Why Federal Employees Are Wired to Retire Later than Planned

You probably have a retirement number in your head. Maybe it’s 60 or 65? Maybe you’ve told yourself you’ll know when you get there but determining what you’ll “do” in retirement makes the date more distant than you’d like. 

One more year could mean a few great advantages, including a larger FERS pension, more money in your TSP, and a bigger Social Security benefit.

So, you move the date, only to wonder if you can even afford to stop in the first place. 

See the pattern? 

Why Do Federal Employees Have So Many Reasons to Wait?

Federal employees have a retirement system that gives them plenty of milestones to plan around. Your age and your years of service matter. Your FERS annuity also plays an important role. Your TSP keeps growing while you’re working. Social Security becomes another piece of the decision.

That’s helpful when you’re building a retirement plan, but it can also create a trap because there’s almost always a financial reason to wait.

But eventually, “I should probably work another year” can become less about the numbers and more about how you, at that retirement age, feels about leaving a paycheck behind.

Does Working Longer Actually Make Retirement Better?

It’s true that working another year can improve your financial position. Having more of each of the benefits listed above are meaningful advantages.

But there is another question worth asking:

How much better does your life become because you worked another year?

That question is harder because it’s no longer purely financial.

A retirement calculator can show how your income changes if you work until 61 instead of 60. It cannot tell you what that extra year is worth to you personally.

For one person, that year may provide breathing room by strengthening savings or paying down a mortgage. For another, it may be worthwhile simply because they still enjoy the work. Those are very different reasons to keep going.

How Do You Know When You Have Enough to Retire?

What does it mean to have “enough?” The hardest number in retirement isn’t always your pension, but the income needed to truly live the life you want. 

For a federal employee, that means looking at the income coming from your FERS annuity, TSP, Social Security and any other assets or income sources you expect to have.

Then compare that with what you expect to spend. You don’t need to predict every expense for the next 30 years, but you do need to understand whether the income you can reasonably expect will support the life you’re planning to live.

If it does, you’ve crossed an important line, and the question changes from testing your ability to challenging your desire. 

You are no longer asking, “Can I retire?”

You’re asking, “Do I want to keep working?”

That is a completely different decision.

When Does “One More Year” Become a Habit?

This is where retirement planning gets psychological. Retirement asks you to do something fundamentally different and pivot from accumulating to spending. It could sound fun to start using the money you’ve saved, but it’s also uncomfortable because you’re suddenly stopping the same program that’s been running in your brain for decades.

The paycheck that arrived every two weeks for decades is suddenly going to disappear. Even if your retirement income is sufficient, your brain may keep telling you that more would be safer.

What Should You Ask Before Pushing Retirement Back Another Year?

Before deciding that another year is automatically the responsible choice, look at what you’re actually getting for it.

What does another year buy me?

Put a number on it. How much does your pension increase? How much more could you add to your TSP? What happens to your overall retirement income?

What does another year cost me?

There is a financial cost to working longer, too. You’re giving up a year of time that you could spend traveling, being with family, pursuing interests or simply living without a work schedule.

If I retired today, where would my income come from?

Look at your FERS annuity, TSP, Social Security and other resources. Understand how the pieces fit together before deciding that you need another year.

And then ask yourself the question that may be hardest to answer:

Am I working because I need the money, or because I’m afraid to stop?

You may not like the answer, but it’s worth knowing.

Retirement Isn’t About Finding the Perfect Date

For some federal employees, working longer will be the right decision. Another year of income and additional retirement benefits may provide meaningful value.

For others, the numbers may already work. Decision-making comes down to identifying the real questions that impact your life, rather than simply assessing the emotions tied to it. 

“I want to work another year” is a choice.

“I don’t know how to feel safe without my paycheck” is something else.

Retirement is about reaching the point where you’ve built enough to give yourself permission to use it. Before adding another year by default, pause long enough to ask what you are hoping that year will give you, and what you expect to give up in return. The answer may not point to a perfect retirement date, but it can help you make the next decision with more honesty, more confidence and a clearer sense of what this season of life is supposed to make possible.

Neil Cain is a certified financial planner with Capital Financial Planners. If you don’t feel confident in your current or future retirement withdrawal strategy and would like feedback, you can register for a complimentary Retirement Readiness Meeting. For topics covered in even greater depth, see our YouTube page.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.