As a rooster was scratching up the straw in a farmyard, in search of food for the hens, he hit upon a jewel that by some chance had found its way there. “Ho!” said he, “You are a very fine thing, no doubt, to those who prize you; but give me a barley-corn before all the pearls in the world.”
– Aesop
Sometimes we don’t know the value of what we have. Who knew that in 620 BC, a Greek storyteller would understand what is most needed for the average public employee. If there has been a common theme in five years of providing financial planning services for a Wisconsin county it is that many employees don’t understand the value of their benefits. Like the rooster, they have access to a great value, they just don’t know what to look for. Why is this?
First, many employees do not understand their retirement benefits, for example, the Wisconsin Retirement System (WRS) Pension. This is partly due to the structure of the statements they receive in the Spring. They have all the information needed to understand the benefit accrued so far, but they must run a calculator online to determine what the future benefit might be. While the calculator is very powerful, there are some necessary projections that must be made outside of the calculator to make it truly meaningful. Running this calculator is by far and away the most common task when meeting with county employees. And the most common response when we are done is, “I had no idea . . . !”
The second reason many employees undervalue their benefits is due to an “apples-to-oranges” comparison with their private sector peers. Several meetings with county employees have started with, “I was comparing my retirement account with my friend’s account . . .” Typically, the comparison results in frustration that the county employee doesn’t have as big a balance as their friend. A simple exercise of projecting their friend’s account balance and comparing the resulting income stream to the county employee’s plan typically levels the playing field.
Another common conversation starts with, “I am thinking of moving from the county to a similar position in a private company. I can make a much better salary.” On these occasions, I run a projection to determine the county employee’s projected income, then calculate how much must be saved in a 401(k) to achieve the same income. Usually, this reduces the income advantage of moving. Suddenly, the grass of the other rooster doesn’t look so green.
Public sector employees could benefit dramatically from a better understanding of their benefits, and specifically how they fit into their overall financial wellness. While there is a lot of easily accessed information online, nothing compares to talking with someone who can explain how these benefits fit into the employee’s overall financial situation.
“What is the difference between core and variable, and what should I elect?”
“How can I know what my benefit will be?”
“Should a county correctional employee elect the protective or general?”
“Should I save Roth or pretax in my deferred compensation account?”
“What about my finances outside of my workplace – emergency funds, debt, saving for college, Social Security, and Medicare?”
As we were reminded by Aesop, sometimes the problem isn’t that we don’t have the benefit, it is sometimes that we don’t recognize what we have.
Connecting public sector employees with financial planners that understand their unique needs and provide tailored advice can help them get set up for retirement and be more confident in the benefits they’re offered by their employer.
Author: Tim Shirk, CFP®, Financial Planner, Francis LLC – Tim has been helping people from all walks of life reach their retirement goals by providing engaging group education and personalized individual advice since 2006. Email: timothy.shirk@francisway.com.
