The Fourth of July is often the time to reflect on freedom and independence.
But the Office of Personnel Management is prodding federal employees to also think about financial freedom — especially in retirement.
As part of its Retirement Readiness Now series, OPM compiled a list of four things feds should do to start getting a handle on their future retirement.
Tammy Flanagan, the senior benefits director at the National Institute of Transition Planning, told In Depth with Francis Rose the tips can help federal employees begin preparing for retirement and “thinking about making sure your financial house is in order,” she said.
Set a savings goal. “It’s really hard to plan if you don’t know what you’re going to have when you retire,” Flanagan said.
Employees can use the Federal Ballpark Estimate to receive an estimate of federal annuity benefits (including through the Thrift Savings Plan). These will tell you how much you can expect to earn in retirement and will also give you an idea of how much you need to have in savings to make up the difference.
Increase TSP contributions or start making them. Flanagan said between 10-15 percent of federal employees do not contribute to the TSP.
“Especially under the FERS system, that’s pretty scary,” she said. “If they’re not doing it, there’s plenty of good reasons to do it. Whether it’s the tax savings or the matching government contributions or just the fact that you won’t be able to afford to retire unless you have something to supplement your Social Security and your FERS benefit — those two by themselves are just not enough.”
Determine how long it will take to pay off credit card debt using the Federal Reserve’s Credit Card Repayment Calculator. I think our generation needs to learn to live within our means: spend only what we bring in and try not to overspend. Today, it’s just so easy with the plastic to do that,” Flanagan said. “I think it would cause nightmares to use (the repayment calculator) for some of us. But use it anyway; be brave.”
Review your annual credit report, which you can receive for free here. Your credit score helps create the basis for the interest rates you will be charged.
Still, the idea of financial independence seems to elude many, Flanagan said. For example, she said she often hears from feds who say they can’t afford to invest in the TSP.
“How can you afford not to?” she said she tells them. “Unless you want to work until you’re 90, you’ve got to put some money aside. You’ve got to have that freedom to live a nice lifestyle in retirement.”