Many feds are as sheltered as children. Yet they’re expected to make financially responsible choices.
I recently surveyed 563 Feds to learn how it is possible that so many are financially unprepared for life after Federal Service.
In a recent radio appearance, I was interviewed as a “Federal Retirement Specialist” by Tom Temin, host of the Federal Drive, in Washington D.C. Our conversation primarily concentrated on the conclusions of this eye opening survey. Its results seem to support the theory that little information escapes an informational “Black Hole” to inform and prepare federal employees about their retirement benefits.
The survey revealed the likely origins of this troublesome issue to be, continued reliance on outmoded training philosophies and standards. I believe the “old school” philosophy focuses on over protecting those that don’t have the comprehensive foundation to fend for themselves in an increasingly complicated financial world. “So”, some protective parents may ask, “What’s wrong with that?”
Feds are not children. They need to be released from these overprotective and repressive methodologies and notions. I always heard, “The only constant in life is change.” This old adage apparently doesn’t apply to Federal Retirement Training. Instead it seems another old adage is securely in place, “But we’ve always done it this way…”
While we do live in a complicated financial world, I don’t believe that Feds should be sheltered from it. On the contrary, it seems to make more sense, now more than ever, to expand their knowledge base.
This is the final piece in my 5-part series – Federal Retirement Facts and Myths: Do You Know the Difference?
In this series we have looked at various issues concerning truths and misconceptions concerning Federal Retirement.
The previous 4 articles addressed:
- Recognizing Good Advice and Avoiding Bad Advice
- Finding Reliable Retirement Income Facts
- The Pros and Cons of Staying in or Rolling Out of the TSP
- Locating a Fed Focused Advisor
It seems only fitting I finish this series by addressing the federal retirement training.
For many Feds clear, consistent and thorough training is not available. To be sure, government provided information is offered on TSP.gov and OPM.gov. However, for anyone not familiar with the jargon and concepts, this info is like learning a foreign language. Yet, training on the subject matter is sporadic, erratic, late and (for many Feds) unintelligible.
I witness the end result of these long-held training practices. Surprise, the minimal distribution of vital retirement planning information ISN’T WORKING! Certainly not as well as it should be.
Food for thought – Feds across the country are tasked with the responsibility of supervising the security of our nation, maintaining national infrastructures, managing healthcare, paying our nations debts and supervising numerous social programs (to name just a few responsibilities).
Perhaps it’s possible, these same Federal professionals can become mature managers of their own financial destinies, as well.
When we were newborns, our parents would do everything for us. They would feed us, clothe us and care for our safety. As we got a little older, they would instruct us how to perform chores or tasks that we hadn’t previously carried out. They would be by our side to assist if we faltered. As we neared adulthood, they were sensible enough to know that in order for a child to become an adult, the child had to learn autonomy. As the child got older, it was important to teach them personal responsibilities.
Feds need to be permitted self-reliance in their understanding of at least the basics of investing, retirement planning, federal retirement benefits and risk assessing. With the current training system(s) in place, these are not reasonable goals for most.
They require (mandatory) comprehensive and on-going education that would permit them the ability to grasp and even excel in retirement preparations. How can Feds be expected to become fully responsible for, and wise about, their retirement income futures, if their “Parent(s)” won’t freely release their substantial control of information?
Chris is a Fed that I met some years ago. Chris was “self-taught” on federal retirement benefits and had put together his own retirement plan. It was fairly simple. Chris was eager to retire at 59. He would use: his federal Pension, annuity supplement and an annual 5% distribution from his TSP for income. Finally, when his SSA retirement income benefits would kick in, he would be “set for life.”
Chris was insistent he didn’t “need” an advisor, because he wanted to leave his TSP assets in the TSP when he retired. This is a common plan many Feds expect to use.
But, there were huge gaping holes in Chris’ plan that he either couldn’t or wouldn’t see. For example, I suggested that using his TSP early in retirement (and at that rate), in his case, was likely an unsound plan and suggested that he may not want to delve into those assets until much later in life. This would allow them the ability to grow, so that when he was older and not able to work any longer, he would have another substantial income source to tap into. I also suggested that a qualified “Fed Focused” advisor could provide insights and experience that would be extremely valuable to Chris’ distribution and investment plan.
Chris turned 59 in 2007. He chose to stay with his original plan. The 2008 market crash occurred. Chris was not prepared and didn’t have the training or expertise to handle the decline in his TSP account. When Chris retired he had $530,000 in his TSP. The plan he developed required him to take $2,200 per month from the TSP. By the end of 2008 (less than 2 years into Chris’ retirement) his TSP value had dwindled to less than $280,000.
Chris returned to work in 2010. He is hoping to retire…again in 2018, when he will be 70 years old.
Chris didn’t know how to properly develop a retirement plan or manage his assets to match his risk tolerance. When he initially received professional advice, his lack of education and understanding on the subject lead to him to ignore it.
It’s been proven time and again, the more education an individual has in a certain field, the greater chance they have of success.
Feds want more education in Federal Retirement Benefits, Retirement Planning, Investment Management and Risk Comprehension. It’s time to take off the training wheels and let Feds develop financial maturity so they can avoid mistakes like Chris’.
Note: Nothing can replace years of training. However, I try to provide as much support to Feds as possible. The following is a link for anyone interested in learning more about the book (You FIRST) I published as a technical guide to federal benefits. Or if you are in or nearing retirement, you may be in need of a free Federal Retirement Readiness Review (FRRR). I donate up to 8 (1 hour) FRRR’s per week.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risks, including the loss of principal. No strategy assures success or protects against loss.
Silverlight Financial donates free/no obligation Federal Retirement Readiness Reviews. These reviews culminate with a no cost phone consultation with founder, Randy Silvey. To personally request your FRRR email: [email protected]