Discussing Risk Tolerance and Income Options with Justin Pierce: Audio automatically transcribed by Sonix
Discussing Risk Tolerance and Income Options with Justin Pierce: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Speaker1:
Well, welcome back to the Federal Retirement Show. I'm your host, Val Majewski, with American Benefits Exchange. And if you've been following us, we've been talking about the top ten mistakes and as well as some of the ins and outs when it comes to what federal employees experience, what they go through along their working career. And I want to talk today to one of our top representatives, one of our regional folks that is amazing at working with federal employees. He has done a tremendous job in assisting federal employees with not only their benefits, retirement info, but just making sure they're set up in the best position possible. So I want to introduce our guest today. Mr. Justin Pierce. Justin, as I said, is one of our top reps in helping federal employees. Very sharp individual when it comes to benefits, knowledge, retirement information and and really solutions in ways both inside the box and outside the box to help you, the federal employee, when it comes to benefits, retirement, just setting yourself up in the right way. So, Justin, thank you so much for joining us today. Appreciate you taking the time out here to talk federal benefits and to share some information with the federal employees tuning in.
Speaker2:
Hey, Val, thank you very much for having me. I appreciate it. You're very welcome. This beautiful day today. I'm glad I could share it with you. Just let me know what you need.
Speaker1:
You want to get into first. For those that don't know, you tell me a little bit about your history in working with federal employees, how you ended up settling in and focusing on the federal employee. Because I know this is the bulk of what you focus on day in and day out is talking to federal employees, guiding them through their individual situation. So tell me a little bit about your history and how you landed on helping federal employees?
Speaker2:
That's a great question, Val. And like a lot of financial professionals who work with federal employees, we work with other private citizens as well. And that's where I got my start. I actually got my start in the financial services doing mortgage protection insurance back in 2008 for the people in the private sector. And then I remember calling up Bryan Pearson, your boss at American Benefits Exchange, back in 2010, and chatting with him a little bit. And he said, Hey, we've got some seminars that we do for postal employees and we got some people that are interested in finding out how their benefits work. Would you be willing to go out and see them in their home and talk to them and present to them and help them? And I said, absolutely. So about 2010 to 2012, I was doing that part time. I would call people up, go go see them at their home, review their earnings and leave statements with them, answer any questions that they might have, go over their six main federal benefits that they have now and into retirement. What their options are project their their pension and their TSP annual incomes and just have a dialogue with them. And then I eventually ended up doing that full time at about 2012 era and doing that in the home, doing conferences with you, union meetings, things of that nature, anywhere and everywhere. I could be of service to federal employees. That's kind of how I got my start. And now I do it 100% virtually across the country. And now I can see a lot more people a lot more effectively.
Speaker1:
Yeah. And what again, drawing you to federal employees, is there just something that these folks really need, this information? There's a gap here as far as what's being taught by the government to their employees. Is that kind of what what drew you towards them and wanting to really focus and specialize in working with the federal.
Speaker2:
Yeah, I could I could tell right away with just the first couple of weeks of working with people way back in the day that there was a huge deficit between what what the federal benefits and retirement package was and the information delivery mechanism that the federal government had to delivering that to the employee. It was nonexistent. And I would say the problem is, is each agency is tasked to do it differently, as you know. So VA might do it differently than the FDA, which might do it differently than Social Security. And so there's no real rhyme or reason. And I could tell that folks needed someone who could not only help them with their benefits, but also answer their day to day questions, some of their simple HR questions that would take h.r. 2 to 3 weeks at best to get back to them. So these were people that were clamoring for good information, not just in the beginning, but also through the rest of their career, having someone as their advocate.
Speaker1:
You bring up a really good point there about the different agencies doing things in different ways. Right. I have found there's there are different agencies that will have different levels of knowledge and it's pretty consistent like, okay, well, this agency does a better job than this one or the. And that one. And then there are some that just do a completely poor job, right? If we were grading them on a scale, they would get an F as far as federal benefits knowledge that they're sharing with their federal employees. And that's that's troubling, right? Because there's this is their career, but this is also their retirement and preparing properly. And a lot of the information just isn't shared with them.
Speaker2:
Right. It is very vague. It's very out in the abyss of the red tape of of the government bureaucracy. Like you said, it's not fair to the federal employees with as much time and energy and effort the federal employee serves our country with because they're serving our country, maybe not in the same capacity as the military, but they're still serving and they don't get the type of treatment as it relates to, like you said, a simple location or a simple source of understanding how things work, where their document location hub is, how to submit the form to retire, how to request the form to require which which form to request. I mean, it's as basic as that that they're just not getting served on. And that's where people like myself and you fill those gaps.
Speaker1:
And this is interesting, right when I first started working with federal employees, I would talk to a a surgeon at the VA or somebody that works for NASA, you know. Right. As a scientist. And I would think, what am I going to teach this person? I'm going in. I'm not at their level of education or maybe their their level of intelligence. What am I going to teach this person? I was kind of doubting myself. This is in the earlier years of working with federal employees. And next thing I know, they're asking me questions and kind of looking very surprised when I'm just displaying what I think is just basic information. Because as as smart and as intelligent and as high level of a job that they have is they didn't know some of the basic things when it came to benefits and retirement. So that opened my eyes a lot to think it doesn't matter what level of government you're in or your pay scale or what's behind your name as far as PhD, MD, whatever, everybody's in the same boat with needing this info and I can't prejudge thinking, Hey, look, you've got higher education than I do from a collegiate level or beyond that. Everybody still needs this info. Would you would you agree with that?
Speaker2:
Yeah, you make a great point because the benefits and retirement from the federal government doesn't discriminate. Everybody is on a playing field. And it doesn't matter if you're doing the, you know, the sterilization trays down at the VA or if you're doing the knee surgery two floors up. Right. Everybody is at the same level where they just don't have the information. And that's that leads to a very common mistake that federal employees make when it relates when it relates to their retirement and their benefit selections and changes is they hear something that they were told at a meeting. Another employee told them something. Someone's brother who's at another agency gave them some advice. And I can't tell you how many times people have turned in their SF 3107, which is the first retirement application. I talked to them after the fact and they had no idea about two or three of the benefits that they made decisions on.
Speaker1:
Sure. Yeah, that's unfortunate. That's another thing we talk about, right, is where do you get your information from? Do you do you trust the person working next to you? Is it a friend? Was it somebody that's in the financial field? But maybe they're not an expert in federal benefits. They may be a general expert, but they're not specific to that. And some of these choices you make when it comes to your 3107, your retirement application are permanent. They can be an irreversible type mistake that you make if you're not getting accurate information.
Speaker2:
Big time. Yep, all the time. And that's another good point. There's a lot of people that claim to be experts, claim to know federal employee benefits and and understand it. But if they don't do it 24 seven, if that's not their entire realm of of work, if you will, if they're working with other people in other industries, they can't focus entirely the same reason why you don't want to get a knee surgery done by a general practitioner. They're doing a little bit of everything right. And they might have taken a weekend course in Kabul about how to slice up a knee, but you don't want that guy. So any time you have someone that you're doing a federal benefits evaluation with, make sure that you look into who they are and what they say. Are they fully licensed? Have they been doing this a long time? What are they, a fiduciary? Those are the things that will always eliminate someone, but just know who you're talking to because you just want to don't want to be left holding the bag. As it relates to, like you said, irrevocable decisions made on that 3107 form.
Speaker1:
And then you bring up a point I just want to touch on before I get to my next question. Now, you you've got some credential criteria. I want to just elaborate on that a little bit. You mentioned fiduciary and being an expert. And if people see what is next to your name, their CHF, ABC can explain those two things a little bit and why that separates you when working with federal employees.
Speaker2:
Yeah, that's a good question. It doesn't make me any better of a person than anybody else. And there's some really good financial professionals out there that that work with federal employees who don't have designations. But I've just decided to elevate my game and elevate my understanding and my education level since this is all I do. 24 seven And as a fiduciary, that means that I'm a financial professional, but I'm held to a much higher ethical and legal standard than most other financial professionals. And I'm required by the SEC to put my client's needs ahead of my own, essentially eliminate any conflict of interest. And one of the ways that we eliminate conflict of interest and one of the reasons why I work the way that I do is independently. So I don't work with just one financial company, so I don't work with Fidelity or I don't work with just Morgan Stanley, because although those advisors are probably very good at what they do, don't get me wrong, but they are captive. They have to recommend what the company has to offer. So there's a lot out there that doesn't get talked about.
Speaker2:
One of the main retirement accounts that I talk about on offer most financial planners don't have access to because they're captive. So that's just one example. And then as a chartered federal employee benefit consultant, that's what the FBC stands for. Essentially what that means is I'm a subject matter expert in federal benefits and federal retirement. In fact, it's a certified designation through FINRA, which is the financial regulatory agency. And in essence, it means that I know what I'm talking about and I've been doing this a long time. In fact, I was asked by FIBA in 2019 to co-author a book with them all about federal benefits and retirement planning. It's about 150 pages. So I say all that because that's kind of what you're looking for. There's there's there's other folks like me out there. So whether it's me or folks like Val or whoever might be in your area, make sure that they're credentialed and you're going to know a lot easier that that person you're talking with knows what they're talking about.
Speaker1:
Yeah. Tell me about the book. Beat me to it. I was going to ask you about it a little later, but tell me about the book and what drew you to wanting to co-author the book and talk about federal benefits in more depth?
Speaker2:
Yeah, it just it was an opportunity to have a say in the education process on a grander scale. And I was excited about that and wrote a few chapters in the book. And essentially it's about 150 pages. And it goes through all of the main benefits, some of the financial considerations to be aware of as you enter retirement and some of the mistakes that that some federal employees make commonly. And it's something that, you know, when someone does a consultation with me, which they're always complimentary and we review your six main federal benefits and project your pension and TSP income and answer any of your questions. You get a digital copy of the book for free and folks that would prefer to read it and make it available to you. Hard copy as well. It's the informed Fed.
Speaker1:
And you said a cool word that I've been using over and over on this show and it's mistakes. And we talked about the top mistakes that federal employees make and how to avoid them. And I'm not just trying to paint everything as doom and gloom, but we want to help avoid mistakes because they can be detrimental during their working career and beyond. So there could be a lot that we can discuss here and unpack. But in your in your opinion and your experience working with federal employees was what is probably the biggest area of concern or an area where you think their employees need the most help, or maybe it's the biggest mistake the U.S. people make. What's the biggest area of concern that comes to federal employees?
Speaker2:
That is a very good question. I would say there's two that I would say you would want to be aware of as a federal employee. And the first one is. Making sure you thoroughly understand everything that's on the Sep 3107 form. As Vowles mentioned, that is pretty much the last decision you're going to make as a federal employee and within 30 days of retiring is the only time frame you can make a change to that in most of the benefits, most of them are eternal. After that, they're going to last forever. So be very, very careful when you go through that. And if you aren't sure about it, seek professional advice from someone who knows federal benefits inside and out. H.r. Bless their souls. They do a lot of work, but they don't work. Federal benefits all day, every day. They're doing so many different aspects of the h.r. Role that they sometimes don't have the correct information or the most accurate information, if you will, sometimes. So I would say that's number one. Make sure the SF 3107 is bulletproof and that you've got some professional help in filling that out. And the number two is you absolutely need to work with a federal specialist as it relates to all of your options. With the TSP, the TSP can be your greatest asset and your biggest liability when it relates to retirement, because there are so many different options and so many different misunderstood alternatives. So you really need to understand what all of your options are, what is best for you and your investment strategy.
Speaker1:
When it comes to TSP. And first, I appreciate you sharing that because it's tough to narrow down just one, right, one area that is a big concern. So I know that's a tough question to answer, but you touched on the TSP, right? And I always call it the wild card. Whenever I talk to a federal employee or give a presentation to a group, I call it the wild card. And I explain. I said, well, your pension and Social Security or first supplement, if you're eligible for that, are set in stone. There's not much you can do to affect that. It's going to be a forever payment, a lifetime payment, hopefully, with Social Security. Right. But when it comes to those two, those are pretty much set. There's not much you can do to really affect those except try to make more money and try to work more time. But with TSP that's reliant on you, you make the choice of how much comes out of your paycheck. You make the choice of where your money is invested. As you're getting closer to the end and you're getting near retirement, you have some choices to make on on your TSP and how you want to treat it as you're getting closer. And it's it's on the person, right? Tsp is not a managed account. You know, like you're mentioning Morgan Stanley or some of the other folks is what we call it administered account. So would you agree with it being kind of the wild card when it comes to that?
Speaker2:
That's a great way to put it, Val. It sure is. And it is up to the participant as to what to do. It is up to the participant to educate themselves. It is up to the participant to know what each one of the funds do, what their purpose is. Because although it's available, it doesn't mean that it's right for you and the time frame in your career. Because let's put it I'll put it bluntly, the stock market is great for someone who's 30, 40, 50 years old, but it's extremely dangerous for someone who's 60 years old just because of the simple fact that you're going to need that money and you're not going to be able to overcome any market losses anymore.
Speaker1:
I agree with that. I mean, that's what we say. The TSP, great for accumulation, right? Great for building an asset over time. Right. So awesome when it comes to preservation and conservation. As you're getting closer to retirement, there's there's there's not too many conservative options when it comes to TSP.
Speaker2:
Right, right. There's not too many conservative options in the country, let alone the TSP. And so the TSP, you know, there are conservative option. You know, you're asking my opinion, I'm going to give it to you.
Speaker1:
You know, I appreciate it. Lay it on.
Speaker2:
Me. Yeah. The G Fund is abysmal. It's the government's money market account and it's borrowed from by the federal government since 2017. They stopped in 2019. But that's part of the reason why we had the shutdown of the government almost in September, because they were borrowing from it for so long. That and the rate of return is abysmal. Right now it's averaging about 1 to 1 and one half percent rate of return, and inflation is 6 to 8%. So if you do the math on that, you're going to be out of money in a short order. Then the only other conservative option is the bond fund, the F, the F fund, and that lost money last year. So, you know, in the TSP is bringing in some mutual funds, they're bringing in some mutual funds in the summer, but the mutual funds are just going to be nothing but the same, but they're going to be more expensive. So just don't rely on TSP, don't rely on the federal government to have your back in every situation because they do with the pension. They do with the Social Security. But the. Ksp is up to you.
Speaker1:
And there's a lot of options out there that people can choose from. Which one is right for them? We can really never comment on during this show at this time because everybody is in an individual situation, but people do have the ability to make a change, take control of their TSP at a certain point in time. Know in your opinion, when most people get to that age, when they get to that that ability to to do something with their TSP, do they take advantage of it and really should they? Your opinion, what should what should people do or be thinking about with their TSP when they become eligible to take control of it even while they're still working?
Speaker2:
Yeah, that's an awesome question, Val. And without specifically recommending something, I would say in general, what I do with my clients is it needs analysis and understand their risk horizon and their investment strategy. And most of the time I'm talking with people who are 60 years and up at the moment I'm 59, but most people are 60 and up and those folks fall into a category where they are no longer want to maximize returns. They no longer want to be in the accumulation phase. Phase, as you mentioned. Right. They want to go into the protecting. They want to minimize losses. And so they don't want to sacrifice returns while they minimize losses. And that's what happens in the G fund. And that's what happens in the F fund. Yes, the G fund guarantees no losses, but there's no return. So you're going to run out of money one way or the other, especially when you start drawing money out. Right. So then they want to maximize returns. So their only option right now is to put it in the CSE or IRL funds, which are very risky. They could get double digit returns, but they can have double digit losses. So what I like to recommend when the situation is right, is something called a fixed indexed annuity, which is the best of both worlds.
Speaker2:
And to put it in the terms of the TSP, it says if you take the C fund, stick it right on top of the G fund and smash them together and create one account, that's the fire. So that when you get a market that's doing really well, you get returns similar to that of the market. But when the market's doing poorly, you get the flow of protection as if you were in the G fund because it's the fee is tied to professionally managed stock index funds and some of these professionally managed by firms such as Credit Suisse or BNP or Barclays or even Fidelity, so that the returns aren't just in the really good years, but they're triggering returns in down years and flat years in some cases. All of that can say this is the best fund, in my opinion, because you can get double digit growth some years. You can get really good high single digit average rates of return and you can have never have a loss. And it's and it's it's guaranteed by the insurance company.
Speaker1:
Yeah. The questions that you can ask, right. I mean if you can get the same protection of the G fund but with much better returns than the G Fund, is that something you'd be interested in? And most people that we're talking to at that point, you know, 60 and older are nearing retirement or relatively close to retirement. And you're absolutely right. Adjusted. I mean, you don't want to stay in the G fund and have abysmal returns and just hide your money under your mattress or bury it in the backyard. You want it to still do something for you, but you can't stomach it if you have a 2008 scenario or 2000, 2001 scenario where the market is tanking and in a highly volatile time like we're in now, I mean, we can see how temperamental things have been. So, you know, federal employees, if you're you're listening, you're watching and you're unsure of what to do. I mean, it is it's an option. As Justin said, it may not be everything for everybody, but if you're looking to protect money, you know, there's no better plan than I know of either. That can give you that protection of the G fund, but with much better growth potential. And it's it is all about that protection, right? I mean, that's that's the safety and security that sleep well at night type of protection that we're talking about. And you could probably tell stories just in about clients that may have called you in March of 2020 when COVID first hit and the market dropped 30%, where you're getting calls to people wondering, hey, what's going on? How's my money doing things like that. You had to just calm them down, be like, look, we talked about this. You can't lose a penny. Yeah, those kind of conversations.
Speaker2:
Oh, yeah. I had to send an email blast to my entire client database, reassuring them because it's not like they saw that their account was going down, but they saw the news and they saw the tsp of their decimate. And I sent out an email saying, Listen, this is why the fire was built back in 1995. This thing's been around for almost three decades doing exactly what it's designed to do, which is protect you from the downturns. And every single one of them. Every single one of them. And I've got almost 1000 clients now and. None of them lost money and they never will because that's, that's what the FIA is designed to do and it's something that is only getting better.
Speaker1:
Then they probably said, you know what, that's, that's what I thought. I think that's that's what we remembered, we talked about. But they still, you know, natural reaction is people are in a panic mode because the market went down 30% in a month and thinking that they're in the same boat. But they weren't right. They weren't they were protecting they were against losing anything.
Speaker2:
Exactly. And just because it's tied to the market, it's only tied to the positive performance of the market. So that's what sometimes people get a little confused about. It's market like gains, which it is, but it's never market like losses because of the protection that that it offers. And it's contractual. So there's nothing to fear.
Speaker1:
Well, if. If there are people that were saying, you know, I love I love hearing with Justin saying I love the topic, I'm concerned about my TSP, you know, and they wanted to get one of these analysis is that you're talking about and going over their their six or top six benefits when it comes to their situation. How would they get in touch with you? What's the best way to reach out and to say, you know what, I'd love to talk with Justin and get my complimentary consultation.
Speaker2:
Call my assistant Donna and schedule an appointment. And her number is 4054711669. Or you can email me at Justin at Fed Employee Advocates. So that's advocate s Justin Fed Employee Advocates dot com.
Speaker1:
We appreciate you sharing that information, Justin, because I'm sure people are going to say, hey, you know, I'd love to reach out, but I just wanted to share that contact information with everybody tuning in. Well, Justin, we've come to the end of our time. I know we can certainly talk for hours and hours about a variety of topics, but I appreciate you coming on the show, sharing your advice, your expertise with those tuning in. And hopefully and I would recommend you reach out to Justin if you're looking for more information on your benefits, on protecting your funds, making sure you are safe and sound and set up properly going forward. But again, Justin, thank you for taking the time and I really appreciate you coming on the show.
Speaker2:
Thank you, sir. I appreciate it. Great talking to you.
Speaker1:
Well, folks, appreciate you tuning in to the Federal Retirement Show. Again, my name is Val Majeski with American Benefits Exchange. And look forward to talking to you again on a future episode. And.
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