Flickr user Jon Rawlinson

Where Retirement Is Headed

Change is coming at an exponential rate.

When I left federal service in 1988 as a retirement counselor at the FBI, I fully expected that my position would become obsolete within a few years, because it seemed that retirement processing was becoming automated. We were told that in the not-too-distant future, employees would only need to decide on their date of retirement and everything else would be automatically submitted to the Office of Personnel Management by an integrated computer system.

Fast forward to 2018: Paper applications continue to be used in most agencies—though they can be filled out online, which is something of an improvement. The forms require hands-on processing by human resources staff at the employee’s final agency of employment. Applications, along with supporting documents, are turned over to administrative specialists at OPM’s Retirement Operations Center, a massive underground facility in Pennsylvania.

Most employees continue to require some retirement counseling to help them understand the complex details of the application process—which is why I am still employable!

In short, we’re still waiting on for an automated system. And while it may not emerge soon, the world is changing at a speed that makes it hard to imagine what everyday life will be like in a few years. Technological advances will continue to change the way federal employees plan for their retirement.

In his book The Truth About Your Future; The Money Guide You Need Now, Later, and Much Later, Ric Edelman addresses the concept of exponential growth and change. Critical to it is understanding the impact of compounding.

Think, Edelman writes, about how much money you would have if you doubled the value of a penny every day. In seven days, it would grow to 64 cents, but after 31 days, it would be worth $10 million. It’s too bad there isn’t a Thrift Savings Plan Fund that grows 100 percent per day! (Although slower compound growth in the TSP is still significant: There were 10,000 TSP participants with $1,000,000 or more in their accounts at the end of 2016 and almost 24,000 a year later.)

The important point is that whether you are doubling a penny or investing in the TSP, the largest part of the growth occurs at the end of the time period. Technologically speaking, Edelman believes we are reaching a point where growth and innovation is going to happen much faster than ever before. Consider:

  • According to IEEE Spectrum, driverless cars will be mandatory by 2044.
  • Researchers at MIT’s Media Lab, recently featured on 60 Minutes, have developed technology to connect the human brain to a prosthetic limb and to an individual’s vocal chords.
  • Blockchain technology, Edelman writes, will eliminate the the need for many “middlemen,” such as insurance brokers, commercial bankers, real estate agents and even lawyers. Eventually, the need for the “trust industry” will disappear, since the blockchain creates a link between the data of the borrower and the lender (the buyer and the seller, the estate and the heirs, etc.) that is maintained forever.

How will such developments affect how you plan for retirement? Edelman writes that it’s critical to think about long-term care, estate planning and investing for the future. If you’re already doing that, great. If not, learn more by attending pre-retirement training sessions at your agency, if available. These generally explore the topics of federal benefits, tax planning, financial planning and estate planning. You also can look into courses offered by private companies, such as J.P. McGehrin & Associates, Graduate School USA and Management Concepts.

More broadly, you should be thinking about the need for more education for yourself and your children to adapt to a changing world in which many of today’s jobs will become unnecessary. OPM recently estimated that automation could cut workloads for 60 percent of federal employees by about 30 percent and render nearly 5 percent of government jobs completely obsolete.

As work becomes less labor-intensive and more flexible and automated, the concept of retirement is likely to change—and possibly become obsolete itself.

If you haven’t thought about these things already, it’s time to get started. Because the future is coming at incredible speed.

Photo: Flickr user Jon Rawlinson