Take your Retirement for a Test Drive

9.12.25: Audio automatically transcribed by Sonix

9.12.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And really appreciate you taking the time out of your busy schedule to view our content, because that's what it's here for. It's you. It's for you, the federal employee that's looking for information regarding your benefits and retirement so you can make the best decisions. You can set yourself up properly as you move through your working career and into retirement. Before we get started, I just want to remind you, if you like our content, if you like what you hear, subscribe. Make sure you're notified when a new episode is out and do me a favor. Share it with your colleagues. You work with all the federal employees that we're ever going to have to talk to and help out, so share it with them. If you like it, share it. Tell a friend. Don't keep us a secret. Pass the word and and hopefully we get a whole bunch more listeners. I hear from people all over the world that listen listened to the federal retirement show, and it's incredible. It's very humbling to know that this little message that we started just a few years back with the idea of reaching federal employees with the the spoken word, if you will, with a podcast to talk about your benefits. And retirement has reached people all over the world. Doesn't matter where you're stationed or where you're looking, uh, for information, you're able to find the federal retirement show.

Speaker1:
So thank you for that. Now today's conversation we're going to be talking about test driving your retirement. And this comes and stems from a conversation that I've had recently with a federal employee. You'll notice that a lot of our episodes come from conversations with federal employees just like you and reviewing their situations, but a federal employee who is in the deferred resignation is going to retire at the end of this month. As of today, this recording of this episode is September 2025. At the end of this month, a lot of the deferred resignation electeds are going to separate from service, and it reminded me of something that we used to talk about years ago. Ten years plus. When I was talking to a group of federal employees and giving a group presentation about benefits and retirement, and we talk about test driving your retirement, right. Looking at your retirement while you're still working and ensuring that you're on the right track. Now, I say this all the time that you are planning for retirement. And we had a guest on this show. One of our reps in Tennessee, Ernst Brandi Person, had said, you're planning on retirement, whether you know it or not, from day one of your employment with the government from day one. And the the more you can maximize that time that you have, the better suited or situated you're going to be. When you finally walk out that door and have your last day of service.

Speaker1:
Okay. So maximizing the time, not just maximizing what the government gives you, but maximize the time that you have. So the purpose of this test driving your retirement is looking at your retirement from different benchmarks away from retirement. So how can I view my retirement at different stages and ensure that I'm on the right track? Now, there's a lot of times where we give a a presentation and we talk about or you say the word retirement and federal employees do not come to our workshop or do not want to view the webinar or go there because they're thinking retirement is so far away. I don't need to know about this stuff because I'm not planning on retiring soon. Retirement is not something that you can cram for. This is not a test from when you're in high school. This is not a project that's due tomorrow that you can cram into an overnight session and get it done. It takes time. It takes a concerted effort. It takes continual effort, and it takes little actions throughout a long working career that build up into this perfect plan for retirement, this awesome plan for retirement. So, as I said, maximize the time you have. But we used to look at and we still do. But I pulled this from presentations that I gave years ago about test driving, retirement and looking at different things at different stages of your career as you're getting closer and closer to the finish line.

Speaker1:
Why? Because it's going to be here closer than you think, or it's going to come quicker than you think. And they tell me that about my kids, right? When my kids were born, um, they people had said family members, friends, people that have have had kids and have parented kids and have had them grow up and they say, appreciate every second, appreciate every moment. Why? Because it's going to go by like a blink of an eye. And next thing you know, they're going to be driving away to college, getting married, and you're going to be like, where did the time go? It went by so fast. And I've talked to a lot of federal employees that have worked 30 plus years that have said the same thing. It feels like I just got hired yesterday. It feels like it was just yesterday that I started with the government. No matter what agency you work for, I can't believe I'm at the end now while you're in the middle of it, right while you're in the middle of it. I know it seems long, and it seems like it drags out at times and things like that, but in the end it's going to feel like it went by quick and you're going to be thinking, and hopefully you're not if you're watching this and preparing properly, but you're thinking, why didn't I take advantage of all the time that I have? I don't want you to have any regrets along the course of your working career, or regrets at the end saying, I should have taken advantage of all this.

Speaker1:
I should have done something better. I should have done more to prepare myself for retirement. Why? Because that future version of yourself, that retired version of yourself, is going to love you today. The present version of yourself is going to look back and love the the actions that you took, the steps that you took to ensure that your retirement is going to be one that you love. And I say this all the time, but it's going to be so you can retire how you want, when you want, with the lifestyle that you want and be comfortable. Right? You're going to have enough income in retirement. So let's dive into today's content and talk about test driving your retirement. So we talked about test driving. What do you think if you think of a vehicle right. And this is how I want your retirement to be I want you to be like I'm driving my dream car. Now, granted, this is just a picture of a couple in a convertible. Hands are high in the air. We're enjoying it. It's like riding a roller coaster when we were kids. And this is going to be the best retirement ever. We're not limping into retirement. We're speeding into retirement and just going all out because we've planned properly and we're there.

Speaker1:
So we have to look at different benchmarks, different time horizons, different points in time and see these little checkpoints. And these are certainly not an all encompassing, you know, end all, be all, uh, type of deal. But just understand that we need these little benchmarks, these little checkpoints to ensure that we're retiring properly. The first one is about ten years out now. It could be a little further. It could be a little less. But just think about in ten years, if you're going to retire within ten years or ten years on the nose, what are some of the checkpoints that you need to have and things to plan for? The first is planning on retiring debt free. Planning on retiring debt free. Now, why is that? Because most people, when you go into retirement. Okay, um, they don't want to carry a whole lot of debt. Why? Because chances are, if you're if you've, uh, seen the way retirement incomes work, you might be making less money in retirement. And you don't want to have all these debts. You don't want to have all these things that are bogging you down, right? Weighing you down. These extra payments that are coming out while you're in retirement, um, you know, all this, this extra debt that you might be getting at the last minute if you're going to buy that that dream car, you know, do it. So you plan on retiring debt free by the time you get to retirement, if you're going to be buying a new home or if you're going to be buying something new or you're taking on extra debt, let's try to plan on getting that done well in advance of retirement.

Speaker1:
That way, if you go into retirement with any kind of debt, usually the only thing that we want to look at is maybe a mortgage. Maybe you haven't paid the mortgage off yet. But if we get the credit cards, pay those down. We've got car loans to pay those down. Um, student loans, other kinds of debt. Let's try to pay those down as best we can. Now this is just general guidance and advice. But if you look at it ten years out, do you have a plan to get out of debt before you retire? This will keep more money in your pocket when you're in retirement, and it won't be as stressful when you do step out the door. Okay, now adjust your savings accordingly, right? Because you're going to plan on having this buffer in retirement. Now, granted, I know you're building up money in your TSP. You're planning on getting your pension and Social Security, but it's always good to have this extra savings, this extra money that can bridge any gaps, uh, for the future. Okay. It could also help with unforeseen things. Maybe medical expenses or other things. Right. So it's it's not trying to just pay down debt, which would be great to keep more money in your pocket, less payments going out.

Speaker1:
But now you can adjust your savings and and plan for those gaps in retirement. We talk about not only the income gap as far as monetarily, but the time that it takes, the amount of time that it will take from when you do retire until you get your income. And one of the conversations I had recently with somebody who's got this deferred resignation, they talked to to OPM, they talked to a retirement specialist, and I say that with air quotes. Um, and the person was giving him what I believed to be incorrect information when it came to the timing of, of when that income is going to start coming in retirement. And it made it made it seem like there's going to be a much bigger gap than there's actually going to be, but there's still going to be a gap from when you first retire until your first paycheck, and then from when you start receiving that first paycheck to when you start receiving that first full paycheck. So planning for those gaps, the gap between when you first get the the interim paycheck and then the gap from when you start getting the interim to when you start getting your full paycheck plan for that. Do you have extra money? Do you have money in reserves? Do you have emergency savings set up? Okay, so once we pay off that debt, let's now plan on stockpiling for an emergency savings.

Speaker1:
Looking at your insurance needs. And because if you're ten years out from retirement, you're a little younger, probably a little healthier. Um, we're talking about health insurance. Are you in a good health insurance plan? Are you currently enrolled in Fhlbb plan? Do you want to keep that Fhlbb plan in retirement? What about life insurance? Have you taken a look at your phegley? Is it the most cost effective thing for you right now? Are there better options outside the government while you're younger and in good health? Are you better to get qualified now for the life insurance you want? Or should you wait till you're closer to retirement? I can say, uh, just this is just my advice here, right? My opinion. But if you're in decent health now and you want insurance coverage, you want to save money compared to, say, option B or something like that, it's better to get it while you're younger and healthier. Because you're healthier means you can qualify, and you're younger means it's going to be cheaper down the road when you retire. Let's say you're ten years out. We can't guarantee what your health's going to be. Number one and two. I know of ten years later it's going to be a lot more expensive. So relook at am I ensuring that I've got enough of my life insurance for now and in the future? And health insurance wise, I should start looking at my health insurance plan.

Speaker1:
And if that's something I want to enroll in or keep in retirement. Now we'll talk about it in the next section, but just looking at it right. Being aware of the options you have and what will you do in retirement. This goes to all different benchmarks, but it's rare that I see federal employees or anybody in general just retire and retire and do nothing. And what I mean by that is there are no no hobbies, no travel, uh, no part time jobs or other jobs that they want to do in retirement. It's rare that people just retire and stay still and do literally nothing. So what is your plan for retirement? What do you plan on doing? What? What are your goals for retirement? Some, yeah. They want to play golf every day. They want to travel the world. They want to see family, grandkids. They plan on having a part time job. They plan on doing a different passion in retirement. What is it that you'll do because you don't want to get to retirement now? Try to figure it out. Um, I've seen a lot of people get bored in retirement. If they don't have that figured out and they end up doing something just to do something. Plan ahead. Take the time to plan ahead. And this is again benchmark about ten years out so you can look forward to that. Right? What's ten years out for me that the clock is ticking. That's nine, eight, seven.

Speaker1:
I mean those years can go by pretty quick. So have some of these things in mind at least ten years out. What about five years out? Okay. We relook at health insurance again. Why. Because there's that five year rule for keeping your health insurance and retirement. And this more relates to people that are perhaps on a spouse's plan that is not an employee with the government. So if you are currently not on an fhlbb plan, a federal employee health benefits plan, and you want to keep that health insurance in retirement or get into that health insurance and retirement, you need to have it for at least five consecutive years prior to retirement in order to keep it in retirement. Now, the only exception if you're on a spouse's plan is if that spouse is also a federal employee or military personnel. Right. You're on Tricare or you're on another person's fhlbb plan. You're still covered by a federal health insurance plan. Okay. But if you're on a spouse's plan that is not a federal employee and you don't have your fhlbb at least five consecutive years prior to retirement, then you will not be able to keep it in retirement even if you really want it. So taking a look at the five year marker as you approach the five year mark about your health insurance is key if you want to keep it. Now, if you're already if you've had a health plan from the government, you've had an fhlbb plan your entire working career.

Speaker1:
You plan on keeping it. This is a moot point for you, but this is more for people that are maybe not on a federal employee health plan while they're working for the government. We talked about being out of debt at the ten year mark. Right. Evaluating the debt and saying, I'm planning on being debt free by the time I retire five years later or now. That could be seven, six, five, four somewhere in that range. Are we tracking on the right path? Are we looking like we're going to be debt free in retirement? If that's our plan? I highly recommend that. Um, it's just something that we normally take a look at when we're looking at a federal employee situation. But if that's something you want to do, reevaluate it. Make sure you're on track. Right. Do you have to adjust accordingly if you're not on track? Maybe you're doing such a great job, but now you're putting more money into your savings. You're stockpiling for that those gaps in retirement. You're making sure that you've got enough liquid cash for X, Y, and Z or emergencies. Okay. And I would say check for retirement changes. I mean, we've seen this with, your different administrations. So five years out, especially five years out from today, there will be another administration in there. Will there be other changes to the retirement system, positive or negative? Right. Hopefully if there's any changes they're positive.

Speaker1:
But there have been times when things have been cut, budget proposals have been made and things have been eliminated. So will these things affect your retirement? I don't know. We don't know what's going to come down the pike. So just because it is the way it is today does not mean that it's going to be exactly how it's going to end up when you do retire. So five years out and in in from here, let's look to see if there's any different retirement changes or modifications that will positively or negatively affect your plans for retirement. And then two years out or within. Here's just a recommendation. Okay. And we do this with federal employees. Whether you're 30 years away from retirement or you're retiring tomorrow, we do a benefits and retirement evaluation. When we go through that, we give you all the ins and outs. Here's what you have. Here's what you don't have. Here's the cost for things. Here's how those costs change over time. Here's your retirement income projections based upon what we know today and your situation. And when you plan on retiring as you get closer to retirement. And we do the estimates and you get an accurate number of what that's going to look like, can you live on that amount? Can you live on it? And if you can test it, they said this is a test drive. Can you test that? Can you live on your expected retirement income? And if so, great, save the rest.

Speaker1:
That's going to put more into your savings. But can you live on it now? Hopefully you're saying yes because the projected retirement amount is the same, if not more than what you're currently making, which would be awesome planning on your part. But if it's less and there's not really a whole lot of time to make up the difference because again, retirement is not cramming for this test. It's not there studying at the last minute to get it all done. Um, can you live on that? Can you test drive that? Can you test it out? And if you can. Great. Save the rest. Okay. Should you take your foot off the gas when it comes to risk? Risk? Now we're talking about test driving. Okay. As people, as federal employees in general get closer and closer to retirement. Most of them want to take their foot off the gas. And this is just in my experience, with what I've seen in the conversations I've had with federal employees. Most want to take their foot off the gas when it comes to risk risk, and that has to do a lot with their investments in TSP. Now, your risk tolerance may be different than the person that works next to you. This is just in general, I've seen federal employees want to take their foot off the gas when it comes to risk. Why? Because if your foot's on the gas and you're risking a lot.

Speaker1:
Good news is you can gain a whole lot as far as interest and return on your investment. But you can also lose. And with only two years left or within two years, you don't have a whole lot of time to make up losses. If the market does go down or if you lose, and your investment strategies. So a lot of people will evaluate, at least at the two year mark, sometimes five year mark or beyond. But do I need to take my foot off the gas as far as my risk is concerned? And, uh, is it necessary for me to do that, to preserve and conserve the money that I've accumulated? Because I'm going to need this in retirement, so I'm willing to take my foot off the gas a little bit, drive a little bit more conservatively. Okay. So I can ensure that the money that I have is the money that it's going to be there for me in retirement. I'm forgoing the opportunity for big returns to preserve my nest egg. Not a bad move, right? Actually, a pretty prudent move and a smart thing that a lot of federal employees do because we don't have a crystal ball. You know, the market may be doing great, and this is not by any means investment advice. Just general talk here. But the market might be doing great year after year after year. And there's no guarantee that it's going to continue.

Speaker1:
And we don't have a crystal ball to know what it's going to do in the future. Hopefully it continues to go up great. But what if it had a downturn and you lost 10 or 20% your last year working because you did not take your foot off the gas? It's not a scare thing. It's just to say it's a reality. It has happened. I tell the story all the time. Imagine you're the person that's going to retire, uh, January 1st of 2009. And the market's been great since the.com thing happened in the early 2000. And the market's been doing great great great great great. And uh, on January 1st, 2008, you're thinking, this is awesome. I've got one year left, 365 more days and I'm out of here. The countdown is on. And then 2008 happens and boom, you lost 15, 20, 30% in your TSP. As you're walking out the door, how would that affect you? You wouldn't be too happy about it, right? But you'd be extremely grateful if you took your foot off the gas and preserved. I bet you it'd be an easier thought to have that if the market went up as you took your foot off the gas, that at least you conserve what you had, rather than saying, I kept my foot on the gas and I lost a ton of money. It's probably just an easier thing for yourself. Again, this is just something based on conversations that I have with federal employees.

Speaker1:
Okay. And then check your personnel file. That's a big thing to ensure that all the time that you have credited or have served as a Fers employee or CSRS employee or government employee is counted for. Right. And that includes military buyback time. If you bought back military time. Ensure that it is. Ensure that they have it completely paid off. Ensure that all of your time. Because some people have some situations where they work part time here and part time there, and sometimes here with a break in service, and you want to ensure that all of your time is accounted for, that everything is right in your personnel file, because I've seen mistakes happen and people don't find out until the last minute and they're looking at their sf50 or they're looking at their personnel and and things are off, and then who's going to fix it? They got to go to OPM, and OPM is backlogged. And they're dealing with a lot of other things. And it just prolongs the process and drags it out and causes more questions to be had where if you would have gotten in front of it, let's say at least two years out, maybe even more, to just confirm everything that's supposed to be in your personnel file is there? That's that's a big thing. So do not leave it to OPM to or just assume that they've got it all figured out. Confirm it. Double check.

Speaker1:
I had that conversation with my son yesterday. Um, he was studying for a test, and he told me the things that were going to be in the test, and I had heard something different. And I said, do me a favor. Just double check to make sure that you're studying the right stuff. And he goes, dad, I am. And I said, I'm not saying you're not. I'm not saying you're not. I'm just asking you to check again. He did. And he was right. But what does it hurt to double check? Do not assume that it's just on the right track. And if. What does it hurt to check two, three, four times? Confirm. There's so many times. Maybe I'm just, you know, a little anal retentive when it comes to that. But a double, triple, quadruple check stuff. Did I lock my car? Did I lock the front door? Did I do this? Did I do that? Not that I'm forgetful for some reason. I just have a thing. I just want to check it again. I just want to ensure. Okay, so do that with your retirement. Why not? Especially your personnel file? Because there have been mistakes that are made and it takes an arm and a leg in order to to do that or correct it. Sorry. When it's all said and done. So I know that's a quick evaluation there of test driving your retirement and just giving you some benchmarks, whether you're ten years out, five years out, within two years of retirement, just some general guidance.

Speaker1:
But the way to get a full and complete understanding of your situation is to do a full and complete benefits and retirement evaluation, and we do that with federal employees on a daily basis. How do you do that? You have to go to our website. Okay, that's federal retirement Show.com fill out the form, request a benefits review. And one of our experts, if it's not me personally, will be reaching out to review everything with you. Review your situation, take a deep dive and answer any of your questions. That way, as I said earlier, you can ensure that you are on the right tracks, that you're going to retire how you want, when you want, with the lifestyle you want, and you can prepare properly for everything that the government gives you and maximize everything along the way of your working career. As I said earlier, like subscribe, get notified about our new content. You can view our previous episodes on the website as well while you're there filling out the form. Share this with a friend. We want to help and reach as many federal employees as we possibly can, so please help us get the word out by sharing this podcast, this show with a friend with a fellow federal employee. So thank you for your time. You've been watching the federal retirement show. My name is Val Majewski and I look forward to seeing you on a future episode.

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