How to Kill Your Potential With the Retirement System

Recently, I was in a conversation on a LinkedIn comment thread with someone who misunderstood my thoughts around the new Blended Retirement System (BRS). While I was agreeing that the BRS is fine, I mentioned that this model―along with the pension systems and the TSPs & 401(k)s that comprise them―creates a poverty mindset.

They're intended to be a safety blanket for people who aren't looking to do bigger and better things beyond working for their entire lives and saving for retirement. That’s why they're there. There’s nothing wrong with that life choice. It’s very common, and the BRS, pension systems, and 401(k)s are set up for people with this mindset, because otherwise, how would they be prepared for their future in the current economy?

But the reality is that there is a lot of opportunity out there beyond just working for forty years, saving for retirement, hoping the stock market will behave in your favor, and doing calculations about how long you can “afford” to live. 

The individual with whom I had this conversation checked out my profile and decided to cherry-pick my comments, much like the fake news media does. We all choose to see what we want to see. This individual apparently chooses to see the 401(k) as a path to wealth.

Retirement Planning Leads to Mediocrity

I, on the other hand, choose to see veterans who are being misled down a path of mediocrity, when there is so much more abundance and opportunity available to them in our society right now. The 1% who are wealthy don't funnel whatever they can spare into 401(k)s. They don't rely on pensions. And they don’t work 9-to-5 jobs that ultimately make someone else wealthy. They leverage their assets and resources to create for themselves the future that they choose. 

We're in THE United States of America. The land of opportunity. Everybody “knows” that you can do it, and there's plenty of opportunities for people that have “bucked the system” to go create the future they want. But most don't, because they're comfortable in a safety blanket (401(k) retirement plans) that they think is good enough. And that's what it's there for. And there’s nothing wrong with doing what everyone else is doing and following the status quo, if that’s what you want to do. But there is something wrong with not making sure that transitioning veterans understand that the status quo is merely one option for how to organize your financial life. 

That's why I am so clear about the kind of clients that I feel will really benefit from what US VetWealth has to share. I help the 1% who serve our country: our service members, our veterans, and our military spouses who sacrifice their liberty and their freedoms to serve in the defense of our country. I believe that they deserve more than the status quo, especially when they have the resources and the will of the American people behind them. They have the opportunity to join the 1% who can influence the rest of the country. But in order to join that 1% of Americans, they need to create wealth and liberty for themselves, not just save for retirement.

So yes, I believe the 401(k) savings model creates a poverty mindset, because it convinces those that participate in it that it is in their best interests to sacrifice financially now, so that they can be financially secure later. It sounds reasonable in theory, right? But what is really getting sacrificed here? A few Starbucks lattes every week? An occasional evening out? No. What is really being sacrificed is innovation. Positive change in our communities. Entire generations of people who have a passion for service and the ability to lead, but who instead of serving and leading in the post-military phase of their lives, just fall into step with the rest of the herd, because what they have internalized with regards to their finances is that they can’t afford to use their money to finance their dreams now.

#BeBetter

This is why I'm so focused on finding those 10% in our community who want to tap into this modern economy, leverage their resources for use in the present, to serve and lead in our communities in the way that resonates the most powerfully with them, and oh, by the way, create real wealth for themselves in the process. 

The programs we offer at US VetWealth aren’t about money and getting rich. They are about time, power, and influence for the good: not for yourself, but for those whom you are meant to serve. 401(k)s aren't meant for you to use your money to serve other people; they're a nest egg intended only for you. And it’s a very real risk that that nest egg may break and leave you with nothing.

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Here are the REAL Facts

The individual from my LinkedIn conversation asked me for facts to back up my opinions; facts specific to the BRS and Treasury projections for outlays under the new and old government retirement systems. I don’t have those facts, but I have plenty of facts from the Blue Star Families’ Military Family Lifestyle Survey Comprehensive Report relevant to what is going on with our transitioning veterans in their financial, professional, and by extension personal lives, and it’s not pretty:

• Of those military family respondents planning on separating from the military within the next year, over half (54%) reported they have less than $5,000 in savings or otherwise available in case of emergency (Pg. 43). A USAA statistic (Military Influencers Conference, September 2018) indicated that 40% of their members had less than $1,000 in savings.
• Sixty-two percent of military family respondents reported they felt some or a great deal of stress as a result of their current financial situation, which is slightly higher than the broader American society, where 56% indicated worrying about their finances within the last year (Pg. 22).

The women seem to have it more difficult than the men (Pg. 56):

• Sixty-seven percent of female veteran respondents characterized their financial transition as difficult or very difficult, compared with 47% of male veteran respondents
• Fewer female veteran respondents (45%) than male veteran respondents (53%) were employed full-time
• Fewer female veteran respondents (52%) earned at least half of the household income compared with male veteran respondents (85%).

Other disheartening responses include:

• My first civilian salary or pay was 38% worse than expected (Pg. 1)
• Only 32 percent of veterans received the civilian job that they wanted (Pg. 2).
• 43% of veterans say that their transition was stressful (Pg. 2)
• Only 36 percent of veterans are happier now compared to when they were in the military (Pg. 8).

Instead of serving and leading, one of our greatest national resources ― the men and women the most dedicated to serving our country ― are stressed, unhappy, and in financial straights. At the presentation given at the Military Influencer Conference in September 2018, at the exclusive USAA DigiMilEx breakout to which I was invited along with 30 other top military financial influencers, a fellow West Point graduate and USAA’s lead Certified Financial Planner (CPF) stated that a third of their members are living paycheck to paycheck, an alarming situation which at that time had been the reality for seven years straight. 

Interestingly, there are no facts in the Blue Star Families Survey about 401(K)s―how many have them, how they are doing, etc. 401(k)s are the new American way. The assumption out there is that everyone has a 401(k) and is saving for retirement. The reality, in my experience as a financial planner, is that that is far, far from the truth. I think it’s a safe assumption that according to the bullet point above, over half of our transitioning service members probably don’t have 401(k)s or have next to nothing in them, since in the event of a real emergency, 401(k)s can be borrowed from or cashed in, although at great immediate and opportunity cost. 

What's the Incentive to Save? Not much...

My theory is that there is little incentive for people to save, so they don't do it. And that's why they're *living paycheck-to-paycheck. Saving in a 401(k) is an easy thing to put off, because retirement is so far away that most people can’t even imagine it. And those who are contributing to one are locking up all of their money in such a way that they can’t do anything with their lives but retire. So they're forced to keep working and working, even if they really, really want to do something else. That sure sounds like a poverty mindset to me.

Our wealth and liberty strategy gives you, as a veteran, the opportunity to do more with your lives now. Being active on LinkedIn, being intentional with your personal opportunities, your personal brand, and building your human capital gives you the flexibility to do things that a 401(k) pension system simply cannot do. So to reiterate, the BRS and 401(k)s are not bad, they’re just not good enough for many in our veteran community.

So yeah... I hope I do better by my clients too. I think they will back me up. Because they are whom I'm meant to serve. I'm certainly not for everyone. But to assume I'm disregarding the 401k and BRS because you have memorized the "facts" better than me is a joke. I can google too. Do better than that. Think about the history that led us to believe these systems are the "best" choice available.

Don't know the history? Most don't. That's why I'm writing about it in my next book "The Military Retirement Myth".

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