The federal workforce is bracing for a bit of upheaval as more workers approach retirement eligibility.
According to a U.S. Government Accountability Office study, nearly 31 percent of career employees (non-postal service) will be eligible for retirement in September 2017.
The numbers are astounding: Nearly 600,000 workers of the 1.96 million permanent career employees, as of September 2012, can hang up their hats and put in their time elsewhere — at home or on the golf course.
Those retirement-eligible workers, however, will need to take a close look at their federal benefits and any current retirement investments to make sure they have sufficient available income to meet expenses.
Here’s one general rule of thumb: A worker thinking about retiring must be mindful of the fact that they will need to make 75 to 85 percent of their preretirement income in order to maintain the lifestyle they have now during retirement.
That’s no short order. And while federal benefits are generous (thethree pillars are: basic annuity payout, Thrift Savings Plan investments, and Social Security), they may not be that generous to ensure a smooth road to retirement.
A shortfall in retirement income causes a potentially difficult situation called the retirement gap.
This is the gap between your current savings, income, and investments (where you stand today) and whether that will be enough to secure a worry free retirement, especially when the income from a full-time job in the federal government goes away after the retirement papers are filed.
In other words, it’s the difference — or possible gap — between what you expect to need in terms of income to attain the kind of retirement you desire, and what money you will actually have on hand to achieve this. For some, the gap is either as wide as the Grand Canyon, or as narrow as a small stream.
Whether it is the Grand Canyon or a stream, we have to figure out how to build a strong bridge between your retirement expectations and needs, and the financial resources that will support it.
For a federal worker, this begins with understanding the projected payouts of federal benefits — basic annuity (pension), Social Security and any Thrift Savings Plan investments.
That’s where we come into the picture. We’ll help you sort through the complexity.
There are hundreds of rules governing how these benefits are paid out, when they are paid out and when you are entitled to receive them. However, after this step, we may have only built half the bridge.
There might still be a gap between retirement expectations and security, and income through benefits, investments and savings. Your federal benefits may not be enough to close the gap.
That’s where we come into the picture again.
Depending on individual financial situations and current investments, we may recommend other financial products and investments to either supplement or complement the retirement benefits package developed by the federal government. We’re here to help you close that gap.
If you are one of the lucky 600,000 workers who have the opportunity to retire, don’t hang up your hat. There are a multitude of financial factors to consider before you decide to retire.
And if you are not one of those lucky 600,000 workers, watching your colleagues and bosses head for the exits may be a wakeup call to begin planning for your retirement today and mulling over exactly what that retirement gap means to you.
Contact one of our federal benefit specialists today for a free consultation.