Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Putting It Off

Across government and throughout the private sector, people are reconsidering their plans to retire because of the tough economy and an uncertain future. How much will you really gain by postponing your plans to retire? How much difference will it make if you quit and start a second career?

The answers to those questions revolve around an even more basic question: Will you have enough income to cover your expenses? This week, we'll look at how you should think about that question if you're under the Civil Service Retirement System. Next week, we'll tackle the issue for those under the Federal Employees Retirement System.

To understand the factors in play here, let's look at a case study of a hypothetical federal employee.

Getting Rich? Let's assume Rich is eligible to retire this year with 30 years of service and a year of unused sick leave. His current salary is $113,007 and his high-three average is $108,027. His retirement will be computed as follows:

58.25% x $108,027 = $62,925

Now suppose Rich plans to choose the maximum survivor benefits for his wife. That will reduce his retirement benefit by $6,022 per year -- an almost 10 percent reduction. He also will pay income taxes on his reduced retirement with a small credit for his previously taxed retirement contributions. His net retirement income will be about $43,000 a year.

That's less than 40 percent of Rich's current salary, but we can make another assumption to show this isn't as bad as it sounds. Suppose Rich puts a fair amount of money away in his Thrift Savings Plan account. That, plus other deductions, could leave him with only slightly more than half his annual salary in his current net income. Hypothetically, his deductions would look like this:

  • Retirement (7 percent): $7,910
  • Medicare tax (1.45 percent): $1,638
  • TSP contributions: $22,000
  • Income tax: $21,851
  • Total salary deductions: $53,400
  • Net income: $113,007 - $53,400 = $59,607

Considering all the deductions from Rich's salary, his retirement is only a little more than $16,000 per year less than his current net income.

(Note: I didn't include deductions for insurance -- health, life, long-term care, etc. -- in the example, since these costs will remain mostly the same in retirement. The only difference is pre-tax deductions for these benefits are not available to retirees. But to balance out this loss, many employees reevaluate their life insurance needs after retirement and find they need less coverage.)

Closing the Gap

Suppose Rich still isn't happy with the difference between his net salary and his retirement income. What can he do? Here are some options:

  • Work longer to increase the percentage of his high-three average salary used to compute his retirement benefit. Every year of additional service will increase the percentage by 2 percent, and, of course, the average salary will go up at the same time.
  • Reduce his living expenses by paying off his mortgage prior to retirement, or using retirement savings to make mortgage payments. Since Rich has been saving the maximum in his TSP account, this account could be used to pay his housing costs.
  • Consider relocating to a less expensive area.

There's one other option available to Rich, too. He could retire and start a second career.

Let's say Rich leaves government and finds a new job paying $65,000 a year. He'll continue to save the maximum retirement contribution (for 2009, that's $16,500, plus $5,500 in catch-up contributions -- the limit is the same for private sector 401(k) plans as for the TSP). His new employer offers a savings match of 6 percent of his salary. In addition, he will be contributing to Social Security, giving him the credits he needs to qualify for a Social Security retirement benefit.

Here's how Rich will benefit:

  • After four years, he will have $2,400 per year more in Social Security retirement benefits (this includes the modified computation due to the windfall elimination provision).
  • He'll be able to put away $22,000 a year in retirement savings, and get $4,000 in matching funds from his new employer. Over four years, that adds up to $104,000 (plus some growth on his investments -- we can surely hope for growth, can't we?).

Lessons Learned

Here are the morals of this story:

  • If your retirement is not enough today, there is always tomorrow.
  • If you have an opportunity to work after you retire instead of continuing your federal career, it might be worth considering, as long as you don't expand your lifestyle to match the expanded income.
  • Having some savings set aside in addition to your CSRS retirement will allow a cushion for paying down debt and creating additional retirement income.
  • Even though the Social Security benefit may not be substantial, a CSRS retiree who has enough Social Security credits to qualify can create additional retirement income as well as cover the cost of Medicare Part B at 65.
  • Try to eliminate as much debt as possible prior to retirement and maximize retirement savings. This will make retirement more affordable.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on or on WFED AM 1500 in the Washington metro area.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.


When you download a report, your information may be shared with the underwriters of that document.