Expert’s Financial Advice for Federal Employees
Today’s topic is one that is near and dear to my heart because I see too many federal employees take the advice of these water cooler experts, only to realize that their advice didn’t fit with that person’s situation. And so it ends up being bad advice, sometimes really bad advice. We know this because we hear all sorts of stories at our retirement workshops about the advice that employees are receiving from these water cooler experts, and so I have to talk about it today.
Today, we’re going to cover why these water cooler experts can be dangerous, and frankly, even a few ways that they can be helpful. I want to be fair here, but we have to point out both sides.
Next, we’re going to talk about what to do when you’re getting advice about money from a co-worker. Maybe it’s even unsolicited advice. Who knows? Why you might feel compelled to take their advice, and what to do once you have the information, but before you take action on the advice itself.
Throughout today’s material, we are going to talk about some different resources. Those will all be available to you. I’ll be sure to share how you can get those here at the end of the session, and that will help you to feel like if you need some help, that you’ve got a place to be able to go regarding financial matters, benefits, decisions, all of that. So stay tuned for access to all of that information.
What is the water cooler expert?
Like I mentioned in the introduction, this is the self-appointed office expert. The person who is self-taught. They perhaps read a lot about these topics. They may have very extreme views, they may have very mainstream views, just depends on the kind of person that you might be dealing with. Back in the Marine Corps, we would call these barracks lawyers, right? The Marine in the barracks that knew what everybody should be doing. Same kind of concept here.
And let me start by saying I think these people, for the vast majority of the time, are very well-intentioned. They’re often misinformed though, and they’re misinformed for a lot of different reasons that we’re going to dig into here today. But here’s something that I want to bring to the forefront pretty early in this episode, and that is that these people who are giving this advice, whether solicited or unsolicited, they are not responsible if you do something dumb. They’re not responsible if you take their advice and something bad happens to you.
That’s why I kind of lump these people in with book authors and radio personalities and TV celebrities that give this broad brush advice to people that they don’t know and that they’ve never met. I listen to a lot of podcasts, I read a lot of books. All of those things are good, and it’s okay to use that to spark ideas to get people talking, to get people thinking, wondering, “Hey, is this possible for me?” I’m all for that, but it’s another thing to give advice to someone you don’t know anything about.
But here’s where things get a little messy. The water cooler expert does know you. They at least know the surface level you that you’re willing to expose at work. But that’s where things get muddy here, because chances are, you have not divulged your entire financial circumstance to the water cooler expert that you happen to be hearing some TSP advice from. We have to be able to think through the scope of what this person knows about us and our situation before we’re taking advice from that person.
What do they tend to give advice about?
Well, like I mentioned a moment ago, the most popular topic is the Thrift Savings Plan. But really, all of these topics are on the table. And frankly, even though you’re at work, these topics might not have anything to do with anything about your federal benefits. It may simply have to do with money in general.
And frankly, it can be lots of things. It doesn’t even have to be money, but for the context of this conversation that we’re going to be having today, we’re going to focus on kind of the financial aspect. With respect to TSP, that’s the most popular topic ’cause there’s so much fuel for those conversations in the regular media, right? We’re always hearing about market up, down, inflation, recession, all of those pieces that tend to drive those TSP conversations.
But we also hear topics like, when’s the best time to retire? Which month? Which day of the month? Picking that quote, “Perfect retirement date,” based on that stupid chart that gets passed around every year. I hate that chart. You guys know what I’m talking about. The one that’s like, “In 2024, you should absolutely retire on these three days because they happen to align with the last day of a pay period.” Who cares? Who cares? It’s only changing one pay period of annual leave accrual. There is nothing special about those dates.
When people hone in on those charts that make it seem like that is just the perfect time to go, but they haven’t bothered thinking about the rest of the financial decisions that they have to make, it’s super short-sighted. But we hear people talk about this day in and day out, always asking for that chart, and it makes me absolutely crazy.
Anybody who comes to me directly and is like, “Hey, do you have that chart of when we’re supposed to retire throughout the year and why this is the perfect retirement date?” I set the record straight, “I think this chart is ridiculous, absolutely ridiculous,” but people love to talk about things like this.
The next thing is the special retirement supplement. Who gets it? Why you might not get it, what things to be careful about. Thinking about federal benefits, why the life insurance works that way in retirement. Some are like, “Hey, that’s really dumb. It gets really expensive. Why would you keep that coverage?” Without really knowing your situation or what it is that you’re trying to cover? Are you uninsurable? Is your health so bad that you can’t get other life insurance?
That might very well determine whether FEGLI is smart or dumb for you. And I use those phrases very liberally here, kind of in a broad brush standpoint, because chances are, most of the time the water cooler expert has a really clear picture of what they believe is true about these benefits without really looking at the bigger picture.
Next, they can talk about the FEHB plan. Every open season, there’s an opportunity to change plans. They may love their plan and want to tell everybody about how great it is, but you know what? It might be best for them but not for you. We have to be honest with ourselves about what that really looks like.
And then last, as far as the list of the benefits that we’ll cover today is long-term care insurance. Many of them believe that it’s better to take that money that you otherwise would pay for long-term care insurance and invest it instead, without really understanding the ramifications or perhaps the likelihood that you’re going to need long-term care.
This is just a spattering of different topics that we hear people discuss at the water cooler because they’re telling us that these self-appointed office experts are giving all this advice, and then we have to set the record straight as far as how all these things work.
What do I love about self-appointed office experts?
I told you I’m going to be fair today. The other side of this, is what do I love about self-appointed office experts? There’s plenty of reasons. I’m not terribly fond of them, but there are a couple of reasons why I absolutely love them. Here’s why. They can be, can be, a sense of inspiration for some people to get off their duffs and do something, right? Make decisions, be thinking about things, which I find great.
Many of them are encouraging those younger colleagues to get started in the Thrift Savings Plan or do more, and pushing them, say, “Hey, what can you do to get to 5%? Oh, you’re already at 5%. Cool. What would it take to get to 10? What would it take to max out your TSP? What about the Roth, part of TSP?” They can really spark a lot of ideas and a lot of thought, which is wonderful.
Where things go sideways
This is where the rumors start
They get the conversation going, but here’s where things go sideways. It’s where a lot of rumors start. They start out with somewhat accurate information, maybe even completely accurate information, but the audience that they’re talking to, who maybe aren’t as up to speed on how these benefits work, they end up misinterpreting some of what is shared. And little by little, when they go to share that information with their colleagues and their friends at other agencies and so on, this ends up morphine into bad information.
It’s like the telephone game that you played as kids, where you whisper something to someone and then they’re supposed to whisper it to the next person, and then by the end, it’s not what it started out as. We have to be super, super careful that we’re taking into account what the truth is versus just what we’re hearing.
Talking to someone in another retirement system or category
The next way that things can go sideways is if you are talking to someone who’s in a different retirement system or category than you. So retirement system would be CSRS or FERS. Or perhaps, you’re with the DOD and you have some non-appropriated funds people with you. They’re not under CSRS or FERS, they’re a different group, right? Or you’re dealing with the military, the service members. Those rules are different in all these various systems. You have to be talking to somebody in your retirement system.
The next is categories. This would be are you a regular employee? Are you a law enforcement officer, firefighter, air traffic controller, a special group of people? Because all these rules are different. If you’re talking to a law enforcement officer and you happen to be an administrative person in that office who’s not under the law enforcement category, the rules that they’re talking about don’t apply to you. It might be completely accurate information. It’s just information that doesn’t apply to you.
These people don’t know anything about you
Here’s the biggest way I think this self-appointed office expert or this water cooler expert situation goes bad. They don’t know important things about you. They obviously know where you work. They know how much money you make, right? It’s all public knowledge, with pay scales and all of that. They don’t know your debt, your mortgage situation, your tax situation.
Do you have some back taxes you filed late last year and now you have some penalties? Are you married? Does your spouse also have employer-sponsored benefits that you’re trying to juggle and get right? Do you have a disabled child? Do you have some gambling issues? Do you have kids that are still asking you for money, kids that you’re still trying to get through college?
Are you taking care of one of your parents? Or maybe you’re having to pay for a nursing home or an assisted living facility. You got that big inheritance from Uncle Rich. What does your retirement lifestyle, what is it that you want? Do you plan to move to another state or maybe even another country?
These are all super important things to know about somebody before you’re giving legitimate advice. It’s something that I hope that you will take into account as you’re hearing the discussions that happen at the water cooler, or wherever they might happen, that you’re using this as a little bit of a filter to say, “Hey, this is really interesting information. I’m not going to do anything with this just yet, but I think it is important for me to understand how this applies to my circumstances.” And so we’ll give you some tips here in just a second.
Red flags
Here are some red flags that you should always be keenly attuned to. When you hear someone giving advice about how someone else should be invested. Again, going back to the TSP conversation. If you hear somebody say, “Every federal employee when they are within X number of years of retirement, absolutely should be invested this way.”
And it might be one of the big extremes. “You should have all of your money in the G Fund,” or, “You should be absolutely all in the market.” That is a red flag because we don’t do that on the financial planning side. We have to be looking at the whole situation. Big red flag when someone is telling you, without knowing anything else about you, how you should be invested.
The next thing is when they’re constantly chasing performance. When the market’s going up and down, are they making big sweepy moves with their accounts? These are some examples of red flags.
Of course, there are tons of them out there, but these are the things that should cause you to be like, “Oh, I didn’t know that you were the self-appointed office expert, but now I do.” So that you recognize that this person, well-intentioned, and that stuff might work for them, and frankly, it might not work for them, but you should have your ears perking up when you’re hearing these types of red flags.
Why are you listening to this person?
Here’s my question. Why are you listening to this person? And it’s a legitimate question, and I want you to find your own way of answering that’s true to you. But I have a couple of thoughts. The first is, that it’s okay to be open-minded to hearing what co-workers have to say. I mentioned that before. That’s one of the big perks of that water cooler expert, is that they get the conversation going, they get people thinking about these decisions.
And tons of it might be great to consider, but be careful about taking their word blindly if you’ve not done your own research or your own vetting of that information. “Does this apply to me? What is my situation that might alter what advice I should be getting? How does this fit with the rest of my picture?”
Two very important questions
When we’re thinking about why you would trust a water cooler expert with this level of important decision, what you do with probably your largest retirement asset, your TSP, or any of the other slew of benefits that you have, my two questions, is this person educated and licensed to provide this advice to you? And the second question is, what recourse do you have with them if they provide you bad advice?
When we think of financial professionals out there, they have to be educated and licensed with oversight to provide this advice. When they go to give advice to their clients, they have to justify the advice that they are giving, that it is appropriate for that person, that it’s appropriate for the individual. They have to be looking at the big picture.
And if they don’t, there’s recourse. You have to understand what it is that you are doing, whether it’s through a financial professional or otherwise, but the difference here is that the financial professional has an obligation to provide that advice through the lens of your financial circumstances. And if they fail to do so, they will be held accountable.
But the biggest question here is, are you willing to listen to the advice of the water cooler expert just so that you don’t have to pay a financial professional for real advice? And that’s an honest question for you. No doubt, the idea of going through the financial planning process can feel a little bit overwhelming, but I will share with you that financial professionals are not the enemy. They are not the enemy. These are professionals who help people prepare for and live in retirement every day. Financial professionals simply are not the enemy that most people would want to make them out to be.
The real reason most people would rather take advice from co-workers than talk to a professional
But here’s the real reason, the real truth, that most people would rather take advice from their co-workers than talking to a professional. You don’t have to bear all of your details of your life to your co-worker.
Remember, they have no responsibility whatsoever to how all this plays out for you. You don’t need to divulge all that sensitive financial information, that vulnerable side. You don’t have to cough up all the assorted details of your financial past, and talking about that inheritance that you got, and the fact that you’re struggling to take care of your mom or dad as they’re aging. You don’t have to tell them any of those things because they don’t care, and it doesn’t matter to them.
That’s not to say they’re trying to hurt you in this process, but it’s easier because you don’t have to come to terms with those financial situations. You get to tuck all that away because you think it’s easier than facing it with a professional who helps guide other federal employees to plan for and live the retirement that they want.
In fact, you’re right, it is easier. It also doesn’t work. Retirement is far too complicated to leave it to a person that you’ll likely never ever see again after you retire. And a person who has no responsibility for how any of this turns out, a person who does not have to ask the hard questions that really do matter.
Two things I want you to do
Here’s the two things I want you to do. First, if you have a water cooler expert in your life, one who brings up ideas about money, they elicit these conversations, they make you think, they question whether you’re doing the right things, they push you to do more for yourself, I hope you’ll go thank them.
Thank them for igniting a spark in you that’s causing you to know that you need to take matters into your own hands, get to the real root of the situation that you’re dealing with and take action. Because I think this is the very best that a water cooler expert can do, is to inspire people to do something, to take action.
The second thing I’m going to encourage you to do is to get real about planning for your future by seeking the help of a financial professional. These are people who can truly understand your financial situation because they must know those things in order to provide you real guidance.
And of course, you guys have to make sure that this person understands these federal benefits because it changes the advice you’ll be getting. You guys are different than the average person out there who may be seeking advice from a financial professional.
Federal benefits are odd. There are all sorts of weird rules, and you want to make sure you’re talking with somebody who understands those intricacies so that they can help you leverage every one of the benefits that you have to your advantage and keep you from making decisions that otherwise will not serve you well.
Super, super important that we get that right. And seeking advice from a financial professional is something, that although it can be a little overwhelming and a little bit vulnerable, it is the key to you getting this right so that you retire one time and you stay retired, and that you’re happy in that phase of your life.
Wrap Up
As we start to wrap up today, if you have not been to one of our retirement workshops yet, or you need a refresher, and if you want access to the show notes from today’s episode where we list out some of the resources that we’ve talked about here today, for instance, getting some firsthand knowledge of how these benefits work, linking up with a financial professional who understands how these things work, we have a whole network of those that we work with every day.
If you want that, pull out your phone and text the word ‘PODCAST’ to the number 224-444-6144, and we will make sure that you get access to both the show notes from today’s episode and all of the workshops that we have open so you can find one in your area. In addition to that, within the show notes, you’ll have a link to be able to get introduced to a financial professional so that you can start this journey on your own.
Again, to get that, text the word ‘PODCAST’ to 224-444-6144, and we’ll send an email to you right away so that you get everything that you need. If you need some help, some financial coaching, if you will, please get the help. You owe it to yourself to get legitimate help from a pro, not the water cooler expert that might have the best intention but doesn’t know your situation.
Getting linked up with a financial professional in our network assures you that this person has gone through a series of training. They have our ongoing daily support to make sure that if you bring them something weird, we’re going to be able to get to the bottom of it so that we can get you taken care of.
To wrap up, couple of things we want you to remember about this water cooler expert topic here. Water cooler experts are typically well-intentioned, but what they don’t know can hurt you. The rest of your financial picture that they don’t understand because you’ve never told them can hurt you. Get ready to get a little bit uncomfortable talking with a financial professional, ’cause you’ve got to be able to lay it all out and get super clear of where you are, determine what you want, and then design and build a plan to get there.
No more hiding behind the water cooler expert who doesn’t dig deep. They don’t know your situation, they’re not asking all those deep questions. You’ve got to make sure that you’re talking with someone who has the full financial picture before they’re giving advice.
That is it for today. I hope that our talk about the water cooler experts has been helpful. You guys probably know who that is in your office, and if you’re not quite sure, it might be you. So be careful. Stay tuned to the FedImpact Podcast to get straight answers and candid insights on your federal retirement. And if you haven’t already, subscribe today so you’re sure not to miss an episode.
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