Above all, don’t panic

FederalNewsRadio Senior Correspondent Mike Causey says federal employees have an advantage over their private sector counterparts when it comes to retirement sa...

By Dorothy Ramienski
Internet Editor
FederalNewsRadio

Unless you’ve been living under a rock, you know the stock market hasn’t been doing well.

Across America, people have started to worry about their retirement savings — but what about federal employees?

On Tuesday’s Daily Debrief, host Amy Morris spoke with Senior Correspondent Mike Causey, who says feds really don’t have it that bad, comparatively speaking.

The Civil Service Retirement Fund is solid. It is backed by the full faith and credit of the U.S. Treasury. It’s like Social Security money and government treasury bills — treasury securities. It is safe. . . . If the federal Treasury fails, we’re all out in the street fighting each other for scraps of dog food, but this is not the case.

Causey says those in the private sector, however, might not be so lucky.

On Tuesday, the head of the Congressional Budget Office, Peter Orszag, said that the retirement plans of Americans have lost as much as $2 trillion in the past 15 months.

[That story] refers to private pension funds and possibly even some state pension funds because of investments that are now going south . . . but you know these things can change too. It can get worse, but it can also very likely get better.

Concern among those with money in private-sector funds is growing, however.

An Associated Press-GfK poll taken Sept. 27-30 says that more than half are concerned they will have to work longer because their retirement funds have declined.

Causey says federal retirees, however, shouldn’t have the same concerns.

If all else fails, he notes, there’s always the G fund, though feds should be warned not to put all their eggs in one basket.

The G fund — it not only never has a bad day, it also never has a very good day. It’s rate of return is low. If inflation’s low, that’s fine, but what people warn about — having too much money in the G fund — is that you don’t want to outlive your money. One of your enemies in retirement is inflation and you need to be able to have money to fund a full retirement. . . . But the G fund is safe, in and of itself.

The other funds, Causey says, aren’t as steady when it comes to ups and downs, but they might make a fed more money.

The C, S, and I funds — those are stock market index funds and they rise and fall with the market — and, of late, they have been falling, for obvious reasons. The F fund is a bond index fund and usually the bond market goes the opposite direction of the stock market, so the F fund is probably doing very well. Then you have the life cycle funds — the L funds — and those are target [dated]. . . . The asset allocation is fixed up by experts. It is readjusted, literally, daily and they’re doing things that people like us wouldn’t have the nerve to do in times like this. When the stock market is down, they are buying into it, because they say it’s on sale and they want to keep their asset allocation.

Another difference between federal employees and those in the private sector has to do with when money is taken out. Causey says many federal employees are eligible to retire earlier than their private sector counterparts — and some don’t even touch their TSP’s!

[Feds] can retire on annuities that are indexed to inflation, which is not the case in the private sector. So a lot of federal workers won’t need to touch their TSP [for awhile] — some will never touch it. They’ll leave it for the kids or their grandchildren — but many of them won’t touch it for five, 10, 15 or even 20 years after they retire.

Causey says, the bottom line is, most federal workers invested in the TSP should be in good shape when it comes to comparing themselves to some in the private sector.

Federal retirees get an annuity that comes in every month like clockwork. It’s indexed to inflation. . . . If there was a serious recession — and I heard a financial planner say this the other day — he said federal retirees would be some of the wealthiest people on the block.

FederalNewsRadio tracks your TSP daily. Go to our home page and look for the Thrift Savings Plan Ticker.

Also, don’t forget to read Mike’s column daily.

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