Agree with the new administration or not, with the “regime” change on January 20th, 2025, some of the campaign-pledged shifts have taken place at a rapid pace. Among other goals, this new (returning) administration has a well-publicized objective of “cutting waste, fraud, and abuse” within the federal government. If fully successful, they hope to locate and cut billions, if not trillions, in “unnecessary” federal expenditures.
To be sure, cutting these types of expenses from federal spending has been tried before, but those efforts were largely unsuccessful. Of note, Ronald Reagan pledged to shrink the federal government after the 1980 election. President Obama also launched a “Campaign to Cut Waste, and eliminate misspent tax dollars in every agency and department…” Needing support from both sides of the aisle (and not receiving enough cooperation) essentially killed both efforts on the vine.
Will (or can) this time be any different? This new administration believes so and is well on its way to attempting to massage and coerce its campaign’s promised and desired changes through Congress.
Their promising (initially receiving limited support from both sides of the aisle) ace-in-the-hole for this ambitious endeavor is a new outside advisory organization that has adopted the name Department of Government Efficiency, or DOGE.
DOGE has a broad, two-pronged mandate:
- To locate unnecessary government spending and advise on ways to shrink or completely eliminate these costs to the federal government and, thus, the American taxpayer.
- Find ways to increase federal government efficiency.
At least some leaders in both parties see the DOGE assignment as honorable and even well-meaning in its depiction and described goal(s). After all, what Americans could argue about the effort to cut the costs of “wasteful” tax dollar spending?
Note: DOGE is not a government agency, as that would require an act of Congress. Instead, DOGE will work as a Presidential Advisory Commission from the outside (yet physically working from within the White House).
However, here’s the kicker that I’m not sure has been fully considered in the DOGE implementation of its stated objective – if its assigned task is successful, how could DOGE affect numerous long-serving, “typical” federal employees? Is it possible that many hardworking and dedicated federal employees could be displaced, forced to resign, or proactively leave before facing such forced departures? What could a preemptive move like this yield for those inclined to do so?
Stew Fret (Not his real name)
Stew is a married 59-year-old federal employee who has been in service for 26 years. He plans to retire at age 65, with 32 years of service under his belt. But the news of the DOGE agenda has Stew thinking he may need to reconsider his long-held plan.
Stew is anxiously concerned that DOGE may trigger government actions that would lead to his forced early “retirement.” (Note: Stew is in an agency that DOGE leadership mentioned as a likely target for alterations or cuts.)
At 59, Stew is concerned about what the next portion of his life may look like, so he began pursuing a “realistic” assessment of his financial well-being should he decide to leave federal service. Stew, considering a voluntary or forced exit from his current job, is exploring two post-federal employment options:
- Full-fledged early retirement
- Partial retirement, which would include part-time employment
Being proactive, Stew gathered his financial information and participated in a Federal Retirement Readiness Review (FRRR).
What Stew Learned
Stew’s “high-3” averaged $125,700 annually. Stew found that he needs $76,000 annually to cover his household “needs.” Stew also learned that if he left federal service in the next three months, at his age, with 26 years of federal service:
- His pension (retirement annuity) will cover about 43% ($32,680) of his basic monthly expenses.
Note: He would qualify for 1% per year of service or 26% of his “high-3” annual income. At age 60, since Stew has more than 20 years of service, he would qualify for 1.1% of his “high-3,” ostensibly a 10% bonus to his annuity/pension.
- Should he begin taking them, Stew’s Social Security benefits at age 62 would cover another 36% ($27,300).
- Stew would not be able to draw SSA income until age 62. However, as a FERS employee with over 20 years of service, at age 60 he could qualify for the FERS Annuity Supplement. In his case, the supplement would be equal to $1,739 per month. (Stew would qualify for 65% of his age 62 SSA income benefit. His age 62 SSA income benefit currently shows $2,676 monthly. $2,676 x 65% = $1,739).
- In approximately 6 months, when Stew turns 60, his fixed income from federal retirement sources will be $20,868 (the FERS supplement of $1,739 x 12 = $20,868) plus $32,680 (the FERS pension or annuity). Therefore, his total fixed income will be $53,548. This would leave Stew $22,452 ($76,000 – $53,548 = $22,452) short in his annual income needs, meaning he would need to either withdraw $1,871 ($22,452 ÷12 = $1,871) monthly from his TSP account or find a part-time job to cover this shortfall. At 62, Stew would lose his FERS supplement. However, he could begin taking his SSA income.
Note: If possible, it may be wise for Stew to delay taking Social Security benefits since delayed benefits increase monthly after age 62. This increase may be substantial until full retirement age, which is 67 for Stew since he was born after 1960. At age 62, he would only qualify for 70% of his full SS retirement income.
- His TSP balance currently stands at a little over $700,000. If he requires access to the funds until he finds a part-time job, he could withdraw his TSP and transfer it to an IRA, allowing him to receive small monthly distributions of $1,871. Nevertheless, it would be advisable to avoid making these distributions a long-term strategy. Those distributions could put a significant damper on the growth of his retirement savings. He may (and probably will) need to access his retirement savings to continue growing them tax-deferred as long as possible to supplement his income when he’s no longer able or willing to work part-time.
Many federal employees plan to retire without needing a part-time job. However, early retirement or Dodging DOGE may force them to alter their plans. I hope this disruption is not lost on DOGE, Congress, or the new administration. As they say, “The road to hell is paved with good intentions.” While saving tax dollars from waste or misuse is a VERY good intention, it may cause “retirement hell” for many hard-working federal employees.
This plan doesn’t fully meet Stew’s original retirement dream, but he’s content with what he learned. He now knows he can meet his financial obligations regardless of whether he decides to retire or is forced out. While some retirement travel plans may need adjustments or delays, they don’t have to be abandoned.
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