Business Innovators Radio - Interview with Mario G. Taffo, Federal Benefits Consultant on Understanding FERS Benefits and Retirement Planning

Episode Date: December 20, 2024

Mario Taffo is a volunteer educator for The Institute for Financial Awareness, one of the fastest growing 501(c)(3) nonprofit organizations in the DC/Metro area.Mario is a widely sought out speaker. His most requested workshop/webinar topics are 10 Steps to Financial Freedom, Retirement Planning for Federal Employees and Estate Planning.Mario has been a member of the Greater Washington Hispanic Chamber of Commerce since 2009. He has provided financial educational support and resources to many embassies in Washington D.C., military bases, federal agencies, churches and other organizations. He also provides direct support to numerous HR departments at federal agencies in the DC/Metro area.Mario has presented hundreds of financial wellness and financial literacy workshops in the DC metropolitan area, as well as educational webinars to participants around the world.Mario has a MBA degree from the University of Central Florida and has been working in the financial services industry since 1996. Mario started his financial services career as a loan originator.Mario has experience in investments and banking, in addition to retirement planning. Mario is fluent in Spanish. His bi-lingual abilities have allowed him to help guide many civilians, active duty and in-service and retired federal employees through the complex steps of their retirement planning process.Thousands of individuals and small business owners have benefited from Mario’s knowledge and expertise, but one of his greatest pleasures in life is to help his friends and family plan for retirement. As a father, Mario has personal experience planning for college and has helped countless families reach their college planning goals.In his free time Mario enjoys traveling, playing soccer, scuba diving and exercising. He is a loyal CrossFit enthusiast who can be found in his local gym every morning, competing with himself and pushing others to reach their full potential in the gym.Learn more: http://www.ifaonline.org/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-mario-g-taffo-federal-benefits-consultant-on-understanding-fers-benefits-and-retirement-planning

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us, Mario G. Tap Oak, who's a federal benefits consultant, and we'll be talking about FERS benefits and retirement planning. Mario, welcome to the program.

Thank you for having, Mike. Hey, you're welcome. So I always love learning new things. It doesn't matter the industry, but I'm intrigued about what FERS benefits are, and I know we want to dive into that and connect that to how you can optimize retirement planning with your clients. But before we get in to that topic, tell us a little bit about your story. How did you get into the financial services industry in the first place? Oh, great question.

So, you know, I started back after I graduated from college, my dad is an ex-Navy seal, and he was getting ready to retire. And, you know, he came up to me and said, listen, you went to school. What's all this stuff? You know, I, my major was in finances. So, you know, I had no idea what all the stuff was. what you know what first meant because he went from the navy you know to the to the government so i had to you know figure out things for him and then you know walked right into the needs of not just

him but i've noticed that there was a huge need for for not just more products but for more education there is a huge misconnection between HR and the actual employees and just the educational portion of how to get to retirement, how benefit works, and what to do, not just as if we approach retirement, but on an annual basis. You know, I love that you mentioned that because so many times when I talk to people about how did you get into a certain industry, they'll go, oh, when I was little, you know, like I fell out of a tree, broke my arm, no doctor could help, but this one chiropractor, and then they wanted to be a chiropractor. So I love that you had that family connection.

and you wanted to help your dad. You learned along with him. But then it was like, who else needs this? And one thing that it made me think about is it sounds to me like when you mentioned the HR people, you know, they just kind of tell the facts. And it's similar to like the Social Security Administration.

You can get some facts on the website or call in or go by the office and get pure facts. But how to strategically claim so security benefits for retirement, maximum optimization, that's a whole other story that they don't. know how to do. So that's kind of where you're in here with educating and teaching and understanding what a client needs so that these benefits are optimized. So let's start off with what actually are FERS benefits. So the package under the federal employee retirement system, right, because that's what Farras stands for. It's something that, you know, every federal

employee gets as soon as they start working for the federal government. It's They have their retirement portfolio, which is made out of three accounts, the pension, Social Security, and TSP, the Thrift Savings Plants, or their 401k version for federal employees. And these benefits usually are based on income, are based on how long you stay with the government and go through not just retirement, but also protect the component. Federal employees have life insurance, health insurance, disability insurance, and long-term care within this package. And most federal employees are not fully maximizing their benefits. So that's a great point. And it reminds me of when people go to work for a company and their HR people say, here's the 401K full of this paperwork and it's this sign this, check this, go.

And it's this standard, who knows what, I'm sure it's not maximized. So what elements of the PERS benefits package are even able to be optimized or changed or tweaked? Because I would venture to say that some employees don't even know that they can make some of those decisions. Yeah, Mike, you know, there's so much misinformation. Most employees don't even know that they have a rough option inside the TSP account. Most federal employees are not even aware that they can take with them the life insurance policy. and the health insurance policy post-retirement. Both people are not even aware of their actual options

when it comes to the health insurance, right? They have one of the best health insurance plan in the world, and they are able to take it with them post-retirement for them and their spouse. And it's not even set up correctly by the time they get to retirement. And so some spouses have lost coverage just because they didn't take a look at their benefits five years prior to the retirement. The government, that's what they call the five-year look back. And just in the past year, I've seen three couples lose health insurance coverage just because they did not know that there was a five-year look back in that selection.

Now, that's really powerful because I think, you know, the old saying you don't know what you don't. don't know. And in that scenario, you just mentioned, someone didn't realize that there was deadlines and cutoffs or opportunities or missed opportunities. And that sure does make a huge negative impact when you lose something. What are some other aspects or components of some of these benefits packages in the purrs that people might not know to take advantage of or if you don't meet a deadline that you might miss out on it? Great question. So usually the one thing that I see a lot, it's federal employees will cancel their faculty, their federal employee group life insurance that the government offers. They cancel it just because they don't know that the standard, right? The policy has four different options, but the standard policy that the government offers is something that comes with a free disability. short-term and long-term policy. And when they cancel this policy, they lose that extra benefit,

that extra coverage that they're not aware of. And not to step on anybody's toes, but there's life insurance agents out there. They're not aware how these programs work. And it's good to understand that maybe anything extra above the standard coverage could potentially be more expensive, but keeping the standard policy, it's something that they'll benefit for the rest of their life because also this is the portion of their policy that they can take with them even post-retirement. And after 865, it becomes a free life insurance policy. So definitely huge misunderstanding and not enough education for federal employees to understand how these things work under their own plan.

Yeah, that's a great point. You mentioned the life insurance plan. Is it like a term life plan where at a certain time frame, 10 years, 20 years, they have to then refresh it and maybe re-qualify health and you or with like a fitness test and things like that? What kind of a plan is that? Great question. This is this is what one of the benefits that federal employees have. This is what they call, this plan is what they call a group life retention. insurance policy.

It's based, you know, the cost is based on the standard smoking rating. They don't go through a medical underwriting or anything like that. As long as they work for the government, they automatically get these policies. Now, this life insurance in particular, it's a five-year term. So every five years, it'll renew itself, but it goes up based on age. And at retirement, they have the option to keep the entire coverage that they have. or, you know, they can adjust to what their needs are post-retirement and continue to carry this policy into retirement without a medical underwriting.

See, that's pretty big for me because I don't know your industry and I certainly don't know the furthers and all of that. But one, that's the big thing that jumps out at me because one of the negatives of a term policy is every 10 years or whatever the term is, you got to pre-qualify health wise. And if you have a health hiccup, you might not get it or the premiums might be sky high. But what you just said there really eliminates that because you can carry it into retirement and not have to requalify health wise. That's a big win. It is. And that's not just with the life insurance, but also with the health insurance. Mike, this is probably one of the

major reasons why folks in the private sector jump into the government. for the last five, six years of their career, just to qualify for this health insurance plan. Because after age 55, all of us have to go through a medical underwriting to qualify for health insurance. And after 55, the only thing we have is Medicare. This is a powerful tool when we're planning. Yeah. All of your expenses, all your health insurance and health issues expenses are going to be covered. And is the health plan similar to the life insurance plan in that at retirement, you can carry it into retirement and you don't need to get off the health plan and go get on Medicare?

That is correct. At that point, at 65, it will come in a single with Medicare and you'll have options to where you can select one for options with Medicare or keep this policy as your main provider of care. Which we do not need to get into intricacies of the plans or Medicare, but I do know that Medicare, there's a lot of things like, well, a supplement or an extra this or that. So probably the hybrid, the combining like you just mentioned, probably give some wonderful benefits to retain the health plan through the first benefits package as well as then layer in and add in the Medicare. So I would suspect that that's a big light bulb moment for some people that, you know, it's kind of like I've got. My son-in-law is in the military, and I know that some people in the military don't even know that you get the VA benefits to buy a home as there are down. So I'm sure that there are many benefits like this that people say, wait a minute, hold up. This is a benefit that I can take advantage of.

Yeah, 100%. And that's something that I run into on a weekly basis. There's so much missed information and not enough education to reach out to federal police to help them understand. the ins and outs of all of the extra benefits that they have. And that's the gap that we're trying to cover. That's where we're here. And that's where we're so busy, especially over the last three to four years. It's been a huge change.

You know, we, prior to COVID, we used to go to the actual federal agencies to do these presentations, to do these workshops and educational seminars. Now, after COVID, everything with webinars. now all of our webinars, you know, are, you know, are getting to more people across not only the United States, but also around the world because we have federal employees that are working in different countries and they join in to our presentations from literally around the world. Wow. So I know that if you were to kind of take the word retirement plan, that's a pretty broad term and it incorporates so many aspects, including taxes. Like, you know, you need to be aware

of how taxes impact you or self in retirement before retirement, during retirement, after when you transfer money to your family. Talk a little bit about how some of these first benefits will impact your overall retirement strategy, especially how it relates to taxes. Great question, Mike. you know, one of the first things I usually do on some of my webinars or some of my presentation is ask people, when do they think it's the best time to start planning for retirement? And of course, you'll have folks saying, you know, five years prior to your retirement at age 60, age 55, and they'll throw different numbers out there. But I usually tell them that the best time to start planning for retirement is the day that you

earn that first dollar. because if you would 10 cents out of that first dollar for every dollar that you earn up until today, how much money would you have set aside for retirement? Right. So it's definitely about planning. And the earlier we start, the better. Within the government, one of the biggest problems when it comes to retirement is taxes. So the federal employee, it's going to have in retirement, income from pension.

income from Social Security and income from their TSP or the 401K, right, which creates a higher income, which, you know, don't take me wrong, it's a good problem to have. But when we have our, you know, investor hat on, if I'm taking my money out into a higher tax environment, that means that the money that I saved inside my TSP is going to pay higher. taxes on the way out. So when people do not plan and utilize this rough option that they have inside their TSP account to alleviate some of that tax burden in retirement, they're definitely, you know, loosened or missing out on some huge tax-free growth inside their account.

So that, you know, I feel like that is such a deep, and vast strategy with these TSP withdrawals and tax implications. I want to put a pin in that go a lot deeper and ask you some really detailed questions. But before we do that, I want to just kind of wrap up this thought with the first benefits to go a little bit deeper on some of those other misconceptions that people have. We talked about a couple of the, you know, ooh, you don't know what you don't know. What are some of the other ones when you sit down with a client and start educating them and teaching them? And I emphasize those two words because I want people to realize that you are not someone that's going,

here's this, do that, and then you walk out confused. You're a teacher. You're an educator. You want them to understand options. But what are some of the other things that tend to pop up as misconceptions about the first retirement plan so that people can be aware so that they then can avoid them? Great question. So the other things that usually pops up, it's folks that want. to, you know, jump out of the government for a higher salary.

What they don't add to that calculation or to that comparison when they're comparing salaries, it's that just the benefits itself will add somewhere between 20 and 30% extra on top of their income because the government is contributing towards the health insurance, towards the life insurance, towards the disability insurance, towards, you know, 5% towards match towards the, the TSP. They're also paying, you know,

towards Social Security and towards their pension. So when you really want to compare apples to apples, the salary out there should be 20 to 30% higher than you currently have just to make even.

That's one. Second taxes for every federal employee out there. The problem in retirement is not income, it's not savings. It's not even investment, Mike. The problem in retirement is taxes. And that's something that we usually help alleviate for most retirees. And is one of the aspects of the first benefit, you mentioned some categories, but did I hear something that related to a pension? Yes.

So every federal employee will have a defined pension for the rest of the revenue. of their life and this pension could ultimately also be passed on to their spouse. That's huge. So I want to find out more about that, but I think that I just wanted to kind of, you know, wrap up this conversation with, these are some pretty amazing benefits, this benefits package. And these days, it's rare, few and far between that any company offers any kind of pension. So the fact that's part of this is great. And then knowing what to do with it, how to optimize it, how to maximize this for your benefit, that's huge. And it sounds to me like you're just like almost like a guide, you know, helping people

understand options and making a little tweak here and a little adjustment there so that it is performing the best way possible for them, up to retirement and through retirement for them. That is correct. I've hold so many federal employees hands not to the transition, but into retirement And right now, I have clients that I touch base with once a year. Just to stay up with changes, bring them up to speed on the tax brackets and making sure that they're not running out of money in retirement.

And this is something that I do annually for them. That's huge. Well, I tell you, Mario, this has been really helpful just to kind of get a grasp on the first benefits, how it relates to retirement planning, how that a lot of people have certain things that they just don't realize that are in there or that that are possible for them to tweak or make adjustments to. So this has been super helpful. If someone is interested in learning a little bit more and even reaching out and connecting with you, what's the best way that they can do that? They can call me 240454-6154. We can look us up via LinkedIn. We have a huge

presence on LinkedIn or our website, www.IFA online.org. Excellent. Well, Maria, thank you so much for coming on. It was a real pleasure talking with you. Thank you. Thank you for all the listeners and looking forward to our next conversations. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, Visit www. www.

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