Are you truly prepared for the unexpected? In this episode, Michael, Tommy, and John dive into how to protect yourself financially, tackling the common objections and biases they encounter in their decades of experience. You’ll hear key insights on insurance, including how to ensure you’re covered before you need it, how FEGLI Option B compares to Basic, and why life and disability insurance are non-negotiable.
Listen in to learn why it's crucial to plan both for living a long, fulfilling life and the unexpected realities that could happen tomorrow. They also discuss the value of Social Security and survivor benefits, as well as how maximizing these benefits can give you peace of mind. Discover how having the right plan in place can help you stress less and focus more on living your life.
Listen to the full episode here:
What you will learn:
- How to ensure you’re always prepared. (5:30)
- The importance of having insurance. (7:15)
- How FEGLI Option B works and how it compares to Basic. (14:40)
- How to guarantee peace of mind. (20:00)
- Why survivor benefits are key. (27:00)
- The value in knowing you have the right plan in place. (36:30)
- Why you shouldn’t compare your plan to someone else’s. (41:00)
Ideas worth sharing:
- “When the house is on fire is not the time to get insurance. You need to have insurance before the house is on fire.” - Mason & Associates
- “We can’t change the past—it’s all about what we’re doing moving forward.” - Mason & Associates
- “Don’t be your own worst enemy.” - Mason & Associates
Resources from this episode:
Did you enjoy the Federal Employee Financial Planning Podcast? Never miss an episode by subscribing on Apple Podcasts, Amazon, Spotify, and YouTube Music.
Read the Transcript Below:
Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.
John Mason: Welcome to the Federal Employee Financial Planning Podcast. I'm John Mason, President and Certified Financial Planner at Mason & Associates. Today with me on this episode, Mike Mason and Tommy Blackburn. Folks, if this is your first time listening to our podcast, thank you for being here. Thank you for coming across our podcast and for giving us your time, which we know is valuable.
And we specialize with federal employees. We do comprehensive financial planning and tax planning. We typically work with folks right at or near retirement who have close to a million dollars or more saved in TSP and other assets. We're financial planners first and we do this content creation second.
We're enjoying it. We hope you will enjoy it. If you're new, if you're returning, thanks for coming back to join us on another episode. Mike, Tommy, we just recorded another one. I think we can let our audience know. We're all wearing the same shirts. We're recording episode two for the day, but how are we feeling? We had a 4th of July holiday. We didn't talk about that at all recently.
Mike Mason: Yeah, Fourth of July was hot. for most people, one of the hottest fourths across the country, but plenty of family time, and let's call it Independence Day. That's better than Fourth of July. Every country has a Fourth of July, so great Independence Day.
Tommy Blackburn: Yeah, it was, it was always nice to have a long weekend, although, it always seems busy, whether we're working and doing the day-to-day during the work week or even have a long weekend with the young family. So we personally, we left town and went to Cape Charles, which is on the eastern shore of Virginia, not a terrible drive for us here locally.
It's neat, it's kind of, I would call it a quaint, kind of quiet town. It seems like it's grown a lot though for a little town, has a golf cart feel to it, which was pretty fun. Particularly, we were there with other young couples and young families, so putting all the kids on a golf cart and riding around town was fun and convenient.
Very hot. Man, yeah, you're right. It was a hot weekend, but thankfully the water helped cool it off, getting in the ocean there. Yeah, so it was nice. But keeps you busy.
John Mason: Keeps you busy, especially with kids. And we had a wonderful Independence Day, wonderful Fourth of July.
And things are rocking and rolling here, guys. And we're going to dive into this podcast episode, but things at Mason & Associates are going well. We have summer projects, whether we implement traction or we don't implement traction, we have our quarterly rocks that we're all trying to hit and work on.
So as for our audience, I think it's good for them to know, yes, we do financial planning. Yes, we do content creation. And then a certain amount of work, like the reason we're not always available for new meetings. Like if you looked at our calendar, And said like, “When's Tommy available? When's Mike available?”
The answer is not all the time. And it's actually pretty rare that we are available because we're prioritizing and saying yes to our family. We're prioritizing and saying yes to ourself, to our health, to our well-being. We're working on the business. We're working in the business. We're taking care of clients.
We're pulled in a lot of different directions. So it's very important for us to have that time away where we can say yes to the things that matter most in life. So I'm glad you guys had a good holiday. Let's talk about this podcast episode, which is protecting you from yourself. So if you are the audience, you are the you in this, protecting you from yourself. And we're going to share some Mason sayings.
We're going to talk about what we've encountered over our three or four decades of doing this, the objections that we've received, the biases that we see from clients when they come in, they have these biases where we have to knock down that wall a little bit and kind of chisel away at some of them.
So I think it's going to be a fun episode guys, as we help our audience protect themselves from themselves.
Mike Mason: Yeah, I've got 37 years worth of silly statements I've heard. And it's good that the prospective clients or clients actually echoed that silly statement. ‘Cause if they didn't, I wouldn't have been able to correct their thinking.
I don't know that I'll be able to share every story. But, some of them, some of the easy ones, it's like, I'm not getting life insurance because the insurance company's betting I'm going to live and I'm betting I'm going to die. So that's just an intro to protecting you from yourself because there's a news flash here.
You're going to die, right? It's just a matter of when, and, and while I'm on the insurance thing, how about, I'm insurance poor or I don't want to be insurance poor. Well, if you don't want to be insurance-poor, then buy the right insurance because insurance-poor is when you need insurance and you don't have it.
You need health insurance, but you don't have it. Now you're poor, right? You need life insurance and you die. Now you're poor. Insurance poor isn't having it.and not needing it. Insurance poor is not having it and needing it
John Mason: Well, maybe we can just stay right here on life insurance disability long-term care. Just insurance in general and isn't it fascinating that one of the reasons people do not buy insurance is because they actually don't want somebody else to win. I mean, think about that for a second. “I'm not going to buy insurance because I don't want that person to get a commission,” or “I'm not going to buy insurance because I don't want that insurance company to make money.”
It's almost spiteful. It's like, well, you still need it. So we are intentionally putting your family at risk because you don't want anybody else, you have to win. Sometimes you have to win, but nobody else is allowed to win.
Mike Mason: Sometimes it's even your family that doesn't win because of your choice.
People that have a 70,000-dollar or 60,000-dollar vehicle realize that if they don't have insurance on it and they wreck it, it's going to hurt them while they're alive. But that same person may not have life insurance or may not take survivor benefits and in reality the person they're hurting is the one they leave behind and they're okay doing that, right?
It's a great thing. It's not just the insurance salesman that's losing. There's another story, I'll tell it later in the podcast. But another, a commercial I hate, and we'll talk about that later.
Tommy Blackburn: Okay, well yeah, I'm interested to get into that, so don't lose the idea, let's definitely circle back to it.
As you were talking about, being insurance-poor, yeah, what comes to my mind is, when the house is on fire, it's not the time to get insurance. You should have had it before the house was on fire, and you hope you never need it. I do think we all agree that insurance is not the answer for everything in your financial plan.
And that's what you have to be wary of. Sometimes it's marketed as being a Swiss Army knife to all of your issues. And it's maybe not the most or is not the most efficient way to get there. But it is good to have these things and hope you never need them. And it is usually selfless. That's why you get life insurance because that's to help those you leave behind.
Disability perhaps has to help you some, but that's really again to help those who are depending upon your income. So, you have to have these things and it's honestly, well one, I think about estate planning documents, wills, power of attorneys, revocable trust events. That's honestly, a lot of times insurance in my mind too, because if you're not here, you can't make decisions, it's putting something in place. It's a form of insurance.
And it causes me almost heartache sometimes when I run into people in life, really regardless of where they are in life and they don't have these things. And it bewilders me, as I'm sure it does y'all somewhat, or just shocks me the amount of risks that people are willing to take on when they've gone their entire life, raised kids, and thankfully everything worked out, and they never had estate planning documents. They never got life insurance. And it's just oh man, I can't believe you took that risk. I'm happy for you that it worked out that way, but it's definitely always causes me pause as an advisor. And I'm saying this to somebody who doesn't sell and we don't sell, we advise on insurance, but we don't get compensated on these things. We realize it's critical that they're in place.
John Mason: Well, Tommy, you said so many good things, and our audience, we always say we're here to support, empower, educate, and motivate not only our clients, but our audience to make changes in their financial plan. And that's one of the values of hiring a financial planner is to help decipher or decide what's going to be actioned and what's not going to be actioned and when to action those things and how to prioritize.
And frankly, ignorance is bliss. If I'm a consumer and I've never done financial planning and I have no idea what a trust is or a will, or I use trustee and executor interchangeably like they're the same thing, and I have no idea how to Google and find or decipher which estate planning firm is better or worse than the other, and then somebody slaps out a 5,000 dollar fee for documents that I don't understand, I just want to stick my head in a hole and never come out again. And not that's the right answer, but I guess I'm just opening up the conversation a bit that it's scary out there. and that's one of the values of hiring a financial planner.
And that's one of the things that we have talked about, at least Mike and I used to for a long time, is when clients come in, new clients come in with their tax returns or insurance policies, it's kind of like that dream maybe some of our audience have where you show up at school and you're buck naked and you're like in class and you're completely naked and you're like, “What is happening?”
And it's a terrible recurring dream for some folks. Well, that's what–if you're hiring a financial planner for the first time, that's kind of what you're doing. You're like, all your dirty laundry, every decision you've made, all the good, all the bad, you have to be ready to receive that. And if you're working with a good advisor, they're not going to make you feel bad for those decisions.
Tommy Blackburn: We're compassionate. Unless there's the occasional, I think it's where you're so proud and we try to be compassionate or you're so sure of yourself, but maybe you need a little bit of a rougher handling to get the point across. That's rare. Usually, it should be a very compassionate conversation and we can't change the past. It's all about what are we doing going forward.
John Mason: That's absolutely right. So let's talk a little bit, Mike, about FEGLI for a second, since we're on this insurance subject. And one of the values of a financial planning team is to help with the whole idea of analysis paralysis and again, create action.
So how does FEGLI option B work? Maybe we can compare and contrast that to FEGLI Basic. This'll be good. You and Ken started making clients at 50 years old. Why? And what was your kind of like marketing strategy for those folks?
Mike Mason: Well, you just opened up the floodgates there. So, let me, first I do want to open up with, remember, this podcast is to protect you from yourself, don't be your own worst enemy. So we want to, it's human nature to try to make, you don't want to spend more money. It's human nature. So you try to logic your way through why you're not going to spend more money.
And one of those statements is the insurance company, we already said it, is betting I'm going to die and I'm betting or the other way around, they're betting I'm living, I'm betting I'm dying. So I want to stay on that, but to get to your point, we started working with federal employees 37 years ago.
It's interesting, this business plan grew up 37 years really quick. Just like you're going to go 37 years really quick. And Ken and I said, 35 to 37 years ago, if we do this right, we're going to wake up in retirement, 62 years old, and we're going to be working with clients that have a million dollars or more to put under our management.
And it's interesting how that business plan materialized and it did materialize on its own. People like John and Tommy and Ben came in. John, you made this statement earlier. I didn't know at all, right? Just like our clients that are listening can't do financial planning. John's a, how he got it, I don't know, born CEO, but the direction he moved the company.
So that's the same thing, you know, as you going out and getting a qualified financial planner, we had one right here, a qualified CEO that all I had to do was listen to. And then Tommy comes in and brings his own flavor to it. So the plan came together. I don't know that I'm answering exactly what you wanted me to do, but–
John Mason: You're not, but that's okay.
Mike Mason: I think so as well. So remember, don't be your own worst enemy. Many people, we're going on the FEGLI thing, and let's just zero in on, because there's a FEGLI issue out there, so let's zero in on FEGLI option B. When you start in the federal government, most people take maximum basic plus five times.
Nothing wrong with that decision, but if you do a financial plan, you're going to look in the future and you're going to see as you get closer to a mortality moment, 50, 55, that Federal Employees Group Life option B begins to get really expensive, and you shouldn't wait until you're 55 to get out of it because being insurance poor, let's say you did that math like we talked about earlier. John, you did the math and said, “Boy, I need to get out at 49 and a half because at 50 it's going to start getting expensive.” And then your mortality moment is at 48 and now you're uninsurable, right?
So you're still going to be, you're going to have the insurance, you can choose to keep it and pay the x, the increased rates every five years, but you're going to be insurance poorer because you didn't make that choice to buy a 20 or 30-year term. And let's be really clear to folks, 99.9% of the time when we encourage you to increase your life insurance, it's in some type of 20 or 30-year term policy.
John Mason: So, and when we do that, we don't sell insurance because we're the only financial planning firm, but we still encourage the replacement of FEGLI option B for a lot of folks.
So in summary, Mike, FEGLI option B, you can buy one to five times your salary. The premium is super cheap when you're young and every five years the premium goes up. And you reach a point at like 45 or 50 when the premiums start doubling and they get nasty. And then people start doing things like they just drop it arbitrarily because they don't want to pay the premium anymore.
Not based on whether or not their financial plan can support them dropping it. They're making decision based on one fact, which is I don't want to pay the premium. It's not based on anything else other than this is unacceptable. And we know–
Tommy Blackburn: John, if I may, you once said you may have, I don't know, it was a while ago when this starts happening, you have a license or beforehand, whenever–you have a license to shop not to drop, right? Or at least get something else in place and then we can come back to it. So it's not that we don't want you to be efficient with your money, but we don't just go dropping things. There was a need for insurance. We got to make sure we fill that.
John Mason: That's absolutely. I forgot I said that. That was a good one.
I like that. And so now the danger of podcasts, the danger of content, the danger of education is that the end consumer who's listening, who doesn't have a financial planner, they've heard this, and they said, “Well, doggone, Mike and Tommy said that FEGLI option B gets expensive at 55, so I'm not going to do anything until I'm 56, or 54 in six months,” or whatever it is.
They push out this delay because they've done the slide rule, they've extrapolated, they built an Excel spreadsheet, and they found the exact point in time where it makes sense to replace FEGLI option B based on them living until 87 and a half years old. That's it. We need a financial planner to say, “Great, you should go get it now before you get cancer,” right?
I mean, that's ultimately how we help clients protect them from themselves. It's, “You did really great math. Let me share something with you.” In this scenario, it doesn't matter because we have acknowledged there's a problem. We've acknowledged that we're going to need insurance past the point of when this becomes a problem.
And we know we can fix this problem. Now, if you choose to delay, you are potentially getting into a point where we no longer have options. So there are some times where you just pay a little bit more to know that you've locked in that option forever rather than the kind of rolling the dice or saying I'll address it when it becomes a problem rather than proactively addressing it.
Mike Mason: And it happens, folks. It happens. Last year's strategic planning meeting SPM with a 35-year-old. I said, “It's time.” I sent him the link to LLIS, and between last year's meeting and this year's meeting, he didn't take care of the 30-year term. And at 35, when you think you're 10 foot tall and bulletproof, there's a cancer diagnosis.
And that's probably 15 years before he'll ever, 15 really, really good years before he might be able to be underwritten again. So it happens.
John Mason: It does. And I know Tommy and I did the same thing, but mine was initially a little bit different. So when we were able to sell insurance a long time ago, I said, I'm going to go get a 30-year term so I can go through underwriting, understand the process, etc.
And then as it gets closer, it's like well, I'm serious with this girl and we're going to get married. I should probably go get insurance while I can. And I'm on a snowboard trip and I'm sitting on an icy black diamond and I say, “Well, I want to have a family one day and I could break my head on this. I should go get disability insurance.” So we got the right life insurance, we got the right disability based on the anticipation that a family would be there. If I hadn't done that, if Tommy hadn't done that, you could wake up with a family one day and not be able to protect them. Did I waste money? Did I waste money? Did I spend more money than I should have? The answer is yes, I did. Was it wasteful? Absolutely not. It was the best decision I could make to get the coverage when I could get it, guaranteed at preferred best issue rates, etc.
Tommy Blackburn: Oh, and yeah, the peace of mind that both of us in that situation received from having it in place and being able to go through life and have that family and know it's already there.
I mean, it's tremendous. I even wonder, I don't know, interest rates were so cheap. I kind of wonder what the premium, I may have gotten a good deal, but who knows? Maybe it wasn't, we could have optimized it more if we knew how the future was going to unfold. And that's so much of financial planning is you don't know how things are going to change, exactly what cars are going to be dealt.
That's why you do the best you can today with what you have. I guess a couple things before we keep going is did we touch on basic? ‘Cause I know we said we wanted to say B versus difference in basic. If we did touch on it, we can just keep moving, and the other one is Mike mentioned a commercial, I want to make sure we hit that commercial. That was hot on his mind.
Mike Mason: Yeah. And then guys, I want to make sure we also don't pigeonhole ourselves on the life insurance during this. Let's talk about other ways that we can be our own worst enemy. But yeah, I don't even know who the insurance company is. It's 1-800 BUY SOME TERM LIFE INSURANCE. But it starts with this couple in their kitchen and the husband says, “George next door had a heart attack.” And the wife says, “Well, did they have insurance?” And he says, “No.” And she says, “Well, John, do we have insurance?”
So the frustrating part for me is how all of a sudden did it become John’s fault and he's the only one that knows do they have insurance or not. I mean, it's a family thing, right? It's a family thing. So I'm like, oh I want to turn it off, but I want to hit one other point, your own worst enemy. In 37 years, this has happened at least 10 times in my career. A young family is one month, two months pregnant and I ask about the life insurance. “Well, we haven't had the baby yet, and I've got,” be the husband, “I've got insurance at work and she's going to be a homemaker.”
Well, how much insurance does she have? “Well, I've got insurance and I'm the breadwinner.” Well, guess what? You can't go to work and raise a child at the same time. And the baby is growing right now. So you have this responsibility. It's time to fix it. You don't wait until it comes out of the womb. It's time to fix it now. Don't be your own worst enemy.
John Mason: So, Tommy, to your point, FEGLI Basic, F E G L I Basic, is essentially one times your pay plus 2,000 dollars. And it's different than FEGLI Option B, Basic, and B are actually two different things, but Basic is the same cost per thousand for everybody. And you have two times your pay until you're like 35 years old, and then it reduces to one times your pay over the next few years.
But basic is actually like a bad deal when you're young and gets to be a better deal as you get older. So FEGLI Basic and Option B are materially different. I posed this question to you, Mike, and I know we want to get off insurance at some point, but there was a sweet spot 10 to 15 years ago, where we would have a lot of clients come in at 50 to 55 years old, who we knew at 59 and a half or retirement, we would be able to transition assets under management, keep TSP open, but move the bulk over to us, provide ongoing financial planning and tax planning.
But one of the things we would do is, and I'm going to use this ugly four-letter word: sell. We would sell a life insurance policy to these folks for a couple reasons. One, we were helping them do things that they wouldn't have otherwise done. So we would sell a 500,000 20-year term to replace FEGLI option B.
It was good for them, it was good for us. We had to kind of convince them, we had to show them that all of the benefits to why this individually owned term policy that was either cheaper or the same cost in a lot of instances was better for them. So we made a career a little bit out of doing this, helping people just replace FEGLI option B.
And then after that they were clients and we would be able to do ongoing financial planning and tax planning for them, and that morphed into where the business is today. So I think it's just important for folks to know how passionate we are about this. And as we think about that ugly four-letter word of selling, you can think of a used car salesman, you can think of a life insurance salesman, but at the end of the day, things at Mason & Associates are, what they seem support, empower, educate, motivate you to make changes in your financial plan.
If that requires a little bit of selling to show you why these things make sense, to help you make a good decision for yourself, ultimately, that's what we're doing is educating you, showing you all of the benefits so that you can make a decision that's best for your family. Let's transition from insurance to social security because it kind of goes along with insurance as well, Tommy, if you'd like to start there.
Tommy Blackburn: Well, I at least want to share the same, since I think that's part of what we wanted to do. And that's where I was thinking we would head to, and I'll give credit. I think that it's a Masonism. I think it was a Mike saying, but somehow it came out of the firm and we used it in our social security episode we recorded, but another–one of the things people say that's irrational when you step back and they don't usually say it in the same sentence, but through a conversation, we can boil it down to one sentence. And what we're thinking here is, we'll say as a potential client or a person, “I'm not going to get life insurance because I'm healthy and I'm going to live forever. So I'm going to take that bet. I don't need life insurance.”
Okay. Well, if that's the case, if we're going to live forever, we should probably delay social security because we know that it goes up 6 to 8% a year that we delay it. And if we live past 78 or 80, we're in the black, we're making money, right?
You're going to live forever. Let's delay social security. “No, I'm going to die early. So I'm going to take Social Security 62,” and say, “Okay, these are, these thoughts don't align well, and we need to discuss this.”
John Mason: It’s a material conflict between you're going to live forever and you're going to die tomorrow, right? And as financial planners, we have to solve both of those. We have to solve for what if you do live forever and we have to solve for what if you die tomorrow. So you can't live on both sides of the coin. And that's where people tend to want to go is, again, they maybe don't want the insurance company to win.
So they have this kind of like ignorant or illogical statement where, “I'm just going to live forever.” And then they certainly don't want the government to win. If there's anybody, if there's any entity that nobody wants to win ever, it's the federal government. So, by golly, I will turn on my social security immediately because there is, I'm going to get it. I'm going to get it and I'm not going to wait.
Mike Mason: But then they let the government win, or at least statistically win. You know where I'm going on this one. It's another choice and another story. Survivor benefits. It's if you don't want the government to win, why wouldn't you try to get as much money out of what you've put into your pension as you possibly could, and that's by taking survivor benefits because statistically, spreading it over two lifetimes is going to be a longer and bigger payback than over one.
So one of the stories, and again, don't be your own worst enemy, this is going back 20 years probably, at least 15, where the military had its first open season. It's had two now, but the first open season where you could buy into survivor benefits had you turned it down. And the premiums that you didn't pay would be pulled out of your paycheck over a two-year period.
And I remember sitting down with a man and his wife and he was working in his second career and I proposed that he take this, right? And again, when you say sell, that doesn't necessarily mean that there's a commission attached to it. Because if he gets into survivor benefits, the government's not going to send me a check and say, “Thanks, Mike.”
So I proposed it to him and he sat back and thought, and he says, “It's going to take my entire military paycheck for the next two years to pay these back premiums.” And he says, “I can't afford to do that.” And instantly from my mouth, you know, is if you can't afford losing your check for two years, how does she afford losing it forever?
And this is what you pay if you should be paying financial planners for to tell you non-bedtime stories. We have to tell you the truth and then we have to help you understand why it's in your best interest because inherently, individuals will delay making decisions and find reasons not to spend more money.
John Mason: Well, they go into analysis paralysis, but then addition, Mike, to that is we already said they don't want the government to win. So although all three of us on this podcast agree that survivor benefits make sense. But the reason people decline survivor benefits is because A, they think it's too expensive or maybe they don't understand it, but they certainly don't want the government to keep anything, right?
So they start doing all this analysis. They started saying, “Well, if we both live until we're 88 and he or she outlives me by one year, we wasted all of those premiums, right?” So, it is another example of why people, I'm not saying that we do agree with survivor benefits and certainly survivor benefits provides the most value from an early death perspective.
But if both people die at the same time at 90 years old, you lost. Or you lost, in quotes, you lost premiums, the insurance wasn't needed. So I think that a lot of times people do make that bad call because they're worried about having premiums that didn't yield any material benefit.
Mike Mason: At least not one they could see.
John Mason: Well, that's what I was going to say. The emotional benefit of having it, or knowing the decisions you make, the way you live your life, how you retire, how you hang out with your grandkids, how all of that is different knowing you have SVP in place versus not is an unquantifiable difference.
Mike Mason: How you handled that 2008 50% butt whooping in the market if you didn't have survivor benefits and that million dollars that was in your investments dropped to 500,000. Now everything's losing. Your survivor benefit's losing, your retirement's losing, and do you get scared and miss the entire rebound?
So it's not just emotional. I mean, it just piles on everything, right? And again, that's how we help folks avoid being their own worst enemy.
John Mason: Well, even worse than that was COVID. Luckily, COVID from a stock market perspective was a very quick down and up. The amount of time we had to wear masks and the amount of time that we were scared was a longer period of time, but at least the stock market was pretty quick.
But if you think about survivor benefits during that time, not only is the market down, we also are being told we're all going to die. I mean, that's even scarier if you've made the decision to decline survivor benefits. So sometimes as consumers, or sometimes as people who are just soaking in this information from our podcast, they can be so logical that they become illogical.
And that's where we can really step in as the financial planning team. I know we've said it a million times already, but help analyze the situation. This is or isn't applicable to you. Here's a hole for you that's not a hole for your brother. Here's something we need to do for you that we don't need to do for your neighbor.
And then prioritize in action the things that we can make a difference on now. So, yeah, I think protecting people from themselves or avoiding harm in a lot of ways is avoiding the analysis paralysis, but also not letting people convince themselves that the data says what it says, but really it just says what they want it to say.
We made these decisions based on, we made a spreadsheet based on what we wanted the answer to be. And then we convinced ourselves that was the right option.
Mike Mason: Correct. And that brings us back to another Masonism. You said it without saying it. They are not talking to you, right? You may be getting media-based financial planning that's geared to the folks that don't have federal pensions.
You may be getting, you know, we had somebody the other day when we presented our fee to him. “Well, my buddy says that he has a financial planner, and his, and that fee is lower, that you're on the high end.” And they're not talking to you ‘cause you have no idea what that financial planner is doing.
Maybe that financial planner is our life insurance agent and all they got was a commission so the client didn't pay anything, right? So you just, they're not talking to you. Just ask yourself, every time you get advice, “Are they really talking to me? Do they understand my situation?”
Tommy Blackburn: Advice should be customized. This is the biggest thing I come back to. So that my mind was going to the same place. They're not talking to you. And even if, let's say, it's somebody who knows federal benefits well, or they understand taxes and tax planning very well, are we talking in generalisms, or are we talking specifically to you and your goals in your family, in your financial plan?
And that's what's really critical in all of this when they're talking to you. It really needs to be customized to you and your situation. And one thing that's odd, I guess we're somewhat wrapping up here, so maybe I'm taking us backwards, but people sometimes will spend, I don't know, they have different–it's like they want no insurance or they want all the insurance. And part of what I'm thinking of is like health insurance. It was just critical. We've got to have it. We aren't believers. That's not something we don't have. But FEHB, I'm thinking about some people, they're in standard. And we try to talk about, you know, we need to understand your situation.
You know it probably better than we do from a health perspective. But have we looked at basic? Have we looked at the high deductible plans? And particularly as we get into Medicare and coordinating these things, and we have TRICARE, so we're fans of insurance, but we're also fans of doing it cost-effectively, but yeah, health insurance strikes me as one where sometimes you can work kind of hard to convince somebody like it's okay to go to basic and you can always change this the next open season.
Mike Mason: How about the ones that we've seen that are Medicare, Tricare for Life, Blue Cross Blue Shield, FEHB, and oh, I never come out of pocket for anything other than 670 dollars a month worth of premiums that you don't need, right? but I don't want to change. I don't want to change.
John Mason: Well, it's another example of helping people protect themselves from themselves is showing them that well, what's your worst case in that?
If we went to Medicare and FEHB only, what's your guaranteed loss, right? Or if we suspend FEHB and go on TRICARE and Medicare only, what's the worst case that could happen? So protecting people from themselves by showing them, educating them, empowering them to make these decisions.
The other part of our value, guys, that we've danced around so much is that when you know you have a planner and you know you have an unbiased expert who's going to help you in all these life decisions, the Dave Ramsey's, the water cooler, financial planners, your neighbors, your friends, all of a sudden all the jibber jabber, all the noise, you can actually, remove yourself from it. And you can look at them, and you can pretend you're listening, but then you can realize, “I've already got a plan.” And there's a lady that comes to mind. She's a younger client. She's a daughter of a client, actually. And somebody was telling her she was doing her TSP all wrong.
And she was typing at her desk, and she looked over, and she goes, “John told me to do this. So I'm right. You're wrong.” And that was the end of the conversation. And like how empowering is that to just be able to tune out all of the noise because you have a plan in place and you're not spending hours and hours. Think of how much time we spend second-guessing ourself. Think of how much time we spend wondering if we're doing the right thing or wondering if we should make a change. Well, if we could just eliminate all of that, how much time have we got back in our life? Unquantifiable, the amount of benefit that you can have working with a professional who understands you and your situation.
Mike Mason: What probably was going to come out of that advice giver to your client was that, “I've got a system that beats the market,” ‘cause I wanted to get this one out too, you know, are you going to beat the market?
I want to beat the market. So I'm going to look to my left to give you these numbers. I pulled them off the internet this morning, so it's July 10th, so that I'm covering all of our bases. July 10th, it was 10:40. The Dow Jones for the year is up four and a quarter. S&P 17.22, Nasdaq's 23 and the composite which is, you know, a composite of all the exchange is up 7.3%. So which market are you beating you know and there's another ad on TV, it says something about beating the market. So what market do we have to beat guys? Is it the highest market this year and is that what we're going to be held every year?
John Mason: Highest market every year.
Mike Mason: Right, so the market that our plans beat or meet, let's say meet, is the rate of return you need to get overtime for your financial plan to work. That's what the goal is: will your plan work and are you comfortable, in this risk and does it work within that risk tolerance? It's never beaten the market.
John Mason: Does it matter if you beat the market every year for the next 30 years and you run out of money before you die? Did you win? Somehow did you win? You beat the market every year.
Tommy Blackburn: I don't know if you didn't play in every other area. You could control.
John Mason: Right, I beat the market every year and still lost. Great. Or, alternatively, you can have a financial plan that generates a rate of return necessary so that you have money left over when you pass away. You didn't run out of money before you died. That's how we measure success because rate of returns and investments are only a tool, right, guys, to get you where you're going to facilitate all of the things that you want to do in life.
This arbitrary like competition, like I don't know who made it a competition, but investments and rates of return are not, it's not a competition. We're not trying to beat anybody. We just need a reasonable return so we can do the things we want to do. Who made it so mean?
Tommy Blackburn: I think it's just, if that was your marketing strategy, right? Just if you want to be the discount advisor, you market on, “I'm the cheapest guy in town,” even though you get, it's effectively priced as somebody I know would say, so it may be—
Mike Mason: It's like going to Vegas, you know, a gambler and then the investor at the same time, ‘cause people start talking to each other.
It's like, “Ooh. I've got a buddy that has NVIDIA.” And he's, “Look what I've made on NVIDIA. I've done this. I don't need a financial planner.” But they never tell you about the non-NVIDIA stock that got his butt kicked. And that's like the gambler that never tells you about losing his shirt, but only wants to tell you about a friend of mine that did a scratcher and won a hundred thousand dollars.
Now, I don't think he's spent a hundred thousand dollars on scratchers, but it's possible that he did over time. So, John, you're right, people are mean. It's like, “I'm doing this and I'm beating you ‘cause I'm not telling you about the ones I lost on.”
Tommy Blackburn: I think, well, I guess maybe a lot of financial planning is, I think about it too, it all comes back to you're in competition with the person in the mirror, so to speak.
It's not about everything else and all the noise happening around you. It's about how do you make you and your plan every day. And so maybe that's part of our value is bringing it back to this is customized to you and your goals and not arbitrarily beating everybody else out there. The other thing in the news is we say the market and you ran through the indices. Nobody ever seems to account for the bond market, which is most retirees' portfolios. So it's like okay, well, 40% of your portfolio is probably in some type of conservative investment like bonds. Or 50. And what was its benchmark rate of return? And how does that change all of a sudden this whole beating the market?
So we don't even know what we're beating, I guess is what I'm going to have to do is bring it back to your plan and at least be transparent or compare the right things to the right things.
John Mason: Well, we're not even in the same race, right? It's like if you have any other asset class other than stocks other than large-cap growth stocks, then you will be lagging the Nasdaq.
It is mathematically impossible for you to be exceeding, meeting, beating, keeping up with, or doing anything remotely close to the Nasdaq if you have any, if you have cash in your portfolio, you lost. If you have a CD, you lost. If you have small caps, you lost. If you have one dollar in bonds, you lost, right?
To be a prudent financial plan, like you're never going to keep up with the one best asset class every year.
Tommy Blackburn: I'll pontificate one more thing here too about this whole beating the market. My suspicion is, and then we've probably seen it anecdotally, is the people who say that and are, you know, maybe they have fantastic rates of return they can point to. You almost, you kind of said it, John, of just but you still ran out of money. And the reason is so many times what's more important is how much are you saving. You might be able to light the market on fire, but if you only had a dollar to start with, guess what? 500% rate of return isn't going to get you very far on one dollar.
So it's very important how much we save, are we being, and are we controlling the things we can control, taxes, maximizing our benefits, planning for our situation and goals.
John Mason: If we've got a leaky boat, that's going to sink, right? And we've got to find the leak. And that's what we do at Mason & Associates.
We help fix the boat, repair the boat, plug the holes, whatever you want to say. So as we wrap up this episode, protecting folks from themselves, protecting you from yourself, this is what we do at Mason & Associates. And we've recorded another episode recently where we talked about hiring a financial planner when to find a financial planner.
It is our recommendation that you hire us or somebody like us. Wherever you are in your life, you can benefit from a financial planner. You just need to find one, guys, that can meet you where you are in life, who can help you go through what you're going through, and then determine the level or the amount of monetary contribution that we can allocate towards this goal of hiring a planner.
Higher service, better service, more customized feel. That's where Mason & Associates lives and we charge a premium fee to do that. There are other firms that charge less and arguably do less. So I think the takeaway for me on this episode is it is time to hire a financial planner, at the risk of just being overly risque to get undressed, to take, to just say, “This is where I am and I need an unbiased assessment of this situation so I can improve.”
And I hope that through this podcast, our audience, if they haven't hired a financial planner, haven't taken that step yet, can get a little more comfortable with the idea of kind of burying their soul and being open to criticism and being open to change and being open to improvement through education and empowerment. So that's my takeaway and I had a lot of fun on this episode. I think you guys did too.
Mike Mason: Yeah. I want to put on, as we close, I want to put in one other Masonism and it's not fair of me to call it a Masonism. It's a Bob Hall-ism but many times we get in our own way because we're dumb greedy. And dumb greedy is having the money and not getting the estate plan done.
Having the money and not hiring the financial planner. Dumb greedy is when we make silly statements that says the insurance company's betting I'm gonna die or I'm gonna live and I'm betting I'm gonna die. No, you just need life insurance. Don't be dumb greedy.
Tommy Blackburn: And, take it even more ancient. I think it's saying exactly the same things was from Sun Tzu, I think is how you pronounce it, and it's tactics without strategy is the noise before defeat. And that's what all this is. And my tactics is to beat the market, but I don't have strategy for anything else. Defeat. As we went into, didn't buy life insurance ‘cause I was about saving money, defeat.
So you have to have strategy. That's a big part of what an advisor will bring to the table.
Mike Mason: I like that.
John Mason: Well, thanks guys. This has been another awesome episode of the Federal Employee Financial Planning Podcast. Thank you to the audience. Again, if this was your first time, we hope you loved it. If you're a recurring, returning listener, thanks for being on this journey with us.
We're Mason & Associates. We've released two episodes a month of the Federal Employee Financial Planning Podcast. If you like what you're hearing, if you like what you're seeing, if you're watching this on YouTube, drop us a line, whether it's a comment or an email to masonfp@masonllc.net. That's masonfp, like financial planning at masonllc.net. Our website, masonllc.net, our phone number 757 223 9898. We have live humans answering. Thank you again for being on this journey. We hope you're finding this content valuable and please help us help you. That's another saying as we close this one down, help us help you, and help us help your friends by doing all the things for us.
Like, subscribe, share, hit that bell notification. Thank you again for being here with us. We'll see you next time on the Federal Employee Financial Planning Podcast.
The topics discussed on this podcast represent our best understanding of federal benefits and are for informational and educational purposes only, and should not be construed as investment, financial planning, or other professional advice.
We encourage you to consult with the office of personnel management and one or more professional advisors before taking any action based on the information presented.