By Allen Giese, ChFC®, CLU®, ChSNC®
Now, we may not have seen it all, but we’ve seen a lot over the years. We’ve seen the mistakes, big and small—and in some cases, HUGE—that firefighters and police officers make with their FRS retirement plan. And unfortunately, we see those mistakes repeated over and over again. So, in this video today, we’re going to list the five biggest mistakes that we see FRS Special Risk participants make, over and over again.
5—Let me let you in on a little secret. When it comes to FRS participants, the Deferred Comp plan tells me—as a fiduciary advisor whose sole purpose is my clients’ success—it tells me A LOT about somebody and how successful they are likely to be in retirement.
When I see a well-utilized plan with a strong level of contributions and NO LOANS on the plan, this tells me that this is someone who lives within their means, understands the importance of not just saving, but saving in a great tax-deferred environment. It tells me they think about the future and probably have put some thought into long-term planning.
But what it tells me most is that this is a person who has a great shot at a really good retirement experience.
So it’s a big mistake and a big opportunity lost to not really take advantage of this plan—this Deferred Comp plan your employer has offered you.
4—Number 4 is putting too much faith in thinking that the rep from the company that manages your Deferred Comp plan has any clue what they are talking about when it comes to long-term financial planning and your retirement.
Listen, nothing personal here. These are good people that mean well, but think about it for a second. First off, they work for their company, whether it’s Nationwide, ICMA, Vanguard, or whoever your department has their deferred comp plan with. They don’t work for you. They are trained to represent that company first. And it makes sense, because who pays them? You or the company they work for? Now, that doesn’t mean they don’t have your good intentions at heart, but it can be argued that it limits the scope of their advice.
Second, these are entry-level jobs in the world of financial services. I don’t think this is where you are going to find advanced financial advice, which I personally think you deserve. You can do better.
3—Number 3 on our list is picking the wrong pension option. We’ve done videos on this one and go into great depth in our books about this incredibly important decision.
Which pension option should you choose? When someone makes a mistake on this one, the impact can be devastating. You’d think with all the information out there that’s available, nobody would be making mistakes here. But that’s just not so, and it points to how confusing these things are for some people.
On top of that, we see A LOT of misinformation out there by well-meaning, but perhaps a little misguided, advisors who ultimately are trying to sell a high-commission life insurance or annuity product. Again, they are typically good people; I think they just don’t know better and honestly believe they are doing the best thing for you. But like I said earlier, you deserve better. Consider getting your advice from someone who isn’t incentivized to sell you something.
2—Investment plan or pension plan? The number two mistake we see is officers and firefighters picking the wrong plan FOR THEM.
This is one of those decisions where there’s no right answer that is right for everybody. So I can’t tell you in this video what the right answer is for you. You can have two people with exactly the same career, but for one of them the right answer is the pension, and for the other the right answer is the investment plan.
Each plan has its own advantages, and making sure you are aligning the right plan up with your goals and objectives is what needs to be considered.
Concerned about which is the right plan for you? Let’s talk … maybe we can make that decision a little easier for you.
1—One of the things we, as advisors, enjoy about working with so many Special Risk FRS participants is that as officers and firefighters, you are in a very tight-knit community. You trust each other with your lives, you understand how important it is to work together, and often, you’re like family to one another.
But that’s also one of the biggest obstacles we see. We call it the station financial planner or firehouse financial planner. You know what I mean, right?
Getting what should be highly personalized and complex financial advice from the co-worker on your shift that talks a good financial game is, we think, the biggest financial mistake we see Special Risk FRS participants make.
Schedule a complimentary consultation with a fee-only financial planner to discuss your personal situation in more detail.