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Why is Fed retirement SO bad?

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  • Why is Fed retirement SO bad?

    Maybe I’m calculating it wrong, but Fed retirement looks much much worse than the average municipal police retirement. Is this right? If so, how do Fed employees deal with this? Max out their TSP contributions? This is crazy...

  • #2
    Yup max out TSP. Also if you can afford to do so, max out IRA as well. You'll need both if you wish to retire "comfortably". Otherwise you'll have to get a second job.

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    • #3
      It's not that bad unless you have no financial discipline or succumb to lifestyle inflation. There are some people who don't even stay the full 25 years and retire early because of maxing out TSP, IRA, and putting additional funds into a taxable account. I know this isn't typical for the average person because most just spend and save only a small percentage, though.

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      • #4
        I am going to say it's bad only if you have poor financial management. In fact, I would go to say that the TSP retirement is one of the better retirement plans out there. For example, our agency matches up to 5% and we have access to people who tell us where to put funds in and when in order to maximize investments.

        I have been maxing out my TSP for the last year and will continue to do so until I retire. Based on conservative returns and growth, at the end of my 27 years I will have a significant amount (high 6, low 7 figures) in my TSP, and that's not counting my pension, social security (assuming it is still around), or other investments I pick up along the way.

        Many of the people in my agency retire and live comfortably off their TSP and pension alone.

        It is easy to max out your TSP, you just have to have good financial management. For the record, I live in one of the most expensive cities on the East coast, have high rent, student loans etc etc. and I am still able to max out my TSP and have a few bucks leftover for whatever.

        Am I driving an Audi S5? No. Do I have a couple Rolex and Patek Philippe watches? No. Am I eating steak every night? No. But I could when I retire if I invest properly.

        If you can max it out, you'll be doing better than the majority of other retirement plans.

        Comment


        • #5
          Originally posted by Jwebb514 View Post
          Maybe I’m calculating it wrong, but Fed retirement looks much much worse than the average municipal police retirement. Is this right? If so, how do Fed employees deal with this? Max out their TSP contributions? This is crazy...
          If youre going off raw percentage vs percentage compared to a state like Texas, yeah it looks bad. However with the minimum 25 years for a young person, it is 39%. Considering the salary for most 6c LE is so high it isnt a bad deal. A high school graduate can be guaranteed a job with the Border Patrol for example and be working at 20. In five years, they are making 100K, for a minimum of 20 more years. All while living in the lowest cost of living areas in the US.

          The 5% match TSP is outstanding. If someone is making more than 100 and isn't maxing out their TSP, they have serious financial problems. The other thing to consider is most state LE job require you to put something like 7 percent into retirement, which we do not.

          With your actual pension, TSP, and the social security supplement, there are plenty of guys making 100K in retirement. Which can be as young as 44 realistically. I had classmates at academies who were hired at 19/20, so they can fully retire at 44/45 with the above mentioned numbers.

          Plus what is the biggest for me, is youre not tied to one state. I have lived and worked all over the US, including an island paradise US territory. I have been uniform, investigator, and quite a few positions in between. I've had the ability to move around states and keep my same retirement train going.
          UNITED STATES BORDER PATROL
          "90 years of tradition unhindered by progress!"


          honor first

          Comment


          • Exbpa340
            Exbpa340 commented
            Editing a comment
            Well said......

            How many police departments/Sheriff’s Offices across the country pay their non supervisory police offices well into 6 figures? There are some places but not many.

          • battlewagon
            battlewagon commented
            Editing a comment
            Where they do, it is a high cost of living area. Which means a fed would be making even more with locality pay.

        • #6
          The retirement % is not great compared to a lot of states, but as said above, your Fed salary is also probably greater than those state salaries as well. You can also retire after 25yrs of 6c service (or 20yrs if you are age 50). A lot of states that I've seen require 30yrs. For us Feds, once you retire, you will receive a Social Security Supplement roughly equivalent to your future SS earnings until you are able to apply for that SS earnings. Unfortunately, Trump's OPM wants to take the SS Supplement away, so who knows if that will be there for me when the time comes.

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          • #7
            It is a three part system. The first part is what you are probably concerned about. It is a defined benefit plan. Years of service times a set percentage of your salary equals your retirement check. It is idiot-proof but not enough to retire on.

            The second part is Social Security, again a sort of defined benefit plan, based on your salary over a number of years. Again, it is idiot-proof but not enough to retire on.

            The third and most important part is the Thrift Savings Plan (think 401K). It is a defined contribution plan, meaning you get out of it what you put into it. It is not idiot-proof. It's bad only in that the federal government lets the individual employee screw it up by giving them the option to not max out (or even not contribute to) the TSP, or to do something really stupid like borrowing against their own money. If you have patience, discipline, and use just a little common sense* in planning, the retirement is fine.

            *Meaning you should contribute/invest in riskier/more aggressive TSP funds when you're young and migrate to more conservative funds as you progress towards retirement. This ain't rocket science.

            Comment


            • scotty_appleton814
              scotty_appleton814 commented
              Editing a comment
              You are right about having multiple streams of income in retirement. I'm a local and I am going to rely on my pension, my 457, my Roth IRA, and (if it's around) my Social Security. We gotta play the long game with different pieces on the board.

          • #8
            It would be interesting if someone would do a comprehensive comparison between the pay/benefit structures of most state/local and most federal LE jobs.

            I suspect the state/locals have it far better than what is usually accepted as fact.

            Border Patrol is likely the exception, as they largely tend to be posted along the southern border, mostly in RUS pay areas, and often in rural locations that typically compensate out at the bottom end of the state/local pay range.

            Comment


            • #9
              When you guys are saying max out the TSP, are you saying put in 5% to get the 5% match?

              Or max out the non taxable yearly contribution limit of $18.5k per person, or $37.0k for a married couple? At roughly $100k salary, that would have you putting in nearly 20% per check (or 15% personal + 5% match).

              Comment


              • emaichbe03
                emaichbe03 commented
                Editing a comment
                The $18.5k is pre or post tax I thought. So you can do the traditional or the Roth, but either way your cap is $18.5k.

                The $18.5k can be done for sure. Gonna be harder when you first start out tho.

              • Sheridan1
                Sheridan1 commented
                Editing a comment
                It can be pre or post, but there's no reason for it to be post unless you think your taxes are going to be more when you retire, which shouldn't be the case because you're not likely be in a higher tax bracket in retirement.

              • emaichbe03
                emaichbe03 commented
                Editing a comment
                You can’t predict whether tax rates will be higher or lower in the future, so some pre and post tax diversification is beneficial

              • Sheridan1
                Sheridan1 commented
                Editing a comment
                Well, unless you have huge payouts in retirement, I don't think 40-50k a year in the future is gonna be taxed at the rate 100k+ is now. At least not in the next 30 years. We're not going to become socialist and give 50%+ of our salary to the government like other countries, people wouldn't stand for it.

            • #10
              1. 1811 TSP millionaire stories are mostly fiction. Yes, there are a few who've made it to that level, thanks to an abnormally nice ten year bull run. But markets don't always go up, and as seen in the 1,300 drop in the Dow this week, aren't as reliable as a grandmother's love. A friend of mine who retired in 2006 had 340K in his account when he walked away; not because he wasn't diligent in contributing, but because the market for that decade was mostly a straight line (before falling off the cliff in 2008). This party won't last forever and don't assume the market will be your friend anymore than a roll of dice at a craps table is your friend.

              2. Who gets hired as an 1811 before age 25? Very few, that's who. The vast majority have to go to at least 50. I only know of a couple of people who retired younger than 48 and I have yet to see anyone retire at 45 or younger, btw.

              3. People will buy a house during their career and need funds for the down payment. Say you were newly married in 2002 and bought a 1,200 square foot starter house for you and your wife and dipped into your TSP for 20K because you need 10% for a down payment. By 2011, you have three kids and an unhappy wife, which is completely understandable given the size of your house. You put your house for sale on a still-depressed housing market and after dropping the price three times, you finally get an offer for about what you paid for it. At least you don't have to come up with money to complete the sale, but bah bye to that 20K down payment and bah bye to the 40K you put into a new roof, new driveway, new heater, new garage doors, new carpeting. And guess what? In order to purchase that 5bd/3ba Mcmansion your wife is gaga about, you have to tap into your TSP again to come up with the 10% down payment. This may seem farfetched but I can attest as reality for how life situations often occur. Those TSP hits really impact things in the long run but you do what you have to when it comes to a happy wife, right??

              4. $100K+ private sector jobs waiting for you when you turn 50: Here's the deal with this: I know many people who have retired in the last ten years. I would guess around 50. Of that number, only a handful turned in their gear and started the next week in a six figure gig. The rest? Well, I don't keep tabs on all of them but the ones I do work part time or full time at a Costco... at a gun range... at a dispatch center. Frankly, most of them are just chilling out, playing golf, playing with their grandkids, and spending lots of time sitting around not thinking about work anymore.

              What did the handful that pulled off the lucrative gigs have going for them? One of two things: either they were upper management, or they had a unique and valuable skillset. Most importantly, they had developed a large network of professional associations who were tuned into their value and helped them segue into another career.

              Another point on this: those $100K retirement jobs aren't exactly strolls in the park, btw. In fact, often times can be more stress and toil than previous careers.

              My bigger point is this: the cookie doesn't crumble the same for everyone. Some people lived charmed lives; they make money off every real estate deal, marry a cancer surgeon, and retire to Sanibel Island by 48. For most, that's not reality.

              What is the median reality? Retire in early to mid 50s, annuity and social security averages about $70K, with plus or minus $500K in TSP. If only 2% ($10K) is taken out of the TSP annually and it makes 2%, that's the legacy which gets passed on after you pass on....
              People get on, people get off, but the train never stops.

              Comment


              • Esco
                Esco commented
                Editing a comment
                I’m with USPIS. Man we hire a lot of inspectors in their mid 20’s and the work shows. The FBI wouldn’t hire many like that.

              • battlewagon
                battlewagon commented
                Editing a comment
                ^ true. Youngest guy in my first CiTP class was super young
                He's deep in the process for USPIS now, he's 25/26. My hsi academy class had some 40 somethings, but I'd guess 1/3-1/2 our class was 30 or less, but had been street cops since very young.

                I wish what I knew now. I joined BP and was 1811 in 5 years. So if I was one of the six guys in my BP academy class who were 21 or less, I'd been 1811 by 25.

                If someone is willing to be in sort of a grinder 1811 agency, like USSS, you can be picked up very young. But the reality is most of us don't have our heads screwed on that straight when we are 18, so we don't actually start our careers and/or go fed until quite a bit later.

              • Ratatatat
                Ratatatat commented
                Editing a comment
                One of my co-workers this week was telling me he went through CITP at age 22. How'd you manage to pull that off, I asked. "Oh, it was easy. I interned one summer in college, and when I graduated the next summer, I was hired." I told him he was the equivalent of scratching off a million dollar winner, because GS13 by age 27 and then maximum contributions for the next 20 years is exactly that.

                So does it happen? Yes. It is the norm? no. Most people have to bounce around lower paying jobs for years, building a resume, lucky to get on before they turn 36 years and 364 days old....

              • CCCSD
                CCCSD commented
                Editing a comment
                Rat, your post is SPOT ON! Quite a lot of bs stories out there about that $100k job just waiting...

            • #11
              Two things when talking about when it comes to federal retirement. Congress is continually making changes to the federal retirement system and generally they are not in new employees favors. Secondly, I hope no one under 45 is basing their financial security on the belief that Social Security will be there be the time they hit the magic number. I know I am certainly not.

              1.7% pension for every year served "aint" stellar but it's a lot better than nothing. I encourage folks to go get a Roth IRA outside of the federal system and max that out every year (current $5500 a year allowance). Couple that with your TSP maxed out (if able) and you should be just fine. Obviously living within your means goes without saying.

              I think we can all agree no one is doing this federal thing for the retirement.

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              • #12
                alot less stressful in the feds. as a leo..local leo guys will they live long enough to enjoy that nice retirement?...

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                • raptor170
                  raptor170 commented
                  Editing a comment
                  True statement for sure!

                • SHU
                  SHU commented
                  Editing a comment
                  That depends on if your job, as a fed, is to go out and arrest people on a daily basis or sit behind a desk.

              • #13
                I don't think anyone has mentioned this. But don't feds have free healthcare or at least affordable healthcare in retirement? At least around where I am at in the suburbs of Chicago, when it comes to healthcare us newer LEOs are on our own when it comes to healthcare. I know a guy who just retired and his pension alone is somewhere around $70k, but he pays around $2200/month to keep his family on the city insurance because he has that option. If I had the choice between that and a pension at about $55k with decent priced healthcare, I am taking choice 2 all day and twice on Sunday. Personally I am ok when it come to healthcare in retirement due to VA....but when I retire at 55 I will have the wife to worry about.

                It's great that people are trying to line dollars up for retirement, but this copper right here who is about 5 years into a 28 year career is thinking about healthcare. As mentioned earlier, I can't rely on Social Security because the gov is going to make that go away to pay for these tax cuts (at least thats my thoughts). So my question is, what do you other young(er) LEOs plan on doing for healthcare?

                Comment


                • #14
                  Originally posted by scotty_appleton814 View Post
                  But don't feds have free healthcare or at least affordable healthcare in retirement?
                  Not free, but affordable compared to what a lot of folks are paying out there. A typical fee-for-service plan might cost the employee $200-$300 every two weeks for active and an equivalent monthly premium for retirees. There are no restrictions on pre-existing conditions, there are numerous plans, and you can change insurance providers every year if desired (even in retirement). Here’s a link to 2018 rates.
                  https://www.opm.gov/healthcare-insur...ation/premiums

                  Last edited by Rockriver; 10-13-2018, 08:05 PM.

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                  • #15
                    Lets take my old state DOC job for an example. A correctional officer with 30 years that makes a high 3 of $50,000 will see $30,000 in retirement. A fed GS-7 CO with 30 years and a high three of $70,000 will make $30,800 in retirement, plus the TSP account.

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