It may not always be the most glamorous, but federal careers offers an opportunity for a level of retirement security becoming increasingly rare. Image: Alohaflaminggo/Shutterstock.com
F. Scott Fitzgerald, whose writings often focused on the rich, is reported to have once said to Ernest Hemingway that “The rich are different than you and me.”
To which Hemingway, who often wrote about people decidedly not rich, reportedly replied “Yes, they have more money.”
Such a conversation apparently never actually happened. The quotation from Fitzgerald appears in one of his short stories, and Hemingway wrote something similar to his quotation in one of his own short stories, as well as in conversation with someone else. Those references melded over time into that pithy but mythical conversation.
Regardless, it is as true today as it was in their time that some people have a lot more money than others and it’s natural to consider the differences between them, including how the wealthier got that way.
Nobody takes a federal job, or should take one, on the hope of living a Great Gatsby lifestyle. The government doesn’t offer an opportunity for striking it rich with a great idea, or benefitting from large bonuses or stock options if an employer is doing well.
What it does offer, though, is the opportunity for a level of security in retirement that is getting harder to achieve elsewhere.
That’s a lesson from a recent Congressional Research Service report on income levels and sources of income for households with someone age 65 and above. The report broke them into fifths according to median income and then broke out the sources of that income.
For the lowest quintile, 83.2 percent comes from Social Security and just 5.5 percent from pensions and retirement savings. The rest comes from public assistance programs such as Supplemental Security Income and various other sources including employment.
For the second-lowest, pensions and retirement savings make up 18.2 percent, for the middle 27.5 percent and for the second to highest 33.2 percent, as the share attributable to Social Security declines from 66.4 to 46.1 to 30 percent.
For the top quintile, only 11.4 percent comes from Social Security while 25.7 percent comes from pensions and retirement savings. (The largest source for them, at 32.6 percent, is earnings—suggesting that those who continue to work beyond age 65 tend to be continuing in well-paid positions.)
The “pensions and retirement savings” figures in the report include both defined benefit programs—such as the FERS or CSRS civil service annuities—a defined contribution programs—such as the Thrift Savings Plan.
In recent years, the private sector has increasingly shifted its benefits offering from the former type of plan, which mainly puts the burden for a worker’s retirement income security on the employer, and onto the latter, which mainly puts that burden on the worker. Some offer no such plans or make them available only under certain conditions.
The federal government offers both types of retirement programs to all its employees. Making the most of a TSP account requires putting the discipline to invest for the long-term over the short-term.
Making the most of the defined benefit civil service annuities requires the discipline of continuing to work for the government over the long-term despite the short-term aggravations.
It’s a bit like the mysterious green light at the end of the dock.
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