Editor’s Note: This is the second part of a two part article on “Contemplating Retirement.” Here is part one.
Your Health and Your Decision to Retire
Another key factor in retirement planning is your health. As people age, the number and severity of medical problems they have tend to increase, demonstrating that nature has a bizarre sense of humor. Accordingly, it is reasonable to anticipate that your medical costs will rise, sometimes to a significant extent.
Your health, and the cost of maintaining it in retirement, will have a significant influence on your post-Federal employee life. The good news is that there are now lots of retirement communities, some of which have facilities which range from independent living to assisted living to nursing home care. The not so good news is that assisted living and nursing home care can be so expensive that it can wipe out savings accounts within a relatively short period of time.
Long term care insurance is available through the Office of Personnel Management (OPM). The Federal Long Term Care Insurance Program (FLTCIP) provides long term care insurance to help pay for costs of care when enrollees need help with activities they perform every day, or you have a severe cognitive impairment, such as Alzheimer’s disease. Long term care insurance can also be purchased through the American Association of Retired Persons (AARP), and a variety of other sources.
A number of retirement experts say it is extremely important to come up with a good estimate of how much money you will need to support your lifestyle, and suggest that part of that process is to come up with a budget. I think that’s excellent advice; I’ve just never followed it (you may be detecting a pattern here). It’s been years since I reconciled my checkbook on a monthly basis, let alone daily. My excuse is that I write fewer checks these days, paying many bills on-line, and I keep a high enough ready reserve to virtually insure that I won’t accidentally incur charges for insufficient funds, but I must admit I stopped balancing my checkbook long before the electronic alternative was widely available.
I would also strongly recommend that you become regular readers of Tammy Flanagan’s weekly retirement planning articles in GovExec.com. Ms. Flanagan, Senior Benefits Director for the National Institution of Transition Planning, Inc., knows more about Federal retirement-related issues than anyone I have ever run across. Another excellent source of Federal retirement information is my fellow FedSmith.com author, Robert Benson. And Ralph Smith’s latest insightful article on personal finances, How to invest in 2012, was recently published on FedSmith.com.
Then there is personality. If you live to work rather than work to live, for example, it may be difficult for you to downshift into retirement, particularly if you hold a position of significant power and influence.
Giving orders to family members is more likely to evoke raised eyebrows and shrugged shoulders than compliance, and even the dog may roll its eyes. And if you decide to go back to work, there is no guarantee that you will be able to land a similar job to the one you left – if you can get hired at all. The February 19 edition of 60 Minutes covered a small group of the huge cadre called the long-term unemployed – people with education, skills and records of accomplishment who had lost their jobs when their companies downsized or went out of business and had since been unemployed for so long that they had lost hope, as well as their long-held place in the middle class.
Help may be on the way in the form of a phased approach to retirement. A Federal Times article by Stephen Losey, published on February 14, said that OPM wants to allow older federal employees to ease into their retirements on a part-time basis. The White House has proposed as part of its FY 2013 budget that employees nearing retirement would be able to continue working part-time, while receiving a partial annuity. They would also continue earning additional retirement benefits proportionally based on their part-time service.
According to the article, the administration sees this as a way to improve succession planning and knowledge management while saving $720 million over the next decade. Agencies would save by not having to immediately replace employees phasing into retirement, and by delaying payment of full retirement benefits, the budget said. It could also reduce the government’s need to temporarily rehire retirees to fill critical skills gaps. Those rehired annuitants are now paid both their full salaries and pensions.
The article quoted the following excerpt from the budget justification: “Many individuals who are nearing the end of their working lives do not want to completely stop working, although they no longer wish to do so on a full-time basis. This proposal will help encourage those individuals to continue working for the federal government and will enhance the attractiveness of late-career part-time employment, thereby facilitating continuity of operations and training of less experienced employees.” OPM said employees phasing into retirement would be required to spend part of their time mentoring younger employees.
My decision to retire early has worked out okay for me, despite my haphazard planning, but if I had to do it all over again, I might well not have retired when I did, since the National Park Service was, for me, a hard agency to leave, and I got great satisfaction out of the work I did with that organization. Only you can decide when it’s time for you to retire. It’s a critically important decision for most people, and I would strongly recommend careful planning – including frank discussions with family, friends and experts in a variety of areas – rather than my “hope for the best” approach. By examining the pros and cons of retiring at any given time, you will be able to make a much more informed decision than I did. Best of luck! As for me, I’m going to keep retiring until I get it right.