In Part I, I talked about my decision to take early retirement from the Federal government and about some of the things I have done during the 10 years I have been retired. This article will include more of my saga – “Mistakes were made,” as Attorney General Alberto Gonzales said recently in another employment situation – plus some thoughts you might find of use when you are contemplating retirement.
I have identified four areas that I think are, or should be, important considerations in making retirement decisions: finances, health, outside interests & attitude. But I’m going to start with what I think is the most important issue, which is whether or not you are very clear in your own mind about your reasons for retiring.
Why Are You Retiring?
In my case, as I pointed out in the first article, I was so uncertain about retiring that I didn’t sign my retirement papers until the last hour of the last day of the buyout.
Part of my reason for electing early retirement was uncertainty as to what impact the agency’s latest reorganization would have on me. I was in a position that combined the duties of an Employee Relations Officer with those of a Special Assistant for Natural Resources. It was a great job and I had a boss I liked and respected, but the pending reorganization could have changed the reporting relationships and a new office director could easily have questioned the viability of my dual-responsibility position – after the early out/buyout window had closed. In addition, I was eligible for an immediate annuity, so I knew I’d at least be able to pay the mortgage.
I even gave brief thought to the worst-case scenario, which was one in which I would feel compelled to get back into the Federal government. I was pretty sure I could do that, even if it would necessitate a move from Denver to Washington, D.C., although I must admit that I never talked to my family about that possibility (some would call it cowardice; I prefer to think of it as reasonable caution).
I will contrast my uncertainty and lack of financial planning with the experiences of two of my friends. Lou retired from the Federal government the year before I did, and I am positive that he has never second-guessed his decision. He had been in a stressful job as a Human Resources (HR) branch chief and when an early retirement opportunity, with a buyout, came up he jumped at it. Lou had done such a good job of managing his investments and finances that he knew he wouldn’t have to work again – and he hasn’t. I think he’s one of those people Fortune, Money and other financial magazines refer to in articles as “The Millionaire Next Door.” Lou is stress-free and it may be my imagination but he seems to look younger and healthier every year, which I find very aggravating.
My friend John retired from the Federal government the same day I did. Like Lou, I don’t think he has ever looked back and wondered if he did the right thing. John managed an agency-wide program and was weary from the brutal hours, frequent red-eye flights and constant stress. He knew he would have to work part-time to support his travel habit, which is similar to ours since the two couples have traveled the world together. In his early days of HR consulting and training, John scheduled vacations around work assignments; today, he only accepts work assignments that don’t conflict with his many planned vacations.
If you are contemplating retirement, surely you have a very clear idea of why you are doing so. Or do you? Based on my own experience and in talking to some of my friends and colleagues, I think there are a fair number of people who retire without having carefully thought through their reasons for doing so.
If someone asks you why you are planning to retire and you can’t answer that question quickly and completely, you might want to hold off on signing the retirement application. This is an area where I believe “gut feeling” should play a strong role. If that gut feeling is telling you it’s time to retire, you might do well to listen to it. If you are emotionally ready to retire, the first thing I would urge you to do is look at your financial situation.
For most of us, finances are critically important to the decision as to when to retire from the Federal government. I did not get sufficient expert advice before I retired, and from what I have read, many people don’t. Based on experience gained the hard way, a realistic assessment of your financial situation, preferably by a reputable financial planner, should be one of your first steps. I tended to be overly optimistic about potential income and to underestimate prospective expenses, and I think those are pretty common errors.
I have become more realistic about finances since my retirement, and now start from a “baseline” of guaranteed income, which pretty much consists of my Federal annuity,
in that I am not yet eligible for Social Security and have not tapped into my IRAs or 401(k) plans. I can provide an educated guess as to my consulting income, based on a look back at the last 10 years, but it is no more than a guess, and I recognize that there may come a day – I’m hoping it isn’t in the immediate future – when agencies are no longer interested in my services or are operating under tight budget constraints.
At that point, if there is a gap between my income and my expenses, I’d better find a way to increase the former or decrease the latter. I think that for many of us it can be very difficult to make substantial spending cuts – at least in areas that are part of our “lifestyle.” I could theoretically live without broad-band cable Internet access, the premium cable TV channels, my separate fax line, and one of the cell phones. However, cutting the next level of “optional” expenses, such as frequently eating at restaurants, taking vacations or buying the occasional new car, would start to affect our lifestyle.
And “fixed” costs, such as a mortgage, property taxes, insurance, and utilities, can be hard to reduce. If it came down to a deficit in my ability to make the mortgage payments, I would rather take even a low-paying job (i.e., “Would you like fries with that, sir?”) than trade the great rate I have on my fixed-rate 15-year loan for a longer-term mortgage with lower monthly payments.
If you own a house, maintaining it properly takes money, but not as much as letting it go, as I keep finding out the hard way. And because stuff happens, such as the night our furnace went out this winter just as the outside temperature reached a toasty zero degrees, it makes sense to have a contingency fund.
Perhaps the scariest costs on the horizon are those for health care. While they could theoretically go down, it is far more likely that they will continue rising, perhaps sharply, as we baby boomers age and tend to need more medical services, which for some will include taking up residence in long-term care facilities.
If you have seen a good financial/retirement planner and are confident that you can support your current lifestyle on your annuity (plus any other sure sources of income), you should have the financial freedom to do pretty much as you please.
For example, if you are financially set, you might choose to do volunteer work, and there are myriad organizations that would welcome you with open arms. Virtually any interest that you have can be matched up with one or more reputable volunteer organizations that are probably already in place at or near where you live. My wife and I served on the board of directors of a non-profit that provided mentors for at-risk kids, and we doubled as mentors of 9-year-old twin boys, an incredibly rewarding, if exhausting, experience.
If your financial position is not as strong, you might have to work in a paid position on a part-time basis. There are organizations springing up to place older workers – e.g., 10 Til 2, and The Boomers Group – and part-time work should still leave you time to pursue other interests.
However, if you believe your financial situation will require you to work full-time or close to it to supplement your annuity adequately, you may want to re-think the timing of your retirement. A recent job fair for baby boomers in the Denver area was heavily attended, despite the fact that many of the jobs being filled paid less than $10 per hour. That tells me if I am currently making $40 an hour with a Federal agency in this area, I may not be able to fully replace that salary on the outside, unless I have skills that are particularly marketable in other segments of the economy, such as expertise in information technology.
In future articles, I’ll address health, outside interests, attitude and what the Federal government is and is not doing to help employees prepare for retirement.