Top 10 Mistakes Made by Federal Employees

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7.11.25: 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. As always, I appreciate you taking the time out of your busy schedule in order to join us and to view our content, listen to what we have to say. Because this podcast, this show is all about you, the federal employee that's looking for accurate information when it comes to benefits and retirement. Hopefully you try to get pointed in the right direction. I highly recommend that you subscribe, that you get notified when new content comes out. And do us a favor. You'll hear me say this a number of times. Share this with a colleague. Write. If you find value in this other federal employees, your colleagues need this information too. So please share the show with them. Tell them to go back. There's so many episodes and so many things that we've covered over the years that could be of a value to them. And if there is a topic that you have not heard about, please reach out to us. You can go to our website, Federal Retirement show.com. Fill out the form. One of our experts, if it's not me personally, will be reaching out to you to review your benefits and retirement situation. Answer any of your questions. Oh, and as a result, you can get a copy of the book that I wrote on benefits and retirement called There's No Excuse. Your Guide to Maximizing Your Federal Employee Benefits.

Speaker1:
So all that being said, thank you for being here. I appreciate you checking out today's episode where we're going to be talking about and going back to something we discussed before, and I wrote a pamphlet years ago called The Top Ten Mistakes Made by Federal Employees. And we're going to go in and get a fresh perspective on some of these things. You'll see the pamphlet as it is here on the screen. But what I want to do is give a fresh perspective not only on what I originally wrote, but based on today's environment and what's going on, I didn't even mention. Hopefully everybody had a great Independence Day weekend, uh, safe. And hopefully the weather was well, I know down here in Texas we had a number of things going on. So thoughts and prayers are with, uh, the families and those who have lost loved ones and lost property and lost things. So just that, you know, heavy hearts this weekend. But and hopefully, for those of you in other parts of the country, you had a great Independence Day weekend. Um, so look at top ten mistakes made by federal employees. This pamphlet that I wrote again was something that we hand out at events. We try to give this and put this into the hands of federal employees. Why? Because we just want to make you aware of some things.

Speaker1:
And I say when you hear top ten mistakes, that doesn't mean all the mistakes, right? At the time that I wrote this, this was my top ten. Now, things may have changed. I might throw a couple bonus mistakes in there for you as we go, but but really, this is something that can be a red flag for you. Are you committing one of these mistakes? Are you a habitually doing something in here that I think is a mistake now? This is an opinion piece, right? This is not an end all, be all. This is my opinion when it comes to my experience working with federal employees since 2012. And this is what I specialize in. Here's what I see. So if you agree great. Take some of the advice. Take some of the guidance. Awesome. If you disagree, I'd love to hear from you. We'd love to hear why and hear a different perspective. These are the conversations that I love to have. But when we go over the number of mistakes and the different things that are in this pamphlet, hopefully you get some great insight. Now, why do we do this? It says here you don't know what you don't know. There's a lot of information that federal employees do not receive when you first get hired, and that's why these mistakes are made. I wish every federal employee got a proper education, get a proper training right when you first got hired, so you can set yourself up in the best way possible going through your working career, but that's not always the case.

Speaker1:
That doesn't always happen, so you need to get some guidance from somewhere. You need to be made aware of some of the things that are out there that hopefully you're not taking advantage of in a negative way. So again, why are we doing this? It's to give you information that you have not been given before, and to make you aware of some of the mistakes that we believe that our employees making. And I'll share with you how we can avoid them. So mistake number one, and this is the very beginning, right? Not attending a federal benefits or retirement workshop, seminar, training, whatever it might be. This you can consider coming to the federal retirement show as kind of a training in itself, educating yourself on these things. Now we do these trainings, whether it's virtual or in-person, all over the country, all year round. And these workshops or at these workshops, you wouldn't believe the amount of people that come up and say, wow, I wish I would have known about this five, ten, 15, 20 years ago. I've never heard that before. I've been with the government for 20 plus years. Nobody's ever told me this. And that's the reason why we do what we do. Right. But the benefit of going to a training is that you want to make sure you know all the information right before I make a decision.

Speaker1:
Maybe before you make a decision, I'd like to know all the variables. I'd like to know all the ins and outs. I like to do my diligence. I like to do my research. And then I'll pick it apart and. And put together the pieces in the right order. So that way I'm set up properly. Right. Your retirement, you can look at it as a puzzle. And if it's just scattered all over the place, you hope you throw the pieces all over the table and they magically assemble themselves in the right order to make the perfect picture. It's not really going to happen that way. You might get lucky. You might throw it out there a thousand times, and it might do it once. You never know. But chances are where something's going to get missed. Something's going to be out of alignment. It's not going to be set up properly. So going to a training, whether it's by our group or another one, you want to make sure that they're telling you the truth and they're giving you accurate information. But you've got to educate yourself. You have to. This is mistake number one. And some people hear retirement training or retirement seminar or retirement anything and think, I'm so far away from retirement that I don't need to do this.

Speaker1:
I don't need to go to a training. I don't need to go to a seminar because retirement is a long ways away. Do not let the word retirement fool you. It's retirement benefits workshop. Retirement benefits training. What you need to know when it comes to benefits and retirement. But do not delay. I say if you got hired yesterday, you should go to a benefits and retirement training seminar, workshop, webinar, whatever it might be because you need to know this information and the earlier you can learn it, the better. So do yourself a favor. If you have made this mistake and have not attended. Attend a training today. If you have not. If you haven't had a way to get into a group training, then request a one on one benefits of retirement evaluation. Go to our website Federal Retirement show.com. I'll be coming back to this in a little bit. Mistake number two. Paying way too much for faculty. Option B now, if you're not even aware of what Fegley is, that's why you need to go to the training Fegley federal employee Group life insurance. We've talked about this in different episodes. If you have not been made aware of what Fegley is or what you have, please, you can pause here. You can go find our other episodes that we've done on Fegley. We've talked about this in length, but there's an option that you can have called Fegley.

Speaker1:
Option B, this allows you to get up to five times your salary and additional life insurance on top of basic a top of option a um, but if you're not made aware of how this works, the cost increases every five years, beginning at age 40. When you're young, it's very cheap, but they don't tell you necessarily that it's going to increase and get exponentially higher as you get older, and you can end up paying a lot more for this life insurance coverage than you have to. The earlier you can start, the more money you can save. So mistake number two is paying way too much for option B, there are ways you can save money. I don't know too many federal employees that wouldn't want to save money. So if you do have option B this is for you. You need to look into ways in which you can save money and weigh the options. Which one is best for me? Mistake number three not putting enough money into TSP to receive the maximum matching. Now again, these are my opinions when it comes to these mistakes. So it's not an end all be all. But in my opinion, the best kind of money that you can make in any scenario is free money, right? Money that is just given to you. And that's what TSP wants to do when it comes to putting money into your 401 K your Thrift Savings plan, the government, if you're a Fers employee, will match you up to 5%.

Speaker1:
This is free money. Again, the best kind of money that you can get is free money. So I would encourage you, if you're able to get as much free money as you possibly can, that is putting in up to at least 5% into your TSP. You're maximizing the matching funds that the government will give you, maximizing the matching or the free money that the government wants to give you. Now, understand there are different buckets you can put money into, but the matching money, no matter where you put your money up to 5% matching will go into the traditional bucket. So it is creating a little bit more of taxable money down the road for you. But it is extra. It's free money as long as you put in up to 5%. So the stake number three is not putting enough in to get the matching funds. I'd encourage folks to put in at least 5% or find a way to if you can. Mistake number four along with TSP putting money in. Now this is talking about taking money out is not understanding all of the distribution options within TSP. And there's a lot of them. And you've got to understand all the different ones and which one's right for you. So talking to an expert as you get closer towards retirement and understanding what you're going to do or what purpose, what function you want your TSP to serve for you in retirement.

Speaker1:
Go over and review all of the distribution options that are available, and you can determine which one is right for you. Now, why is this important? Because in some cases, when you choose a distribution option, it is set in stone. It is an irrevocable choice, and you wouldn't want to be locked into something that you didn't fully understand or didn't know all the ins and outs about, or all the repercussions okay, about. So understand all of the distribution options so you can determine when the time is right, which one is right for you. You do not want to be locked into a scenario where you chose something without knowing everything and realizing this wasn't really the best fit. This is just what I heard others do, or this is what I thought everybody did know. You want to know what's right for you. So understand all of your TSP distribution options. Mistake number five is neglecting to save enough for retirement. Now this goes back to getting a personalized benefits and retirement review done. How will you know if you're on the right track when it comes to saving enough money for retirement? You have to get some estimates done. You have to get a review done. You have to see where you stand because at some point when you retire, they're just going to hand you a sheet of paper.

Speaker1:
And this is figuratively right, but you're going to see all the income that you're going to get. You might be like, that's it. That's all I'm going to get. I thought it was going to be more than that. No, you should have known whether it was going to be too much or too little or just right. Right. Three little bear scenario. Is it going to be too hot to cold or just right? You need to know that ahead of time you should absolutely 100% know what your pension is going to be, what your Social Security is going to be at a certain age, or the first supplement if it's still around or what your TSP is going to do for you. These are numbers that you should be working out along the way. And why do I say this? It's because there is, in some cases, a false sense of security for federal employees thinking, I work for the government. I'm going to be taken care of. I put in my time, they're going to take care of me. And that's not always the case. You need to understand what is going to be coming your way when it comes to retirement income. So there is no excuse. And that's the title of my book, by the way, right? There's no excuse to not knowing these things and not being prepared.

Speaker1:
Then what if you run the numbers? What if you do a check of your situation and it comes up less than what you were thinking? It's not as much as you thought. If you do it early enough, you still have time to plan. And I tell all federal employees that I talked to, it's not a bad thing to over plan, right? If you're putting your money aside and you're putting funds away for your future retirement, and in the end it ends up being too much, you're not going to have a problem with that. You're going to be thankful that you started earlier. You're going to be thankful that you are diligent and obedient and sticking to that game plan so you can have enough, if not too much, in retirement. I've never had one federal employee complain that they were making too much money when they retired. I will say I've had several that have said, how can I get more money because I do not have enough in retirement. What I'm making is not enough. I might be forced to go get a part time job. I might be forced to go do something or move or whatever, change my lifestyle because I'm not having enough in retirement. So planning for your future is key and you have to understand all the variables. All of this goes back to education and training. All of these mistakes comes back to knowing what's involved.

Speaker1:
And the earlier you can learn all that, the better you can maximize your situation and especially when it comes to your retirement income, ensure 100% that you're going to have enough when it's all said and done. Mistake number six is foregoing the opportunity to purchase back military time if you served in the military. First of all, thank you for your service. Whether you served one day or you served 20 years, I appreciate your service. Thank you so much. That's not something that I did. I had family members that have served, but I have not done that personally. I have the utmost respect for those that volunteered, for those that sacrificed their time, their lives, put themselves on hold to go into the military, the armed forces, and serve for our country. So thank you for that. But as a result, if you did that and now you're a civilian federal employee and you did not retire right, you didn't have your 20 years, you're not going to get a military pension. Utilize that time as a federal employee. Now buy it back. And the earlier you can do that, the cheaper it's going to be for you to do so. And here's how it works. The process is on the screen. It's on this page of how to purchase back your military time. It's a little bit of a process, but it's not super complicated.

Speaker1:
Just go through the steps. But in the end, what you want to do is find out how much is it going to cost you to purchase back all of your military time. And once you make that deposit, which is typically done over payroll deduction, it's usually over time, not in just a lump sum, You can pay it in a lump sum if you want to. But now that service time that you had in the military. Counts towards your federal side, your civilian side. So if you serve five years and you had five years purchase back. Now you've got five extra years of service that are going to count towards your retirement eligibility as well as your pension. Okay. So make the most of that time that you had and purchase it back. Now the longer you wait. There will be interest charged on the deposit. So the earlier you can do this the better. And in some cases I've seen where the interest was 2 or 3 times the original deposit amount. If the person, the federal employee were to have bought it back right away, they would have saved some interest and some money. When it came to that. Now it was still worth them doing it. So I've seen people do it, but the earlier you can do it, the better the cheaper it's going to be, the less or no interest that you're going to have on the deposit.

Speaker1:
So if you do have military time, I recommend purchasing it back. Mistake number seven is choosing the wrong survivor benefit election. Now this comes down to when you fill out your retirement paperwork. What survivor choice do you want to make? How much do you want to leave your spouse if something happened to you first in retirement? So let's say you're the retiree. You you go into retirement and you pass away. Do you want something or a portion of your pension to go to your spouse now as a first employee, because most of us are are fers here, right, that are listening? Uh, you can leave either 50% or 25% of your pension to your spouse. Those are your two options if you want to leave something. There's a cost involved with this, right? It's going to cost you 10% if you want to leave 50% of your pension. And it's going to cost you 5% if you want to leave 25% of your pension. If you leave nothing, well, there's no cost for it. Just when you die, everything dies with you your pension, health insurance, all of that. So understand all the variables when it comes to it. Now, sometimes I'm recommending yes, you have to do the 50%, sometimes the 25%. Sometimes it makes sense to do nothing. Think everybody's situation is different, but you need to know what all of those resulted.

Speaker1:
What are the consequences for making that choice? Why do I say this? Because the choice is pretty much set in stone. It's pretty much an irrevocable choice. When you make it, you can't go five years down the road and just willy nilly go, you know what? I want to get rid of the survivor benefit. I think I made the wrong selection. Unfortunately you can't. It's locked in. So you want to ensure that you made the right choice. Do you hear me say that a lot? Ensure. Make sure. And that's where education comes in. Right? How do I make sure I have to educate myself? I have to do my diligence. I have to do my homework. I have to run all the numbers. I have to go through this scenario. That's why I keep saying it, and that's why it's so important to go through this. So choosing the right survivor benefit can help out your spouse in the best way possible, can save you some money when it comes to what comes out of your pension, and we call it pension Max, you can maximize your pension by ensuring you're choosing the right survivor benefit selection. Mistake number eight is not having a proper estate plan set up now. People think estate plan like you've got to be a multi-millionaire in order to have an estate plan. But if you have assets, if you have something you want to protect or hand down to your loved ones when something happens to you, then that's an estate plan, right? That's having a plan for what's going to happen in the future, and making sure that all of your assets, all of your things are secured and taken care of in the way in which you want them to be taken care of.

Speaker1:
And there's a number of ways in which you can do that. Most people think of having a plan like a will or a living trust or something set up. I'd be more leaning towards having a revocable living trust, and that way you can make changes for it along the way. But having all of your assets at the time that you pass going to the trust, and then they get distributed according to your last wishes, according to your will, whatever it is that you decided that you wanted to put in into the trust. But if you have assets, you have things that you want to protect. Um, you know, whether it's valuables, cash, uh, vehicles, uh, properties, 401 like TSP, other investment accounts, those could all go into the trust and be protected and then distributed to your loved ones in accordance to the directives that you put into the trust. So having a proper estate plan and not just leaving it up to chance that somebody's going to figure it all out when you pass could be key as well.

Speaker1:
It's not for everybody, I will say that. But in general, if you have assets, which can be most of us, if you have assets that you want to protect, setting up a trust could be very beneficial. And having a proper estate plan could be beneficial for your your beneficiaries when it's all said and done. Mistake number nine is neglecting to properly ensure spouse and children. And this goes back to Fegley and Fegley. Option C and you've had a lot of experience with this since, uh, you know, writing this pamphlet. But option C allows you, as a federal employee to get coverage on your spouse and any eligible children. Spouse can get up to $25,000 of coverage. And each eligible child, which is a child that's under the age of 22 and not married, can get up to $12,500 in coverage. Understand I mentioned option B, and you can get up to five times your salary in additional life insurance, and you can only get up to 25,000 for a spouse or $12,500 for each eligible child. There's an imbalance there, and I know that even if my spouse were just a stay at home spouse, right, a homemaker, whatever it might be, if something happened, 25,000 wasn't going to cover it. So are you properly covering your spouse whether they're working or not with it, no matter what the situation is? I just know that 25,000, for the most part, is not going to cover it.

Speaker1:
So there's an imbalance between what you have as a federal employee and what your spouse has. If that's the only thing that you've done. And that's why I put it here as a mistake, only relying on option C when it comes to spousal coverage and child coverage. Because when children age out, that coverage goes away. They can't carry you with them. They can't convert it. It doesn't build any cash for them. There are so many other ways that you can properly cover your kids. Then we don't want to think about what happens to our kids, but I want to set them up on the right foot. And I can tell you what I've done with my kids and the way we've set them up. I'll tell you that more on a on a personal basis, one on one if you're interested. But when it comes to covering spouse and children, you can do a much better job of of managing that imbalance and making sure they're properly covered. Still having it be cost effective because we don't want something to happen and be like, oh, I thought they'd be all right. Or I'm I'm the breadwinner and I want to make sure that I'm covered. So you got all the coverage for you, a basic option, A option B, but we neglected to get something for our spouse. So this is a mistake that I've seen.

Speaker1:
Because what happens if the the spouse passes away, not the federal employee? Everything may not be taken care of or there may not be enough money there from an insurance perspective to cover what's needed if the spouse were to pass away. And lastly, mistake number ten failure to get a personal benefits. Every time a review I mentioned going to a a seminar, a workshop, attending a webinar. But it all drills down to getting your personal benefits and retirement review completed. And this goes to the entire pamphlet, right? Why did I write this? The top ten mistakes that Federal Employees make. Because all of these mistakes are as a result of a lack of education. It's not that the federal employees are uneducated. That's not what I'm saying. It's that you were just not properly educated on your benefits and retirement. And I wish every federal employee were given this information when they first get hired. In fact, we do this our company does with different agencies and associations and unions, where we'll bring in people that are newer. Right within, say, five years to do a new hire type of training, we could do a mid-career type training or an approaching retirement, late career type of training. But I wish every federal employee got a mandatory training when they first got hired. That way you can set yourself up properly. And we say this again, if you the time value of money in both the way you spend it and the way you save it is key.

Speaker1:
And if you were saving money for a longer period of time, there's a chance you're going to have more money in the end. And you wouldn't have to save as much over time because you cannot cram for retirement, right? You can't say, oh, I've worked 25 years, I've got five years left. I'm now going to start planning for retirement. I'm going to cram it in these last five. If you can do it. It's a long game, right? It's a tortoise or the hare. This is definitely the tortoise. It's slow and steady, wins the race in this. So understand the more you can learn about your personal benefits and retirement or situation the better. Yes, it's great to go to a general conference or a general training. But where the rubber meets the road is when you dive in deep to your personal situation, lay out the numbers in plain English so you can see it, I said, scattering the pieces of the puzzle, and we put all those puzzle pieces together for your retirement picture. And we want that picture to be perfect for what you want to do. And I've said this before, you want to retire how you want, when you want, with the lifestyle that you want, making the money that you want. So that way it's all this work is is joyful in the end.

Speaker1:
But you don't want to get to the end of it. Like, this is it. This is all I'm going to get. And I've got to do less now in retirement, I have to live a lesser lifestyle to work a part time job. This is not the retirement that I dreamed of. We wanted to match the picture that you have of your retirement dream. We want to put all those puzzle pieces together so you can see it the way you want it, and it'll be that beautiful retirement picture that you've been planning your entire career. So these are the top ten mistakes that I think that our employees make, um. There's more than that, right? Another one would be not tackling debt. Let me give you a couple of bonus ones here. Just so you're thinking. Not tackling debt. Uh, not taking advantage of some of the additional benefits that you can get when it comes to protecting, let's say, uh, disability. What happens if you are the primary breadwinner and, and, you know, you get disabled or an accident happens? I was talking to somebody this morning, you know, and they were hit by a truck, uh, unable to work. You know, it took months and months and months to get back to work all that time. You know, not making any money. Guess what took care of them? Their disability insurance policy.

Speaker1:
So there are other things that you can do as a federal employee to position yourself and take care of or prepare for the unknown. And those are just two extra, right? Not taking care of debt before you retire or having a plan to get yourself properly out of debt so you can save money on interest and be debt free. And also the extra benefits that you can get outside what the government offers, filling up some of those holes that you may not know you had. And that's where personal benefits and retirement review comes in. So I hope you enjoyed this. If you do want a copy of this pamphlet, I can give it to you. It's in a PDF form. Just reach out to us. Again, federal retirement show. Fill out the form. We will be in touch. Ask the person that reaches out to you. If it's not me directly, say, hey, I want that top ten mistakes for sure. I want a copy if there's no excuse. The book that Val wrote so I can educate myself on my benefits and retirement situation. So again, I really appreciate you taking the time out of your busy schedule. We've got a lot of information on our show, so go back and review all of it. Share this with your colleagues. Get notified when new content comes out. Thank you for joining me and look forward to seeing you on a future episode.

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