By Sean McCalley
Federal News Radio

Federal agencies are facing a reverse retirement wave, the opposite of the much- anticipated retirement tsunami. The Office of Personnel Management continues to receive fewer retirement applications than expected each month. Instead of a crippling wave of baby-boomer employees leaving the public sector, the workforce is growing older in place.

It’s not surprising that the main reason is money.

“I have a child in college and that’s a really bad time to retire,” said Kim Weaver, director of external affairs at the Federal Retirement Thrift Investment Board. “Secondly, if you’re in [the Federal Employees Retirement System], and you retire at age 62, your entire service is credited at 1.1 percent as opposed to just 1 percent and it makes a significant difference in the annuity you can expect.”

Weaver spoke about her decision to stay on the job after her retirement eligibility window opens as part of Federal News Radio’s special report The Reverse Retirement Wave. She will be eligible to retire within five years but, she said, the financial rewards for staying longer are too great to pass up.

She’s not alone in her decision. In a recent Federal News Radio survey, about 65 percent of federal employees who are eligible to retire don’t plan to do it immediately because of the pay and benefits tied to working longer.

Many respondents mentioned the annuity benchmark they’ll receive at age 62. The second-most cited reason for staying on the job past retirement eligibility is job satisfaction, at about 33 percent.

“A lot of my friends … I must trend older … are still in [the Civil Service Retirement System],” Weaver said. “They have been eligible to retire for a while, and are either gluttons for punishment or love their jobs, depending on which way you want to look at it.”

Of the survey respondents who are eligible but don’t plan to retire soon, about half intend to leave government within the next three years. That could signal the start of the long- anticipated retirement wave. But about 20 percent of respondents said they probably would wait at least four to six years to retire.

Staying at least five years past retirement eligibility

The survey numbers reveal a slight “reverse” retirement wave. Federal retirement eligibility relies on various factors, but for most baby boomers working in the federal government, the average age to reach eligibility is around 55, according to the Office of Personnel Management.

But “the average age for people retiring is 61.6 years,” said Weaver. “And that’s true whether they’re covered by CSRS or FERS. And that age has been fairly steady for the past five to seven years.”

That doesn’t mean a “retirement tsunami” isn’t coming, though. Seventy percent of survey respondents who haven’t retired yet said they were close to or past their eligibility mark, which comes between the ages of 51 and 65, depending on individual circumstances. About half said they became eligible to retire within the last three years and about half said they planned to stay at work at least three more years.

In other words, most federal employees are sticking around the office at least until they reach the 62-year benchmark for a higher annuity.

Other financial concerns factor into the decision to continue working. Beyond the annuity bonus, survey respondents listed an uncertain economy, second mortgages and the need for a larger nest egg as reasons for delaying their retirement.

Many federal employees prioritize retirement planning

For the most part, federal employees are making sound financial decisions as they plan for retirement. For someone like Weaver, who works for the small agency responsible for tracking the ups and downs of the Thrift Savings Plan, it’s natural to rely on the information her agency gathers to help plan her own retirement.

But the Federal Retirement Thrift Investment Board tries to make that information easily available so any federal employee can feel comfortable mapping their route to retirement, whenever that may come.

“I have some great minds here that I can tap,” Weaver said. “But all of that information is available on our website, so I would urge everybody who has questions to go look.”

She specifically recommends tracking the L Funds. By comparing the trends across the five options, federal employees can see what a professional retirement planner would do in certain situations.

“‘I want to be a little more conservative’ or ‘I want to be a little more aggressive.’ Whatever you’re personally more comfortable with, that’s how you do it,” said Weaver.

She said 73 percent of federal employees enrolled in the Thrift Savings Plan are taking full advantage of the 5-percent employer match, a sign that many hold their retirement planning as a high financial priority. The FRTIB considers the 27 percent of employees who aren’t contributing at least 5 percent a “concern” because it means they’re leaving retirement money on the table.

The other area of concern is federal employees who place all their contributions into a single TSP fund, like the conservative G Fund, which is based on government securities. But Weaver said sometimes people have good reasons for doing that, like having other retirement accounts outside of the TSP.

“We just want to get the message out that diversification is a good strategy,” Weaver said.

MORE FROM THE SPECIAL REPORT, THE REVERSE RETIREMENT WAVE:

Part 1: Feds choose to stay longer, creating new retirement bubble

Part 2: Rehired annuitants help bridge agency skills gaps, but are they enough?

Part 3: Mentoring helps young feds answer the question, ‘What’s next?’

Part 5: Recruiting, retention key to bucking federal retirement trends

Part 6: Military-style personnel system could smooth path to next-generation workforce

Part 7: Six signs of hope for the federal workforce of the future

Commentary: Time to start planning new retirement reality

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