Fewer feds are retiring in 2020, and yes, the pandemic is (partly) to blame

Call it the pandemic effect, but far fewer federal employees are retiring so far in 2020.

Between March and August, a total of 40,103 employees retired, according to a recent Federal News Network analysis of retirement data from the Office of Personnel Management.

In contrast, 49,997 federal employees retired during that same six-month period in 2019.

This past January is the exception; 17,134 federal employees retired that month. But after January, the number of employees retiring each month dropped significantly. Federal retirements have yet to clear 7,000 since the pandemic began in March.

Federal financial planners say they too are seeing the trends.

No surprise, this spring’s stock market volatility scared off many would-be retirees from making the leap.

Many federal workers who joined public service at the launch of the Federal Employees Retirement System and Thrift Savings Plan were eyeing summertime departures this year, said Greg Klingler, director of wealth management for the Government Employees’ Benefits Association.

GEBA is non-profit benefit association that serves federal employees, military members and contractors.

Some of these employees had large sums of money in the TSP, but the deep drops in the C and I funds scared them away.

“When you look at these people with large amounts of income, these were reductions in their net worth by $200,000-to-300,000,” he said. “That pretty much shocked them out of thinking about retirement, because the new number that they were looking at was something they weren’t comfortable with.”

Klingler said many of those employees are eyeing 2021 or 2022 for retirement instead.

Other factions of employees are delaying retirement for other reasons.

Both Klingler and Tammy Flanagan, an independent federal financial planner, said they’ve had conversations with employees who are no longer turned off by the stresses of commuting and working in the office.

“The ability to work from home five days a week has made work for them a little bit more bearable not dealing with the traffic, rush hour and the Beltways,” he said. “Many people have said you know what, I can hang on for another couple of years to get a little bit higher pension and to add to my TSP.”

Other feds had big plans to travel in retirement, and they had the means and the savings to do so. The pandemic, of course, has changed all of that.

“Because they can’t do what they want to do in retirement, they might as well keep working,” Klingler said.

Flanagan said there are other reasons feds may be delaying their retirements. A spouse may have lost a job in the private sector; a family member may be idled from work due to illness.

Since the pandemic began in earnest in March, an average of 6,684 federal employees have retired each month. If that pace continues for the rest of the year, the government could be on track for roughly 93,200 federal retirements in 2020 — the lowest number since 2010.

Federal retirements have ebbed and flowed over the last decade. In 2020, just 84,427 federal employees retired, according to a Federal News Network analysis of previous OPM data.

But federal retirements rose sharply by 20,000 the following year and increased steadily until peaking in 2013, a tumultuous year marked by budget cuts due to sequestration and a 16-day government shutdown.

Federal retirements later fell during the latter years of the Obama administration. In 2016, 93,713 employees left federal service for retirement. They picked up again in 2018 before leveling off last year, when 101,580 federal employees retired.

Klingler said a smaller group of employees — those who are considered “essential” or work with classified information and must come into the office — are actually retiring earlier than planned.

“People we had identified financial plans for and expected to retire in 2022 or 2023, they’ve decided the health risks associated with this pandemic — because many of them have underlying conditions — are not worth it as they’re being kind of forced to move back into the office,” he said.

Like everything about 2020, there’s no telling how the rest of the year will fare. And more feds may put in their notices for this upcoming January, always a popular month to retire.

For those who are planning to make the leap, here’s some free advice.

The stock market has experienced a “U” shaped recovery since the initial pandemic panic in March. The market is showing some “cracks in the armor,” Klingler said, and the market could take another turn and prompt a “W” decline.

“It is really important to control what you can control, and that in this case is the TSP,” he said. “You’ve seen the market go down; you’ve seen the market come back up. Make sure you’re in a diversified portfolio that’s going to give you what you need whether the market goes up or down in the near and mid future.”

Were you planning to retire this year but put it off due to the pandemic, or something else? Tell us how your plans have or haven’t changed.

Nearly Useless Factoid

By Alazar Moges

Source: Federal Bureau of Investigation

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THRIFT SAVINGS PLAN TICKER

Oct 20, 2020 Close Change YTD*
L Income 21.6569 0.0173 1.59%
L 2025 10.5150 0.0194 -
L 2030 36.0542 0.0821 1.76%
L 2035 10.6820 0.0265 -
L 2040 39.8749 0.1076 1.73%
L 2045 10.7962 0.0309 -
L 2050 23.3760 0.0712 1.64%
L 2055 11.0267 0.0427 -
L 2060 11.0268 0.0428 -
L 2065 11.0269 0.0428 -
G Fund 16.4815 0.0003 0.76%
F Fund 20.9953 -0.0434 6.75%
C Fund 51.0818 0.2405 5.50%
S Fund 61.8329 -0.053 3.45%
I Fund 31.0463 0.1542 -6.83%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.