Far be it from us to spoil your holiday season, but senior career managers in government might want to consider preparing for the worst. Suppose the coming Trump administration does get Schedule F in place. Are ready for a forced retirement or change in career? Some advice now from retirement expert Tammy Flanagan.

Interview transcript:

Tammy Flanagan Thanks for having me again today. And I have been getting calls and it’s almost like trying to talk someone off the ledge of some drastic decision because nothing has happened yet. I tell people, don’t panic. I hate to see panic set in ahead of time, because when that happens, you do things that you probably will regret later. So I think it’s a time for cautious pessimism or maybe cautious optimism depending on how you want to look at it.

Tom Temin Right. And certainly not panicking over something you can’t control. And by all accounts, because of just the way the government works and there’s a lot of, won’t get into rulemaking and all of that. But Schedule F can’t happen on day one, and the firings on day two in reality.

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Tammy Flanagan That’s right, absolutely right. And I think some people think otherwise. So I feel like part of the job we have is to try to calm things down a little bit on the side of making sure you protect your job for what it is today.

Tom Temin All right. So what’s your best advice with respect to say you want to retire or you think you might be retired anyway and maybe now’s a good time to think about that.

Tammy Flanagan Exactly. And I think it’s always time to prepare. Even on day one of your career, you should start understanding your basic benefits, start to set goals for the future. Because just like when our children are born, we set goals for their college. We set goals for what we expect their life to look like. Your career is the same way. You probably have a goal. I remember the old civil service countdown clocks where people would say, I only have 28 years, nine months and 15 days to go. And I think it’s kind of the same way under FERS. But I think with the federal employees retirement system, it’s a little harder to pinpoint a date because we have three different benefits that are working together. But I think the one that’s most unique to your federal career is that FERS basic retirement benefit. And you got to really know when are you eligible for it, how much is it worth, how much would it take to replace that benefit if you were to move into a job that didn’t have a retirement benefit? So there is a lot to think about in preparation for retirement no matter how and when it happens.

Tom Temin And that first benefit, that’s a fraction of what the old civil service pension system was. Correct?

Tammy Flanagan It is. Because the old civil service pension was considered a single benefit plan, meaning that you come into federal service right out of high school or college. You stay until you’re 55 or older and you’re going to retire with that one check that comes in the mail every month or what now is a direct deposit in the bank every month. And that’s what you live on. That benefit could replace 80% of your income if you worked long enough. FERS can do the same thing, but it’s not going to be all in that one single benefit. So that retirement benefit, as you said, Tom, is much less generous. It’s about half of the value of the civil service benefit. But you’re also picking up full Social Security coverage and you have that wonderful thrift savings plan with some tax advantages, and a 100% return on your investment for the first 5% as your agency kicks in, both matching in that automatic 1% contribution.

Tom Temin So if you have a TSP and you’ve saved well for it, and you have full Social Security, you could do better in retirement income wise.

Tammy Flanagan Absolutely. I’ve seen clients that I’ve worked with that would not want to switch back to civil service no matter how much money you gave them. So yeah, we have seen some folks who’ve done really well with the new retirement system that’s been around for over 30 years.

Tom Temin There’s almost nobody left. So once in a while you hear of a CSRS type of retiree, but their ranks are thinning out as the years go by. And it’s possible to get an estimate for FERS. You don’t have to wait till three days before you retire to open the envelope to see what you’re worth.

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Tammy Flanagan That’s right. And you shouldn’t wait till three days before, although I think some people do. I think it’s important to understand the calculation of that benefit and what influences its value. So just getting the estimate is not enough. You can go to a lot of agencies now, have a do it yourself software called GRB platform or an employee can just go on their computer, put in their date of retirement that they’re thinking about that will give them a nice computer printout. But how do you know if it’s accurate? So you really need to know how your length of service plays into that, how your salary rates play into that as well, and what are the possible reductions and withholdings to that. So it’s more than just getting an estimate. It’s really understanding to make sure you are ready in terms of all your personnel records being up to date and understanding that calculation.

Tom Temin Right. And in different career situations, your eligibility date is not necessarily a given either. Used to be, whatever it was, 30 years plus.

Tammy Flanagan 55.

Tom Temin 55, no longer the case. And most people do have mixed careers.

Tammy Flanagan That’s right. Yeah. We have people who come into federal service much later in life than typically was the case with the civil service system. So we have people who can retire with as little as 10 years of service at age 56 or 57. And we still have the 30 year full career available at what’s called your minimum retirement age, which for most current employees is around 57 years old as well. But if you are forced out in a way where your agency is offering you an early retirement, maybe through some type of reorganization or downsizing that might go on, those retirement requirements go down to age 50 with 20 years in any age with 25 years, which throws a whole lot of federal employees into the eligibility now situation, rather than having retirement still be seven to 10 years in the future.

Tom Temin We’re speaking with Tammy Flanagan. She’s a principal at Retire Federal. But it’s more than just a simple calculation of income. There’s a psychic component to retirement. And sometimes even if you’re eligible, you just don’t feel like you’re ready. And maybe you have to wait till that psychic clock says, well, maybe now’s the time.

Tammy Flanagan Right. When someone says to me, what’s the best date to retire? And there is such a thing as having a great day to retire. But I always tell them, I say, make sure before you even consider setting a date, the number one you’re financially ready to retire or move into something else. And number two, just like you said, Tom, you’re mentally prepared for this transition, because just like any other of life’s transitions, this is a big one. Going from full time work of at least 40 hours a week, many federal employees are away from home 50, 60 hours a week if they’re still coming into the office, going from that to waking up every day, having it be the weekend, Monday through Friday, just as it is on Saturday and Sunday. So it’s a big, big move for many people.

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Tom Temin Right. Because boredom can set in. And we all know stories of people that retired were dead six months later just because, Lord knows why. But fulfillment wasn’t there, perhaps.

Tammy Flanagan Well, that’s part of the preparation. Exactly. So have some realistic expectations of retirement knowing that you’ll get those closets cleaned out, within the first six months of retirement, you’ll take that big trip around the world and then, you’ve seen it  all, so what’s left. So you have to have something to wake up for every day. Make yourself a list of what you need to do or what activities you want to learn or participate in. There are so much to do in a retirement that you’ll find many employees who retire will say, I don’t know how I had time to work, but then you do find employees who just can’t get the hang of having that much free time without a schedule, without a title. So there is some preparation, more so for some than for others. So it’s something to be realistic about.

Tom Temin Yeah. And you mentioned title. I think that’s a key fear factor for people is simply that their identity is so closely tied with their career that they feel like they’re disappearing from the face of the earth when they disappear from the workplace. And in some sense you do. You’re gone, and when you think of the people that you’ve known in your career that have retired and maybe you’re the only one that remembers them, but there’s more to identity than your work if you create it.

Tammy Flanagan That’s right. That’s right. There is something to be said for that. All of us have a certain identity at work, and for some it’s that title that gives us some stature in our workplace and some respect from others. And maybe we don’t feel that we’re getting that at home. So we got to find a way to cultivate that in other ways, whether it be a volunteer activity or pitching in to help with some things where you do get those same accolades but for a different reason.

Tom Temin Sure. And if you want to retire from the federal government, but maybe still work in the private sector, which lots of people do, at certain levels you’re going to get a big increase just because that’s the private sector. But even Stephen on salary doesn’t necessarily get you, even Stephen, on your financial wellbeing in that new employer.

Tammy Flanagan That’s exactly right. There was a report that recently came out that said that the federal salaries are still lagging almost 25% behind the equivalent private sector jobs. And what I got to thinking when I heard that is that you’re going to need to make at least 25% more if you take a job in the private sector. Because what the other statistics show is that very few private sector employees get a pension benefit such as the one we have as the first basic benefit, and even fewer still would have lifetime health insurance to follow them into retirement in the private sector, and not necessarily have to go into Medicare at age 65. So there’s a lot more than just the wages that need to be considered. It’s the benefits. It’s the leave periods where you can take time off and get paid. It’s the location, so there’s a lot to consider if you’re making a move from federal employment out into the private sector, even the culture is different. The culture of making sure you follow the rules versus making sure you make money for the company because the bottom line is more important there. So it’s a big switch to go from federal service into private industry.

Tom Temin Yeah, they might love you for the first three months because of your federal service and who you know and what you can tell them. And then you’re on your own. You got to produce, and that kind of fades away. I think people sometimes don’t realize how much that is the case. And you’ve also mentioned the lifetime access to the federal employee health benefits plan. That is incalculably valuable benefit considering that the biggest factor that can get you in financial trouble in retirement is health care costs.

Tammy Flanagan Absolutely. And even some private sector health care benefits aren’t the same. I know my daughter in law is expecting their first child, our second grandchild. And I was talking to her and she was telling me she’s writing a check every month for $300 to pay for the birth of this child. I’m like, what do you mean you’re writing a check? Isn’t it covered by your health insurance? No. She has a large deductible. Then there’s co-insurance, which most federal employees can have children and not ever write a check. So even the value of those benefits, I think we underestimate sometimes because we do pay for them probably more than people pay in the private sector because of the lifetime coverage that we have. But I think in the long run, it’s well worth it.

Tom Temin All right. So just bringing it around to our theme today, which is if schedule F is going to aim for you, still don’t panic and also don’t retire in haste. It’s worth taking the time, even if it’s only six months to plan what it is you need to do, and then you’re much less likely to have regrets.

Tammy Flanagan Yeah, I’ve watched for what, at least 35 years now of proposals to change the government, to make negative changes to our retirement system. And it’s really very seldom that those actually come to fruition. It’s a lot harder to change the laws than some federal employees believe. Take some action, take some time. So stick with what you’re doing. Go to work every day and hope you enjoy the rest of your career.

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