Getting through a divorce is challenging, but it becomes even more complex when federal or military benefits are involved. In this episode, join Tommy, Mike, Ben, and John as they delve into the crucial topic of divorce and its implications for federal employees.
When you have a benefits package that's worth a million, it's essential to plan accordingly. Discover the significance of due diligence when seeking counsel, negotiation tips for a fair outcome, and why keeping the divorce process simple and equitable is key. You'll learn the importance of having both a skilled divorce attorney and financial planner by your side for a smoother journey and more.
Listen to the full episode here:
What you will learn:
- The importance of planning accordingly when you have a lucrative benefits package. (3:05)
- Why you must do your due diligence into who is giving you counsel. (5:30)
- The importance of keeping things simple and fair in divorce. (8:30)
- What adjudication is. (15:00)
- The benefit of having a planner who truly knows your situation. (20:15)
- The importance of finding a good divorce attorney and a financial planner. (26:20)
- How to ensure your divorce is as amicable as possible. (32:00)
Ideas worth sharing:
- “You’re a millionaire in your benefits package, so plan like one.” - Mason & Associates
- “Do your due diligence into who is giving you counsel on your finances.” - Mason & Associates
- “It’s important that both spouses be invested in the financial planning relationship.” - Mason & Associates
Resources from this episode:
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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, certified financial planner, and with me today, the normal crew. We've got Tommy Blackburn, Ben Rakes, and Michael Mason, your hosts of the Federal Employee Financial Planning Podcast.
Today's episode, we're going to be talking about not a fun topic guys. We're going to be going through divorce and what that means for federal employees going through a divorce or starting that process.
Before we get that kicked off, let's go through a few housekeeping items, which I think our audience always likes to know about. Number one is we're starting to get more questions come in, which is wonderful.
We're actually going to answer those probably via email to the people who are asking. And then, I think this most recent question that came in via the Bailey Act, we're actually going to post a YouTube response to that one as well.
So, if you have questions, masonfp, like Mason financial planning at masonllc.net , so masonfp@masonllc.net. I don't know if it's a disclaimer but I think it's catchy. We're financial planners first and we do content creation second.
So, we do live and breathe financial planning every day. And our primary mission and focus in life is serving those who have trusted us with their financial plan. But we're also enjoying this too. If you'd like to become a client, you can start that process at masonllc.net.
And if you want to hear from us from time to time, you can subscribe to our blog. Same thing, masonllc.net. We promise we won't inundate you, but we will keep you up to date with our thoughts, our educational content, and the stuff we're producing monthly. We'll keep you up to date on that.
So, couple of big action items there, immediately for our audience. And I guess I'll also say our YouTube channel is kind of rocking and rolling, isn't it, guys?
Tommy Blackburn: Yeah, we've got more things that we're hoping to do over there, but it's been really neat to see it and the podcast taking off the way they are.
John Mason:And we have those videos posted on our blog. Our user is masonassociates4825. Once you help us reach whatever subscriber content we have to reach to be able to change our name, we will do that. So, if you like the content that we're producing, of course, five stars here.
Do all the things on YouTube: like, subscribe, share this content with those around you and those that you care about.
So, let's talk about divorce as a federal employee and some of the key things that we need to know.
When you're divorcing somebody that has one of the most lucrative benefits packages that exist in the marketplace today — number one, retirement planning is complicated by itself, and divorce is complicated by itself.
But Mike, when we start throwing in federal benefits and military benefits, and for today's episode, we might as well say anybody that has a lucrative benefits package, whether it's a state retirement like California or VRS, you kind of fall into the same category, I think.
Michael Mason: Well, depending on how many shows you've listened to, I'm sure you've heard you're a millionaire in your benefits package, plan like one. Many times, divorce attorneys don't see you as a millionaire. Sometimes you don't see yourself as a millionaire.
And again, it could be your spouse, that's the federal employee. But once divorce creeps in, we don't say “my retirement” anymore. We don't say “my TSP, my IRA.” All the “mys” have to go to “our” retirement.
And so, the spouse that's not the federal employee better have a financial planner and an attorney that knows that benefits package is worth millions and plan accordingly.
John Mason:We did a recent episode guys on expect, demand, work with a fiduciary. And one of the things we talked about in that episode was that you can't legislate morality, but you also — what did you say, Mike? You can't how to or something. What was your statement?
Michael Mason: Oh, fiduciary person, he may have the want-to, but he has to have the know-how as well.
John Mason:The know-to is what you said. Yes, you have to have the know-to. And unfortunately, when you're going through a divorce, Tommy, and these folks maybe are working with a financial planner who doesn't have the know-to …
We're going to use this more often, I think, or a divorce attorney that doesn't know the know-to, the federal employee pension or military pension or California pension, those are all off balance sheet. Those aren't just like readily apparent. You can't just go to Schwab or Axos or TD Ameritrade and figure out the value of those assets.
Tommy Blackburn: Yeah, it comes back to what we talked about in that last episode of due diligence. Do some due diligence into who is giving you counsel when you go through these. Because my read of it, usually most divorce attorneys, “This is a transaction, I'm going to get through the transaction, I've got the standard playbook.”
It's not so much, “Help me help you figure out how to come out of this in the best way forward.” And maybe we'll talk about this too. A lot of times, the best way forward is to do this amicably and let's not fight over it because usually, the only people who win are the attorneys in that situation.
So, if we can try to not bankrupt each other just accept this is going to be what it's going to be, how do we preserve this and get to the fairest answer, even though I know it's a very touchy subject. Nobody necessarily wants to always be fair when we're going through this, but we may only hurt ourselves if we're not wise about this.
John Mason:And the fact of the matter, Tommy, I think it starts with understanding, like is it a joint account? Is it an individual account? So, the fact of the matter is, at least in Virginia, and we can't speak to every state because there's community property stakes in different laws in each state.
But generally speaking, like if you're married to a federal military person, federal or military person, you as a spouse, you have earned half of that pension. So, like half of it is yours.
If it's a $40,000 pension, $20,000 is yours, $20,000 is that’s retired person. So, it's understanding that from the beginning that like you're not really asking for anything. You are really more like demanding, like this is what I have earned being your spouse.
And I think sometimes people feel maybe guilty saying, “Well, I would like to have my marital share please.” It's like, “Well, no, this is what we have accrued together. This is my portion. Maybe I'll be nice enough for whatever reason that I don't need your marital share. But the fact of the matter is it's mine until I give it up.”
Tommy Blackburn: Right, it's a negotiation for essentially the marriage contract that we're breaking up. And I would say, I have to almost view it now not so much as like, “Maybe I’ll be nice and give something up.” But it's just, here's what is important to each of us. Let's assign the correct values.
And part of that is what's the value of a pension if it's there? Are there health benefits, different survivor benefits. But not only that, but what about the tax attributes here?
Let's realize that a million dollars of TSP is not a million dollars in the bank account. Now, let's talk about these pieces in the negotiation. How do we get down to what we both want, but we still are equivalent at the end of the day.
John Mason:And to your point, there are so many different tax statuses of things like retirements, IRAs, Roth IRAs, the sale of a house. All of these have different rules. And if you start going down the path of instead of me having half of your pension, I'm going to have the house.
Or instead of me having half of your pension, I'm going to have a bigger TSP chunk. You start to get very dangerous, it's actually just easier to split everything in half because everybody retains the same tax status of everything.
But when you start monkeying with the system and you start like picking almost like winners and losers in certain asset classes and certain tax statuses, you're really getting dangerous and overcomplicating things.
Ben Raikes: And I want to take this, I think a step back to something that we always say to our clients when we are starting to engage with a prospect, or maybe we're meeting with a new client or maybe even a client we've had for many, many years.
Not only do you have to have a financial advisor that can adequately tell you, “Hey, this is actually what your pension is worth over your lifetime.” Versus okay, “Maybe we just take the house, or maybe I'll just take your small IRA and you can have the pension.”
It's really important to have both spouses in these meetings when you are meeting with a financial advisor. A lot of the times it's just either the husband or wife that's in the meeting, or maybe it's both of them in the meeting, but only one is paying attention. Only one is asking questions, only one is answering to emails.
God forbid a divorce happens and you've got one client that knows the exact dollar value of every asset that they own and their pension and their health benefits. And then there's just someone who's been left in the dark. That's a situation where you can really easily get taken advantage of.
And as we've all said, we want this to be a fair process. How can it be fair if you don't know what you've got?
John Mason:Well, you've opened up a can of worms.
Tommy Blackburn: You took us down a path you said you didn't want to go to when we started this.
John Mason:Yes. You've opened up a can of worms. And I think it's worth for our audience hearing this, even though … so this is like a tangent alert. We kind of have moved off of-
Ben Raikes: Sorry guys.
John Mason:It's okay. We've moved off of divorce a little bit. But it's important that both spouses be invested in the financial planning relationship.
I mean, we have seen time and time again how detrimental it can be to a surviving spouse who has no clue what's going on in their financial plan. And spouses have strengths and weaknesses. I think we could all share stories about …
I know I have a surviving spouse, a widow who had never pumped gas a day in her life. Never once have filled up the vehicle with gas and then her husband passes away and now, she has to learn that at whatever age.
Or conversely, maybe Joe, the husband is very savvy with investments and retirement planning, but he's never opened up a laptop, has no idea where the passwords are, has never paid a bill in the last 40 years, and then Susie passes away.
It's important that we start thinking about the succession plan or succession plan of these various actions that we all do. It's okay to like out-source some things to your spouse, Tommy, but we can't outsource like understanding what all is involved.
Tommy Blackburn: Absolutely. And where I was even thinking about too, is if we're working with a fiduciary as we just recorded that episode. That fiduciary can't now say, “Well, I've always worked with Joe and Joe's the one who knows everything, and now, I'm going to leave Sally in the dark.”
So, that's another example of a fiduciary needs to know, “Hey, you're both my clients now, I've got to work with both of you.” And maybe if you're the spouse who isn't in the know or you are coming at this for the first time. Again, that’s doing your due diligence, finding a fiduciary, finding somebody who knows you and can make sure you don't miss these assets.
Also, everybody's got to be nice and transparent with each other. I think that's actually part of the law on this. I don't think we can intentionally hide assets. So, that's almost fraudulent, I guess if somebody starts going down that path.
Michael Mason: Well, that's when we exit stage left anyhow. We're just not going to go down that road. Tommy, you and I had a call the other day, unfortunately, on this subject and I then wrote some things down because I avoid this like play.
Tommy Blackburn: Me too.
Michael Mason: I mean, we have so much more fun working with couples that are in love and building towards the same path. But the member of this family with the retirement, he kept saying, “I just want to make sure I'm going to be okay.”
He knows as we told him, “It's no longer my TSP, my retirement, it's our TSP, it's our retirement.” And he kept coming back to, “I want to make sure I'm okay.” And that's when I told him, I said, “Well, your wife does too. So, we want to make sure you're both okay. And if at the end of the day, you both have the same amount of income, then that's a winning divorce.” That's a winning divorce because they've been married-
Tommy Blackburn: 40 years, let's call it 40 years which is round. I mean, yeah, hopefully after 40 years we do have love for each other and we do want this to come out, we've raised a family. So, yeah, there's those issues.
And it was striking to me too because it's like when did this TSP, when was it ever yours in a marriage? Maybe if we got married later in life and I had accumulated some assets before we were married.
But it's kind of like the entire time of marriage, this is ours. This is the way we should be viewing it. And again, in the divorce, it is ours and now, we've got to split it. It never was mine or yours.
Michael Mason: Right, right. And it was kind of funny. Well, what was the book that was referenced that she had downloaded the OPM’s Guide to Attorneys?
Tommy Blackburn: There's an attorney's handbook from OPM, and then there was guide to spousal benefit. I'm not exactly sure what they called it, but yes, there's a publication they put out.
Michael Mason: And as we're talking about this and the things to be concerned about, she was armed with that book and she thought if I just take it to the attorney, I'll be okay. You really need a financial planner in that equation because there's just so many nuances, John, that we've seen over time.
The book's not going to tell you, “Hey, it costs nothing to keep the ex-spouse on as the in-service survivor benefit.” It doesn't cost anything. And it's a winning proposition when the person that has the pension makes sure that happens. It doesn't cost him or her anything and you win with doing the right thing.
Tommy Blackburn: Well, you're now taking us down some various steps that we need to take in the divorce, which I think is perfect. So, we're going to go through some factual. This has kind of been like high level, like more feelings and emotions and like what's going on.
But let's start getting into some of the numbers about what it means to get divorced as a federal employee or the spouse of a federal employee. And I will say as we dive into this subject matter that it's really hard.
We've talked many times on this podcast, how do you find a financial planner? How do you find one that's qualified? What's your asset minimum? If somebody called us and said, “Hi, I'm Joe, I'm getting divorced this year. Me and my soon to be ex-wife, Susie, need to hire Mason & Associates …”
We'll probably say, “Why don't you both call us individually once the divorce is finalized?” And that's not because we're mean spirited, it's just because that's not our specialty. We don't want to live and breathe divorce throughout the year.
So, I just caveat that for our audience. If you find yourself in a divorce situation, understand, it may be hard to find a financial planner that wants to guide you … start the relationship in divorce.
Tommy Blackburn: We've unfortunately been exposed to it, so we we're knowledgeable in it, but it's not an area we enjoy.
John Mason:We help existing clients go through the divorce process if requested to be there. But we're not actively seeking that line of business. So, let's first talk about adjudication. And I think adjudication is something very important as you have a divorce.
Because when we get ready to retire, all of our federal employees know this. When I retire, I go into a black hole, and I get really scared because I have no idea when the government's actually going to pay me.
Whoever wants to take this, how long is a normal adjudication? And then, how long do you think an adjudication could take if you had a divorce decree or separation agreement on file?
Tommy Blackburn: So, sometimes we see adjudication seem like they get done in a month, which is don't expect that and that's lightning fast. Usually, I would say it's probably a couple, a few months maybe about three months feels about right. Maybe it takes six but that's on the long end.
Then if you have a divorce decree on file, you get kicked to a whole special world where everything slows down. And from what we've seen, I mean, that's anywhere from like six months to a year. I think in what I've seen, and I assume what you guys have seen as well.
And not only does it now slow down quite a bit, but it's almost like mandatory withholding. When you take ATSP distribution, it's like, “Oh, well, there's a mandatory, we lower the interim payment when there's a divorce decree on file.”
So, instead of you getting 70 to 80% normal interim pay that you would get on that pension, you're probably going to see like 30% of what you were expecting. So, that's good advice, John. Be aware of what that does in this process.
John Mason:I think OPM may even say on their website like 12 to 24 months adjudication in a divorce. Now, we've written letters to court ordered benefits department. I think the address is somewhere in Washington D.C. I know you and I, Tommy both have had a situation where an ex-spouse was entitled to like 5% of the pension.
Tommy Blackburn: We’re sending spreadsheets to OPM. We’re just like, “We can help. Guys, this is unreasonable.”
John Mason:This one lady I'm thinking of, her pension was like $5000 or $6,000 a month. And during her interim status for nine months, they were going to pay her $1,500 a month because her ex-spouse may or may not have actually been entitled to something.
And it was below poverty level at that point. I mean, it just was not something that was sustainable.
Tommy Blackburn: You're causing harm to this retiree at this point because they were planning on this cash flow. And it's really acute for a CSRS. I mean, that's a huge income source. You knock that one down to 20 or 30% of what they're expecting. That's a material change in cash flow.
John Mason:And unfortunately, Mike, I know we've battled this over time as well. We'll meet with a client, typically, it's a single person who has already been through a divorce, and they'll come in.
We mandate or request that clients provide us that divorce decree and separation agreement. And we see it and we're like, “Hey Joe, like it looks like your ex-spouse is entitled to 25%, but the language kind of stinks. It's not really that great. I don't think the attorney really drafted this appropriately.”
And we've tried to send divorce decrees and separation agreements to OPM in advance, or request letters from OPM documenting like, “Are you going to honor this? Yes or no?” And what's the response been?
Michael Mason: Yeah, they ignore you. They can't.
John Mason:No response.
Michael Mason: Yeah.
John Mason:No response. And how frustrating from a financial planning and retirement planning side, we have this piece of paper, we think the divorce decree is not going to hold up. We send it to OPM, we ask for their opinion because that actually matters whether or not they're going to uphold the divorce decree for the retirement projection.
And unfortunately, we've been in the position as advisors to say, “Here's what plan A looks like if they do it. Here's what plan B looks like if they don't honor the divorce decree, we'll have to wait and see.”
Tommy Blackburn: You're going to have to wait until you’re at the finish line.
Ben Raikes: But going back to working with someone who knows what they're talking about — I mean think about the value of working with a client that knows that they're going to have a long adjudication process.
And leading up to that saying, “Hey, in the meantime, there might be a 24-month period where we're going to have to take TSP distributions because you think you're going to get $6,000 a month and you're actually going to get a $1,000 a month.”
I mean, know who you are working with in these situations, know the attorneys that you're working with. The value that we can add in this process, it's unbelievable.
John Mason:You have to know your client. You have to understand, and I thought you were going to say Ben, was that how valuable it is to have two scenarios.
Ben Raikes: Yes.
John Mason:Here's the scenario, if the divorce decree is finalized and they award your ex-spouse something. Here's the other plan, maybe we can kind of hope for this secretly and not feel too bad that we're hoping that it doesn't hold up. But knowing under either scenario, we're going to be okay.
Tommy Blackburn: Exactly.
John Mason:Under either scenario. But can you imagine waking up surprised and being like, “I had no idea, or I forgot about the divorce decree.” It used to be called EBIS. Now, it's the GRB platform for a lot of our clients. You think the GRB platform Tommy, factors in a divorce decree and separation agreement?
Tommy Blackburn: Absolutely not. Yeah, smoke would come out of the screen if it began trying to think through that. Yeah. So that you can't rely on that. And I guess you kind of hit on another good point. You did hit on a good point, but the OPM handbook and so forth and like whether this is going to be honored.
And what that is, is this is not the standard private sector pension, even divorce decree language. It has to be the OPM standards. That's why there's a handbook out there for attorneys so that they can craft the order to be in compliance with … because it is not an ERISA plan.
Michael Mason: If you use the word QDRO, which is qualified domestic relations order, which is private sector. And he's CSRS and the QDRO says she gets 40%, it's not going to hold up, at least that's what we're told. It's not going to hold up. You have to use specific language.
John, several scenarios of what the non-federal spouse and the formula's pretty simple. Years married, so if you've been married and in civil service, let's say 35 years — so 35 years, and then you divorce and you have five more years. So, it's 35 divided by 40 times 0.5, which is half percent. Oh, it's easy.
It's like if it was 40 and 40, then one gets 50%, the other gets 50%. Now, once in that scenario, I think it's 87% times 0.5. So, that's how it's determined. Very rarely do we see exactly 50/50 because spouses get bitter. The one that’s going to retire or that has the pension, they hang on forever: “I'm going to sock it to her.”
Tommy Blackburn: And I'm going to keep working. I'll never turn it on, and I'll never get any of it.
John Mason:So, you just defined the marital share formula, which is perfect. So, for our FERS employees out there, your pension is years of service times 1% times your high-3.
If you're divorced, then it's 1% times years of service times high-3 times marital share would give you your percent of that retirement pension. So, the numerator is the years you were married, the denominator is your total years of service.
And so, although you guys are having fun at this, I think it's okay to laugh at it. It's like, “I'm not turning this on because I'm not paying him or her anything.” We've done the math, and it maybe doesn't work out perfectly, but the non-federal spouse will get about the same amount of pension regardless of when you turn it on.
So, like if you were to work 50 years or 15 years after the 35-year marriage, $40,000, $40,000 is $40,000. It's just when did it get turned on? So, you're not necessarily reducing the amount of income. You're just reducing the time, I guess.
John Mason:Yeah, you're just delaying. Yeah, you're making their cash flow terrible until you turn it on. Because I think the point you're driving home there is just they continue working. So, our years of service went up and the High-3 hopefully went up, should have went up. So, the pension got bigger as we kept delaying it. So, their proportion went bigger. They just had to wait forever to get it.
They have a lesser percentage of a bigger amount. So, it's fascinating. We've seen all of this. And hopefully, if you're a federal employee and you're going to go through divorce, hopefully, we can just keep it on the up and up. Hopefully ,we can keep attorney fees down and make this easy and just do this marital share, which is really important for federal employee health benefits, isn't it?
Tommy Blackburn: Yes, it is a big consideration. It's something we definitely want to keep our eye on. There are some stipulations there that we've got to follow as to whether we had it before. If we can follow it in and just understand too, if you are that spouse that's going to continue it.
You get to pay both sides of it based on our understanding. So, it's going to be pretty expensive coverage. Doesn't mean we should be aware of it, and it should be part of the consideration in all of this.
Ben Raikes: And again, working with someone who's qualified in this field, you might not get anything health benefits-wise if that's not in the divorce decree.
John Mason:We've said it for a long time, federal employee health benefits is one of the best benefits that our federal employees have. Both while they're working and in retirement. It's like having another pension.
And the reason it's so lucrative, and folks don't quote us on this exact number, but if you're paying $400 or $500 a month for FEHB, the government's kicking in over $1,000 a month offsetting quite a bit of that cost, two thirds or more of that cost probably.
And what Tommy was saying is, if you are that divorce spouse and you're going on FEHB instead of paying $500, you could be paying like $1,500. May not be a horrible option for you but there are other options like the Affordable Care Act or private insurance or your own employer or what have you.
So, quite a bit to think about through FEHB. And this kind of like trickles into every decision, both you retiring as a single person, retiring as a married person survivor benefits and the impacts on FEHB, that's a whole separate podcast.
And I'm sure we've covered it by just throwing it out there. So, Mike, you've had experience with maybe one of the most complicated divorce situations of all time. And I think maybe rather than me trying to lead you in, I can just say share with the audience the crazy story that you've been working with for the last 30 years.
Michael Mason: And I would say to everybody Ben, you echoed it earlier. Getting the attorney, finding a good divorce attorney that's going to understand OPM’s guide to court ordered settlements, I think is what it's called, or close enough.
John Mason:Close enough.
Michael Mason: But then you need a financial planner. You need a financial planner. And there are some out there, they’re certified divorce credentialed financial planners. That doesn't mean they know federal benefits.
But let me just give you a scenario where we were presented with a divorce decree. The divorce happened before I met the client and there was a marital share. And let's say the marital share was 50% at that point in time. Well, that only kicks in guys when the federal employee retires.
So, if we didn't address survivor benefits, in-service survivor benefits, if we didn't address that in the divorce decree the ex-spouse, as soon as Joe retires, she'll get X dollars a month, but she's getting nothing until Joe retires.
What if Joe dies before he retires? Well, if we didn't address in-service survivor benefits, then the ex-spouse is never going to get anything and the current spouse is going to draw in-service survivor benefits because it wasn't addressed in the divorce decree.
And then also not addressed was a mandate that when retirement finally happened, that they would share the premiums, ex-spouse and current. They'd share the premiums for survivor benefits.
So, if that was left alone, then the ex-spouse may get one month. Let's say it was $4,000 a month, may get one month of $4,000 and then retiree die. And that retiree could have protected his current spouse because they didn't address it.
So, yeah, you're working until age 65 and you think I'm going to get this, and I'll be covered for the rest of my life. And the divorce decree just didn't do it. Fortunately, we were able to negotiate with both spouses, current and ex, for a more amicable settlement which is I guess what fiduciaries and folks that specialize with federal employees know how to do.
John Mason:And that's where it would've been really nice if we could have actually sent divorce decrees and separation agreements to OPM, got statements, had it in writing, be able to make some educated decisions.
Because let's face it, every year that you live longer, every day that you live longer, you're less insurable, you're less healthy, typically. And our pathway to fixing some of these things, like not having in-service survivor benefits, not having retirement survivor benefits is life insurance.
And it would be nice to know that 15 years earlier, it'd be nice to know it at 50 that we need life insurance for our ex-spouse rather than waking up at 65 and not being able to afford it or being completely uninsurable.
Michael Mason: Right, right. And as the story ends that everybody, both spouse and ex-spouse at death have been taken care of because we knew. Everyone had something to gain. The ex-spouse, the Dominoes fall the wrong way, got nothing. Dominoes fall the wrong way, current spouse got nothing.
So, everybody came to the negotiating table, you know, with stake in the game. And that's why we were able to fix it.
John Mason:It has been watching you go through this, because I've been here 13 years and I've been seeing this story play out for 13 years. The fee, the amount of time that you've spent working with this family … now, it's not always this way, but like you could have never charged an appropriate fee.
An attorney could have never charged an appropriate fee that anybody would've been able to compensate us for over the time that you've been working with this family. It is one, knowing all the scenarios. Two, the amount of effort that you have put in over that time. I mean, the fee would've been six figures plus.
It would've had to be six figures plus. And I feel for folks that don't have Mason & Associates, I feel for folks who don't get or have access to qualified financial planners.
Because like Tommy, you've always said, “Our clients have us on retainer.” And when this type of event happens, we kind of just eat it. And when I say eat it, I don't mean in a bad way, it's just like it's an abnormal year, and we just have to roll with the punches.
Tommy Blackburn: I was going to say, that's also why we're selective about who we work with and the amount of clients we work with is because Mike can only do that so many times.
I mean, he's only got the capacity to do that for so many people. So, that's why we can't help everybody. We want to help as many as we can. Hopefully, the podcast is helping.
Ben Raikes: I think this scenario reminds me of something we've all said a lot around this table is you don't know what you don't know. A lot of times when we talk about divorce, a lot of people think of a nasty divorce where someone's not taking their pension for as long as they possibly can because they want to hurt their ex-spouse, or they want to do some iteration of that.
It actually might be a situation where it's a really amicable divorce and people are really hurting each other financially, and they have no idea until someone like Mike Mason steps in who knows the rules and has done this for decades.
Again, I can't stress enough, if you're someone who's going through a divorce and you're a federal employee, you really have to work with someone who knows what they're talking about, who has experience and who knows the rules.
John Mason:We choose, I think to believe that most people are inherently good, even though maybe there's data that says that's not true.
But I think what we've found in our careers is that most people are inherently good. And the divorces that I've personally seen and the clients that we've worked with, maybe we're just really good at picking them.
If divorce happens, it tends to end as amicably as possible, as easy as possible. And hopefully, Ben, to your point, like that's the direction that it should go. If you've spent a life together, if you've spent time together, like everybody gets what they're entitled to as smoothly as and easily as possible. You avoid the fights. You avoid the arguments and you just kind of let math take over at that point.
Michael Mason: It works for us because these people have been in our lives, and we've been in theirs and they understand that we know. It works for us. You said it earlier, you feel for the folks that don't have Mason & Associates in your world.
And I am not going to badger or hurt every attorney out there, but it seems like he's got his attorney, she's got hers, and they spend all this time battling back and forth and the only thing that happens is each attorney is going to make more.
And I would say to you that a qualified financial planner that isn't on retainer like we are, is probably worth exactly what each one of those made. So, multiply his fee, her attorney's fee and pay that, but nobody would ever do that. They’re begrudging the attorney's fee as it is.
And we would be as valuable as both those fees in making sure. We'd probably shorten the period and make sure that everyone knew what they were getting. So, find a way to make that marriage work is the best advice.
John Mason:And disclaimer, we are not marriage counselors and do not give marriage advice and do not hold ourselves out to be marriage therapists in any regard.
But yes, to Mike's point, guys, let's go around the table with any action items or final closing thoughts. It's been another awesome episode. I've enjoyed it recording with you guys as always.
Michael Mason: Yeah, my first action item, last note I made: you finally get that divorce decree done, it's filed with the courts. Make sure your attorney immediately files it with OPM because there's a timeframe for that too. So, file it with OPM instantly and share it with your financial planner.
Ben Raikes: Work with someone who knows federal benefits. I think there's been plenty of cases throughout this podcast where you've talked about the pitfalls that you could run into and even unintentionally hurting an ex-spouse where you didn't want to.
Make sure you're working with someone who knows federal benefits and can easily outline the value of pension, health insurance, life insurance, all these benefits that are very specific to you.
Tommy Blackburn: I'll do the self-serving one, but I've got some others as well. Go ahead and share this podcast, like it, give us five stars. So, that's our self-serving part there. Outside of that, I would say, let's keep it amicable.
That has been a message, a theme of this. Probably we didn't get a chance to get into it. But take a look at social security, it's kind of begin crafting too on the other side of this. Well, what does the financial plan look for us each individually now?
So, don't forget about social security and mentioned earlier, make sure we're accounting for taxes. So, realize that some assets are pre-taxed, so taxes need to be paid on it. Some are after tax and maybe we even have some that are never taxed. So, let's just make sure we're weighing things appropriately.
John Mason:Oh my, you just got my mind going. And that's a whole other episode on alimony and the taxation. Tax deduction and taxability of alimony and how that would even differ from having a marital share and a pension.
The marital share and a pension just teaser for the audience is better for both parties or it's at least better for the person paying than it would be if you were paying alimony.
Tommy Blackburn: Yeah, absolutely. Because they're just going to issue two 1099s OPM, so each of you is going to get your shares of taxable income. So, that is very straightforward and that is a good teaser for maybe another conversation.
John Mason:Folks, thanks for tuning in to another episode of the Federal Employee Financial Planning Podcast. One of my final takeaways is review, review, review everything. So, if you have found yourself in a divorce or just in general, your life has changed, your legal documents probably need to be updated.
You probably should think about updating your wills, your powers of attorney, your medical directive, or whatever your state's calling those big documents. We probably need those updated.
Teaser on the masonassociates4825 YouTube channel, we're releasing some like blast videos on advanced medical directives, powers of attorney, beneficiary changes, how all of that coordinates with your federal benefits. So, we think you'll like those videos.
So, update Benny's, update legal documents. Just remember whether it's a divorce or any life change, we need to keep those updated. Thanks again for being with us. Remember, we're financial planners first, we do this content creation second.
We'd love to hear from you at masonfp@masonllc.net with any comments or questions. And thank you for tuning into another episode of our podcast. We'll see you next time.
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.