The new federal budget proposed by the White House has an interesting quote regarding federal employee retirements.
The budget proposal reads: “Between 2005 and 2008, annual separations (retirements and other departures) from the Federal workforce ranged between 244,000 and 252,000. Separations fell to 212,000 in 2009. If the reduced retirement pattern continues, 230,000 separations are likely in 2011. If separation rates return to their 2007 levels instead, more than 300,000 separations could occur in 2011.” (See The Budget “Shell Game” and Your Federal Employee Benefits)
We have been reading about a pending retirement tsunami from the federal government for some time now. The White House is saying that 300,000 separations could occur in 2011. That could happen although with the real rate of unemployment remaining in the United States at about 16%, there is no doubt that many federal employees will hold on to their jobs–even if they long for the “greener pastures” they may envision waiting for them in the private sector.
But “separations” are not the same as the number of federal employees who may choose to retire.
The Joy and Freedom in the Federal Employee Retirement System
A federal employee who is retiring has a separate source of income. Many federal employees have continued to work for Uncle Sam primarily because of the retirement benefits–and the ability to carryover the federal health benefits insurance plan into retirement.
A retiree can choose to live just about anywhere, and many people choose to move. You may have lived in a large city (such as metropolitan Washington, DC, the largest single geographic location for federal employees). Federal salaries are higher in Washington and there are a number of reasons a person retiring may choose to continue living there.
But, assume for the sake of argument, you are relatively young, in good health, and you want to travel or live out your life over a period of several decades taking trips or doing things you have dreamed of doing but could not undertake while working 40 or so hours every week. You may want to make your retirement dollars last longer.
As a result, some people want to live in an area that may have lower taxes, a warmer climate, lower living expenses, lower housing costs, and fewer people. (See Are You Part of the Retirement Tsunami? Where Will You Retire?)
If you need to keep working, you are likely to stay where you are. But, if you have a solid financial plan for your retirement, your TSP is in good shape and you are tired of worrying about possible furloughs, future potential changes to the federal retirement system, pay freeze, potential pay freeze if you should get permitted and just want a change of scenery, perhaps you will choose to turn in your retirement papers and walk out the door of your federal office for the last time.
Federal employees have a big advantage over many in the federal sector: a solid retirement plan. And, for older federal employees, you have a defined benefit plan (CSRS) that became unavailable way back in the 1980’s and, for many private companies, went the way of the horse and buggy before that (or even after that if the company went bankrupt).
Federal Retirement Numbers
The number of federal employees who are retiring went down in 2009 (2009 is the latest data available from OPM). (See Will Boomers Retire Like Their Parents?)
But, like many in the private sector, federal employee retirements have not generally followed the pattern of our parents (See The Reality of Generation “U”) and in one of our previous surveys, many readers said they were delaying (but not canceling) their retirement plans.
The Aging Federal Workforce
OPM has predicted a “retirement tsunami” and a resulting “brain drain” from federal service. This chart demonstrates why OPM may be concerned and, several years ago, the agency predicted that as many as 40% of those eligible to retire will do so. Here is the data showing the age of service of federal employees in cabinet level agencies. As you will see, more than 700,000 federal employees in cabinet level agencies are 50 years or older. More than 400,000 are 55 or older.
Changes in Latitudes, Changes in Attitudes
With due credit to Jimmy Buffett, there may be real changes coming to the federal workplace and, perhaps, to the outlook of retiring federal employees who are about to leave for warmer climes or, at least, a different daily scenery. (Video: Changes in Latitudes, Changes in Attitudes)
In our recent survey, 31% of those taking the survey and who are eligible to retire indicated they are planning to retire sooner than they had planned. And, as federal employees are under a retirement system that enables them to retire at a fairly young age if they choose to do so and can make the necessary adjustments in their level of spending, the implications for the future of the federal workforce are significant.
More senior level jobs are likely to open up. The federal government will be hiring more people. As older federal employees with many years of service leave and are replaced by a different generation, chances are the culture of the federal workforce will change.
I would not want to speculate on how attitudes in the federal workforce may change. But, in general, a younger workforce often leads to more change or at least a willingness to accept change. If you have thoughts on the topic, please put them into the comments section.