Author Topic: Government Employees  (Read 12401 times)

Guitarist

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Government Employees
« on: February 15, 2012, 11:26:56 AM »
Wondering if there are any other government employees out there who have figured a way to get the most out of retiring early. That money going into a pension I might not touch is pissing me off.

Stubbleman

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Re: Government Employees
« Reply #1 on: February 15, 2012, 11:29:49 AM »
Quasi-government employee here.  I view mine as one more safeguard.  You would rather have it, than not.  Right?

My only problem is that I may not work long enough to earn it!  Either way it is definitely a good problem to have.

Guitarist

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Re: Government Employees
« Reply #2 on: February 15, 2012, 11:41:33 AM »
Well that was my point, I would like to retire earlier then the age they would allow me to have it. I would rather have the option to put that money into the government's version of the 401k (TSP). And now that they are raising the amount workers have to pay in AND reducing the amount they get out, I want the option even more. I also want the control over my retirement instead of having the government controlling a part of it.
The whole budget fiasco over the last year has given me even more drive toward getting out of the rat race early. I'm tired of being a pariah, and being considered over-paid by a bunch of millionaire's who can't even balance a budget.

adam

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Re: Government Employees
« Reply #3 on: February 15, 2012, 11:55:26 AM »
ALL GOVERNMENT WORKERS ARE OVERPAID!!!


<--- not this one :(


I often dream of early retirement, with my pension, but even that won't be till I've got 25 years (and given the special circumstances needed to retire at 25 instead of 30). I'm about to hit 8, so there's a long way to go.  But from what I remember you can't start getting those checks, or your tsp payouts till what is considered the 'normal' retirement age.  In other words, we have 3 potential backups (TSP, Pension, SS), and nothing in the mid term.  I don't know what the answer is either, but I would love to find out.

arebelspy

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Re: Government Employees
« Reply #4 on: February 15, 2012, 12:19:10 PM »
Another government worker here (teacher).

I'd have to work for another 20 years to hit the retire and get pension immediately level.  PASS.  I plan on early retiring in 5-10 years.

It'll sit there, and I can take it at age 60, or take it earlier at a hit of 4% per year.

I have an excel spreadsheet with all sorts of scenarios with taking it early and investing the $$, etc.  It looks like I'll likely take a 60% pension at age 50.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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MacGyverIt

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Re: Government Employees
« Reply #5 on: February 15, 2012, 06:34:12 PM »
The whole budget fiasco over the last year has given me even more drive toward getting out of the rat race early. I'm tired of being a pariah, and being considered over-paid by a bunch of millionaire's who can't even balance a budget.

If the question is give up your pension or retire early, I think I see your answer here. You don't want to do this work anymore. Early retirement is ultimately the issue of freedom to - loosely quoting previous MMM remarks - never set an alarm and walk out on your front porch in your PJS at noon on a Thursday.

The vast majority of people don't have pension (even Northrup Gruman the largest defense contractor on the planet has stopped this benefit) but in every early retirement blog/article I've read this far in my all too brief journey, none of them have had a government pension. It's tempting to be sure but is it work another 10 or 20 years of your life? If you are frugal and smart with finances, can you live comfortably based upon your TSP and other investments? Take a look at LiquidSapphire's diary on the the ERE site, she's a govie as well and has reconciled letting go of the pension: http://forum.earlyretirementextreme.com/topic.php?id=1340

Don't let the idea of a pension (that may not be there years from now) tether you to the job when your heart's desire says otherwise. Life is WAY too short and can end at a moment's notice.

My two cents.

foodguy

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Re: Government Employees
« Reply #6 on: February 15, 2012, 08:13:28 PM »
I think this is a symptom of a larger issue in our society, that being the desire to blame someone or something else for a problem.  Government employees are an easy target because the general public doesn't understand exactly what benefits government employees are entitled to, how they work, and mainly what they cost.  Sure most gov't employees get pensions, and the general public deems that pensions cost a lot of money.  On the federal level, a lot of politicing goes on to create that stigma for political leveraging.

Truth of the matter, regardless of your own political beliefs, is that $14 trillion is a lot of ching and it will come due some day.  It's tough if you are a government employee to stand by and not feel attacked by the media and others.  In realty, every citizen, gov't employee or private sector, in some fashion or another will pay the price tag.  The best thing that you can do now is position yourself in such a manner to protect yourself in the long run.  Do you rely on the pension in your future calculations?  What about tax rates in the future?  Inflation?  Interest rates?  As an individual you must ask yourself each of these questions and prepare in such a manner that you are comfortable.  If you aren't sure of the answer or aren't informed to a level you feel comfortable with, do some research to fix that.  Burying your head in the sand is NOT an answer.  And the correct answer for me may not be an answer that you will be comfortable with.

Diversification and education are powerful tools toward long term security.

Guitarist

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Re: Government Employees
« Reply #7 on: February 15, 2012, 08:41:05 PM »
Don't get me wrong, I am willing to take a hit for the greater good (helping the American economy), but so far, nobody else is even offering. The reasoning that is being used to hit the pensions isn't even honest. The thing is, I don't think the money saved is being used to lower the deficit but to fund a transportation bill. It's aggravating, both as an employee and as a citizen.

I am not relying on the pension as I'm not expecting it if I retire early, just wondering if someone has something else figured out or knows some kind of trick.

Walking around in my PJs on a Thursday, that's nice, but I'd like the freedom to wake up, pick up one of my six strings, and play until my fingers bleed.

foodguy

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Re: Government Employees
« Reply #8 on: February 15, 2012, 09:46:56 PM »
...I'd like the freedom to wake up, pick up one of my six strings, and play until my fingers bleed.

Then the key lies in the personal responsibility aspect of things.  Treat the pension idea just as you said in your post, a boon-doggle that you'll never see.  TSP to the point of the match(an awesome vehicle with the cheapest funds I've found to date), then max a Roth (for tax diversification), then go back and max the TSP.  Afterward allocate funds in investments outside of retirement.

Remember, the things you have control over are 1-How much of your money you spend, 2-How much you save, 3-How early you start that saving, and 4-How diversified those savings are.

With that said, I'm all ears for other ideas, too.  But if there was a magic fix, I'm sure we'd have heard of it by now.  :-)

Ben

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Re: Government Employees
« Reply #9 on: February 16, 2012, 08:23:45 AM »
Guitarist,

This is assuming you're federal and under FERS, if not please feel free to disregard...

Do you plan on dying before age 62? Or will you be working for the federal government for less than 5 years? You will still receive deferred retirement if you vest (5 yrs service) and retire in your 30s or 40s. Heck, if you decide you don't want your pension you can even ask for a refund of the money you put in when you leave.

http://www.opm.gov/retire/pre/planning/refunds.asp#FERS If you want to do a greater good for the country, take that obligation off the books when you head out the door- but financially, nearly everyone will be better off taking the deferred retirement- I would keep it if I were you!

Some more good news: ROTH TSP will be out in the next few months. The principal on that can be accessed before 59 1/2 without penalty (same as a ROTH IRA, I believe), and you can put up to 17 grand/year into that if you want. An index fund with .025% annual expenses is impossible to beat in the open market.

Most people make bad decisions with money. The Federal Employee Retirement System encourages/forces people to save and gives a vehicle for your less-thrifty coworkers to have some income when they retire. It's a good system, very economical from an investment perspective, and I wish more federal employees recognized the advantages that they have with this, early retirement or not.

adam

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Re: Government Employees
« Reply #10 on: February 16, 2012, 09:12:42 AM »
Guitarist,

This is assuming you're federal and under FERS, if not please feel free to disregard...

Do you plan on dying before age 62? Or will you be working for the federal government for less than 5 years? You will still receive deferred retirement if you vest (5 yrs service) and retire in your 30s or 40s. Heck, if you decide you don't want your pension you can even ask for a refund of the money you put in when you leave.

http://www.opm.gov/retire/pre/planning/refunds.asp#FERS If you want to do a greater good for the country, take that obligation off the books when you head out the door- but financially, nearly everyone will be better off taking the deferred retirement- I would keep it if I were you!

Some more good news: ROTH TSP will be out in the next few months. The principal on that can be accessed before 59 1/2 without penalty (same as a ROTH IRA, I believe), and you can put up to 17 grand/year into that if you want. An index fund with .025% annual expenses is impossible to beat in the open market.

Most people make bad decisions with money. The Federal Employee Retirement System encourages/forces people to save and gives a vehicle for your less-thrifty coworkers to have some income when they retire. It's a good system, very economical from an investment perspective, and I wish more federal employees recognized the advantages that they have with this, early retirement or not.

Yeah, you can actually calculate your pension benefit for something less than 25 or 30 years.  It will be substantially smaller of course, but once you are vested its like leaving a 401k or TSP with an old employer, it will still pay out at the "minimum retirement age" which changes based on how old you are and when you were working for the govt.

I'm very interested in this Roth TSP thing you mentioned, do you know where I can read more about that?

Ben

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Re: Government Employees
« Reply #11 on: February 16, 2012, 09:39:12 AM »
It's been in the works for over a year now, I actually just got a mailing this week with a 'stay tuned' letter and some details. I expect it's headed to you, too.

The flyer:
https://www.tsp.gov/PDF/formspubs/tsplf30.pdf

The website:
https://www.tsp.gov/whatsnew/roth/index.shtml


foodguy

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Re: Government Employees
« Reply #12 on: February 16, 2012, 10:07:13 AM »
I've heard the Roth TSP will be up by April, but in government speak that probably means October.

Chair-Force

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Re: Government Employees
« Reply #13 on: February 17, 2012, 07:13:28 AM »
The Roth option is slated for the second quarter (Apr-Jun) and they said recently it's on schedule.

Green Manalishi

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Re: Government Employees
« Reply #14 on: February 17, 2012, 02:14:16 PM »
I am a government employee however it is the Irish government rather than the US government. From reading this thread it sounds as though the pensions have some things in common. If the state can afford to pay it, I will get a defined benefit pension linked to payscales at the time of my retirement. The pension is contributory and there is no opt out, as long as one remains a gov. employee the contributions must be paid. Contributions are not refunded if the employee leaves before retiring. Also the contributions do not go into a specific pension fund or pot.

I need 40 years' service for a full pension. I am in my mid thirties and have 10 years' service. Were I to leave now, I think I'd get a small preserved pension at age 60.

In recent years the pension contribution has increased while the pension itself has been reduced thanks to cuts in the payscales to which the pension is linked.

Irish government employees are also pariahs and are constantly attacked on internet forums and in the media for our:
Gold Plated Gilt Edged Rolls Royce Gucci Rolex Pensions
 

Guitarist

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Re: Government Employees
« Reply #15 on: February 17, 2012, 08:49:04 PM »
Thank you Ben, that info helped a lot.
And thanks for the rest of the conversation going on.

It's not the job I hate, it's the politics involved. But most of that is beyond my desk.

MacGyverIt

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Re: Government Employees
« Reply #16 on: February 17, 2012, 08:52:45 PM »
Some more good news: ROTH TSP will be out in the next few months. The principal on that can be accessed before 59 1/2 without penalty (same as a ROTH IRA, I believe), and you can put up to 17 grand/year into that if you want. An index fund with .025% annual expenses is impossible to beat in the open market.

I'm curious, does the TSP Roth provide the same purchase options as other Roth accounts, same level of flexibility that non-govt accounts provide?

msmo

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Re: Government Employees
« Reply #17 on: February 18, 2012, 01:56:57 AM »
This government worker is not overpaid either, but no one in my field is (libraries). I am a federal employee, but because I am not GS or Active Duty I am not eligible for pension anyhow. So I don't have the exact same issue. Still, I am not happy with the chain of command thing, how decisions are made, all the bureaucracy in general, and I want out. My 3-5 year plan to re-engineer my skills to something more independently income-generating.  In my neck of the woods, federal employment is the cat's meow. I can't convince friends otherwise. Sorry I went a bit OT there but basically my plan to work around the federal system is to get out.

Ben

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Re: Government Employees
« Reply #18 on: February 18, 2012, 10:40:57 AM »
MacGyver,

Same as regular TSP, I believe: G, F, C, S, and I funds, as well as lifecycle blends of those five flavors. Keeping it simple keeps expenses low and reduces that 'overwhelmed' feeling when people look at 200 options, panic, and then choose not to choose.

G- Government debt only
F- Like an index bond fund
C- Total stock index fund or S&P500, I can't remember which
S- Small market stock index fund
I- International index fund

foodguy

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Re: Government Employees
« Reply #19 on: February 18, 2012, 12:16:08 PM »
Some more good news: ROTH TSP will be out in the next few months. The principal on that can be accessed before 59 1/2 without penalty (same as a ROTH IRA, I believe), and you can put up to 17 grand/year into that if you want. An index fund with .025% annual expenses is impossible to beat in the open market.

I'm curious, does the TSP Roth provide the same purchase options as other Roth accounts, same level of flexibility that non-govt accounts provide?

As Ben said, tailored index funds with extremely low expenses.  However, withdrawal options are more limited than "regular" IRAs and 401k from what I've heard.  I haven't done the research on this yet, though.

tddoog

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Re: Government Employees
« Reply #20 on: February 18, 2012, 01:26:30 PM »
I am a federale and I plan on doing a deferred annuity.  Next year I will be over 10 years when i finish buying back my military service.  Once I get my stache up to the appropriate level, I will pull the eject lever and count on a deferred annuity at age 57.  Since I plan to live a long time I look forward to the plus up at 57 until I die (my grandma lived until a 102, so that's my stretch goal).

Should I die before then, my wife will get a survivors annuity, so there is a little insurance benefit.  I feel like it is an excellent retirement/insurance policy.

sol

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Re: Government Employees
« Reply #21 on: February 26, 2012, 10:10:10 AM »
I'm also a federal employee with visions of early retirement before I'm eligible for a pension.

The federal pension system under FERS is currently based on your years of service, so there is definitely a penalty of sorts for working fewer years.  After I work 10 years, it will theoretically pay 10% of my high-3 salary after I turn 57 if I opt for the (recommended) deferred retirement.  Combined with anticipated SS benefits, a frugal person might survive off of just those two income streams after age 57, TSP be damned.

So the difficulty for an early retiring fed is thus bridging the gap between retirement and the pension onset.  The typical strategies are the same as for everyone else here:

1.  Roth IRA contributions (but not earnings) can be withdrawn tax and penalty free at any point, though you pay the penalty of forsaken estate planning benefits inherent in the Roth. 

2.  Rule 72t withdrawals from the TSP will provide some tax-free income before age 59.5, though typically not very much even using the Fixed Annuitization or Fixed Amortization Methods.  You can also make a regular withdrawal from the TSP at age 55 or later without paying the 10% penalty.

3.  Current law will not allow conversion of regular TSP balances to the newly available Roth TSP, but since 2006 you CAN convert from the TSP to your Roth IRA and pay the taxes in the year of the conversion.  This means you should be able to quite working (lowering your tax bracket), convert one year of living expenses from TSP to Roth IRA every year while paying a low tax rate, then after five years start withdrawing that money from the Roth IRA tax free.  This little loophole seems to allows you tax free savings and growth in the TSP, low tax conversion to Roth IRA, and then tax free withdrawals from the IRA, netting you low-tax penalty-free TSP withdrawals before retirement.  The only hiccup is that you need to have five years of living expenses stashed elsewhere, like a taxable account or from straight up Roth IRA contributions.

This little income pipeline only needs to last you until you start taking real retirement benefits like your pension and social security, if they are sufficient to live on.  Alternately, if they are almost-but-not-quite sufficient then you could draw down a big chunk of your TSP this way and leave a little behind to supplement your income after you start collecting pension and SS.
« Last Edit: February 26, 2012, 10:47:59 AM by sol »

TheDude

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Re: Government Employees
« Reply #22 on: February 26, 2012, 10:53:54 AM »
I am nut sure about the federal government but my wife works for a the school district and she has access to a 457 plan. Its kind of like a 401k in the fact that you get to defer money but unlike the 401k in the fact that you can withdraw you money whenever you want. Plus if you have a bunch of extra money and access to both you can contribute 17000 to the 457 and 17000 to the 401k or 403. I would venture to say the 457 is the best early retirement vehicle that exists.

sol

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Re: Government Employees
« Reply #23 on: February 26, 2012, 10:56:20 AM »
Truth of the matter, regardless of your own political beliefs, is that $14 trillion is a lot of ching and it will come due some day.

To be fair, that $14T in future liabilities came with $14T in current cost savings from federal salaries.  Professional feds are underpaid compared to private sector workers who do the same jobs, by an amount just slightly more than the value of the extra benefits they are offered.  In my opinion, the net pay reduction you accept for being a fed is equivalent to the lower return you accept for reduced volatility in your portfolio.  Yes, you will make less money, but you're also unlikely to see your income ever drop dramatically.

Current 2-year pay freeze (plus 3% annual inflation) excepted, of course.

mcneally

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Re: Government Employees
« Reply #24 on: February 26, 2012, 11:53:54 AM »
The federal pension system under FERS is currently based on your years of service, so there is definitely a penalty of sorts for working fewer years.  After I work 10 years, it will theoretically pay 10% of my high-3 salary after I turn 57 if I opt for the (recommended) deferred retirement. 
[Statement deleted because I am unsure of its accuracy]. Using the assumptions I do, I estimate my FERS pension will have an NPV of around $70k if I retired at 40 (half way between my start date and 57) and around $900k if stay until 57.

You can also make a regular withdrawal from the TSP at age 55 or later without paying the 10% penalty.
This too assumes that you are 55 when you retire. The 55 rule only applies to TSP/ 401k plans when you separate from that employer after age 55. Otherwise it is 59 1/2. There is no 55 rule for IRAs.
« Last Edit: February 26, 2012, 08:37:22 PM by mcneally »

sol

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Re: Government Employees
« Reply #25 on: February 26, 2012, 06:53:06 PM »
This assumes you are 57 when you retire. If you are 56 or younger, you will not receive any benefit until you are 62.

You are correct, and I thought I made that clear in my post.  You get no pension until you reach retirement age, at which point it is based on your years of service.  If you work from ages 20 to 29, you will get 10% (for your ten years of service) when you reach retirement age.

That age is not 62, though.  My reading suggests it's 57 for most of us not already near retirement, albeit with a reduction in the amount of the pension.  So you can retire at 40, live off of your TSP via the Roth IRA for 17 years, then collect your tiny pension.   Of course, retiring at 40 and waiting to collect it for 17 years means inflation will have eaten most of it.  Le sigh.

Quote
This too assumes that you are 55 when you retire. The 55 rule only applies to TSP/ 401k plans when you separate from that employer after age 55. Otherwise it is 59 1/2. There is no 55 rule for IRAs.

I stand corrected.  I wasn't really too worried about that one, since it only buys you 4.5 years anyway and is probably not the chosen path for most folks on the early retirement path.

If you have any other suggestions for how to avoid a 25 year obligation as a federal employee, I'm all ears.

mcneally

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Re: Government Employees
« Reply #26 on: February 26, 2012, 08:36:25 PM »
I'm by no means an expert on the subject, but OPM's website (http://www.opm.gov/retire/pre/fers/deferred.asp) on deferred pensions says of the age reduction

"If you completed at least 10 years, but less than 30 years of creditable service before you left Federal service years, your annuity will be reduced if it begins before age 62.  The only exception to this is if you had at least 20 years of service and your annuity begins when you reach age 60."

which seems to contradict the paragraph above it that says that with 10 years of service you can collect a deferred pension at 57. But then  below that in the section 'commencing date of deferred retirement' it says
"Retirement With 10 or More Years of Service
The annuity begins either:
the first day of the month after the former employee attains the MRA, or
later date specified by the retiree, in order to reduce or avoid the age reduction"

This seems to imply that a deferred pension taken at 57 would still be reduced by 25%.

foodguy

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Re: Government Employees
« Reply #27 on: February 26, 2012, 08:44:15 PM »
Professional feds are underpaid compared to private sector workers who do the same jobs, by an amount just slightly more than the value of the extra benefits they are offered.  In my opinion, the net pay reduction you accept for being a fed is equivalent to the lower return you accept for reduced volatility in your portfolio.  Yes, you will make less money, but you're also unlikely to see your income ever drop dramatically.

I take exception to this statement as it paints with a very broad brush.  Some government jobs are simply unmatched in the private sector.  To attempt comparison is the epitome of apples to oranges.  Are there private sector snipers?  Compared to a private sector sniper, how should the federal one be paid?

Furthermore, given the pay freeze for government employees and the steady increase in inflation it amounts to a pay cut, albeit not the traditional sense.  I certainly realize that the private sector has endured several hardships over the past few years, how is it that the government employees are now responsible for paying for a 2% OASDI tax cut this year for everyone?  It's not a dramatic drop to which you allude, but I know of government professions where termination is a real concern.  That sounds like a dramatic income drop to me.

Also curious as to the reduced volatility you refer to?  I'm unclear how a 100% stock allocated TSP is "reduced volatility."  Or how legislation in Congress to increase required FERS contributions for current employees qualifies as well.

sol

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Re: Government Employees
« Reply #28 on: February 27, 2012, 06:04:30 PM »
I take exception to this statement as it paints with a very broad brush.  Some government jobs are simply unmatched in the private sector.

Fair enough.  I will refrain from further comment on government wages if I might be misconstrued to be talking about snipers.

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Furthermore, given the pay freeze for government employees and the steady increase in inflation it amounts to a pay cut, albeit not the traditional sense.

Yes, I agree that the federal payfreeze amounts to a pay cut in light of inflation.  And you forgot to mention the recent law that raises federal employee contributions to their pensions by almost 400%, which is also a pay cut.  Or the last decade of lowest federal pay increases in history.  Or any of the other proposals currently being floated to cut federal worker pay.

I'm not arguing that feds are overpaid.  Quite the contrary, they are the current favorite scapegoat for all of our nation's ills.  I think they'd have a hard time selling the notion of extending unemployment benefits by taxing just the nation's teachers, but somehow taxing just feds was more acceptable because the extension became law on Feb 22, 2012.

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Also curious as to the reduced volatility you refer to?  I'm unclear how a 100% stock allocated TSP is "reduced volatility."  Or how legislation in Congress to increase required FERS contributions for current employees qualifies as well.

I was referring only to the volatility in wages.  Federal employees make less money than their private sector counterparts who do the same job, but they are less likely to be laid off on short notice.  Being a fed means accepting that your salary will be smaller, but it will also be more dependable.  In a similar vein, a more diversified investment portfolio may earn you lower returns than a straight-stock portfolio, but it will also be less volatile.
« Last Edit: February 27, 2012, 06:06:38 PM by sol »

foodguy

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Re: Government Employees
« Reply #29 on: February 27, 2012, 07:59:00 PM »
Fair enough.  I will refrain from further comment on government wages if I might be misconstrued to be talking about snipers.

This is just one example.  I'm saying that many federal government jobs do not have private sector equivalents, a sniper being just one of them.  Private park rangers?  Private TSA agents?  Or is this under the broad idea of law enforcement?  (And by no means am I trying to defend or somehow say that the TSA is a legit position.  I think they are useless, but they perform a unique job function)  Private sector coin making?  IMO, to attempt comparison between government and private salaries in broad measure isn't really appropriate.  Sure in some positions it is applicable.  Attorneys, doctors, accountants, etc.

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And you forgot to mention the recent law that raises federal employee contributions to their pensions by almost 400%, which is also a pay cut.

Quote from: foodguy
Or how legislation in Congress to increase required FERS contributions for current employees qualifies as well.

I did mention that.

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I was referring only to the volatility in wages.  Federal employees make less money than their private sector counterparts who do the same job, but they are less likely to be laid off on short notice.  Being a fed means accepting that your salary will be smaller, but it will also be more dependable.  In a similar vein, a more diversified investment portfolio may earn you lower returns than a straight-stock portfolio, but it will also be less volatile.

Again with the public/private comparison, but touche on the volatility in regards to wages.  Although I'll argue the dependability of the salary, but that would be more on a personal note in regards to my experiences.

Quote
I'm not arguing that feds are overpaid.  Quite the contrary, they are the current favorite scapegoat for all of our nation's ills.  I think they'd have a hard time selling the notion of extending unemployment benefits by taxing just the nation's teachers, but somehow taxing just feds was more acceptable because the extension became law on Feb 22, 2012.

There are so many misconceptions about government pay that you address directly here.  The idea of the overpaid, underworked, bureaucrat who does nothing but pick their nose for 5.5 hours a day and then leave for a 2.5 hour lunch the case.  A vast majority of government employees just show up and do what they are assigned and what they think is best.  To automatically claim they are overpaid or underpaid without doing research or even knowing in regards to which position is being discussed is shortsighted.

[/rant]

adam

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Re: Government Employees
« Reply #30 on: February 28, 2012, 08:19:28 AM »
So.... to move this in another direction rather than start a new thread:
What funds are you guys/girls investing in with your TSP?  Anyone using the lifecycle funds?
I am currently going with
S fund = 35%
C fund = 45%
I fund = 20%

Given that I'm 31, I figured I still had a high risk tolerance and should go with the more volatile (and potentially more rewarding) funds.  I don't know how long I should keep this allotment though before switching to something "safer".

sol

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Re: Government Employees
« Reply #31 on: February 28, 2012, 08:55:08 AM »
I'm currently in the L2040 with new contributions going to the L2050.  That decision was made back when I was still planning on working for another 25 years.  I've always been a risk tolerant investor, so I chose investments with time horizons that match or exceed my planned average withdrawal date, not my retirement date.  If you retire in 2040 and then draw for another 30 years, your average withdrawal rate would be about 2055.

I also think feds should choose an L fund beyond their actual retirement date because the L fund distributions are based on MPT for someone without a pension, and are thus a bit heavy on bonds.  A federal pension is basically like a government bond, so in my view it should substitute for part of your bond portfolio.  One easy way to fix this imbalance is to buy an L fund with a longer date, though you do end up slightly short on the I and S funds that way.  So can you guess what my Roth is invested in?

I'm a big fan of the lifecycle funds for virtually every fed.  They rebalance automatically, hold the same funds as the rest of the TSP, and don't charge anything extra beyond the base cost of those funds for the privilege. 

The one thing that I think is missing from the TSP is an emerging market fund.  You can get a little exposure to the EAFE countries through the I fund, but it's a small portion of your total TSP investment if you're in one of the L funds.  My plan is to seek out some exposure to BRIC countries through my Roth IRA.  Anyone know of a good Vanguard fund to do that?

Guitarist

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Re: Government Employees
« Reply #32 on: February 29, 2012, 09:08:29 AM »
I am currently sitting at:
10 C
75 S
15 I

I usually take advantage of the two IFT's/month.

sol

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Re: Government Employees
« Reply #33 on: February 29, 2012, 09:14:42 AM »
I usually take advantage of the two IFT's/month.

To do what?  I thought the G fund bug had been fixed?

Guitarist

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Re: Government Employees
« Reply #34 on: February 29, 2012, 09:20:42 AM »
Buy low, sell high.

Since there are no trading fees, and our options are limited, I feel like this is the account I can play with.
I plan to be much more of a buy and holder with an IRA and taxed account.

K

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Re: Government Employees
« Reply #35 on: March 13, 2012, 03:06:27 PM »
It's not the job I hate, it's the politics involved. But most of that is beyond my desk.

This is how I feel, too.

All I'm really looking for in a Mustachian lifestyle is enough free time to raise my kids (when we have some to raise), and to start building guitars.. So, until something better comes along (good, steady income from building guitars, winning the lottery, desperately jumping ship for something different, etc).. I could save up my 'stache for a few years and achieve Mustachian status by dropping from full time to part time status. My job makes me a perfect candidate for part time work. I already have 10 years of service, a decent "high 3" and can stomach the "worst case scenario" of working for the Man part time until the hours add up to 30 years of service. After I turn 57, it wouldn't take much longer to retire with full FERS and a healthy TSP.

I really don't like planning to work full time past the age of 40. This was mostly just an exercise in planning a full retirement scenario. I just started identifying the details of this plan, so I may be missing something. If any experienced feds can point out potential pitfalls to this plan, please let me know! :)

Anyway, here's where I first started learning about permanent part time status: http://www.opm.gov/employment_and_benefits/worklife/officialdocuments/handbooksguides/pt_employ_jobsharing/pt02.asp  Maybe it would work for you?

sol

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Re: Government Employees
« Reply #36 on: March 13, 2012, 03:53:15 PM »
I really don't like planning to work full time past the age of 40. This was mostly just an exercise in planning a full retirement scenario. I just started identifying the details of this plan, so I may be missing something. If any experienced feds can point out potential pitfalls to this plan, please let me know! :)

I have also considered going to part time at my federal job, because there are parts of my job that I really love and would miss if I retired fully.

The benefits calculations are not straightforward, though.  If you work half time, the government contribution to your health insurance is cut in half.  Each year of part time work counts as full year in calculating your total years of service (like for MRA+10), but the annuity computation is halved for those years so the dollars cancel out. 

Also consider that your high-3 is likely to be from the three years immediately before you go to half time, and inflation will likely diminish those dollars by the time you are receiving them.  Of course, if you're already a step 10 in the highest grade available to you, then your income is never going to go up much anyway so you're not giving up that much.

You also might have the benefit of rolling your pension contributions and earnings into the TSP, but without running those numbers I suspect this isn't a very good deal.

My ideal plan would be to switch to half time but continue to work 40 hours/week, then take six months of the year off.  This is basically the equivalent of taking LWOP for six months of every year, but depending on the nature of your job and your local office politics neither option may be very popular.
« Last Edit: March 13, 2012, 04:18:48 PM by sol »