Top 10 Mistakes Made by Federal Employees — Part 8: Unprepared to Pay off Debt

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Speaker 1:
Welcome back to the Federal Retirement Show. I am your host, Val Majewski with American Benefits Exchange. And as always, it is a pleasure to be with you. And thank you for taking time out of your busy schedule to join us to view our content. That's what we're here for. You, the federal employee that is looking for information when it comes to your benefits and retirement situation. So thank you for that. And we're in the middle of a series called The Top ten Mistakes Made by Federal Employees. There is a pamphlet that I wrote years ago and we've modified it. We've updated it, but we want to give a fresh look at the top ten mistakes. Now, just so you know, this is not the full and complete list of mistakes. There are others, but these are the top ten that we see. And again, we're in the middle of this series. We'll probably have a little extra a couple extra after the top ten are revealed. But hang with us. Hopefully you're not making these mistakes, but I'd highly recommend if you like today's content, go back and view the previous mistakes that we've covered, and also all of the other content that we have. There are numerous episodes out there. All the information is geared towards you, the federal employee. So if we do not answer your question or your concerns or the thoughts that you had with any of the episodes that we've already covered, please reach out to us.

Speaker 1:
Go to our website, federal retirement Show.com fill out our form. One of our experts across the country, if it's not me personally, will be reaching out to answer your questions, get you the information you're looking for. But let's dive into today's content and continue our discussion on the top ten mistakes made by federal employees. So here's a copy of the pamphlet. This is what it looks like digitally and also in physical format. If you want a copy of it, we can certainly send it to you. But today we are talking about the steak. Number eight. We're nearing the finish line here. Eight, nine and ten are all that we have left. But today, number eight is not having a plan to pay off debt. Not having a plan to pay off debt. More importantly, I can expand on this. Not having a plan to pay off debt prior to retirement. This is a big thing. Why? Because if you've got a lot of debt, what do you have to do to service that debt? You've got to make payments. There are interests involved here, and it's a varying degree of interest depending on the type of debt that you have. But having a plan to pay off debt prior to retiring is key to living the life that you want to live in retirement, especially if you have a lot of debt and there are varying degrees.

Speaker 1:
I've talked to a lot of federal employees over the years, and we've done a lot of debt analysis, and we've done a lot of, uh, planning to help pay off debt. And some people just have a couple things, like a mortgage and a credit card. They pay off every month, and others you'll have the whole kit and caboodle. You know, they've got numerous credit cards, personal loans, student loans, car payments on top of the mortgage and with no end in sight. If you don't have a plan, this can deteriorate your retirement savings or your retirement income. In most cases, federal employees. You can see this through. Our previous episodes are going to make less money in retirement. Now you talk to us and you have plenty of time to plan. Hopefully that's not the case. We want to get you to break even, meaning you're going to make the same amount of money in retirement that you're making before you left while you were still working. But if you're going to end up making less money and you've got all these payments and you've got high interest, then there's no plan in place. It can drastically take away from the income that you're going to have and the money that you get to keep when you're retired. So I think it is wise and this is a mistake.

Speaker 1:
These are all my opinions, by the way. So I don't want you to go through this and be like, these are hard and fast. This is the top ten. These are these are my opinions based on my 14 plus years of working exclusively with federal employees and being a subject matter expert. Um, I said before, in previous episodes, I'm not going to claim to know everything, but I know a whole lot of experience a whole lot. And speaking with so many of you over the years and running retirement reviews and benefits analysis and calculations, these are the mistakes that that I have seen. And if you can avoid these, you're going to have a better chance of retiring when you want, how you want, and with the lifestyle that you want. I say that a lot throughout these episodes. So having a proper plan to pay off your debt prior to retirement is key to keeping more money in retirement and accomplishing those things. Being able to retire when you want and again how you want with the lifestyle that you want. In order for that lifestyle to be there, you've got to have the income, you've got to have the money and eliminating the debt. And the only debt that I'm really okay with in cases of people going into retirement is a mortgage. If you can, if you can get everything else cleared up, and maybe the mortgage is the last thing and you retire with that.

Speaker 1:
Okay. But that's just as a general thought. If you have a plan in place to eliminate all those things, that's a worry or a an issue that is taken off your plate. So why why would we want to eliminate debt prior to retirement? Well, it's simple. If I've got less debt in retirement, I'm going to have less money or less payments going out to service that debt. If I pay everything off sooner, not only am I going to have no longer a payment for that particular debt that I paid off, but I'm no longer paying interest on that debt. So eliminating the payment, eliminating the interest saves me money over time, but immediately eliminating the payments. I have more cash flow. I have more money that I get to keep because it's not going out to pay off debt. Now, I'm going to say this we are not going to do debt consolidation. We're not trying to, you know, bundle everything up in this. You've got to be diligent and obedient to this plan. If you create one to pay off debt. And yes, it might hurt a little bit, you might sacrifice a little bit now. But if we can show you how much you're going to save over time compared to the interest that you would pay or continue to pay if you kept those debts going into retirement, then the choice is up to you.

Speaker 1:
You get to see if it's worth your while to do that, to make some changes. Make some sacrifices now in order to live a little bit better in retirement and have less debt. I mentioned the interest eliminating not only the payment, but eliminating the interest. Some of these things high interest credit cards I've seen 24.99%, 29.99% interest, and if you're not paying it off every month, that interest can be significant. And making the minimum payments is not a proper plan. Again, in my opinion of trying to eliminate or get rid of credit card debt, right? This is where they get you a little bit, hey, introductory rates maybe are low or things like that. And then boom, if you're carrying a balance, these, these big or higher interest rates come on in and they can they can swallow you up pretty quick. So just understand that not only are we saving on the payment, but we can eliminate the interest. And what is interest? Interest is money that doesn't really do you any good. It doesn't do you any good. It's just extra payment. It makes somebody else money. What if you can eliminate that? And now the money that you're saving, you can put into something that can earn you interest, that can be more beneficial. You're on the correct side of interest in that case.

Speaker 1:
And then that allows you if you're keeping more money, you can, as I just said, put it towards something that earns you interest, but it could be more retirement saving. So if you're younger and you've got this, um, large debt or you've got these numerous debts, a lot of people look at, oh, I can't afford that payment, I can afford this, or I can afford that and that payments. Okay, but you're not realizing how much you're actually paying over time, getting those debts off your ledger. Now take that payment and put it towards your retirement. Put it towards your future. Earn some positive interest on that money. Your future self is going to love you for it. Now you might be able to sustain it today that I can afford that payment. I can afford it now. I can afford it now. I can afford it now. But can you afford it in retirement? Can you afford to keep piling on debt as you're getting closer to retirement? That's another thing that's in there is not paying off debt, but also not having a plan properly when it comes to mitigating future debt. And I'm going to buy that that car, you know, a couple of years before I go and uh, before I retire, I'm going to I'm going to redo this or redo that. I'm going to put have a lot on my credit card as I'm leaving.

Speaker 1:
And now I've got all this debt that I'm carrying into retirement because I put it on at the last minute. So there's different types. It could be debt to even carrying the whole time, and you just haven't really had a plan to pay it off when you're paying more interest than than you need to. Unnecessary interest or it's piling on debt at the last minute. And I said I encourage people. It's not a blanket statement, but it's a normal thing that I've seen, uh, doing thousands of benefit reviews over the years Is if you can retire as close to debt free as possible, if not entirely debt free. It's going to make for an easier retirement for you. Again, you're going to keep more money in your pocket. You're not going to have as much going out to service debt or pay interest or things like that. Paying off all of your obligations before retirement would be ideal to get, in my opinion. So hopefully you found this episode helpful. Hopefully you are not making this mistake of of taking too much debt, carrying too much debt into retirement, or not having a proper plan in place to pay it off before you retire. If you need assistance, if you just want to talk it over and map it all out and lay out all the debts and just see if there's something that you can do, reach out to us.

Speaker 1:
I mentioned the website earlier. I'll say it again. Ww retirement Show.com fill out the form. One of our experts will be in touch. We'll do all the different reports. We'll go over your benefits and retirement situation, map everything out when it comes to your debt, and see if there's a proper way or a better way that you can tackle that so that you can have more money in your pocket and save more for your future retirement. I hope you enjoyed this content. If you did, do me a favor. Share this channel, share this show, share this podcast. Wherever you're listening to it, share it with a colleague you work with other federal employees that need to know this information. I encourage you do not keep us a secret. Share it with a colleague, somebody that you think needs to know this information. I think everybody needs to know it if you're an employee of the federal government, but if you know somebody in particular, whether it's a colleague, a manager, a boss, a new person that just got hired and they need to learn all these things, share the federal retirement show with them. We appreciate it. And thank you again. My name is Val Majewski. You've been watching the federal retirement show, and I look forward to seeing you on a future episode.

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