I made the right choice by leaving the private sector and seeking a career with the federal government. Image: Guansiew/Shutterstock.com
By: Abraham GrungoldPrior to my federal career, I was working in a hospital laboratory. With seven years of experience, I was earning $34,000 per year. I was at the top of my pay grade and with the available overtime, that was a tremendous salary. My goal was to move upward and obtain a management position at the hospital. In 1985, the hospital started having financial issues and merged with another hospital. This was a clear sign to me that I should leave the hospital and find a stable employer that could provide a secure career path.
I began my federal career in 1985. My starting salary with a Master’s Degree was $21,804. I was taking a 12,000 dollar pay cut to begin my federal career. This 35 percent salary pay cut was mind-blowing. My friends and co-workers laughed at me and told me that it was a horrible mistake working for the government especially for such a large pay cut. My intuition told me that it was not a mistake and I was prepared to take a step backward in order to take a giant step forward. My vision of a federal career was that I saw growth and opportunity. The hospital continued to suffer with several other mergers and today it has been leveled to an empty parking lot.
So, what would my salary and retirement looked like if I had stayed and lived through all the mergers? I contacted my close friend who was my co-worker back in 1985 and asked her what is her present salary and what will her future retirement look like in three years. We were co-workers back in 1985 and although I worked full time for the government, I kept my hospital job part-time for another 10 years, until I relocated to Florida.
My friend was very bright, the top of her class in college and she climbed the ranks and eventually worked her way up to middle management. She has 39 years of service and plans to work another three. Meanwhile, I retired in 2022. I evaluated her salary, benefits and retirement and she has done great with her career and she will have a wonderful retirement. I thought our careers would make a great comparison. Private Sector career vs Federal career.
The following is a comparative analysis of our salaries, benefits and retirements.
1. Salary/Cost of Living Adjustment (COLA):
a. Hospital: The maximum for a middle manager is 65 dollar per hour. My friend is earning 54 dollar per hour after 39 years of service.
b. Government: In 2022, I retired as a GS 14 Step 10 with a final wage of 75 dollars per hour.
The hospital rarely provided a COLA. During the past forty 40 years, the government provided a COLA every year except 2-3 of those 40 years.
2. Health Insurance:
a. Hospital: The hospital provides few choices for health insurance carriers.
b. Government: Each open season the government provides many health insurance carriers and levels of coverage such as standard and high options.
The hospital does not allow the continued health insurance coverage in retirement. You have the option for contributing to a Health Saving Account. HSA to be used during retirement. The government allows retirees to take their health insurance into retirement at the same premium amount as an active employee.
3. Life Insurance:
a. Hospital: The hospital provides life insurance during active employment which is equivalent to their base salary.
b. Government: The government provides FEGLI with many options to increase coverage. This can be done throughout a federal career.
The hospital does not provide life insurance in retirement. The government allows employees to take FEGLI into retirement with a free limited amount of coverage at age 65.
4. Thrift Saving Plan (TSP)/Matching:
a. Hospital: The hospital terminated its Defined Benefit Plan which allowed employees to have a monthly annuity. Vested employees retained their annuity for retirement. The hospital provided several defined contribution options such as a 403b and a Roth 401k. No employer matching is provided.
b. Government: The government provides their employees with a 5% employer match.
The federal 5% employer matching has been provided every year since 1988.
5. Retirement/Annuity:
a. Hospital: In addition, to my friend’s tax deferred retirement, the hospital will provide her with an annuity of 1,800 dollars per month for her 40 plus years of service.
b. Government: In addition, to my TSP, the government provides me with an annuity of 4,500 dollar per month. Also, I elected to forego 10% of my annuity in order to provide the Joint Survivor Annuity Option for my spouse.
The federal government retirement pertaining to the Federal Employment Retirement System (FERS) annuity is based on a different formula compared to the private sector.
Summary:
Financial Growth: Despite the initial pay cut, my federal salary outpaced my friend’s hospital salary over time. This is widely due to the annual COLAs.
Health Insurance: Access to a wide range of health insurance options and continued coverage into retirement is a major benefit for federal retirees.
Life Insurance: More flexible and sustained life insurance options for a federal retirement.
Retirement Savings: Consistent TSP federal salary matching and a more substantial annuity.
Overall Stability: The federal career provided greater job security, especially in light of the hospital’s financial instability and mergers.
Overall, I made the right choice by leaving the private sector and seeking a career with the federal government. My initial move may have seemed risky, but my foresight in valuing long-term stability and benefits over immediate higher pay proved advantageous. This is a valuable case study for others considering a similar career transition, emphasizing the importance of evaluating long-term benefits and security over short-term gains.
Many federal employees think about going back to the private sector after they have some years of federal experience. I have counseled many federal employees as my clients and warn them of what they will be sacrificing when they make such a move. Sometimes the grass is not greener on the other side. You need to look at the opportunity cost of what you will be giving up as an active federal employee and as a federal retiree.
Abraham Grungold is a retired federal employee with 36 years of federal service – including with the USPS Inspector General, the VA Inspector General, the US Dept of Justice, and the US Dept of Labor. Through his company AG Financial Services he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 50 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.
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