The Federal Employees Retirement System (FERS) was established to prepare the federal employee for a comfortable retirement: opportunities to obtain a comprehensive health insurance plan and declare early retirement, savings preparation, long-term care (LTC) insurance procurement, and more. It also applies to workers’ immediate family members, and there are additional benefits for the surviving spouses of FERS employees who pass prior to retirement.

However, a growing federal workforce and an administration with the desire to tighten purse strings have led to considerable changes to what a federal worker can expect upon service completion. These developments are taking place while many workers reportedly do not use retirement planning and preparation tools — a shortcoming some interviewees attribute to inadequate communication from agency management.

With the rising cost and popularity of LTC, federal retirees are considering their options: whether to invest in long-term care insurance through the federal government or elsewhere, or to bypass insurance altogether.

In the midst of these macro-level shifts, it’s easy to forget the individual stories. To learn more about the retirement planning process and the strategies people use to prepare, Government Business Council (GBC), on behalf of Long Term Care Partners, interviewed several retirees and current federal employees.

Read on to hear more about their stories.

GBC’s interviews reveal a shortcoming of guidance and communication provided by at least some agencies: several federal employees at the middle management level told GBC that their human resources do not sufficiently orient new staff for retirement.

One interviewee describes how he has to fill ‘knowledge gaps’ for his employees:

“They get very little information and help when they come online, unless they have a boss who sits them down and goes through everything with them.”

He describes a recent onboarding experience: “[My new employees] had the benefits packet from HR, but I don't think anybody sat down with them to walk them through what everything was.”

Another interviewee demonstrates the importance of seizing any opportunities to further one’s retirement knowledge: “My agency has offered one retirement class in the [past] 20 years, which I was fortunate to get into, but they denied a lot of other people.”

More than half of the pre-retirees surveyed by Prudential in 2016 reported that they expect to have a more difficult time saving for retirement than their parents or grandparents experienced.

This is also true of federal employees specifically: Ken Zawodny, associate director for retirement services in the Office of Personnel Management (OPM), recommends beginning retirement preparations as much as six years in advance of retirement. And a study published by OPM and the International Foundation for Retirement Education (InFRE) found that less than half of federal employees had calculated how much they needed to save for a comfortable retirement.

Keeping this in mind, government organizations should examine the existing mechanisms that deliver benefits information to employees and assess the effectiveness of such mechanisms.

A range of options is available to federal employees looking for more robust information on retirement. Several interviewees speak favorably of the advice they received from private vendors and financial advice professionals.

“Both my wife and I took out the federal long-term care program, and our financial advisor evaluated it and made some recommendations,” says one individual, adding that “we agreed [to take out] a second long-term care policy with another company.”

This respondent isn’t alone in expressing a desire for additional resources; another participant shares that “it would be very nice if there were some kind of organization that would analyze the long-term care insurance programs, and then be able to help individuals to make a decision about what's in their best interest.”

It’s easy to imagine a situation in which government provides similar services through a central organization or through agency partners. One interviewee describes how this could look:

There’s [a non-governmental] organization that does some advising. They provide social security advice to federal retirees to help them determine [which particular Medicare packages they should consider]. They provide independent, unbiased advice.

As with other services, there is potential value in government integrating these disparate sources and streamlining their functions.

The anecdotes interviewees shared are supported by additional findings in the OPM study: almost 80% would be very or extremely interested in their employer providing additional information about retirement preparation.

Until such measures are taken, it’s worth doing one’s due diligence and soliciting information from a range of experts regarding preparing for the next stage.

Many in the federal government have heard of the ‘retirement wave’: an unprecedented level of departures that is predicted to take place in coming years. For years, federal employment has grown — according to the Bureau of Labor Statistics (BLS), the number of Americans employed in the federal government rose from less than 2 million individuals in the 1950s to highs of more than 3 million in the 1980s and 1990s, and has recently reached a post-recession high of approximately 2.7 million workers.

Presently, there is a risk that a substantial share of the federal workforce will retire before agencies have an opportunity to replenish their payrolls, which has serious implications for the federal government’s operational capacity. Indeed, this is not a recent development — hiring struggles have plagued agencies for years.

As more agencies offer buyouts and early retirement to their staff, and in light of recent revelations of a potential federal pay freeze in 2019, current trends suggest the federal government will face even sharper workforce shortages years or even months from now.

Much of the conversation around federal employment and labor unions has changed in recent years, and policy changes may follow the rhetoric, including such potential changes as TSP adjustments and the removal of key provisions that safeguard federal employees from politically-driven employment changes. Still, while the focus has been on scaling down benefits, federal retirees are expected to receive the largest cost-of-living adjustment (COLA) they have seen in half a decade. Someone near retirement might ask, “how am I expected to get ready for retirement given these changes and uncertainties?”

As the dust from the budget approval and allocation process settles, there appears to be a direct lesson for retirees: plan conservatively.

In the words of one individual who participated in the GBC study,

“getting the financial piece down for what your actual outlays are each month is difficult for most people to do, but there are tools available. So get a really good handle on your real net needs and be extremely conservative about what your money’s going to be for.”

In his view, too many individuals do not adequately prepare for retirement and later find themselves in suboptimal situations:

“Try to determine if you’re going to stay where you are. I’ve seen friends that were miserable because they’ve moved out of the area and can’t buy back into this area.”

While the baseline of federal retirement policies has been established for a long time, revisions and updates are frequent. Both President Trump and Congress have expressed interest in reforming federal retirement such that “government provides adequate compensation to attract and retain skilled employees while not paying more than needed to accomplish that goal." But the present state of flux doesn’t mean that preparation is impossible.

One retiree interviewed by GBC highlights his personal journey towards effective retirement planning and preparation:

“Both my wife and I were active duty military and we both retired from the military. While we were in the military, we got involved with a financial planning group, and they were extremely helpful about giving us information as we started our [careers].”

This view is echoed by another interviewee: “The first step is early planning and participating in what’s free. The second is looking at your needs, your [family’s needs], and what you’ve got in terms of outlay.” When asked about tools he’s found helpful in his own decision-making process, the respondent observes,

As you go on in life, your awareness changes. At age thirty you may view things a certain way. Before you’re ready to retire, you should retake that retirement course [because] your intake and your awareness levels are different [as] you’re cueing into different issues.

The need for long-term care is inevitable for many individuals. Anyone can run into physical and mental barriers impacting their ability to carry out essential daily tasks, and those who are aging are particularly susceptible. Long-term care (e.g., assisted living centers, nursing homes, and even family-provided care) can greatly increase the length and quality of life.

To prepare for all outcomes, it’s important to consider the financial costs. Individuals without long-term care insurance may find costs eating into savings, retirement income, and ancillary funds. With costs reaching $300 per day and higher, an LTC plan without LTC insurance can burn through cash quickly. 

Insurance can be helpful in smoothing these costs out over a longer period of time, and some federal employees choose to supplement plans purchased through their federal employment with insurance purchased on the private market.

“We thought having long-term care would be the best solution for us and our family members,” says one respondent. “We have kids and didn’t want to put them through what our families went through with our parents. We wanted to go to a quality place that would take care of us in our later years.”

Retirement presents unique challenges due to complex financial considerations, shocks to value systems, and the procurement of effective healthcare for one’s self and loved ones. Another major factor is mental health, and the tendency of mental health issues to become more inhibitive in one’s later years.

While some individuals pursue LTC for assistance with physical disabilities, a large share of those currently receiving LTC care are also there for mental health treatment. According to the Centers for Disease Control (CDC), at least three-quarters of LTC providers in hospice, nursing home, and residential care community settings deliver mental health or counseling services. Recent studies have also shown that as much as 20% of older Americans exhibit symptoms of mental health disorders.

Still, not all mental health services are exclusive to crises or disease. A large share of them are focused on improving the day-to-day experiences of those in long-term care. For instance, several mental health researchers recently outlined what mental health could look like in LTC: “Beyond assessments and individual therapy,” the researchers state, “mental health providers have the potential to make substantial improvements in quality of life in the long-term environment. Their contributions can have… positive effects on systems, culture, and the well-being of residents and the effectiveness of staff.”

This is a development that retirees may want to consider. Research continues to suggest that physical strength and mobility are not the only factors in determining one’s ability to function and perform daily chores independently; mental well-being is just as critical.

Despite the general unpredictability around health conditions, some health issues can be forecast with a degree of certainty. Indeed, both peer-reviewed and non-scholarly literature points to potential LTC indicators.

One interviewee describes what this looked like in his case:

“I did an analysis for my wife [based on our income] from TSP, and also realized that the average lifespan of somebody who goes into long-term care is [approximately] two years.”

He describes how this impacted his family’s LTC insurance calculus, pointing out that “we kind of banked on our home because we paid for it within a 15-year mortgage... So [LTC insurance] became an [undesirable] option pretty quickly.” For this individual, having the means to cover LTC and having a keen knowledge of family medical history indicated that taking the risk of not purchasing LTC insurance was a worthwhile bet.

In the words of another participant, “we thought that having long-term care would be the best solution for us and for our family.” He highlights some of benefits he sees as most pressing:

“We wanted to look at nursing home care and [assistance with] Alzheimer’s or dementia or injury.”

This family’s personal financial situation made the acquisition of two long-term care insurance policies the preferred approach.

A conversation with a third interviewee shows that long-term care insurance may be the preferred route for most: “I looked at a variety of different options. I [looked] at the long-term care insurance that was offered by the federal government as well as private insurance companies. It looked like the one that was best for us was with one of the private insurance companies.”

Thoughtful retirement preparation produces freedom and flexibility. Many decisions expectant retirees will make (e.g., when to retire, how to occupy one’s time, which particular healthcare arrangements to make) depend on budgetary constraints. It’s also worth inspecting non-budgetary concerns and understanding what they mean for those nearing the end of their full-time career.

One interviewee focused on a particular aspect of post-retirement life: creating value.

“It’s all about how you define value in your life. Defining value in a social framework outside of work is difficult.”

Asked about his own value sources, he shared that “part of [defining value for me] is how much ‘me time’ I have to sustain myself longer when I retire.” After undergoing a life-threatening triple bypass surgery, the respondent gained new perspective:

“It helped me refocus on gratefulness, and the gratefulness concept is one that sticks with me every day.”

It is not hard to imagine the difficulty of adjusting to a value system that is independent of professional life. With the average American spending approximately 40 years of their life in full-time employment — and surveys showing the extent to which work-related accomplishments drive Americans’ feelings of self-worth — the difficult adjustment experienced by some retirees is understandable.