Q: I just finished reading your article (From COLA to Diet COLA: What the Budget Proposal Means for Your Retirement) and I totally agree. Please don’t punish the employees who have worked 20, 30 years and are banking on retiring in the next few years! Is there anything Federal employees can do that could prevent this from happening?
A: I have two answers that may both help you insulate yourself and perhaps improve federal employees’ chances of not having their retirement benefits gutted.
First, look at what you can do that may help soften or even prevent these proposals, and second, consider what you can do to try and prepare in case they happen anyway.
Join an Advocacy Group
Look at joining National Active and Retired Federal Employees (NARFE). They are a non-profit advocacy organization for federal employees. They fight for current wages, benefits and federal retirement benefits, the latter of course being the most pertinent to your question.
Today NARFE has some 300,000 members (according to Wikipedia). This is a reduction of nearly 200,000 since 1984. It may not seem like a big deal, but when voicing concerns in Washington, numbers matter. NARFE allows current and retired feds (both CSRS and FERS) to have a unified voice. If enough feds join NARFE, that voice could be raised from a murmur to a loud roar.
Take Control of Your Retirement
Take control of items in your retirement package to the extent that you can.
This is such a foreign subject to many feds, so much so that it is largely ignored until the last minute. If you are overwhelmed by the subject, you may want to seek out a qualified financial advisor to assist in creating a comprehensive and well thought out retirement plan.
If you are like most feds I speak to, you are concerned about the costs. I understand, however, a recent study by Aon Hewitt and Financial Engines found, “…on average, employees using [financial advisor] help…had median annual returns that were 3.32 percent higher, net of fees, than participants managing their own portfolios.
Manage Your Investment Risks
You should know and understand your panic point for taking risks with your retirement savings. This is key in making intelligent investment decisions, even while assets are still sitting in the TSP.
You may have a hard time understanding the significance or rationale behind “risk tolerance.” However, a simple yet thorough financial risk assessment may do wonders in lifting this confusing curtain. Many can be located online. I know the Motley Fool has an online assessment, and I offer a free risk assessment as well.
If COLAs, supplemental retirement income and pension calculations (from high-5 to high-3) are cut, then you will need to offset those losses. This could, at least in part, be accomplished by adding more to your TSP. Or it may be as straightforward as simply adjusting allocations/investment choices (wisely) within the TSP. In some cases, a well-planned adjustment may potentially increase TSP savings balances, thus offering larger retirement incomes from the TSP savings.
Actively Participate In Your Personal Retirement Planning
You need to know where you stand heading into retirement as soon as possible. With these types of budget proposals out there, this could (more than ever) mean the difference between financial retirement success and failure.
Some suggestions to help with this include:
Dream about your retirement. What will it look like?
Affix values to each aspect of your retirement dream. Example: If painting landscapes will be a big part of retirement, how much will brushes, canvases, paints, etc. cost each month?
Add all known and anticipated retirement expenses together to create a fair and realistic retirement budget. You really can’t afford to guess or rely on a poor estimate here. From these steps, it is possible to work backward in determining how much will be needed to fund retirement.
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