Pay & Benefits

One way to figure if you made the right federal career choice

One federal retiree analyzed the question of whether he was right to switch from the private sector to federal.

Tom Temin@tteminWFED

July 19, 2024 12:32 pm

9 min read

One measure of a career is the financial remuneration and whether your money and health needs are taken care of. One federal retiree analyzed the question of whether he was right to switch from the private sector to federal. Joining the Federal Drive with Tom Temin with the details, Abe Grungold, owner of AG Financial Services.

Interview transcript:

Tom Temin One measure of a career is the financial renumeration and whether your money and health needs are taken care of. My next guest, a federal retiree analyzed the question of whether he was right to switch from the private sector to federal. Here with what he found, Abe Grungold, owner of AG Financial Services. You took a long look back at a long career, Abe. Just give us what you are doing here.

Abe Grungold Tom, this was a question that has always plagued me my entire federal career. Did I make the right choice from leaving my senior position at a hospital and transitioning to the government? Because I took a $12,000 pay cut, which was about 35% of my previous salary, to work for the government. And I always wondered, did I make the right choice?

Tom Temin Well, let me ask you this, though, what was the motivation in the first place to go to the government?

Abe Grungold Well, the hospital was going through a lot of financial problems. They had merged with another hospital and I saw the beginning of the decline of this hospital, and I didn’t see a future with the hospital. I was afraid I was going to get laid off one day.

Tom Temin Sure.

Abe Grungold So, that’s why I sought something else a little bit more secure. And, it’s funny. In 1985, I started with the government, and a very close friend of mine also started at the hospital in 1985. I recently had dinner with her, and we discussed our salary, our benefits, and her future retirement. She’s going to retire in three years. And it was just wonderful, comparing my federal salary and benefits and retirement, comparing to hers, and I learned quite a bit.

Tom Temin Now, we know from previous interviews that you are a multimillionaire in the TSP. And you are not three years from retirement, but about three years into retirement, enjoying the pickleball life and so on. So, tell us about what some of the findings were, compared to your friend.

Abe Grungold Yes, so we hit upon five major areas: salary, health insurance, the TSP or her 401K, the retirement monthly annuity, and life insurance. So, what I found out from salary is that in the hospital, they did not provide very many COLAs. Over the past 40 years. I remember receiving a COLA once in the seven years that I was there. Now, with the government, I basically received a COLA every year with the government. I think during my last 40 years, there were two or maybe three occasions where the government did not provide a COLA. So even though I started my federal career at a lower hourly rate, I accelerated through promotions, and my salary was much higher than my friend’s present salary, who was also a manager, but I think that was largely due to the COLAs.

Tom Temin The cost of living adjustments, by the way, for those that don’t yet know what a COLA is. So, you ended up ahead in the long run on salary, then.

Abe Grungold Yes, yes. I ended up with a $75 per hour last salary that I had three years ago, and her present salary is $55, with a maximum she can achieve of $65 per hour. And I was already at the maximum when I retired with the government. But I think that difference in salary was certainly due to all the COLAs that I had received during my federal career. And, with respect to health insurance, the government provides a large variety of health insurance plans to pick from. The hospital where my friend works, they basically only have two or three choices. And variety is really the spice of life and health insurance. You want to pick a health insurance plan that really tailors to your needs, and that is very important. But the most critical part of the health insurance benefit is, I carry my health insurance into retirement. My friend will not have that opportunity to take their health insurance into retirement. That is a big, big benefit that I received.

Tom Temin Yes, in some ways, it’s one of the biggest ones. And it’s really pretty much that situation for the rest of the private sector as well as your friend. We’re speaking with Abe Grungold, retired federal employee, and now owner of AG Financial Services. And then there’s the TSP, and the ability to save in a 401K, in which the government and private are a little bit more equal in most circumstances.

Abe Grungold Yes, my friend had a variety of different deferred compensation plans to pick from: a 401K, a Roth IRA, and a 403B. And I remember participating in the 403B when I was at the hospital. But with the government and the TSP, I have always received a 5% matching to my TSP every year of federal service. My friend has never received any matching from her employer to her tax deferred plan. And that is probably the most important benefit that a federal employee can obtain, in addition to their health insurance. So, that is where I really grew tremendously with my 401K. I certainly didn’t ask my friend what her balance was, but the key is that she never received any match.

Tom Temin There’s so many variables, such as your tolerance for aggressive investing for much of those years. And you had a pretty good tolerance for that.

Abe Grungold Yes. I mean, I was a roller coaster rider, and I was always aggressive with my TSP and the merry-go-round riders are the ones who are solely in the G fund. There’s nothing wrong with those investors, but if you want to be a TSP millionaire, you’ve got to ride the roller coaster. And that was a big difference I found in our discussion was the employer matching.

Tom Temin And then the other factor is, if you had a steadily higher increase in pay, then the more you contribute to social security, which means that at the end of a career, your social security benefit is greater.

Abe Grungold Yes. I mean, certainly my social security benefit would be higher. I didn’t even ask my friend about that, because I knew that was already going to be true. So, we didn’t even hit upon that question. But what I did ask her was about her retirement annuity that she would receive from the hospital after 39 years, or she’ll have over 40 years when she retires. Now, I didn’t have her formula for her retirement annuity. But we did discuss what the amount is, and mine was more than twice what she would be receiving. She’s going to receive $1,800 per month, and I received at retirement $4,500 per month as my annuity. Now, that is probably also largely due that I have a higher salary. And I also received COLAs for my retirement annuity. She did not know if she’s going to receive any COLAs and I don’t think she will, because they usually buy those from an insurance company.

Tom Temin You’re a FERS.

Abe Grungold I was always a FERS employee. And certainly, your retirement annuity is very important. It’s one of the three-legged parts to your stool, and your three-legged stool is your annuity, your TSP and also your FEHB plan that you can take into into retirement. And the last thing that we discussed was life insurance. Life insurance is something that she was always able to obtain at the hospital and I could obtain it through the government. But the key difference is that she cannot take her life insurance into retirement. That benefit will end when she ends her employment. With the government, you could take your life insurance into retirement, and the government provides a basic $10,000 free portion to your life insurance, I believe when you hit age 65. But you could still carry any amount of life insurance into retirement as a federal employee. That is also a significant benefit.

Tom Temin Well, it certainly helps your spouse take you to your eternal reward in style\, should that need arise.

Abe Grungold Actually, Tom, I terminated all my life insurance when I left federal service. I just didn’t see a point of needing any, and that was just a personal decision. Every employee needs to evaluate their life insurance needs. And for us, we terminated ours. But, basically, what I learned, Tom, is that overall, I absolutely made the right decision with my federal career in all five of these categories. My federal career excelled in all these categories with salary, benefits, retirement, and certainly social security as well. And there were many other little benefits that we talked about. But certainly these were the five most important.

Tom Temin All right, so the federal slot machine comes up with a row of cherries, but I have to ask you one existential question. Did you like the work? Was it good to work for the government and you didn’t go crazy waiting until the end?

Abe Grungold I loved all four federal agencies that I worked for. It provided me with a feeling that I was doing good. Each position was a little bit different. But I was always sort of in the investigative side of government and trying to, you know, correct problems, and catching criminals, etc. And I found that work to be very fulfilling. I mean, I certainly enjoyed working at the hospital. But my federal career far exceeded my needs, in that self actualization on the Maslow hierarchy of needs. Yes, it certainly fulfilled that. All right, Abe ‘Moneybags’ Grungold is a federal retiree and owner of AG Financial Services. Thank you for that detailed analysis. Thank you, Tom. It really was important to be finding out and now I’m so happy that I did.

Tom Temin That’s right. Well, you know, living well is the best revenge, they say. We’ll post this interview at federalnewsnetwork.com/federaldrive. Hear the Federal Drive on your schedule, subscribe wherever you get your podcasts.