Federal Employees Retirement & Post-Retirement Plans
Federal employees tend to retire earlier and save more, in the same relative period, as compared to employees in the private sector. But they face the same post retirement issues, and in some cases, are even worse off, when it comes to having a plan to turn the savings in to a respectable nest egg sufficient to cover post retirement expenses and maintain the same lifestyle.
In a recent survey by the Office of Personnel Management (OPM), 77% of federal employees described themselves as moderate or conservative investors. The same survey also indicates that only 48% of all federal employees have calculated how much money they will need after retirement. One of the main reasons for this is tat federal employees live in a sheltered world where all their bills, health care premiums, medical expenses, accommodation, gas and other monthly bills, are taken care of by the United States government, in addition to a basic salary. When they exit this system, and find they have to pay all these bills out of pocket, federal employees are ill equipped to manage personal budgets and are much more likely to run out of retirement funds.
Thus, that it is even more imperative that federal employees focus on setting up a relatively high performing investment portfolio and retirement plans which take in to account the post retirement expenses, rather than focusing on simply adding contributions to a federal retirement plan such as the Thrift Savings Plan, CSRS or FERS.
Knowing how to build equity enhanced real estate investments and an inflation adjusted retirement portfolio requires considerable financial literacy, awareness of financial products and an ability to understand and make choices between competing investment vehicles.
For example, a federal employee who is provided accommodation might use the saved rental to make mortgage payments on a purchased house, and try to clear the mortgage while still employed. Since he is provided accommodation, the mortgaged property can be rented out, thus making it easier and faster to clear the mortgage, while accruing tax advantages and a significant asset whose value will rise in the coming years. Compare this with simply adding the saved rental in to a federal retirement plan and you realize the kind of investment opportunities which federal employees pass up, or rarely think about.
In summary, a good retirement plan should first take in to account your needs and resources, both present and future, and based on these factors, provide the optimum returns. If you think that your TSP plan is the best way to do this, that might be true for the present, but once you are out of the system, costs have a funny way of ballooning up, and if you do not have the assets (house, health plan, monthly pay check) to cover the costs, you might have to end up back in the work force for a second career.