Can Career Complacency Cause Retirement Regret?

I am a 42 year old GS-10 FERS employee with 12 years of service. As long as I work at least 30 years and put 5% into the TSP, will my retirement income be that much different from someone that is a higher grade than me?

Q: I am a 42-year-old, GS-10 FERS employee with 12 years of federal service. The first 5 years of my federal career I bounced around until I landed in my current position. I need to stress that I truly enjoy my job. I can’t really see myself doing anything else in my career. I intend to work another 20 (+) years before I retire.

Recently a newer coworker suggested that I wasn’t doing my retirement any favors by staying put in my current position and that I could be dramatically hurting my retirement income if I didn’t try to move up the ladder.

But, as long as I work at least 30 years and put my 5% into the TSP, will my retirement income be that much different from someone that is a higher grade than me?

A: Sorry, but your co-worker is probably right. Consider: both your TSP savings and your FERS Pension will be impacted by not only your years of service, but, also your annual earnings.

Example: You said you are a GS-10; I don’t know your location or steps, so let’s keep it simple. We will assume that you reside in “Rest of the United States” (Not located in another locality pay area). According to the OPM 2016 General Schedule (GS) Locality Pay Tables, if you are a GS-10, step 1 you earn $53,925. However, a fed in your locality that is a GS-12 (also step 1) earns $71,012. This equates (in today’s dollars) as a difference of $17,087 annually. We know that this variance will grow as steps are added, but, I am trying to keep this as straightforward as possible. So, I am not adding in steps.

Let’s look at a comparison, (GS-10 vs. GS-12) of retirement benefits for both the TSP savings and FERS pension.

TSP – As a GS-12, if you and your employer each continue to put 5% (of your annual salary) into your TSP, you can anticipate in 20 years an additional $34,160 being deposited into your retirement account. ($17,087 x 10% x 20 years = $34,160). If we assume a 7% annual growth rate, the additional amount in your TSP account may be as much as $74,184. ( savings calculator) If you start taking a 4% withdrawal from these assets immediately upon retiring, your additional income could be $247.28 per month. ($74,184 x 4% ÷ 12 = $247.28)

Pension – Using the info you provided and the GS locality pay table (mentioned above), we will estimate pension amounts for your current income as that of a GS-12. The FERS pension calculator uses years of service + high-3 (average of your highest 3 years’ salary earned) + a multiplier. The multiplier in your case will be 1.1%. (You will be over 62 and have more than 20 years of service).

GS-10 – High-3 estimated at $53,925 x 32 x 1.1% = $18,981.60.

GS-12 – High-3 estimated at $74,184 x 32 x 1.1% = $26,112.77 (More than 27% additional income).

Difference of $7,131.17 annual income.

All of these figures are estimates, however, they do show a dramatic difference in both the TSP and FERS retirement incomes.

FERS = $247.28 per month.

FERS Pension = $594.26 monthly. ($7,131.17 ÷ 12)

Combined – $247.28 + 594.26 = $841.54 additional monthly income.

This is assuming that you step out of your current position and in the next 20 years just advance 2 grades. Obviously if you continue to move ahead in your career path, we can expect these numbers to be considerably larger.

In addition, your SSA income benefits will also likely improve since you will be paying more into that system. Finally, I haven’t even addressed the difference this type of advancement could have on your current lifestyle. Imagine the change that $17,012 per year could make to your current financial condition.

As you struggle with this issue, consider – A new survey by asked the question, “What is your biggest financial worry about retirement?” 62% responded – 1. My savings will run out, 2. I won’t be able to afford daily expenses or 3. I’ll have too much debt. Paraphrasing – they all feared not having enough money to survive retirement.

Conclusion: financially I agree with your co-worker. I know it’s not easy to step away from a position you really enjoy. I have met with many federal employees that share your dilemma. They are faced with either moving to a new position that they may detest (but, will pay better) or stay put in a job they adore. Not an easy choice.

When we view the growing costs of healthcare, the potential of extreme inflation and the possibility that SSA will either disappear or more likely change drastically in the future, more importance than ever is placed on your ability to earn (and thus save more) for your own retirement protection.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  Investing involves risks, including the loss of principal.  No strategy assures success or protects against loss. 

Securities offered through LPL Financial, member FINRA/SIPC.

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.