TSP

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How are you doing when it comes to retirement savings? There are many ways to measure success in preparing for retirement, and in one of them you’re doing better than 74% of workers. What way is that you ask? That way is having a defined benefit pension like FERS. According to the Bureau of Labor Statistics 26% of civilian workers have a pension. Only 16% of private sector workers are fortunate enough to have a pension, where over ¾ of state and local government workers have one.

Your FERS pension will be a valuable source of income in retirement. Looking at the present value of money, someone with a FERS pension of $30,000 per year would have to have saved roughly $1,500,000 to generate that level of income. Your FERS pension has a modified cost-of-living adjustment and is payable for as long as you live. You will never run out of money from FERS, and you will not lose too much ground to inflation. In fact, in years where inflation runs at 2% or less, you will lose nothing; in years where the inflation rate is 3% or over your pension’s increase will trail inflation by 1%. The most recent FERS COLA was 4.9% based on an increase in the Consumer Price Index of 5.9%. Do be aware that (unless you are a special category employee/retiree) you do not begin to earn the COLA until you are age 62.

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However, unless you have close to $1,500,000 in your Thrift Savings Plan, you will not be able to count on an income of $30,000 per year from your TSP. It’s quite possible that, if your investments do well, you can draw $30,000 a year, but it’s not guaranteed. Look at your TSP balance and compare it with the following numbers which show the median net worth of families by age:

• Under age 35 $13,900
• Age 35 – 44 $91,300
• Age 45 – 54 $168,600
• Age 55 – 64 $212,500
• Age 65 – 74 $266,400
• Over age 75 $254,800

Be aware that “net worth” includes more than just retirement savings so, if you have saved more than the above amounts, you are doing better than over 50% of your age group.

So far, we’re probably feeling pleased with ourselves and where we stand vis a vis our age group, not to mention the fact that we have our FERS pension. I suspect that our situation has something to do with our net worth too. Here are median net worth figures for different types of families:

• All families $122,700
• Homeowners $255,000
• College graduates $308,200
• The top 10% $1,589,300

The odds are favorable for federal employees to enjoy a comfortable retirement. Take a look at where you stand and see if they are favorable for you.

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