Federal Worker Feeling the Uncertainty

Summary

Podcast Summary: Federal Worker Feeling the Uncertainty Episode Title: Federal Worker Feeling the Uncertainty
Release Date: March 13, 2025
Host: Jill Schlesinger, CFP®
Platform: Audacy

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Introduction

In this episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger, alongside her co-host Mark, delves into the financial uncertainties faced by federal employees nearing retirement. The episode centers around a real-life caller, Jennifer from Connecticut, who seeks guidance on navigating potential early retirement amidst shifting job security.

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Caller Introduction: Jennifer's Financial Profile ([03:30])

Jennifer, a 57-year-old federal employee from Connecticut, brings forth her concerns about her readiness for retirement. With nearly ten years of service, Jennifer is on the cusp of qualifying for the Federal Employees Retirement System (FERS), which would allow her to retire between the ages of 55 and 57. Her primary motivation for pursuing a federal career was the pension benefits, which she now fears may be jeopardized.

Key Financial Details:

• Annual Salary: $132,000
• Retirement Contributions: 10% into the Thrift Savings Plan (TSP)
• TSP Balance: $162,000
• Other Investments:
  • TIAA Account: $678,000
  • Fidelity Annuity: $70,000
  • I Bond: $11,000
• Emergency Fund: $20,000
• Home Value: $567,000 with an outstanding mortgage of $298,000 at 3.13% interest
• Marital Status: Married, spouse not currently employed due to health issues
• Children: Two in college (one attending a state school, the other a private institution with significant scholarships)

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Discussion: Navigating Retirement Uncertainty ([05:00] - [14:00])

Jennifer's Situation: Jennifer expresses anxiety over her impending eligibility for FERS. As of the conversation in October, she would accrue the necessary ten years of service to retire at 57. However, the uncertainty surrounding her job security has led her to seek advice on financial preparedness should she need to retire early.

Key Concerns:

• Pension Security: Jennifer’s decision to leave higher education for a federal position was heavily influenced by the promise of a stable pension.
• Cash Flow Strain: Despite a substantial salary, Jennifer indicates that her monthly expenses amount to approximately $6,000, leading to tight cash flow.
• Dependence on Single Income: With her spouse unable to work, Jennifer is the sole breadwinner, increasing the financial pressure.

Mark’s Analysis and Recommendations: Mark conducts a thorough financial assessment, aiming to bolster Jennifer's financial resilience in the face of potential job loss.

1. Adjusting Retirement Contributions ([09:02] - [12:09]):

   • Recommendation: Temporarily reduce TSP contributions from 10% to 5%.
   • Rationale: This adjustment aims to increase Jennifer’s emergency reserves, providing a financial buffer during the uncertain period leading up to her potential retirement.
   • Notable Quote:
     Mark ([09:02]): "I really hope that this is just a temporary little pause and that the money, that extra 5%, goes straight into the emergency reserve."

2. Evaluating Asset Liquidation and Employment Alternatives ([12:09] - [13:52]):

   • Housing Equity: Jennifer could consider selling her home to unlock approximately $270,000 in equity, providing additional financial security.
   • Job Diversification: Exploring opportunities in higher education, given her background and advanced degree, could serve as a fallback option.
   • Emergency Preparedness: Encouraging Jennifer to plan for worst-case scenarios, including the possibility of moving to a rental property to maintain cash flow stability.

3. Encouraging Proactive Planning ([13:52] - [14:00]):

   • Mark emphasizes the importance of proactive financial planning and staying hopeful.
   • Notable Quote:
     Mark ([14:00]): "We need Jennifer to hang on. We got to get her to November 1st. That's the goal."

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Conclusion: Hope and Action Plans ([14:00] - [15:38])

The episode concludes with a message of support and resilience. Jill and Mark reiterate the importance of maintaining open lines of communication for federal employees facing similar uncertainties. They encourage listeners to reach out for personalized advice and emphasize the significance of cash flow management during financial transitions.

Final Takeaways:

• Maintain Flexibility: Adjust retirement contributions as needed to ensure liquidity.
• Explore Housing Options: Consider leveraging home equity to bolster financial stability.
• Diversify Income Streams: Seek alternative employment opportunities to mitigate risk.
• Proactive Communication: Utilize platforms like Jill on Money for support and guidance during financial uncertainties.

Closing Quote:
Mark ([15:20]): "Change your work, change your wealth, change your life."

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Notable Quotes with Timestamps

• Mark ([05:36]): "Okay, great. And are you married? Single, partnered?"
• Jennifer ([05:45]): "Married."
• Mark ([09:28]): "But if you don't make it, it's zero."
• Mark ([11:35]): "I Really, I hopeful that this is just a temporary little pause and that the money, that extra 5%, goes straight into the emergency reserve."
• Mark ([14:00]): "We need Jennifer to hang on. We got to get her to November 1st. That's the goal."

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Resources Mentioned

• Website for Assistance: jillonmoney.com – Listeners are encouraged to visit the website for personalized financial guidance and to access additional content.
• Subscription Platforms: Odyssey app and other podcast platforms for accessing Jill on Money and its sister show, Money Watch.

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This episode serves as a valuable resource for federal employees and others facing similar financial uncertainties, offering actionable advice and a supportive community to navigate through challenging times.

Transcript

[Jill Schlesinger]

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[Mark]

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[Jill Schlesinger]

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[Mark]

Welcome to the Jill on Money show. It's Thursday, March 13th and we are here trying to help you make better, maybe less bad financial decisions. Now really, that's not exactly what we're doing. What we are doing is we are trying to walk you through big decisions in your life that happen to touch your money. And for many of us, when we're making a big life decision, there is usually money involved. I'm sorry to say it's not just that you can ignore it unless you have a bazillion dollars. And even if you have a bazillion dollars, sometimes your emotions will get in the way of the decision anyway. So why don't you get in touch with us? If something's going on, all you need.

[Jill Schlesinger]

To do is go to our website.

[Mark]

Jillonmoney, click the Contact Us button, which is in the upper right hand corner. Write us that note, tell us what's happening. If you'd like to join us live, check the box. Mark the best executive producer in the whole world. He will actually follow up with you and figure out how to get you on the air with us. Maybe on this show might be on our sister broadcast called the Money Watch show. That is also a show that we love. That is a show that is now dropping on Saturdays and Sundays. And you can subscribe to all of our shows here at the Odyssey app.

[Jill Schlesinger]

Or wherever you you get podcasts.

[Mark]

But check out the Money Watch show. We are changing it up a little bit. We're going a little bit more into depth on issues that maybe we sometimes will gloss over here on our show on our Monday through Friday show. So check out Money Watch. You can subscribe on the website or wherever you get podcasts now. With that said, let us turn to the matter at hand. We have Jennifer, who joins us from the nutmeg state of Connecticut. Hello, Jennifer.

[Jennifer]

Hello. How are you?

[Mark]

Are you impressed that I know that it's the nutmeg state?

[Jennifer]

I love that you know it's the nutmeg state.

[Mark]

I know it's crazy. What's going on? How can we help you out?

[Jennifer]

So I am a federal employee and, you know, times are a little crazy. And I'm kind of betwixt and between things right now. And I have some questions on am I all set for retirement if I have to retire early? And you know, a pension is a big reason why I took this job. I love my, love my job. It took me a long time to get to the point where I could apply to be a federal employee. And I've been a federal employee for just shy of 10 years. And that's the crux of the issue. In order to get my Federal Employees retirement system, the FERS, my minimum retirement age can be between 55 and 57, which is okay because I'm 57 with 10 years of service. And I don't actually have 10 years of service until October.

[Mark]

You gotta hold on for dear life, baby.

[Jennifer]

I gotta hold on because a lot of the reasons why I moved out of higher ed, which is where I was before in finance, which is where I was before that was the pension. I have my thrift savings account and I have some money from an old tiaa. I have a Fidelity account. I have all these different pieces. But what I didn't have was a pension. So that was really.

[Mark]

Has anyone in your little area been let go or not?

[Jennifer]

Not yet.

[Mark]

And has anyone been offered an early retirement in your agency?

[Jennifer]

Just the OPM letter.

[Mark]

So I wonder that would be if you had through September, would that give you 10 years or would it have to be through October?

[Jennifer]

It would have to be through October.

[Mark]

Okay, I gotcha. All right. I'm holding on for dear life with you. How much do you earn right now?

[Jennifer]

I earn. I wrote this all out. 132,000 a year.

[Mark]

Okay, great. And are you married? Single, partnered?

[Jennifer]

Married.

[Mark]

Okay. Does your spouse work?

[Jennifer]

No.

[Mark]

Is your spouse okay?

[Jennifer]

He had health issues. So he, he's a little bit older than I am. He's almost 59 and a half. But he's not going to be working. He's going to take some distribution at 59 and a half.

[Mark]

Okay, so. And how old are you? 57. Okay, 57. Got it. And do you guys have kids that are grown?

[Jennifer]

We have two in college.

[Mark]

Oy vey. Okay, how's that being paid for?

[Jennifer]

I had set aside a college fund. So one's in state school and one is in private. Actually, in this account, this situation, the private school is less than the public.

[Jill Schlesinger]

That's so weird.

[Mark]

Is that because there was more money available at the private school?

[Jennifer]

Yeah. Excuse me. More scholarship money available at the private school.

[Mark]

Hmm, Amazing. Isn't that? Because, you know, your default is always state school. But then, yeah, some of these richer, smaller schools and private schools have the money to help you out. So how is your cash flow right now on just your Single salary of 132,000?

[Jennifer]

Tight. My cash flow is very tight.

[Mark]

How much money are you putting into the thrift savings plan?

[Jennifer]

I'm putting in 10% of my weekly pay, my bi weekly pay.

[Mark]

How much money is in the thrift savings right now?

[Jennifer]

$162,000.

[Mark]

How about that old TIAA? What's in there?

[Jennifer]

$678,000.

[Mark]

And the Fidelity account, is that a brokerage account or a retirement account?

[Jennifer]

It's an old annuity with 70,000 in it.

[Mark]

And you mentioned that there's college savings, but that's all going to be spent, right?

[Jennifer]

Yes, that's already earmarked.

[Mark]

And any other money that is non retirement, like a brokerage account?

[Jennifer]

No, I have. Well, I have 10,000 in an I bond.

[Mark]

Okay.

[Jennifer]

That I got a couple of years ago when the interest rate was nice. Yeah, but it's, it's about $11,000 now.

[Mark]

Okay, and what about cash? Like savings, checking, money market, anything like that?

[Jennifer]

No, we have about $20,000 emergency fund.

[Mark]

Okay, that's fine. And you own your home?

[Jennifer]

We have a mortgage.

[Mark]

Well, that's okay. You still own the home. We're going to help. So how much is the house worth?

[Jennifer]

The house is worth 567,000.

[Mark]

I'm going to say 565. I like round numbers, gang. What is the outstanding mortgage amount?

[Jennifer]

298,000.

[Mark]

Do you happen to know the interest rate on that?

[Jennifer]

3.13.

[Mark]

Okay. And you love this house. You're going to stay in this house?

[Jennifer]

Going to stay in this house until we retire and then sell it.

[Mark]

And then where are we going?

[Jennifer]

Don't know.

[Mark]

Mark has an extra bedroom. Are you a good cook?

[Jennifer]

Because you know, I am a good cook.

[Mark]

There you go.

[Jennifer]

I'm really not very good at handyman jobs, so something that has.

[Mark]

He's good at that.

[Jill Schlesinger]

Don't worry.

[Jennifer]

That's been.

[Mark]

So when you look at the tight cash flow, have you considered pulling back a little bit on the thrift savings plan?

[Jennifer]

I'm nervous about doing that.

[Mark]

I'm going to tell you what I'm thinking and then we'll go through this. So right now, if you make it to October 31st, if you get to November 1st, what would the pension amount be?

[Jennifer]

The pension would be about 1,500.

[Mark]

Okay, 1,500amonth. But if you don't get to 10 years, it's zero.

[Jennifer]

Yeah. I can't find anything that tells me differently.

[Mark]

Okay, that's fine. I'm not going to. Will not change that. How much do you think you need right now? Like when you're look at your tight cash flow, what do you think you're spending on a monthly basis? Six, $7,000, 8,000, what is it, a month?

[Jennifer]

About $6,000 a month.

[Mark]

Okay.

You said when your husband turns 59 and a half, he's going to start taking distributions. What does he have?

Yes. Where is he?

[Jennifer]

Well, his distribution would come out of the $678,000 that was his TIA.

[Mark]

Okay. Okay.

Okay. Includes husband. Okay. Is your husband disabled?

[Jennifer]

He is recovering from a cancer diagnosis, so.

[Mark]

So it's not disabled in the sense that he was. He's not claiming Social Security disability?

[Jennifer]

No.

[Mark]

Okay. And what will his Social Security benefit look like when he is 62, 67, what's that look like?

[Jennifer]

It'll be about 1,600. When he's 62, it'll be 2,300 at 65.

[Mark]

And if you make it for those 10 years, do you get healthcare for life?

[Jennifer]

Yes.

[Mark]

Okay, got it. And then I guess until you get to 65 and then you go over to Medicare, Is that how it works?

[Jennifer]

Yep.

[Mark]

Okay. Okay. So I'm thinking that we temporarily reduce your Thrift savings plan from 10% to 5%. And the reason I'm thinking that is that I Really, I hopeful that this is just a temporary little pause and that the money, that extra 5%, goes straight into the emergency reserve. I want you to try to bulk up your cash a little bit because if you don't, just in case. Is exactly right. Just in case you don't make it. So this is not a big bet that we're making in terms of the thrift savings plan. We're saying, you know, the rest of March, April, May, June, July, August, September. So seven, eight months. Now, let's say that you make it through this fall deadline. Would you stick around?

[Jennifer]

Yes, I would.

[Mark]

You'd stay as long as they'd have you?

[Jennifer]

I'd stay as long as they'd have me.

[Mark]

Okay, so then I definitely think pulling back to a 5% thrift savings plan. Mark, are you okay with that?

Yeah. At least for the time being. See what happens. Yeah. Stockpile some cash.

Let's get some cash together. Because here's. Here's the upside and the downside. The upside is that like, oh, I've made a terrible mistake. I've been. I was fine. What was I thinking? No problem. And you can just restart that, you know, once you get to November or maybe even the following year. Okay.

[Jennifer]

Okay.

[Mark]

Now the downside of, of like that what you're facing risk wise is that you don't make it. We lose that fifteen hundred dollars a month, you got to go get another job because there's not enough money here to get you to where you want to go. So what I think is most prudent is to do exactly what you're doing, do your job. I'm sorry that this is happening right now, but there's a few things that are in your favor. I mean, if you want to do like the, the break the glass scenario, planning, if you get booted out, right. You go and you try to find another job. You either can find it or you can't find it. But maybe what you would do is if you really got freaked out, you could always sell the house. You got a couple hundred grand in equity in that you could, like, settle in a second, take a breath, go rent somewhere, stockpile your cash and find yourself a job. I don't think you're going to have to do that. I'm going to hope, because we're going to do hope that you keep your job. But I think what you should do is, even though you have so far evaded this, I think you should, just for your own peace of mind, you're going to pull back the thrift Savings plan, investment. But I also think it would behoove you to start looking around for ways. What would I do if, like, if you lost your job right now, where could you go?

[Jill Schlesinger]

Could you go back to higher ed?

[Mark]

Is that a possibility?

[Jennifer]

It is.

[Mark]

Not that they're doing so great, but, you know, it's possible, right?

[Jennifer]

Yep, it is a possibility. You know, I do have advanced degree, you know, and. And I am in Connecticut, so that is college land. Right.

[Mark]

Okay.

[Jennifer]

So. So there's that, you know, just love my job, so this was really gonna. Just so disappointing. And I'm so close.

[Mark]

I know, I know. Well, I'm gonna be hopeful. Mark, how are you feeling? You feeling hopeful or not? Let's take Mark's temperature right now.

Fingers and toes across, like, for real.

Everything crossed. But I think, listen, if you hear otherwise, if the news isn't good, I want you to get back in touch with us and we're gonna put together the game plan for what needs to happen next. You get right to the top of the line. Cause any government employee who's listening or someone who's just been let go, you get to cut the line. You're going to get preference. You're going to come on the program with us. So, Jennifer, do you guys have your estate documents done?

[Jennifer]

We do.

[Mark]

Okay, good. Let's go community. Get your, like, collective good wishes going. We need Jennifer to hang on. We got to get her to November 1st. That's the goal. If you are out there and you're freaking out, because I know, I hear it in Jennifer's voice, it's not a pleasant time. If something is going on, let's lay out some game plans for you. Maybe again, again, pulling back temporarily on your retirement contribution to help your cash flow. This is the most important thing you can do in times of transition and crisis. Cash, cash, cash, gang. You've got to try to really stockpile that. But get in touch with us if you need some assistance, go to jillonmoney.com hit the contact us button. Write us that note. Don't forget, while you're on the website, check out all of our content that lives there, all the links to everything else that we. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen and of course, lift someone up. Let's lift up Jennifer, for God's sakes. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.

[Jill Schlesinger]

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been complex, time consuming and expensive. But imagine if real estate investing was suddenly easyall the benefits of owning real, tangible assets without all the complexity and expense. That's the power of the Fundrise Flagship Real Estate Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as $10 4700 single family rental homes spread across the booming Sunbelt 3.3 million square feet of highly sought after industrial facilities. Thanks to the e commerce wave, the Flagship Fund is one of the largest of its kind, well diversified and managed by a team of professionals. And now it's available to you. Visit fundrise.com jillonmoney to explore the fund's full portfolio. Check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] Flagship this is a paid advertisement. Sometimes I wish I had a personal sommelier to guide me through the world of wine, helping me discover bottles I'd never find on my own. And then I found Soamsation, which might be even better. Psamsation's expert team does exactly that. They seek out incredible wines from top independent producers that you won't find in stores. These aren't mass produced wines. They're made with care and precision, using pure ingredients and meticulous winemaking. Their sommeliers curate every bottle, ensuring you're not just drinking good wine, you're experiencing great wine. You can shop their online store, join a curated wine club, or take it up a notch with virtual or private tastings. Explore [e-mail] jillonmoney.