Retirement Tidal Wave or Work Till You Drop?

If you are still on the job, are you planning to retire ASAP, or will they find you cold in your cubicle, with your shrunken TSP statement in hand?

Forget about wanting to retire. The question is can you afford to retire. Ever?


The White House and Congress froze white collar (nonpostal) federal pay for two years (no raise in 2011, no raise in 2012) and there is talk of extending the freeze another two to three years.


Federal, postal, military and Social Security retirees have not gotten a cost of living adjustment for the last two years.

There is a bipartisan effort in Congress (bipartisan means Republicans AND Democrats!!!) to reduce future federal retirement benefits. Under the plan, which was one of the recommendations in the president’s bipartisan deficit reduction task force, future federal retirement benefits would be based on the employee’s highest-5 year salary average. Currently annuities are based on the high-3 formula. The change would reduce benefits for future retirees by thousands of dollars a year.

Some feds have said that if the formula is changed from high-3 to high-5 they will retire immediately, before it is signed into law. If enough people feel that way, it would produce the dreaded retirement tsunami, the brain drain, that has been predicted each and every year since 1999. But feeling and doing are two different things.

On our Wednesday’s Your Turn radio show (click here to listen) the subject of the high-5 and retirements came up. One listener, Mike in Fredericksburg, Va., had this comment:

    “At the end of your Wednesday radio show, there was a quick comment, that if Congress cuts pension rates, then there will be a ‘tsunami of retirements.’ I thought the reverse would be true. If people’s target rate for retirement is cut, wouldn’t they work extra years to make up for it? I am a CSRS employee with 31 years. I planned to work until I get a 75% pension. If Congress cuts my pension, I would have to stay on until I get my 75%. This would create a log jam at the top of senior workers, who would slow the ability of newer employees from getting advancement. I am also curious that CSRS employees with more than 20-30 years would suddenly have their pensions cut. Isn’t this a violation of our contract? Couldn’t we be grandfathered in and keep our pensions at the rate we were promised?”

IF, and again this is IF, Congress and the White House change retirement rules they can do anything they like. Most likely, the change would be prospective, meaning it would not impact current retirees or people who retired before the new rules took effect. Most likely. That would give retirement-eligible folks time to get out under the current high-3 formula, before any new formula took effect. Most likely. The issue of whether it would be a breach of contract would, most likely, be settled in court. Given what state and local governments have done in downsizing employee pensions, there is a good chance the court would uphold the government. A lot of IFs there!!

So, if they change retirement rules will you be part of the brain drain? Or, after doing the math, will it encourage/force you to hang on longer than you intended?

To reach me:

Nearly Useless Factoid
by Suzanne Kubota

(Kind of useful, actually.) This month and this month only! Super Full Moon! Fourteen percent bigger than usual!


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