Federal Employees and Boomers Should Delay Retirement Like It’s 2009 Sponsored by: Todd Carmack

If we say that the past is repeating itself-and it usually is—the current economic condition is proof that the financial crisis due to coronavirus could have impacted federal employees or Boomers long after whatever present date they are retiring in. In this article, we shall discuss more federal employees’ retirement and whether they delay it or not? 

The economic situation today can be easily compared to the 2008 financial crisis that mainly impacted the housing and financial sector. Two immediate effects in both crises were a major drop in the stock markets and a drastic increase in the unemployment rate.

Thankfully, the unemployment issue is not of much concern to a federal employee. There wasn’t a considerable loss of federal jobs at that time, and no one talked about losing their federal jobs for now. 

Well, investment losses are things that need to be considered. Most Federal employees feel much like all investors, especially the TSP participants, where the average account size was about $150,000 as of the end of February.

There is one way to compare the present crisis with the earlier one, at least financially-speaking, the behavior of TSP investors has changed. Last time, when the crisis occurred in late 2008-2009, the stock market dropped. Similarly, TSP investors overall were involved in a “flight to safety” by transferring money into the safe government plan that is treasury securities, or the G fund. The same thing happened this time, but we must mention here, in both cases, that only a minority of investors have moved their money.

 

The question here is whether to delay retirement or not?

Now the question that needs closer consideration that most of the federal employees are facing these days is whether to delay retirement or not? 

If you are a federal employee, and you choose to delay, an employee can continue to work and earn a salary higher than any annuity; can build up a good sum of the annuity by saving more money out of service; and can recover a plunging TSP account with his or her additional investments that are otherwise, not permitted after retirement.

The potential numbers are known to everyone but worth summarizing—and yes, they have a story to tell that belong to generations. Whenever the topic is Federal employees’ retirement, or at this point, we call them Baby Boomers, those born in the 20 years—after World War II. We can say that none of the Greatest Generation exists in the federal workforce, and only the oldest of X Generation behind the boomers are becoming eligible for retirement. 

Even if we talk about the youngest of the boomers, they are now at or past the earliest standard immediate retirement eligibility (56 under FERS, 55 under CSRS). 15% of the federal workforce is eligible, and 30% are 55 and up, and a similar number is expected in a few years away from becoming available. 

Again, learning lessons from the past is advised.

In the year 2007, when the first half of the boomers were in the cited retirement eligibility category as the second are now, some 51,000 executive branch employees took voluntary retirement (note: this doesn’t include Postal Service and other forms of retirement like early-retirement and disability).

In the year 2008, as that financial crisis hit the economy hard, that number significantly dropped to 49,000, and after 2009, the stock market losses had it full to 40,000. In 2010, it increased to 47,200. It wasn’t until the three years after the market was hit that the number started returning to a pre-downturn level, at 54,900. After that again, it increased to 60,000, where it stayed showing minor fluctuation each passing year. 

Meanwhile, we can say that the Boomers already show more significant dedication to work until they are old enough to save more during their years of service.

It will take some time to get a clear picture of this crisis and its impact on the Federal employee’s retirement. However, if it lasts for some more time, it will impact workers in the long run. 

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