Future Retirement: Federal Workers In Good Shape

By on October 4, 2012 in News, Pay & Benefits, Retirement

How do federal employees stack up against the private sector in saving for retirement? Here are some figures to give readers some perspective.

According to the Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), more than half of American workers (60 percent) report they and/or their spouses have less than $25,000 in total savings and investments (excluding their home and defined benefit plans), including 30 percent who have less than $1,000. 10% of workers have between $50,000 and $99,999, 11% have between $100,000 and $245,999 and 10% have $250,000 or more.

58% of workers indicate they are saving for retirement according to the report.

Another report from EBRI shows that the average IRA balance is $67,438. And, in 2010, the average IRA individual balance (all accounts from the same person combined) was $91,864.

Federal employees are in a different situation because they have a retirement system that includes the Thrift Savings Plan but also provides for other income throughout their retirement years. Although it is a subject of considerable dispute among readers as to which group receives the greater benefit, there are differences between those who are in FERS and those covered by CSRS. You can read a couple of articles comparing these retirement system and read the comments by those who believe one system is superior to another in articles such as The Best Annuity: FERS or CSRS? and CSRS Is Better Than FERS. Are You Sure?.

There is no direct comparison to federal employees as we do not know how much employees may have socked away in other retirement savings accounts. Also, federal employees receive an annuity throughout their retirement although the amounts differ considerably depending on the retirement system, length of service, and average income over a period of several years.

The number of American workers with a defined benefit plan is quite small. According to the Social Security Administration, the percentage of employees  covered by a traditional defined benefit (DB) pension plan that pays a lifetime annuity, often based on years of service and final salary, has been steadily declining. From 1980 through 2008, the proportion of private wage and salary workers participating in DB pension plans fell from 38 percent to 20 percent. At the same time, the percentage of workers covered by a defined contribution (DC) pension plan—that is, an investment account established and often subsidized by employers, but owned and controlled by employees—has been increasing. From 1980 through 2008, the proportion of private wage and salary workers participating in only DC pension plans increased from 8 percent to 31 percent.

How Do Your TSP Savings Compare with Other Federal Employees?

With that in mind, how much do federal employees have socked away in their Thrift Savings Plan accounts?

As of August 31, 2012, the average TSP balance was $68,452.93 according to the folks at the TSP. Here are a few more statistics that put this into better perspective.

For those employees under CSRS, the average TSP balance as of August 31st was $88,373.90. Most of these investors are older as the FERS system has been in existence since 1986. The average TSP balance for FERS employees as of August 31st was $87,720.21.

So why is the average for TSP accounts much less than either of these figures? The reason is that the average TSP balance for uniformed service members was only $13,535.20 as of August 31 which brings down the average balance.

As one might expect, those that are older have accumulated more in their TSP funds. Those who are 56 and over have an average TSP balance of $113,450; those 46-55 have $104,435; 35 to 45 year olds have $51,003, and under 35 have $11,993.

Most Federal Employees in Good Position for Retirement

In the final analysis, the average federal employee has less money in the TSP than most Americans have in all of their IRA accounts. However, as noted above, we do not know how much other money federal employees may have saved in other retirement investment accounts. In a recent survey of our readers, of those who chose to take the survey, 44% indicated they had saved between $100,000 – $500,000. 3.3% had accumulated more than $1 million and 4.4% had saved less than $1000. In the same survey,  those responding to the survey were “Very Confident” in their ability to retire and they probably have good reasons for their confidence.

But, as noted in an OPM survey several years ago , many federal employees have never calculated how much they need to save for a comfortable retirement and most still expect to work after they retire.

Federal employees who retire will receive much of their retirement income through their respective federal retirement system.

In the article cited above by Robert Benson, he considered the financial retirement income for two hypothetical 57 year old federal employees with a high three income of $54,000 and 27 years of service. There are different factors but whether under FERS or CSRS, the federal employee in either scenario will have substantial additional income from their respective retirement plan.

Keep in mind that the average “high three” income selected for comparison purposes by Mr. Benson is substantially less than the average federal salary. According to the federal Bureau of Economic Analysis,  the average federal employee salary in 2010 was $83,679 and $51,986 was the average private sector salary. This means that the “average” federal employee would have more coming in after retirement than the hypothetical example used by the author.

When taking into account their income in retirement will be much more than what they have accumulated in a TSP account, as a group federal employees can count on a retirement that is relatively secure and provides financial security for the remainder of their lives.  Of course, there are a number of federal employees who are not taking advantage of their ability to participate in a TSP account which will not serve them well in their retirement years.

In short, in terms of saving for retirement, most federal employees are doing reasonably well.

© 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.

22 Replies

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  1. USPS Letter Carrier says:

    It’s a fair guess that the “IRA individual balance” is higher than the ave Fed TSP balance because 69% of the workforce don’t have a DC plan and must relie on an IRA for retirement. And Feds have a pension which makes the TSP less urgent.

    I see from the EBRI link that the median individual IRA balance is a woeful $25.3k – a far cry from ave individual IRA balance of $91.8k.

    Your survey “current total savings” question had 5 categories for under $100k and only one category for $100 – $500k. The $100k – $500k group should’ve been divided in more groups. Did you really need to have 3 groups for under $10k?

  2. worker says:

    Sorry.  Again I believe CSRS is much better than FERS.  With CSRS you know your income.  With FERS a large percentage of your income is determined by market forces which could be good or bad.  I would rather have the certainty of knowing my income.  Also one must compare apples to apples.  You must compare FERS social security plus   FERS retirement plus you mus somehow fit in the 5% TSP match to the CSRS plan.   I’ll take the known over the unknown.

  3. Fed Up! says:

    No doubt about it, ‘old fashioned’  defined benefit pension plans are better than what the private sector and the R-TP have given the rest of the countries workers over the past 30 years and will give govt. and private sector employees more of if Willard wins.    

    • guest3 says:

       except for the fact that most defined pension plans are unfunded and nearing bankruptcy.

    • Not Exactly says:

      Not exactly. Defined benefit plans are typically life annuities that are only better if you live long enough to collect. My father retired CSRS at 59, but died this year from cancer at age 68. He was divorced with no spouse. There is no more benefit. Had he converted his CSRS to FERS, and took the full matching TSP contributions from that “Defined Contribution” plan, the money would still belong to his estate and he would be able to help send his nieces and nephews to college instead of helping pay the national debt.

      • Fed Up! says:

        sorry for your loss.  But I believe you can designate child survivors to receive your CSRS annuity, same as for a spouse.    

        • Lamala Maria says:

          This is incorrect information.  Recently attended a CSRS retirement seminar and someone asked if they could leave their annunity to their son.  The answer was NO you can not. 

  4. Fed Peasant says:

    Rest assured, there are people scheming right now as to how they can further tax & inhibit the TSPs, IRAs, pension annuities, variable annuities, etc.  One must factor in many future uncertainties.  Wars, recessions, depressions, politcal upheaval, natural disasters, etc.  10 years after 9-11, the wall street crowd talks around it.  It’s not good for their profits.  The TSP should have a few other choices such as a precious metals & commodites fund. 

    • Give me more money says:

      What’s stopping you from doing it? Open up a mutual fund IRA for $500. and now you can move anything you want to from TSP to your IRA. This what I did for more advantage into other markets. Until TSP adds more to their markets, there is nothing from stopping you. Still have to pay taxes when start taking money out at a later date still.

  5. jimijr says:

    Try to get at least 4X your high3 in TSP, 6X would be better yet. Then you need only withdraw 4-6% per year to make 80% of H3, considering your annuity and SS. Your account should be able to earn that much so it is a sustainable proposition. It can be done. Good luck! 

    • Bill T. says:

      True that.

      I was a late starter (I had to pay down some debt while my earnings were low). When I got the debt under control and my salary was better, I moved to 10% then 15% deposits.  I expect to have the 4X when I retire in Jan of ’15. God willing and the crick don’t rise, of course. I also didn’t panic in 2009 like some of my co-workers, I was buying stocks then, figuring if things got worse we’d have other things to worry about.

    • Gordon says:

      Well, I should be OK, then.  I’m 44½ with nearly 19 years in FERS (including 9 years of military time bought back).  My TSP + IRAs = 2X my current salary.   My overall portfolio is 75% equity, so any major bump in the market can bring me back down to 1.0 – 1.5x my current salary.  I’m maxing out TSP and IRAs (including non-working spouse Roth IRA) this year and hope to again do so in 2013.  I drive a beater with 235k miles and co-workers make fun of me, but let’s see who’s laughing in retirement.

  6. Black_Diamond says:

    enjoy it until the GOP gets in. Then BYE BYE

    • Tim says:

      If you are going to make a statement, make it. I’ve made money under Democrats and Republicans. The only zeros for raises have come under Democrats. The “I’m scared of the GOP because I’m told so” is old and baseless.

      • D Byte says:

        Not true Ronald Reagan stiffed us twice.  History of pay raises since 1969 to 2010 =
        CPI increased 577%
        Fed pay increased 528%
        US pay increased 732%
        source, CRS Report 1/20/10

    • kettlecorn says:

      enjoy it until Obama is re-elected, then BYE BYE with redistribution of the wealth.