Are You Prepared for the New Retirement Realities?

By on August 11, 2005 in Current Events, Retirement with 0 Comments

A substantial portion of the federal workforce will be retiring in the next few years. Surveys of our readers show that more than 50% will be retiring in the next seven to 10 years. If you are among this group, here are a few questions you need to ask yourself before you retire.

Three Financial Groups of "Baby Boomers"

"Baby boomers" fall into three rough categories from a financial standpoint. First, and the one that presumably includes most federal employees, are people who have saved regularly and are financially well prepared. Most baby boomers are under the Civil Service Retirement System (CSRS) which had the advantage of Uncle Sam taking money from each paycheck and then giving that money (and usually a lot more) back to the former federal employees during their (probably) long retirement years.

Second is the middle group: those who don’t have enough money to retire yet but will do okay if they work a few more years and get lucky with some of their investments. This group needs to maximize their contributions to the TSP and cut down on expenses but will be able to retire.

The third group of roughly 25 million Americans has less than $1000 in assets. They will have to continue to work. Presumably, there are very few federal employees in this group, especially those under the CSRS system, but there are certainly a few who have lived beyond their income and will never be able to retire and also continue to pay their bills.

Trends That Impact Retirement Planning

When retiring, one major consideration is how much money to withdraw from savings, which would include your TSP, savings accounts, IRA’s, etc. Ken Dychtwald, author of Age Power: How the 21st Century Will Be Ruled by the New Old, says there are three demographic trends that are dramatically impacting retirement planning: longevity, lower birthrates and the "age wave" of maturing baby boomers.

Dychtwald points out that on the first day of the 20th century, the average life expectancy was 47. On the last day of the century, it was 77.

Those figures are for average life expectancy when a person is born. A 65-year old woman can expect to live until she is 90.

Defining "Old Age"

In our society, we have had the belief for decades that old age begins at 65. It used to be true. People did not live as long. Dychtwald says that is obsolete thinking. He refers to a new stage of life–middlescence. This is a time between the ages of 50 and 70. In many ways, people in this age group are productive, healthy and at their peak productivity. it is a time after youth has passed but a person is not yet dealing with the illness of old age.

Dychtwald contends that boomers will change retirement. Many people may leave their primary career but will not want to live a life of leisure for 20 or 30 years. They may take part-time jobs, start a new career or do volunteer work. Many of these people are in the financially secure category of baby boomers and do not have to work if they do not want to.

These major changes have an impact on financial planning in retirement as well. If a person plans to live until 80 but actually survives until 90 or longer, the last few years may be a problem once their money is gone. Because of this, any person considering retirement needs to ensure his money will last as long as the retiree. Financial planners can do this work and a number of companies offer these services. It is easier and less traumatic to do the planning before turning in your retirement papers and walking out the door.

Those under the CSRS system have a big advantage in this area because they are presumably going to have money coming in from Uncle Sam as long as they live–and there is the advantage of the COLA system. As many retirees have pointed out in comments on our various retirement articles, some expenses (gas, health benefits, etc.) are going up much faster than the COLA. No doubt this is true but at least there is the assurance there will be an increase each year and some adjustments can be made by a retiree to adjust to some of these changes. Keep in mind, many retirees do not get an annual increase of any kind and still have to deal with the increasing cost of living expenses. (One aside that confuses many readers: active federal employees do not get a COLA. They get a pay raise which may be greater than or less than the cost of living increase.)

If you are a federal employee and fall within the "baby boomer" generation ("baby boomers" are defined by demographers as the bulge of 76 million people born from 1946 through 1964), you are one of the more fortunate Americans. You are likely to have a financially secure retirement with an annual COLA thrown in. You probably have the extra added advantage of having invested in the Thrift Savings Plan while also being in the CSRS retirement system.

The Fortunate Fed

You are not likely to experience the problem of former workers in industries such as airlines and steel (and perhaps autos in the future) where some retirees are being told their retirement income is being reduced because the company is bankrupt. Many readers regularly comment in response to our articles on federal employment issues that they don’t like their jobs, their pay, their supervisors and various other issues regarding work. But consider this: You are among an elite group of Americans that will be able to enjoy your retirement years with financial security that many of your neighbors will never have–and this is made possible through the contributions of tax dollars by millions of Americans who keep the US Government afloat–including your neighbors who will not enjoy that financial security.

With that in mind, your remaining years as a federal employee may not seem that bad.

Enjoy your retirement–and don’t forget to plan ahead before you walk out the door.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.