Latest / Federal Retirement Advisors | FedLegacy / How Big Should Your Roof Be?
Transcript
- William Smith: So there I was on a 13 hour flight, coming back from one of the trip, one of the best trips of my life. I was full of hope. I was full of inspiration. cultural fire that I felt in my belly on that airplane was something that I had never felt before. But the same time, there was a ton of fear and anxiety because when this plane landed back in America and those wheels touched down, I was afraid that I was going to lose this, this fire that I had never felt before. whenever I get into those places of fear, not sure what's next, what I like to do, I like to hold onto books and go into books that inspire me. And so in this particular time, on that 13 hour flight back from Ghana, I was reading a book, a book by Napoleon Hill, and it talked about definite chief aim. And what a definite chief aim is, So here's what I want you to do. I want you to book a call today, On that call, we'll go through your numbers. We'll ask questions about what your goals are. We'll make sure we begin the process of mapping out a strategy so you understand from A to Z how retirement works. And you can lean on our experience. We've been doing it quite a while. So book a call below. We'll make sure we get you booked with our retirement readiness call. And I cannot wait to meet you He talks about when you have a purpose, you hold on to it, you visualize it. And if you visualize it and you release it to God, God will then connect the dots for you. as I'm on that flight back, I to myself. said, I'm going hold this chief aim that when I get back to America, I'm not going to rejoin the rat race and what I was doing. I'm going to live for something bigger than myself. And so When I got back, it was a week, nothing happened. And again, I'm just reading the book constantly, holding on to the memories I had and the feelings that I got while I was in Ghana. on that second week, I got a phone call from a good friend of mine and invited me to this office down in Alexandria, Virginia, because he was like, look, well, there's this guy, he owns this company down in Virginia, they're financial planners and it pretty cool. And it looks like you would fit right in, in this company. So if you're from the DC area, If you hear somebody tell you that there's a black owned company in old town Alexandria, they have a building. That's different, right? And so that's how a couple of days later I go to the office and when I meet with the guy, one of the first things he said, his name was Mr. Scott. He held up a study. It was, he had it laminated because it was that important to him. And it was from Brandeis university. And it was a racial wealth gap study. And he had the whole thing laminated cause he's like, look, I live by this. And he's talking to me about it. And he said, well, the goal of this company is we want to close this racial wealth gap. And in my mind, I'm like, okay, this is right up my alley of what I committed to myself on that plane ride. he says, you know, how we're doing it is, you know, right here in Washington, DC is right up the road, right here in old town in Washington at route one. He's like, we're right up the street, right down the street from DC. And like, look, there's tons of federal employees that look like you and I, and they all have the same problem. When they turn 50, their life insurance begins to explode, and at age 60, it just explodes completely. And if we can help them solve this issue, then we've made a big dent into this racial wealth gap. at that moment, with his leadership, I said, you know what, I can do that. And from that day forward, and that was 2008, I've been dedicated to helping federal employees just like you. And so tonight, what we're going to talk about is one of the things that we've talked to about, talk about a lot. And as a part of that study that was missed, that was the, in the details of that study, they talked about how people that look like you and I, and I'm assuming, you know, talking to my culture on this one, ⁓ it came to taking risks, we were averse to taking risks in the proper ways with the right structure. And so at Fed Legacy, we call that the roof. And so one of things I've learned is helping after helping thousands of federal employees since that time and seeing other people help through our team as we expanded our team is this. You can't work hard to create a legacy financially as a federal employee. You can work very, I've seen people work very hard, long hours, many years. It doesn't equate to a financial legacy. I've seen people work a short stint, 20 years. but did all the right stuff with their finances and retired TSP millionaires. The way to create wealth is to have a plan structured properly and stick into that plan through retirement. That's how you create wealth. And so when we talk about the financial house, the top part, is the roof. The roof is, and what we like to say is how big should your roof be? And so I want to tell you a quick story about a lady named Beverly. Now, when I started Fed Legacy, now we have a marketing team, we have an admin team, full-fledged admin team. We do a lot of these webinars, we do a lot of seminars, places. But when we first started, it was word of mouth. I would go into government buildings. I would talk to a client. and they would refer me to other folk while would meet folks in the cafeteria. And so in this particular time, this was early in the early days, I was leaving HRSA up in Rockville, 5600 Fisher Lane in Rockville, Maryland, is the HRSA building, big, huge HRSA building in Rockville. I was in the lobby and there was two ladies and they were waiting for the shuttle to take them to the train station down the street. And as they were getting ready to leave, one of the things I used to always do, I would walk up to folks and I would say, hey, how you doing? My name is William Smith. Do you have anybody that's helping you with your TSP and your life insurance? And who's helping you retire on time and with confidence? And most folks would say no one. And so I would say, okay, well, I'll be here tomorrow, meeting with some other folks. I would love to come by your cubicle, come by your office and have a quick 10 to 15 minute conversation to kind of more explore what I do. And so on this day was Beverly and it was Dana. And so Dana was younger, but Beverly was in her mid fifties. And so the next day I went, sat with Ms. Beverly. Ms. Beverly was fresh in the government. She had been only in the government ⁓ a couple of years, like four or five years or so. And she had just never looked at her benefits. put all her money in the G fund. She came over as a contractor, but before that she was with DC government. And she just, she's like, well, I don't know what I'm doing. I'm just working. I'm trying to do my best. And that's it. We made some small tweaks. when it comes to not having all our money in the G fund, we took it and we allocated appropriately based on her risk tolerance. And that made a huge difference in Ms. Beverly's life, huge difference. Ms. Beverly, so much so that when Ms. Beverly was forced to retire eight years later, one of the things she, she had to retire because she had her lung had collapsed and it was the whole thing. And, you know, she, she, I had came to her house to help her with some things around her finances and her retirement. And she said to me straight up her and her daughter will, I would never been able to retire if I didn't have that conversation with you that day because of the change that we made, because she was able to fund her retirement because of that conversation. So here's the thing in 2026, you know, you're already getting squeezed, right? There's no pay raises. We're talking to people this year. And people are like, well, how much did you make last year? 110. How much you make this year? 111, 112. The pay raise was very slim this year. Though the cost of insurance has been up around 12 % on average. Again, I talk about this all the time. When we're doing these, when we have this process we call it retirement analyze process, when we go through the retirement analyzer, one of the things that we realized over the last couple of years, insurance payments have almost doubled for married couples. We've seen this as a team. We analyzed. people's retirement analyzers, the team on every Monday. And that's something we've recognized over the last couple of years, health insurance costs has almost doubled for most folks. This year is up 12%, two years in a row, but pay raises only at 1%. And so when that happens, you need something else to be driving your money up, right? OPM retirements, four times longer than normal. So most folks that are retiring, We have a lot of clients now who retired in September and they still haven't received paycheck. Definitely the December people are out there. And so our clients though, we help them prepare for that because we tell them like, look, you need to have some money set aside for those issues. Right. And so 2026 is already crazy. One of the things that prevents most folks from taking any risks. Again, that study talked about black folks, unfortunately, don't take another risk. And again, I'm just speaking to us today. Um, we don't take another risk. And I can't tell you how many times I've had folks talk. I've talked to folks and they say, well, after 2000, 2008, I I lost so much money. I just left all my money in the G fund. But here's the facts. 2008 market drops. Bunch of people move money to the G fund out of fear. I get it. The market went down 32 % that year. think that's a huge drop. You have a hundred thousand. you drop all the way down to 70, that's a big, that's a big scare. You have a million, you drop all the way down to 700,000, you have 500,000, you're down to 300,000. That's scary for a lot of low fours. That's a big, that's a big scare. However, my job is to talk about the facts thereafter. And so if you look 29, 20, 20, 29 to 2012, we had three straight years of double digit gains in the twenties. big, big, big bounce back. And we're talking to folk and we're talking about people that are TSP millionaires. And we talk to those types of folks every day, well, almost every day. But ⁓ the thing they say is after 2008, I didn't touch my money. I left it in the CS and I, and I just didn't do anything else. just let it, I just kept contributing and here I am. And so when it comes to risk, had a mentor tell me that One is like, like, he said he was talking about business owners, but I'm related to this G fund. It's like one old mean lady keeps most people broke, right? Because one old mean person prevents people from asking people to help them with their business, right? Even though most people are nice, right? One mean person in your head could prevent you from living with purpose. And that's a lot of people that just stuck in fear, not taking any action. because of one person that they imagine in their mind might be meaning them or was means that in the past. That's the same thing with the C fund and risk when it comes to money. One bad year has people sitting in the G fund for 20 years. Whereas another person who had that fear, saw it as an opportunity, then came out on top. And it makes a big difference, right? So when we look at it, safe is not free. It costs you money. costs you. It can cost you time. It can cost you peace of mind because you just might not be able to retire the way you want. Long-term care might be a threat because you didn't take care of, don't, you didn't grow your money enough. was talking to a couple of the day and we were just going through their finances earlier and I was just telling them, I'm like, look, long-term care is not going to be an issue for you because you have enough money saved up. And sometimes that's even hard for people to have enough money to even believe that. But again, doing this now. for almost 16, 17 years now. And I've seen it. I've seen people go from 65 to 73. I've seen people go from 45 to 60. I've seen people die. Like I have plenty of clients whose spouses have died, who went through long-term care situations. And I'm the phone call that they're talking to them. I'm reminding them of what they set up. And this is consistent. And so the difference between those that can retire well, And what I mean by retire, well, I mean, you retire, you have peace of mind around traveling. You have peace of mind around long-term care. You have peace of mind around spoiling your family. I mean, let's be honest. Like you have grandkids. You want to be able to spoil them. You want to be able to take trips with your kids. You want to be able to invest in your kids. That difference is all about how much you have in your TSP for the most part. Not everything, but it's a big part. And so if you look at it, the G fund on average, 10 years, 2.6. If you have 500,000, and that grows over a 10 year period, that's 646,000 after 10. The TSP, the C-Fund and the return ⁓ at 13 % over the last 10 years at the time of this slide anyway, 500,000 have grown to 1.6 million. That's a huge difference. And I can speak from experience, I've seen this. It's same money, same salary that people have, same salary, same background, same family structure. All of that stuff, money sitting in two different pots just because one person got good advice, one person got spooked by the market dropping. They go to lunch together. They raise their kids together as far as same age, going on play dates and stuff like that. Gossip about the same people at work. They go to have retirement sessions. I meet with each one of them separately. Totally different retirement accounts, all because they just park their money in two different places. and really never had that conversation. But money, same money, two different places, two totally different retirements. And so the reason why we talk about the financial house is because if you have your, if you have your, we like to say house in order, you have the right structure, you will be able to retire on time and with confidence. Those are the reason why we always say it's on time and with confidence because early on in my career, ⁓ I learned that two things the federal employees want to do. And it might be you is you don't want to be the oldest person in the office, right? You don't want to be that person. And also you want to be that person that when you retire, you're retiring and you're confident, you have peace of mind, you don't feel forced out. You don't feel like, well, do I have to come back to work? When you retire on your own terms and you retire confident, that's a heck of a feeling, hell of a feeling. And so That's something that we go into all these webinars with, all our one-on-one sessions with me, my team, we're trained to make sure that our goal is by the time we finish meeting with you, by the time we finish having our conversations with you, when our TSP finish line process, that you're confident and you're retiring on time. You're not working past the time in which you need to. And oftentimes, once you put your stuff in structure, the timing is relatively easy. Because the thing about you as a federal employee is this, you have a pension, you have social security, you have your TSP. That's the envy of most people in America these days. Most people, you know, after the eighties were taken off the pension system unless they worked for the state or they worked for the federal government, and even the state governments. Those pensions are nowhere close to as good as what you all have in the government. And so you all have the enviable retirement system, but you gotta use it. And when you use it, enjoy it. Don't just sulk in what everybody else's issues are. Enjoy your retirement. You work long, you work hard. Some of y'all work hard, not everybody. But anyway, you got that federal job, use it to your best benefit. And the thing you can do is by making sure you structure it right. So here's another thing I wanna talk about. The question is, now how big is your TSP? Yes, that matters, but it's, is my TSP structured? to support you in retirement? Going back to the long-term care piece, going back to the, do you want to spoil your grandkids or invest in your children or invest in the family legacy by buying different real estate? Like I love talking to clients and they're like, look, you know, I invested in my TSP, but now I have three rental homes and I'm leaving this for my kids. Like, do you have the structure to be sustainable? It's not how big your TSP is. It's how is it going to support you in retirement? because there people that have, you know, lots of money in their TSP, but they don't have a tax strategy. So even though they have all this money, the IRS is waiting to get 37 % of that money as soon as they pass because their kids have high salaries and they didn't have a tax strategy. So now all that money is going to the IRS. So it's not how big it is, it's what's your structure and is the structure to support you. And so at Fed Legacy, when we meet, And what we talk about consistently is this financial house. You want to have a foundation where your pension's there, the income you need is there, the legacy money's there, the money you're looking for your kids is there, that peace of mind money is there, the healthcare emergency money is there. You want to have that stuff locked into a foundational piece because those things can derail you when it comes to your peace of mind and retirement, which can cause you to collapse everything else because now you're stressed, you're making emotional decisions. And you want to make sure that money's sitting aside in a good place. Like even with the lady Beverly, when she had her illness and she, hurt her, well, her coworker first reached out to me because she knew how close I was to her. Her daughter reached out to me and we already had a plan. We just executed the plan and me and Beverly had been talking about for years and we executed it. And you know, Beverly's no longer with us, but her, her daughter's fine, right? Because we executed a plan where her daughter's fine financially, emotionally, you know, her mother's no longer here, but financially everything was laid out. And so her daughter didn't have to go reaching all, know, taking down money out of her legacy. Everything was already set up. And so it kept the financial house standing because if sometimes, because financial house is not only for why you're living, it's also for your heirs when they inherit your money, making sure that they're not just pulling them all over the place to try to solve issues. We make sure we do that stuff in advance too. And so. The roof, again, is not just extra money. It's traveling money. had a lady hit call me, we were talking on Monday and she was like, I want to have X amount of my TSP because I just flat out want to travel. I just want to travel. So we broke down a plan because she had about 700, 800,000 under TSP, didn't really need any income. I said, well, look, if you get 5 % on your TSP money, that, and I think the amount was like 30,000 in interest. Don't quote me on the amount, but It was like 30,000. I was like, is that enough to travel on to all the places you want to travel on in a given year? I was like, all right, well, if that's your goal, let's just use the interest that you make on the money that you make in your TSP. We can put you on something decently safe, you know, put some money aside that's aggressive. But if we keep this money in a decently safe place, you could just live off the interest of this and travel as much as you want. Is that what you want? She's like, heck yeah. Again, proper structure. Right. So for her now, she knows here's where my travel money is going to come from. Family, health care, generosity, love talking to people who are opening up foundations. And I love having those conversations. One lady opened up a summer camp, you know, all types of different things you could do when your money's growing as a federal employee. Because again, as a federal employee, your income, it should be taken care of by your pension, proper structure and your social security. And your TSP is there, not necessarily just for income, you can use a portion of it, but that money is just going to keep growing. Like I said, I'm seeing people double their TSP over time in retirement and don't know what to do with it. So you can now start having conversations like generosity, what are you going to give back? What do you love? Your church, your grandkids. That's one thing I'm big on is starting family businesses where you take your federal employee experience and leadership and working in teams and things like that. Cause this younger generation, I hate to say it, some of them just don't have that structure, but they have the vision and they have the energy. They have the curiosity. They just don't have that 30 years of structure that you have working together. You obviously being the leader of it, following their vision and helping them structure that as a team. That gives you purpose. seen that many times. I mentioned a friend of mine and her dad retired from the department of education and he retired at 55, went into business with his daughter. And now they have four preschools in the DC area, and they're doing really, really, really well. All because of dad took his experience in the government, connected with her dream and his money, his money and invested in her. And now they've 10 X that money easily and continuing to grow. That's what we got to be doing more of having those types of conversations because that stuff lasts for generations and generations. Cause we don't know how long this whole federal government thing that we've got going on is going to last. But what we got to do is take the money that we do have and invest that into each other so that we can then build a better community. when I first met with her, she had about $55,000 in her TSP. Eight years later, she had $314,000. To her, that was a big deal. Because if she would have kept on that straight, path of where she was, you know, she would probably got to maybe a hundred thousand, keeping it all in the G fund, but 314,000 allow her to retire when she needed to, because she didn't have a lot large pension because of her, because she didn't work in the government that long. But you know, she has pension from DC government, pension from the federal government. She had a social security and that 314 gave her some breathing room that she really needed during that time. And so again, small tweaks. make a big difference is another client, Myra. Myra, when she tired, she followed the plan. She had 986,000 RTSP when she retired. She had 42 years of service, but she had all of it, 100 % traditional. know, with 100 % traditional 96, that's a huge tax bill in the future. We helped her manage that, moved 350 to traditional IRA, converted some money over the last three years, 70,000 each. That's going to be able to free up 426,000 for her tax free money. from that 900,000, super important because she can use that money in the future when it comes to leaving legacy with no taxes, long-term care emergency if she needs it and making sure that she has the peace of mind that she needs.