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

Are Cuts Coming?

Lately, it seems everybody has an idea for cutting federal retirement benefits in the name of balancing the budget. The Congressional Budget Office has weighed in following an earlier set of proposals from the National Commission on Fiscal Responsibility and Reform. Last week, a group of Republican senators got in on the act, introducing legislation that would eliminate the basic retirement benefit under the Federal Employees Retirement System for everyone hired after 2012.

In the 30 years I've been working in the field of federal employee benefits, I've never seen a time when so many proposals affecting the financial security of federal retirees were floating around. None of the ideas has been implemented -- yet. But with so much emphasis on cost-cutting, and so many people making the case that government benefits are overly generous compared to the private sector, it seems like the stage is being set for real changes that could affect retirement benefits, cost-of-living adjustments, Social Security and even the Federal Employees Health Benefits Program.

Working Longer

Before 1920, there was no federal retirement system. Employees just kept working -- sometimes past the point where they could provide useful and efficient service. Those who wanted to retire had to rely purely on their personal savings.

Now, a substantial portion of the typical federal retiree's income is derived from defined benefits such as a retirement check and Social Security payments. Reducing these sources of income would make for a much more uncertain retirement. Consider that it takes roughly $300,000 in investments to produce around $1,000 a month in income. And keep in mind, there are many variables affecting how long you can draw on such funds before you run out of money: How much is the principal earning each year? How risky are your investments? Are the withdrawals taxable? How long do you expect to live? Is anyone else depending on you so that the money would have to last more than one lifetime?

Suppose Congress and the White House agree on cutting back on federal retirement benefits, increasing employee contributions to FEHBP and raising the Social Security eligibility age. That could have ripple effects across the federal workforce.

Many employees would have to work longer to save enough money to cover their living expenses when they retire. That would leave fewer job openings for people looking to enter the workforce. And for employees who don't have enough money left over each month to save for their retirement, losing the FERS basic benefit, paying more for health insurance and having to wait longer for Social Security benefits could be devastating.

I hope the people making these proposals think long and hard about the possibility of ending up with a growing population of elderly people on welfare. That certainly wouldn't help the budget situation. It's worth remembering the words of President Franklin Roosevelt when he signed the 1935 Social Security Act:

We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.

Defending Benefits

I'm confident groups representing federal employees and retirees will make their voices heard in the coming debate over benefits. They will have their work cut out for them, but in the past three decades, most of the changes in federal benefits have been positive, thanks in large part to the effort of these groups.

Here are some of them:

I'm sure there are other groups also working to protect and preserve federal benefits. If you know of any, feel free to note them in the comments section below. 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

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