I CAN'T AFFORD TO RETIRE: part 3 in the letter to federal law enforcement series

This is the 3rd and final part of this series. If you haven't read parts 1 and 2, go back and check them out. Today, we'll deal with those who are later in their careers and might be facing some looming college bills, large mortgage payments, or perhaps recovering from some challenging financial situations. Those that feel like they really can't afford to retire due to financial pressures.

Excuse #3.  I need to go until mandatory and then I will still have to work! I’m broke!

I realize that there are some people that find themselves here.  Life happens. And sometimes it happens hard. There are divorces, family members with special medical needs, crushing debt, poor investment decisions, etc.  It is impossible to go back and relive certain decisions, so we press on, dealing with the consequences.  What this means for a hypothetical 48 year old SCE is that he or she may not actually be able to retire completely at 50.  

But—and this is key-- I want to make sure everyone understands the distinction between retiring from the government, and retiring completely.  

If working into your 60’s is inevitable for you, that doesn’t eliminate the option of leaving the federal government at 50.  I speak to retirees who left in their mid to late 50’s and their refrain is a common one: I’m not as marketable now as I was when I was 50.  Trying to make some inroads into the private sector at 57 is simply not as easy as it is at 49 or 50.  It’s just a fact.  There are some professions that may be a little more forgiving in age—teaching might be one.  Perhaps consulting of some sort.  But for security-related jobs, retirees report back to me that the earlier you can leave the better.  Getting hired at 50 is not as difficult as getting hired at 57.

I have some thoughts on planning your marketability and have written a paper on it, but for now, suffice it to say, looking into the private sector at 50 may turn out to be much more lucrative than working for the government until 57, and then trying to find a private sector position.  I know of several retirees that have left within the last 12 months who all make salaries well into the 6 figures. (And the first digit isn’t a 1!)  They were all right at 50 or just over.  They feel confident they would not have gotten jobs that command those salaries had they waited to try to get them at 57 or later. 

Remember back to part 1--for most of you, anything you get above 35% or so of your current gross would be a raise. Let's go back to our fictional $130,000 SCE. He needs to make roughly $45k to bring home the same amount he's bringing home now. If he gets a job making $100k, he just got himself a $55,000 raise. This is what leads me to say:

if you absolutely need to work, you, perhaps more than anyone else, need to leave as soon as possible so you can earn more money.

People will often say, "But I lose my supplement if I earn too much after hitting my MRA." True. But remember two things. One, if you're continuing to work for the government, you're not getting your supplement anyway. Two, if you lose your $15k supplement annually then your theoretical raise goes down from $55k to $40k in our example above. But, hey--it's still a $40k raise! No grade or step increase is going to get you that!

You offer a lot as a retired federal LEO.  Don’t sell yourself short.  There are jobs out there.  They rarely just come to you, however. They often require networking (hello, LinkedIn) and maybe a few years of planning and targeting. But they are out there.  Remember, you already have a cushion of a retirement check.  And you have health insurance, which is a huge plus when applying for a position.  Tell them you don’t want to be on their health insurance—they’ll be thrilled to hear that.  Use it to negotiate a higher salary, more days off, or simply use it as a leg up against your competition.   

CONCLUSION

I don’t want people to misunderstand the purpose of this series.  I’m not intentionally trying to get everyone to leave the federal government.  For many of you, this job may be what fulfills you, and you still get out of bed after 20 years just itching to go to work. As much as I am a numbers guy, this much is true:

Life is not just a math problem.  

If you have found your true calling, by all means continue to work it. The government desperately needs passionate, hard-working people.  If you’ve got the drive to fight the bureaucracy and make things better after 20 years, then you’re a rare person indeed and the government is fortunate to have you.  

However, I’m not naïve enough to think there are not a whole lot of you out there who have arrived at the stage where you simply do this job for the money and nothing else.  You’d like to retire, but you just don’t see how. This series is directed toward you guys. Talk to me or a financial planner, and at least see what your options are.  

Lastly, I want to say this. The focus on this paper was demonstrating that sticking around just to improve your retirement check is not really as smart as many people think.  That doesn’t mean there are not other reasons to stay.  Building up your TSP may be a valid reason contributing to your staying. The government will match 5% and that is a significant amount.  However, many decent jobs in the private sector also have matching as well. Perhaps you only need to pay the house off in another year, and then retire for good and never work again. That’s probably a decent reason to stay—you only have a year left and you make a good salary.  

But if you are sticking around to earn more annuity money, or if you’ll have to work after the government anyway, please take a good hard look at leaving when you’re first eligible.  There are plenty of good reasons to do so, not the least of which is less stress.  As Dan Jamison writes (you DO get the FERSGUIDE, don’t you?!), “Don’t discount the effect that retirement will have on your health. Most folks report that they are in better health, both mentally and physically, in retirement.  They also report better marriages and relationships with their kids” (2018 SCE GS13 v.2017.12.3, p 98).

I want all of you to have comfortable and fulfilling retirements.  If you’ve done 20+ years in the government, you’ve earned it.  If you think I can help in any way, don’t hesitate to contact me.  We can run through your specific numbers or find answers to other financial questions you may have.

And seriously, if you are not familiar with the FERSGUIDE, please go to check it out. I know I mention it a lot. And it's not for financial reasons--I don't receive one dime from it in any way. I just promote it because it’s the single best source out there that I've found for planning your government retirement, especially for SCE's. It's the only site I've allowed all of my newsletters to be archived. Why? Because the author is one of us!  Dan Jamison is a retired FBI Special Agent (and CPA, by the way), so he fully understands the FERS SCE rules, and has given solid information to thousands over the years.  And, he too retired when first eligible.

Click links for Part 1 and  Part 2 of the series.