John Grobe, Federal Career Experts
When it comes to our retirement benefits, federal employees are different from a lot of other people, something worth keeping in mind as you consume media intended for a general audience.
I thought of this recently when I was reading the cover story in the March edition of the AARP Bulletin. The article was by well-known financial author Suze Orman and it listed ten items that Suze felt should be part of your 2020 action plan. Now, I like Suze and her rather directive, no-nonsense approach to finances, but there was one item in her list with which I seriously disagreed.
I disagreed with the item as it applied to us; that is, federal employees; not as it would apply to those who are different (i.e., less fortunate) than we are. This points out a problem with generic articles in mass-circulation magazines, widely-read blogs, and TV shows designed for everyone.
An article in a widely distributed magazine has to make general assumptions about the readers. Also, such articles (even feature articles) are frequently limited in length.
This means that those with special circumstances (us), often receive information designed for those who do not share our circumstances. It also means that nuances are often overlooked.
Suze recommended that individuals look into single premium immediate annuities (which she called “plain vanilla”). If you were a person who only had Social Security, an IRA and, possibly, a 401(k) plan, this would be sound advice. It does make sense for such a person to take some (not all) of their lump sum savings and use it to purchase an annuity that will give off guaranteed income for life.
But it doesn’t make sense for most federal retirees. There’s a reason that the Office of Personnel Management refers to our FERS (or CSRS) pension as an annuity; the reason is that we receive guaranteed lifetime income from our federal retirement.
With guaranteed income from both Social Security and FERS, why would today’s federal employee feel they needed more guaranteed income? Why would they give up flexibility and the low expenses of the TSP to tie up their other source of retirement income in an annuity that restricts their access to it?
A couple other topics in the article might not apply to all federal employees. One was about utilizing Roth options, either in an IRA or through an employer sponsored defined contribution plan such as the TSP. There’s room for some nuance here; Roths are not automatically better than traditional plans.
The other was advice on when to apply for Social Security. There are rules that affect government employees and retirees who were covered by CSRS, that would render her advice “inoperative”.
Don’t let this brief article keep you from reading articles on retirement and savings written by experts and published in mass magazines.
Do, however, remember that you are a federal employee or retiree and that you may be different from the general audience for whom the article was written.
Know your federal retirement and benefits and, when you read articles on finances, apply their information in light of your federal benefits.