#131 The Government Is… What Can You Control?

Micah Shilanski 00:00
Welcome back to the Plan Your Federal Retirement podcast. I’m your co host, Micah Shilanski, and let’s just say we live in some interesting times, and so we’ve gotten a lot of questions over the last series of weeks and months about some how do we look at the things that are happening, what are action items that we need to do, how do you make sure that you’re financially prepared and protected, so we thought we’d do a podcast just on this, and to make sure we’re hitting all the spots, I wanted to bring in another great financial advisor. Now, just to be fair, I do have to say that, because she’s my older sister, but really, she is pretty good at what she does, Jamie, welcome to the pod.

Jamie Shilanski 00:35
Since you emphasized older, can I emphasize that you are my baby brother.

Micah Shilanski 00:41
Well, I was trying to beat you to the punch, because you always introduced me that way, so I’m like, oh, I get the lead this time.

Jamie Shilanski 00:48
You know, what’s hilarious is when you eat Micah and I am person, I am five foot eight, and how tall are you? 6’2? 6’3, yeah, so I’m so before you come in the room, I’m like, hey, can I introduce you to my baby brother? And of course, that word baby always makes somebody think somebody short’s coming in, and then this magnanimous man walks in, broad shoulders, 6’3, and I’m like, yep, trust me, he’s still a baby.

Micah Shilanski 00:53
6’3. All right, so a couple things that Jimmy we wanted to make sure that we were jumping into today. One is, ever since February, we’ve been getting just a ton of phone calls, emails, messages, etc, all across the spectrum, coming in from not just some clients, but some, you know, people that aren’t yet clients, and just saying, hey, what do I do with my benefits? What do I do if your social security goes away? What do I do if I ripped how does this fear work? How did the fork work back when we were talking about that, right? How do all of these things come together? And as we’ve been working through several months of this thing, one common thing echoes again and again and again with the people that we talked to. Well, I guess it’s kind of two things, but one of them is, you need to control the controllables. There’s so many things that are outside of our control. What is Congress going to do? Who knows, right? I have some guesses, right? This is my one political joke, so I hope everyone listening laughs. The problem with this administration is the same with the previous administration, they don’t return my phone calls, like I have great ideas on what they should be doing, but we don’t get to control that. So Jeannie, I think it’s really important, and we live in uncertain times, we really focus on things we can control, making sure we’re prepared.

Jamie Shilanski 02:19
So earlier this year, the government dropped a four letter F word on federal employees. Fork is the one I’m referring to, and since that has happened, as Micah said, you know, we work with a lot of federal employees all across the United States, and I just started getting just these, these messages that were short, they were quick from Feds, and they were really concerning, because it was, what do I do? Am I going to have a Vera am I going to be offered a VSIP? Should I take the deferred resignation? Should I wait until a better offer comes in? And it was just these barrage of confusion for federal employees, not knowing who to trust, what to listen to, what were the next offers coming down the pike? And I saw a lot of emotional decision making, so I love your emphasis right now Micah, about there’s a lot you can’t control in the world right now, so what are the levers that you can control? What are the things that you can pull on, and say, I don’t get to decide on that, but I do get to decide on this.

Micah Shilanski 03:18
That’s the main one we want to focus on. The second one that I do have to say we need to focus on is the aspect of you have to know how your benefits work. This is so, so important, right? To know these things. So many of the questions we have coming in is because we don’t understand how our basic benefits work. Now I understand, like, I’m going to get over my skis a little bit, right? But on the psychology side of this, what happens is, logically, we know something, then we get hit with this aspect, which is emotional. It kind of hijacks our brain, and now that logical side really isn’t kind of functioning well and understanding our basics. Now the challenge that we have with that if we’re in that emotional state, sometimes we don’t always make the best decisions. So I love it when people reach out, and we can start walking through this. So again, if you’re in that emotional state, not trying to plug for business for us, but make sure you are talking to someone that understands how your benefits work. Because most of the time, these decisions, if you walk through them step by step, it becomes pretty clear what decisions you should make, but you can only get there if you really understand your benefits and how they work.

Jamie Shilanski 04:22
And Micah, I think you had a similar experience, but I had a client last year, we were prepared to retire December 31st and you know, she’d already done 30 years of service, and she was like, you know what, I’m gonna finish, I’m done, and as she submitted her retirement paperwork, her agency came to her and said, wait, hold on a second, we don’t have anyone to replace you, we have, you know, this brain drain, so is there any way would you please stay on, because we just got assigned this new project, she was super excited about it, and she said, you know what, I don’t hate the people I’m working with, I don’t hate the job, I’m going to delay my retirement, and I’m going to, I’m going to stick around. Well, all sudden, that postponed you know, the deferred retirement package came out, DOGE started getting involved, and she just started panicking, and said, I don’t know if I’m ready to retire, I don’t know if I’m cash flow prepared, I don’t know if our investments are set up, and I had to say, hey, Sue, because all of our clients are Bob and Sue. I said, Sue, pause. We were going to retire just a couple of weeks ago, like, less than 12 weeks ago, we were ready to retire, you’d already built a successful retirement plan for that opportunity, what’s changed between now and then and as you’re alluding to I really think her amygdala got hijacked. You know, we had this this timeline, this pressure, this decision, this fury of things happening, I mean, more and more bills going out that they could keep up with and not knowing who to lean on to get information, and so in that particular situation, we got an appointment, got them on the phone and said, hey, let’s start looking at cash flow, let’s forget about how this is being offered to you with the VERA and let’s start looking at your retirement income plan. So what are the things that you can control today?

Micah Shilanski 04:24
Now, Jamie, I’m going to add to that a little bit, right? Because again, we’ve had so many of these conversations. So if you’re listening to this, you’re like, oh my gosh, Micah and Jamie are talking about me. Don’t worry, we’ve had similar these conversations with many Bob and Sue, but again, I was talking to an individual, Laura, 40 that had just contacted us for the first time, as we’re going through things, they were very concerned that they were going to lose their job, not sure if it was going to take place or not take place, so how do we plan for that same conversation? Let’s control the controllables, now I’m going to tell you what we mean by that in just a second, but one of the things we’re going to do is we call this our fear setting exercise. Let’s take what we’re most worried about now. How do we figure that out? When you lay your head on the pillow at night, what keeps you up? That’s what we’re most concerned about right now. So how do we take that and how do we start addressing it one step at a time? So let’s take job loss. I don’t know if I’m going to be terminated. Okay, let’s look at your benefit set, and let’s say you were terminated at the end of this month, just for discussion, what would be our game plan now, Jamie, this is the same process, by the way, we use with a client in good times when they’re like, hey, Micah, I don’t know if I want to retire this year or in three years. Well, what would be the advice we’d give to the client? Pick the soonest possible date, and let’s plan for the soonest possible date, and if you want to extend and work longer, that’s super easy to do. Sometimes it’s hard to accelerate.

Jamie Shilanski 04:24
Yeah, and so one of the things that we often talk about when we talk with clients, is, is that cash flow, and we call it the king, you know, cash flow is king, it’s a heartbeat of retirement. And so when we look at the things that we can control, we want to say, all right, so if I, if I go without my paycheck, if I move off of, you know, losing my job, and I move into having a pension, or move into a different income can I am responsible for my income control? Not always sometimes we can have the timing, but we are control of our expenses. So it’s really when we start sitting down and saying, all right, what expenses can we tolerate? What do we have saved up? And like I was sharing with you earlier, that you know, 40% of United States citizens say that they are ill prepared financially to stomach a $1,000 emergency expense without it going on some type of credit card or debt, and when I look at the 23 statistics, the 24 statistics, and as we climb into 25 we start looking at credit card debt, and say, how long are people carrying credit card balances? Well, I think the average balance is just over $6,000 is what most consumers have on their credit card. We’re seeing people delay paying off those credit cards, and that’s inching up into that 9% so what does that tell us? That tells us that our expenses are exceeding our income and that we’re carrying debt just a little bit longer, because $200 at the grocery store doesn’t get you what it used to.

Micah Shilanski 04:24
One of the mistakes that I see as a financial advisor after federal employees go to retire is not understanding how it’s different when you’re in accumulation mode, saving money for retirement, building your TSP, to you’re in the distribution mode, pulling money out of the TSP. Sometimes we think that we can manage everything the same, then it comes to retirement, and we all of a sudden, we have this flood of different types of emotions. And it normally happens to people that generally aren’t emotional about investments, and if you are, it happens to you even more. So we put together a guide for you, a free guide, in order to help know what questions you need to ask, know what learning lessons are out there, and how should you build a proper distribution plan with your TSP? This is so important, because how you got here in order to be able to retire is not how you’re going to stay retired. There are some differences that we need to keep in mind. And more importantly, we have to come up with a plan that not if when the market goes down for a long period of time, how do we, say dispassionate investors, how do we hold for the long run, but have a plan that you won’t run out of money. In order to get your free guide, jump on our website at planyourfederalretirement.com/tspafterretirement that’s planyourfederalretirement.com/tspafterretirement. Take control of your retirement savings, get this guide so you can make smarter decisions about your retirement. So Jamie on that right and pick on what you said, cash flow is king, so how much does it cost to live a month. Now, again, I like, you know, my little buckets, right? And how we’re doing things, so if I did cash flow management, if I could wave my magic wand, everyone would be using kind of five general categories to manage their cash flow, right? Household, travel, entertainment and medical and kids, right? Those are kind of the five areas I did them out of order, so I’m stumbling through them, but those are kind of our five areas that we have to go through when we’re looking at this. Now, what I like about that is we get to see where we’re spending money. Now, we have things that are pretty reoccurring, right? We have the household, you know? We have the aspect of, potentially, hopefully, it’s not medical but medical expenses, we have the kids, okay, those are going to be, we’re kind of know what those are. What are the things we can control, the travel and entertainment side of this equation, right? And so there’s times that says, hey, inflation’s up, things are up, your pay hasn’t quite kept up with inflation, we need to make some hard decisions, but the number one thing to do make sure you’re financially stable, right? Do I have enough in emergency reserves? What does that mean? Three to six months of expenses if we’re not close to retirement, if we’re worried about our job, if we’re closer to retirement, that goes to 12 to 24 months. What does that mean? That means if I’m spending $8,000 a month, and I need 12 months of that, right? I need almost $100,000 set aside for that 12 months at $8,000 a month, that’s what we’re talking about right here, and that’s not necessarily money carved out in your G fund, like, ideally, this would be money in a bank account, and if you’re not there, start with where you’re at. What we have found with clients is the more cash flow, they’re prepared when things happen, and let’s say you keep your job, and I don’t know, hypothetically, the government shuts down and quits paying federal employees.

Jamie Shilanski 11:58
That has never happened. I’m sure I’ve never read about that

Micah Shilanski 12:01
Never happend right? You know, those times are so much easier to bear because we have cash in the bank, and so it starts today. How are we monitoring your cash flow? How much are you spending? How do we make sure we’re carving out a little bit of money each month to put yourself in a better financial position?

Jamie Shilanski 12:17
And Micah, one of the things is, you mentioned the G fund, you know, I think about 2008 and how many people moved, I mean, they had like a, you know, was mid 30s participation in the G fund, and it skyrocketed to almost 50% participation in the G fund during the global financial crisis, but not ahead of the global financial crisis, right? It happened during that time, and I think a lot of that happened because you’re so emotionally tied to your investments, and even right now, you know, with all the VERA’s, I had a client come Bob, and he said, I’ve been offered a VERA, but I can’t take it because my TSP is down, you know, X amount of percentage, and, you know, it’s time in the markets, not timing the markets, it’s an old adage, but it’s one to really think about, because if you’re constantly trying to time your retirement around what the markets are doing, that’s something entirely out of your control, you’re not going to be able to control the markets, and if you are, you’re probably listening to this on a beach somewhere very warm.

Micah Shilanski 13:22
That’s right. So these are things that we really got to think about Jamie as the long term side of things, right? As the aspect of saying, what’s our short term plan, what’s our medium term plan, what’s our long term plan. So looking at your cash flow, what’s your cash flow plan? What’s your investment plan? Let’s get into your financial basics as well your federal benefits, right? Have you done everything you need to do prepare for retirement? What are those from all the podcasts that we’ve done, right? Have you updated all of your beneficiaries? You got at least four out there, your last paycheck, your TSP, the FEGLI, Federal Employee Group Life Insurance and your pension? Have you updated those? Do you have all of your SF-50s? Have you requested a certified summary of federal service? Do you have an estimate as of your benefits on what they would be paid? Do you know what these things are that, God forbid, if you’re cut loose from the government sooner than you intend, do you know what your benefits should be? Do we have a plan for that period in time when we plan for it as challenging as is, it becomes so much easier to think about and to handle and to do, because now it’s not an unknown, and I really think it’s that unknown that scares us, we don’t know what’s going to take place. So let’s face that head on, and let’s get a plan for the unknown.

Jamie Shilanski 14:30
So one of the articles that we wrote, and you did a video on it, Micah, and it’s on our website, planyourfederalretirement.com and it’s called, is your FERS go bag ready? And there we walk through, you know, I think four or five different things, that regardless of whether or not you’re accepting a VERA or a VSIP, or if you’re going to retire this year, or maybe you’re hoping that it’s, you know, 5 or 10 years down the line, we’re in a really volatile year for federal government employment, and so knowing what those belongings are inside of that FERS go bag is really helpful, because if anything, you’re like, you know what? I’m prepared, no matter what’s coming down the line that I can’t control, I’ve already taken these action steps and prepared myself for opportunities.

Micah Shilanski 15:14
All right, let’s talk about another hard one, Jamie, as you’re going through these times, is the aspect of when you’re preparing for this, who do you listen to? And this is something I’m going to think about of saying all right, where are you getting emotionally spun up on, right? If you’re listening to stuff, you’re getting emotionally spun up, you know what, maybe that’s not a place that we want to listen to to get planning advice from, right? Because now we’re not in our logical frame of mind, we’re not kind of logically thinking through this. So you want to listen to people that have good information that you can understand, implementable and you know, just look for that warning sign if you’re getting emotionally spun up, even by listening to me, unfortunately, right? If you’re getting emotionally spun up, you’re probably not hearing the good stuff that’s we’re trying to get out there. So making sure you’re listening to a medium that you can hear logically about what steps do you need to take in these times?

Jamie Shilanski 16:04
And a lot of the emails and conversations I’m having with Feds right now are, hey, my HR, everyone’s talking about this,my coworker said that, they saw this on the news, they saw this on the media, and we’re all somewhat, I think, aware that algorithms show us the news that they think we are going to respond to the most.

Micah Shilanski 16:23
Sure, yeah.

Jamie Shilanski 16:23
And we have some awareness of that, and it becomes really, really hard to discern what information is factual versus what is opinion being published that looks like fact on the internet, and so one of the pieces of advice that I always tell clients is, you know, and maybe it’s not somebody’s vlog or blog, maybe it’s not even a news outlet, unfortunately, but you’re going to opm.gov you’re getting it from the horse’s mouth, if you will, you’re going to plan your federal retirement, you’re going to irs.gov you’re going to these trusted sites that have a reputation of putting out credible information that’s hopefully dispassionate, that it’s just whether you, as Micah said, whether you like what we have to say or not, this is what you should be thinking about and discerning for yourself.

Micah Shilanski 17:12
Yeah, absolutely. And then to kind of boil it all down to the next steps that you need to do, right? You know, taking action is the most important thing. Now, sometimes taking action is not taking action, which is going to sound really funny, right? Sometimes taking action is looking at where you’re at, and maybe you’re set up for this. You’ve reviewed this stuff, you have your cash flow set up, you have your investment plan set up, you’re prepared for the worst case scenario, and you could say, you know what? I have this set up correctly, I’m not going to make any change. Sometimes that’s harder than making a change because you feel like you need to do something. But if you’re on a good path, things are working the way they’re supposed to be working, let’s take market volatility for a second, we joke about this a little bit, but I got two types of clients that are the most concern when the market goes down. Number one, it’s younger investors who really haven’t seen this type of market.

Jamie Shilanski 18:04
They haven’t lived through it.

Micah Shilanski 18:06
Exactly, they know what’s happened, but they’re like, Micah it’s different this time. All right, then everybody, because it’s my money that’s correct, right? So that’s the first type. The second type is the ones that have been through this a lot, but never as a retiree. So those that are just retired, I’m gonna say within about 18 months of retirement, about 12 months before, about 18 months after, in that retirement window, all the sudden we become a little bit more emotional, we’re like, holy crap, this is all the money that I have, I don’t want to go back to work, and now again, that amygdala is hijacked, we start making these emotional decisions. My clients that are the most fine with markets dropping 30% are the ones that have been retired for 20 years. They’re like, ah, my guess is old hat, you told us this would happen, markets move up and down. Yep, we got our cash plan, we got our income plan, we got our growth plan, and it’s not that they have more knowledge about what’s happening or more money or more money, it’s not about that either, no, not at all. It’s just more wisdom, right? They have these experiences of going through firsthand that says, you know what? The White House changes, Congress changes, markets are volatile, moving up and down, and if we keep working a good plan, good things come at the end of it, so it’s really important to keep that in perspective.

Jamie Shilanski 19:17
And I think that’s where going and making sure you understand that you’re working with somebody, you know, a financial advisor that understands your benefits and can draw you out a retirement income timeline, because that’s a significant part of what’s missing from most retirees is understanding, if this, then that. So there, there are different retirement income sources you have, you know, as a federal employee, you’re going to have your pension, hopefully, if you retire from federal service, and then you’re going to have your TSP. So is the money you put in, plus the money your agency has been putting in over time, you’re going to have potentially Social Security, because most of our listeners are from the FERS system. So you’re going to have your Social Security benefits, and then you’re also going to have any private investments or savings, that you have done. But you have to know when I look at those four sources, they’re different levers that I’m pulling at different times. I’m not pulling one of those levers absolutely draining it and then slamming it back up to zero, instead, I might pull on it a little and then back off of it somewhat as well. And we do this a lot when we talk about the FERS special supplement, and so you know, if you’re eligible for the FERS special supplement, you’re gonna it’s gonna stop when you hit age 62 well, does that mean you should start your Social Security at 62 maybe, maybe not, for most of the people we talk with, it doesn’t make sense to start Social Security at age 62.That’s not blanket advice, you have to look at your individual situation and say, how am I prepared to move into a period of retirement, and what are my different income sources? Because instead of going, you know, when you’re working as a federal employee, you got 20, 30, years under your belt. You’ve been getting a paycheck every two weeks, right? So, so you know when the income is going to hit your bank account. When you move to becoming a retiree, your pension check comes one time a month, and so it might not be enough to cover your regular expenses for how you want to live retirement, so we’re also going to be pulling on these different levers, might be starting Social Security, you might be taking money out of the TSP, might be your private investments. We’re going to have all of these different sources of funds, and you need to know how you’re going to strategically set those up. Sometimes we talk to clients like Bob and Sue will have the markets have been good the last few years, and, you know, the retirees have done, you know, in some instances really well, and so when that happens, we sit down and say, great news, we’ve got a little cushion, we can move this up a little bit, but if markets go down in retirement, then what are the levers we’re going to pull then? And maybe it’s not your everyday expenses, but maybe it’s we normally pay for all the kids to go to Hawaii every year. This year we’re going to pass on doing that, maybe we’ll go every other year, and knowing what it’s not, am I gonna eat this month? It’s maybe we’re not going to do this extravagance this year.

Micah Shilanski 22:10
Well, Jamie, this podcast is all about action items, right? So let’s talk about some action items our listeners can implement. Number one is make a list of the controllable things that you can fully control. That’s cash flow, your retirement plan, etc. And then also with that, I love written plans. They don’t have to be complex. I’m a big one page plan kind of guy, right? Super simple, so we can see it, understand it, and then know what that plan is, if you’re married, especially between you and your spouse, if you can manage your cash flow, you can manage your plan, that’s probably going to give you a lot of comfort in uncertain times.

Jamie Shilanski 22:43
Yep, second thing I’d love for you to pop over to plan your federal retirement, go through that FERS go bag checklist, no matter where you’re at in your career, and just make it something that’s annual, you know, we have on there, going and downloading your official personnel file online. Maybe, you know, at 12.31 every year, your first task of the new year is to update that information so you always have access, because maybe you’ve talked to some federal employees that you know who took the deferred resignation and they went to work one day and were told to turn in their laptop and turn in their badges, and they were done, they didn’t have access to anything anymore. So we’ll link it in the show notes, go through there, use that as a checklist and make sure you’re preparing

Micah Shilanski 23:26
Awesome. Jamie, thank you so much for joining me and to all of our listeners till next time, Happy Planning!