A recent Federal Drive interview on retirement income needs touched a nerve, judging from the mail. Abe Grungold — regular guest, retired U.S. Postal Service manager, and financial advisor — pointed out a human truth. Financial facts alone don’t stop people from worrying whether they’ll outlive their money.
Retirement itself has an uncertain meaning, since people do things after they leave government that seem like work. Sometimes they actually do launch new careers. Others feel fine with traditional retirement.
I’m still dazzled by the fact that Abe himself managed to accumulate $3 million in his Thrift Savings Plan before retiring. As far as I know, he and his family ate normally, not Purina Cat Chow. So it shows what’s possible if you maybe skip the Lexus and the G-Fund. Yet, Abe said, his wife still regularly asks if they have enough money.
Specifically, Abe advised planning on a requirement of 80% of your pre-retirement gross income. For many retirees, that would come from a combination of FERS annuity, Social Security and TSP monthly withdrawals. I say “many” deliberately because “average” people don’t exist. Variables like health, spousal career, inheritances and lottery winnings mean everyone has a unique situation.
About that 80% rule of thumb, one reader asked whether that level “would allow for additional travel, fun etc. or just status quo.” Also, whether the 80% level included TSP contributions, which stop upon retirement.
The answer: Yes, the 80% takes into account that you won’t be adding to the TSP. But it doesn’t allow for a lifestyle expansion. “It’s a good starting point to continue your pre-retirement lifestyle,” Abe wrote. Abe himself is living on 110% of his pre-retirement gross, he said. He’s got his FERS annuity, withdrawals and part time work (advising people on finances).
In other words, if you weren’t buying expensive cars and luxury cruises before retirement, you probably won’t be able to start doing so after you retire.
Retirement planning often takes taxes into account. One reader wrote, “Living in New Hampshire – no income or sales tax.” He added, “And very skimpy services.” My recollection of New Hampshire is that state and local officials were superb at snow removal. I don’t know enough about the other services in the “Live Free or Die” state. New Hampshire, decades later, still holds a place in my heart, though.
This reader also paid off his mortgage, which has tax implications. His car is paid off, but he still makes payments to a savings account so he can pay cash for the next car. And this: “I will not leave that much to my children, but I do give them money from time to time and also help them when needed.” Sounds like a good balance.
Some people opt to work after retirement. My headline for the interview, “How to avoid wearing a Walmart greeter’s vest after you retire,” was perhaps too dismissive of those who must work after retirement, as a couple of readers pointed out.
I’ve known scores of senior and sort of senior federal managers who put in substantial careers after government. Dozens have hung out consulting shingles. They like their fields and they want to stay relevant. Others say sayonara and pursue passions they haven’t had sufficient time for.
A friend and neighbor worked for 36 years in the civil appellant division of the Justice Department. Ed was not just a good lawyer, he was a respected mentor to many a young colleague. He also lived a full and exemplary private life. He died months before retiring from an emergent health issue you could describe as a bolt of lightning. Sometimes the fates laugh without humor at our plans.
At his shiva I asked a mutual friend, still working at 72, if he had any plans to retire. He answered, “No, because I don’t know what I would do when I get up in the morning.” I thought, if I, Tom, ever do retire from the vocational scene, on that first morning after I won’t know what to do first. But it will likely involve a motorcycle.
