Who’s to blame when feds don’t feel prepared for retirement?

Federal News Radio and I conducted a recent survey addressing  the growing reality that feds are unfamiliar with their retirement benefits. The results from the 563 feds who participated were disturbing, if not anticipated.

Motive — Federal retirement income benefits are (at least for now) arguably as good as or better than any in the U.S. today. Yet understanding those benefits seems perplexing and enigmatic to a large number of federal employees whose livelihoods will soon depend on them. This is a recipe for late-life retirement income disaster.

Randy Silvey, president of Silverlight Financial
Randy Silvey, president of Silverlight Financial

The Results

Are you fully informed about your retirement benefits?

Nope! Nearly two-thirds (66.27 percent) did not feel fully informed. This response comes as no surprise to those of us that work side by side with retiring feds on a daily basis. Although I believe that even the 33.73 percent feeling fully informed is likely on the high side. My estimate would be closer to 10 to 15 percent being fully informed.

I think it’s likely we’re seeing evidence of feds not knowing what they don’t know. Their lack of understanding about their retirement income benefits may well be leaving some with a false sense of security.

How often do you receive federal retirement benefits training?

48.5 percent said they receive federal retirement benefits training at least once a year. 18.87 percent said they get training every five years and 26.07 percent said they only got trained when they were first hired and (for those that are already retired) at retirement. The remaining 6.56 percent weren’t sure.

Do you feel prepared (financially) for retirement?

69.59 percent feel they are.

This seems to point out an interesting discrepancy: how can nearly 70 percent feel financially prepared, when less than 34 percent felt they understood their retirement benefits? Is this a leap of faith?  How can they feel (financially) prepared if they don’t understand what they have? This is not an indictment of those that took the survey. It actually helps pinpoint the problem. This reinforces my (long held) theory that federal retirement income benefits are a foreign subject to feds. Again, they don’t know what they don’t know.

Nevertheless, this result would indicate that (at least) 30.41 percent don’t feel prepared and likely aren’t equipped (financially) to retire. If they retire unprepared can we then conclude these feds are heading toward a problematic retirement at best? If so, how many feds does 30.41 percent represent?

The numbers have been thrown around that 30 to 50 percent of federal employees could be retiring within the next couple of years. There are approximately 2 million working feds today. So these numbers imply that 600,000 to 1 million will be eligible to retire by 2017. Out of those long serving federal employees 182,460 to 304,100 would be represented in the percent that don’t feel prepared (financially) for retirement.

The fact that 182,000 to 304,000 feds could endure financially distressed retirements is frankly unconscionable. With one of the strongest retirement systems available today, how could this happen?  Who’s to blame? We need someone to blame, someone to fall (or be pushed) onto the proverbial sword. This is an issue that just begs for a fall guy.

The likely suspects are:

  • Human resources departments (HR) throughout the federal government, that haven’t provided consistent and effective training.
  • Leadership from “above.” Upper management not ensuring all feds are as prepared for federal retirement as possible.
  • Elected national leaders.
  • Federal employees who haven’t taken enough interest in their own retirements.

Some of the major problems, in a nutshell, are that feds:

  • Are not (on a whole) taking full advantage of their Thrift Savings Plan (TSP), a major component of a healthy federal retirement.
  • Don’t understand that they may have access to a pension/annuity.
  • Are not educated on when to use their pensions, Social Security Income benefits, TSP or IRA’s.
  • Don’t understand the importance of their retirement benefits package or how to best utilize it.
  • Don’t know how to prepare (financially) for federal retirement.

 An uninformed fed Carol is a fed I met two years ago.  She was 66 years old and still working for the federal government. Carol’s plan was to keep working until she reached 70-years-old and could receive the highest possible Social Security (SSA) income benefit allowed to her.

Carol did the math and concluded she could slide by in retirement with the higher SSA income benefit along with frugal management of her TSP savings. Unfortunately, Carol had a degenerative bone/joint disease that had painfully plagued her for more than five years. She would have certainly left federal employment earlier if she could have.

When I performed a simple Federal Retirement Readiness Review for Carol, we noticed a benefit that she had not taken into consideration. It was the federal pension/annuity that she would receive when she retired. When she understood this additional income source, Carol was stunned. Then she laughed, then she got angry, then she cried and then she retired!

She was unaware that part of her retirement package included a federal pension. In her case, this lack of knowledge caused her to work many unnecessary years in pain, years that could have been better spent with family and tending to her physical needs.

When I started preparation for this survey, I was looking for the ghost in the machine, the hole in the system, where to place the blame and the one major flaw.

I understand that training guidelines could have been more consistent (across all agencies) and effective. But, were feds (in great numbers) asking for and even demanding improved training?

It should be pointed out that some agencies and HR departments do a fantastic job of training. Some feds also do a tremendous job of soaking in as much information and knowledge about their retirement benefits as possible. However, in both cases these seem to represent the minority.

My Final Analysis — There doesn’t appear to be a single identifiable culprit we can point our fingers at.  Everyone is impugnable, but no one is to blame.

So now what? It’s patently clear the knowledge is not reaching the average fed. The system is broken and there needs to be an overhaul to improve all feds’ chances at desirable retirements.

Call to action — We can sit back and leave the system to wallow in its (overall) inconsistent and inefficient status quo or we can instigate a change. I ask for your help. I believe together we can improve the knowledge base, education, understanding, interest, management and usage in (and of) federal retirement income benefits.

Send me your thoughtful, serious and considered ideas on how to repair this system. Then my next article will include your best ideas as a means to begin working toward a legitimate change.

Send your “Benefits Training” suggestions to: silverlightfinancial@lpl.com.


Randy Silvey is the published author of: “You FIRST, Federal Employees Retirement Guide,” one of the bestselling books of its kind on Amazon and Kindle. He has 14 years’ experience guiding feds to pursue a youthful and wealthy retirement. Randy can be reached at 816-524-515 or www.silverlightfinancial.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities offered through LPL Financial, member FINRA/SIPC.

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