I wonder if you believe it’s realistic to retire at age 50 or even at age 40.
Do you think that’s crazy?
If that’s the case, you’re undoubtedly used to the regular retirement stuff on government employee news websites.
Many publications argue over minute details like whether you may retire at your minimum retirement age (MRA) or if you need to wait until you’re 62 years old.
But what if all of those publications about federal retirement specifics miss the topic entirely?
In the following sections, I’ll help you zoom out and ask the critical questions about retirement that you should be asking yourself.
The FIRE Campaign
In the past five years, if you’ve spent time online, you’ve probably run into many articles about “the FIRE movement.” No, it has nothing to do with arsonists. FIRE is an abbreviation that stands for financial independence and early retirement. People in the FIRE movement save a considerable amount of their wages early in their careers to reach a “crossover point” where their savings can last the rest of their lives.
Furthermore, there are numerous sensationalized tales on internet news sites. I’ve met many folks with FIREd who are ordinary, everyday people like you and me.
It’s Either Your Money or Your Life
The latest version of Vicki Robin’s “Your Money or Your Life” sparked my interest in the FIRE movement a few years ago. The novel begins with a dramatic scenario. You’d hand over your cash if that happened to you.
In reality, we confront the same question every day as we sacrifice (part of) our lives for money. Work not only takes hours away from our loved ones and interests, but the modern workplace is also a breeding ground for cardiovascular disease and metabolic diseases.
Is it worth sacrificing our health, happiness, and relationships for a paycheck?
“Your Money or Your Life” gives you tools to help you figure out how much of your life energy you wasted on things like your car, house, or the newest iPhone. If you’re like me, you might want less stuff once you start looking at goods in terms of the amount of your life you’ve given up for them.
Finally, the book will assist you in determining the point at which your assets will pay your expenses.
The crossover point is approximately 25 times your annual expenses without too much detail. So, if you spend $50,000 yearly, you could live perpetually on $1.25 million.
Are Federal Employees Allowed to Retire Early?
The arithmetic underpinning of early retirement is not particular to any profession or income level. However, some twists make it difficult for federal employees to retire before their MRA.
Once I got the itch to retire early, I began searching the internet for services for federal employees who wished to retire early. Unfortunately, I didn’t discover many solutions to essential questions. I was consequently left to decipher the meaning of early retirement for government employees by sifting through the OPM (Office of Personnel Management) legalese.
I discovered that there is good news and bad news. Early retirees from the government are always better off than their private sector counterparts. Deferred retirement benefits are available to them (based on your years of service, somewhere between 57 and 62). The bad news is that they are wasting taxpayer dollars by leaving the government before their time was up.
How much money, you may wonder?
I estimate that if I leave even one day before my MRA, I will forfeit over a million dollars in retirement benefits.
The Million-dollar Workday
How can one day’s work be worth a million dollars? Especially in the federal government, where highly trained employees are consistently underpaid?
When I did the math, I discovered that reaching the point where you’re eligible for full, immediate retirement (30 years of service + MRA) entitles you to a slew of retirement benefits.
Keeping your FEHB coverage and paying only your share of the premium ($406,000 based on my projections) for the rest of your life.
Get the full FERS annuity ($440,000 more than my lower annuity) ($202,000.)
If you could choose between retiring at the age of 56 and 364 days or working until the age of 57 for an extra million dollars, you’d choose the latter.
But in almost every early retirement scenario you test, you’ll find that leaving a day before your MRA means you’ll lose out on benefits worth more than seven figures.
Who Would Throw Away a Million Dollars?
At this point, a typical FEDweek story would persuade you to fight your MRA to ensure you obtain that extra million in retirement benefits.
But I’m here to tell you that leaving money on the table is perfectly acceptable.
In some ways, we’re all asking the same question as the mugged man. Every day when we go to work, we must choose between our money and our lives and prioritize our dollars before our health.
While it is unpleasant to consider, we do not live forever. This graph indicates that between the ages of 35 and 80, we lose almost half of our fitness, and all but the fittest people lose the capacity to perform simple mobility exercises.
Imagine you’re 40 years old and dream of retiring to Rome and taking a stroll up the Spanish Steps when you’ve saved “enough to be truly safe.” In that case, you might discover that you worked all those extra years to be too feeble to walk up steps.
Working an extra decade for an extra million dollars in retirement has drawbacks. As humans, we’re good at entering dollar amounts into compound interest calculators but terrible at estimating how much of our lives we’re giving up for that money.
How Can You Find out More Information on the FIRE Movement?
I just wanted to give you a flavor of what FIRE is and why federal employees should consider it in this post (even at a potentially large opportunity cost).
There is a slew of critical technical issues to address about early retirement.
- How will I obtain health insurance?
- How can I determine my annual spending in the most efficient manner?
- How will I know if I have exhausted my retirement savings?
- How much of a safety margin should I include in my retirement plans?
Fortunately, many excellent books, blogs, and podcasts may help you answer these questions and create your retirement plan.
Contact Information:
Email: [email protected]
Phone: 3604642979
Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely withhelping them pursue the most comfortable financial life possible.Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.Aaron can help you and your family to create, preserve and protect your legacy.That’s making a difference.
Disclosure:
Disclosure:Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
