Do You Know the ‘Goldilocks Principle’ To Federal Retirement?

The author says that you do not want to retire too soon and risk financial ruin in your Golden Years, but you also do not want to wait until too late to retire.

Are you looking forward to those, soon to be received, farewell cards that will read, “Congratulations on a long and successful federal career, enjoy your retirement?”

A growing percentage of Feds are either eagerly preparing for or nervously holding off retirement.  Which category do you fall into?

The best retirement porridge comes from waiting just the right amount of time before digging in.

  • Leave too soon, (too hot) risk suffering severe financial ruin during your retirement years.  A time in life in which you are LEAST prepared to recoup from financial catastrophe.
  • Wait too long, (too cold) risk wasting years working, which could have been spent enjoying a hard earned (just right) retirement.

I know this is probably said and felt by every maturing generation throughout history.  But, “we live in strange times.”  I am 52 years old and so many things seem incredibly odd to me today.  Such as:

  • U.S. Education ranks 14th worldwide. (According to Ranking America’s 01/06/2015 report).
  • Kids today are more familiar with gigabits than chigger bites.
  • Our national debt now exceeds $18 TRILLION.  It has grown by 1800% since 1982, which was the first year the U.S. saw a $1 Trillion debt.  I sure hope the White House wasn’t put up as collateral.  (Figures according to Treasury Direct).
  • Surgeries performed remotely and/or by robots.
  • A person can make phone calls, calculate a waiter’s tip, implement bank activities and play arcade games on a little box not much bigger than a credit card.  “Beam me up, Scotty!”
  • And of course the age old complaint…Today’s music is too darn loud and has no heart.

But, one of the most puzzling things in the world today is that a Federal job is no longer, widely considered, a great career.

Excuse this short time out for a little “old folk’s” reflections.  I am going to relate to my generation and older for a moment…

We all remember years ago, knowing that, “Government jobs = safe… reliable …great benefits…decent pay…kinda boring.”  A government position was considered a GOOD job, supplemented with outstanding benefits.  That doesn’t seem to be the prevalent thought anymore.

So what happened?  Why are Federal Employees (who aren’t financially fit) looking to leave early when their porridge is still too hot?  Why aren’t the best and brightest, of the younger generations, lining up to become Federal Employees?  What took the luster off of federal employment?

I’ve put together a few candidates for this radical change of opinion; feel free to add your own:

  • Wages have become stagnant (at best) after several years of freezes.
  • Hiring freezes, which lead to the “Do more with less” mandates.
  • Constant attacks (by large media and elected officials) on federal employee integrity, work ethics and benefits.  Feds have become political badminton birdies.
  • The perception that federal employees are unappreciated by, the public, the media and Washington.
  • Lack of trust, by the federal workforce, towards the leaders that control their current and future income, benefits and ultimately lifestyles.

Goldie is a Federal Employees that was looking to retire too soon.  She is 57 years old, 17 years of federal service, GS-11, golden hair and single.

Goldie is no longer enthusiastic about being a federal employee.  She wants to retire now!  It didn’t take much effort to learn that Goldie was in no condition (financially) to simply stop working.  It was also easy to see just how little she could “bear” her job.

Goldie shared just how discontent she was in her current position.   She pointed most of her frustration at her immediate and upper management. She felt her management team was:

  • Disrespectful.
  • More interested in pointing fingers than finding solutions to problems.
  • And “Bearish” on her advancement opportunities.

I don’t mean to shine a negative light on federal managers.  I work with many fantastic federal managers.  Some of them are close personal friends of mine.  But, clearly Goldie feels she is in an untenable situation.

Goldie was under the impression that she could leave at 57 and enjoy a comfortable retirement.  However, for Goldie 57 was just too early.  If she continued with her current retirement preparation routine (poorly utilizing her retirement benefits), she would need to work for at least 9 more years in order to meet her “minimum” retirement needs.  Goldie was not happy when she recognized this fact.  We were able to make a few strategic adjustments to her retirement ground work and it now looks like she could retire in as little as 5 instead of 9 years.

Feds have one the most vigorous retirement benefit plans anywhere.  But, poorly utilized retirement benefits are way too common among federal employees.  They often ignore their retirement during the “contribution” years, hoping it will magically turn “just right.”  But, with just a little preparation and planning, pursuing a robust retirement doesn’t have to be a fairytale.

So, what steps can a concerned fed take to determine the best time for them to retire?

  1. Look at your time in service.  If you haven’t been a federal employee for AT LEAST 20 years this may be a “red flag.”
  2. How old will you be when you retire?  Under 55 (CSRS) or 57 (FERS) may be another red flag.
  3. Know your retirement income sources –
    1. What will your monthly federal pension (annuity) be?
    2. Find out, if you are under 62, if you will qualify for the SSA supplemental (bridge) payment.
    3. FERS employee look at your annual SSA benefits statement.  What would you receive at 62 and at full retirement?
    4. What are the values of your IRA’s, TSP and old 401k’s?
    5. Any inheritance, trust payments, etc…?
  4. MAKE A BUDGET! – The first 3 steps relate to finding an estimate of available retirement income.  Step 4 is all about finding how much income you will need.  There are two methods I use with my clients.
    1. My preferred option is to look at all (necessary and reoccurring) expenses for the past year and divide that sum by 12.  That should give you a good idea what you need to initially survive retirement.
    2. A common (easier) approach is to use current income and multiply it by .80.  Most retirees spend a little less when they retire.  It seems that the needed income is generally between 70% and 80% of when they were working.
  5. Partner up with a trusted (licensed) advisor that FULLY understands federal retirement benefits.  They should help you determine when to utilize each portion of your retirement plan.  The good ones will also help account for inflation and taxes.  Note – Some advisors can help with investments, but, aren’t familiar with federal benefits.  It would be wise to seek advice from someone that is already fluent in your federal retirement benefits.  A “works with anyone” advisor is not your best choice.
  6. Put it all together – Bring your figures to your trusted advisor, help them compare your retirement income to your retirement expenses.  Together you can pursue a realistic retirement date.  Not too early, not too late, but JUST RIGHT.

About the Author

Randy Silvey is the published author of You FIRST, Federal Employees Retirement Guide, one of the bestselling books of its kind on Amazon and Kindle. For over 18 years, he’s been educating and guiding Feds in pursuing wealthier retirement lifestyles. Randy can be reached at 816-524-1515 or visit his website at Securities offered through Infinity Financial Services. Member FINRA/SIPC.