Being a financial planner, I give all sorts of advice. In reality, my entire profession is based around the advice I give, and because of that, I take it very seriously. As you’ve likely noticed, I rarely throw out broad statements because usually, they aren’t all that helpful.
Every client, as well FRP Community Member, is certainly unique. Whether they’re a Physician at the VA Hospital or a Mail Handler at the Post Office, they all have differences in their values, thoughts, feelings, and finances. My goal in working with federal employees is to get to the bottom of their why’s. These include:
- Why did you choose the TSP Allocation you have?
- Why do you spend money the way that you do?
- Why do you worry about X?
- Why did you start working for the federal government?
- Why does planning fo retirement matter to you?
Once I determine the why’s, I can usually figure out the hows; and this is where advice comes in.
Although I give out a lot of specific advice, there are still some words of wisdom that I give to every single client I meet with. Today I want to share the advice that I feel is the best I give.
Before I give you the advice, I first want to set you up by telling you a story.
My wife is an absolute worry wart, well at least she used to be. In fact, before she met me, she would worry so much that it caused her to have chronic stomach problems (now she just gets headaches from me annoying her 😉.) I’m not kidding, we finally went to the doctor who said if she didn’t lower her stress she would be due for a stomach ulcer eventually.
Things like having to go back to work after vacation and being in rooms with lots of people (those are some my favorite environments) would cause absolutely wreck her. Another thing that messed with her psyche was me being self-employed. Her not knowing where our next dollar would come from while she was in nursing school just added up to being too much on her plate.
Thankfully I can joke about it now because she’s learned the lesson that I give to all of my clients, and it’s VERY simple.
Focus on the things you can control.
Disregard the things you can’t control.
See isn’t that simple?
By in large, most of the issues I see with federal employee clients, and really all of my clients is worrying about the things that they have absolutely no say in. I’m sure you can think of a million things that you cannot change, but let me give you just a brief list that is specific to your career and financial life as a federal employee:
- The stock market
- The rising cost of FEGLI
- Government-wide decisions such as lowering pay increases
Let’s talk about the stock market
For many of you, the thing that you most worry about in your career is the Thrift Savings Plan.
The TSP makes up one-third of your retirement benefits, the other two-thirds being Social Security and your Pension Annuity (you can read more on those here.) Although the TSP is only 1/3, it’s really the only one that you can control your contributions on. Because of this, along with other factors, the TSP is a major pain point for many people.
The TSP is simply too great of a benefit to pass up, especially with that wonderful 5% match, yet for some, the TSP leads to a much lower quality of life due to the stress it causes.
I’ve heard people say things like, “I wish there were only one option for investing in my TSP” and “man, the people on the Civil Service Retirement System (CSRS) have it so much better.” This kind of thinking though does absolutely nothing for you.
Let me show you an exercise I like to do with clients.
There’s this tool called an Ibbotson Graph. It basically shows how the stock market has done over the past century (if you shoot me an email I can send you a copy) including major events that caused volatility in the market. I have one on display in my office signed by I’m guessing the guy who created it, Mr. Ibbotson as well as one on my computer.
First, let’s look at a small segment of the timeline (WARNING: the following photo may cause stress.)
This is a snapshot of how small-cap and large-cap stocks did from about 1970-1975. During this time of extreme volatility, many were probably worried about how the market performed. But, we must remember that you are not investing merely for five years, but rather for many decades.
Although we look at the above graph and get scared, when we zoom out a little, the lines suddenly start to smooth out.
And if we zoomed all the way out, suddenly the picture becomes clear, over the long-term Mr. Market continues to increase.
My desire in taking you through this exercise is to show you that although you can’t control how the stock market and your TSP performs, you should not worry.
Now let’s talk about some of the things you can control and should be paying attention to.
Things you control
The performance of the TSP is obviously out of your control for the most part. You can’t decide if the market goes up or down and when that happens.
But, you can control your allocation.
Although there isn’t a “Best TSP Investment Strategy” for every person, there is a best strategy for you as an individual that takes into account your tolerance for risk as well as goals and things you’d like to accomplish with the money. This is where an allocation and strategy comes into play, and although you can do it yourself, somebody like me a financial planner with all of the tools and know-how can be of great benefit.
Another thing you can control is your contribution amount. Why settle for 5% when you’ll need more than that to live on in retirement. My guess is you haven’t figured out how much you’ll need in retirement and because of that you only contribute the minimum to receive the full match.
You see, it’s all connected.
The reason you worry about the things you can’t control is because you aren’t focusing on the things you can. Investing 5% in your TSP is awesome, but many of you will need to invest more than that to retire at the age you’d like with the lifestyle you’d like to live. This is where a plan comes in.
A plan will show you how much you need in today’s dollars to retire and meet your goals. You can control a plan, and once you have that plan, you can control the decisions that will help you get to where you want to go. I know I often talk about planning, but it’s because it’s important and WAY too many of you are neglecting to plan for one of the most significant events in your life–RETIREMENT.
This article could honestly go on forever. I can list a million and one things that you are currently worrying about that you have no control over and then list another million things that you should be focusing on but aren’t.
Start taking control of your retirement today! There’s no time like the present and time is dwindling.
– Cooper Mitchell