Join the Government and Become a Millionaire Off the Backs of Taxpayers

Over the past several years, the number of federal workers with million-dollar Thrift Savings Plans (TSP) has jumped dramatically. In April 2010 there were 75 federal workers with $1 million accounts; in 2013, 929 federal workers had Thrift Savings Plans accounts worth $1 million or more; by August of 2014, that number had jumped to 2,675. By mid 2014, there were 102,910 active and retired feds whose TSP balances were worth more than $500,000. [Source]

Thrift Savings Plans (TSP) are in additional to the pension plans offered to federal employees (TSPs are similar to 401k annuities that are the primary source of retirement plans for the private sector). If you are a federal or postal worker you can join the TSP, max your contributions, take advantage of the 5 percent taxpayer match for FERS employees, and settle in for the long haul. Federal workers not only qualify for pensions, but they can also provide survivor annuities and pass on health-insurance protection to their survivors. [Source]

If you are under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS), you can take regular optional retirement if you are 55 with at least 30 years of service; age 60 with 20 years of service; or age 62 with 5 years. If your agency offers early retirement, you must be at least 50 with 20 years of service or have 25 years of service at any age. An employee under FERS also is eligible for an immediate annuity if he/she has 10 years of service and has reached the minimum retirement age (55 if born before 1948, and gradually increasing to 57). An employee under CSRS must meet the 1-out-of-last-2 year's coverage requirement and all employees must have at least 5 years of civilian service. [Source]


According to the Bureau of Economic Analysis for 2008, the average federal employee made $79,197 [the average private sector employee made $49,935]. The pension for the average employee can be calculated as follows:

$79,197 x 30 Years x 1% = $23,759
$79,197 x 40 Years x 1% = $31,678

Understanding the FERS Retirement

When we talk about your FERS Retirement, we're really talking about several different benefits. FERS (Federal Employees Retirement System) has three main components:

1. Basic FERS Pension
2. Social Security
3. Thrift Savings Plan (TSP)

Your FERS pension and Social Security will be fixed dollar amounts. But the money you get from your TSP will depend on how much you contributed and how well you managed the money.

As a FERS, you have a chance to take a more active role in managing your own retirement than CSRS do. But, that means you need to stay up-to-date on your benefits.

Here are some important things you need to know about each part of your FERS retirement...

Reductions to Your FERS Pension

There are some choices you can make that will reduce the amount of your FERS pension:

• Retiring Before Age 62 with MRA+10
  If you retire before age 62 on an Early FERS Retirement (MRA+10), your pension will be reduced. Your FERS pension will be PERMANENTLY reduced by 5% for every year you are under age 62. Click here to see an example of this reduction and how it might affect you
• Survivor Benefits
  Your FERS Pension could also be reduced if you choose survivor benefits. Will my survivor still get my pension when I die?

Thrift Savings Plan for FERS 

Note: Taxpayers are required to match contributions of up to 5% of wages for each federal employee under the Thrift Savings Plan; most private companies don’t match as much.

The Thrift Savings Plan (TSP) is a special account for Federal Employees. The TSP was created as part of the Federal Employees Retirement System in 1986. Most government employees (FERS and CSRS) are eligible for the TSP — even those hired before it was created.

The TSP allows you to save pre-tax dollars in a special personal account. You can choose how to invest those dollars — although your choices are limited.

With your FERS retirement pension and Social Security, you will receive fixed amounts. But with your TSP, the amount you receive depends on how much you put in and how well you managed the money.

Your TSP contributions are optional and separate from your FERS pension.

You may also be able to get your Federal Agency [taxpayers] to contribute money to your TSP. Click here to learn more about the match the government gives FERS employees.

Social Security for FERS 

Employees covered under the Federal Employee Retirement System (FERS) are typically eligible to receive Social Security benefits when they retire. Every pay period, the Federal Government takes out 6.2% of your basic pay to put towards Social Security. But just like your FERS pension, your Social Security benefit is not based on your contributions - it is based on other factors.

According to the U.S. Social Security Administration, the Social Security taxes you and other workers pay into the system are used to pay for Social Security benefits.

You pay Social Security taxes on your earnings up to a certain amount. That amount increases each year to keep pace with wages.

You pay Medicare taxes on all of your wages or net earnings from self-employment. These taxes are used for Medicare coverage.

EDITORIAL: Public-sector millionaires

Government bureaucrats are bankrupting the country

May 17, 2012  

The Washington Times - Fat cats with big salaries are once again the enemy of the left. At the local, state, federal and even international level, liberal politicians are clamoring for new levies on the selfish few living it up on easy street. Left unsaid is that many of those well-heeled plutocrats are pulling down a public salary.

Lavish governmental payrolls and gold-plated retirement packages are straining finances from coast to coast. California’s budget is $16 billion in the red, and Gov. Jerry Brown this week began begging Golden State voters to approve a ballot measure empowering him to raise $9 billion by increasing the state sales tax to 7.5 percent and imposing a tax on “millionaires” - defined as those who earn more than $250,000. President Obama’s own Buffett tax on “millionaires” would kick in at the same amount.

Earlier this year, the city of Long Beach, N.Y., had to borrow money so it could mint a new pair of “millionaires.” A police lieutenant who was about to retire pocketed a $572,863 payment, and a departing sergeant welcomed an addition of $521,461 to his bank account. That’s big money for a small city, the equivalent of each and every household writing a $75 check for the cops’ retirement.

As bad as the municipal system can be, the federal gravy train runs far deeper. According to a database of federal salaries compiled by the Asbury Park Press, the Department of Veterans Affairs pays its top employee $398,322. Another 800 employees earn a base salary of $300,000 or more. A grand total of 3,797 department employees qualify for the “millionaire’s” salary of $250,000. The Department of Health and Human Services has 182 “millionaires.”

Even salaries that don’t quite reach the millionaire level remain quite generous. At the Federal Deposit Insurance Corp., 135 make more than the $223,500 paid to the speaker of the House, the top legislative-branch salary. A total of 798 Treasury Department staffers pulled in more than a congressman’s salary of $174,000. At the Commodities Futures Trading Commission, 559 out of 665 employees were paid more than $100,000.

Hundreds of bureaucrats who don’t have the fancy base salaries can still find themselves invited to the taxpayer-funded country club through massive bonuses ranging from $20,000 to $63,000 added on top of salaries of at least $160,000. When working for Uncle Sam, there is no economic downturn.

When the pay isn’t so great, public-service employees still can live like millionaires by jetting to exotic locales on the taxpayer dime. Four bureaucrats paid between $83,000 and $146,000 are stationed in Burkina Faso. A pair of six-figure-salaried Peace Corps employees can be found in Fiji. Twenty-five paper pushers enjoy the skiing in Switzerland, courtesy of the U.S. public. Federal gigs are available on resort islands including Aruba, Bermuda, Bahamas, Barbados and Jamaica.

The same people taking advantage of these perks are calling for taxes on the rich. California’s millionaire-tax initiative is almost entirely bankrolled by public-sector labor unions. Government unions also are among Mr. Obama’s top supporters. They realize hardworking Americans need to pay more in taxes so bureaucrats can continue to live like millionaires.

How to Become a (Public Pension) Millionaire

In five states, an average full-career retiree receives a retirement income higher than his final salary.

March 14, 2014

Andrew G. Biggs, Wall Street Journal - Detroit and San Bernardino and Stockton, Calif. are in bankruptcy, and across the country the costs of maintaining pensions for city and state employees more than doubled to nearly $84 billion in 2011 from 2002. Yet the American Federation of State, County and Municipal Employees (Afscme) declares that public pensions are "modest," noting that its average member "receives a pension of approximately $19,000 per year after a career of public service."

The facts don't agree. Data compiled from all state pensions show that, for employees who spend a career in state government, generous pensions put retired public workers among the highest earners in their state.

It is true that average public-pension benefits rarely seem extravagant. But these averages are reduced by two groups: older employees who retired many years ago and whose benefits are far less than those of an employee retiring today; and by short-term workers who often receive tiny pensions but almost surely have retirement savings from another job.

A far more relevant measure of the public-pension burden is how much a typical full-career state employee retiring today receives. In a new study for the American Enterprise Institute, I compiled data from pensions plans' Comprehensive Annual Financial Reports, which show the average benefits paid to a newly retired state government employee with at least 30 years of job tenure. Public-safety employees, who typically receive the most generous pensions, are excluded from these figures. These are not one-off examples of egregious abuses. They are what the average full-career employee actually received in retirement.

The typical full-career state worker retiring this year will receive an annual pension of $36,000, nearly double the $19,000 figure cited by Afscme. Add Social Security benefits, which state-government employees receive in 43 states, and the average rises to more than $51,000. These averages include states such as Mississippi, Indiana and Kansas where pension benefits don't appear overgenerous and aren't controversial.

In California, by contrast, a typical full-career worker retiring today receives $61,560, plus roughly $20,000 in Social Security benefits. In Oregon the average new pension benefit is $58,188, while West Virginia pays $49,141 plus Social Security.

Retiree health benefits, which most state government retirees receive, can add thousands of dollars each year. In Massachusetts, annual retiree health payments average $7,500. The California State Department of Personnel Administration once advertised to prospective employees the nearly half-million dollars in lifetime retiree health benefits they could expect to receive.

Ideally, we could compare the incomes of retired public employees to those of private retirees, but government data do a poor job of tracking the income that private retirees receive from IRA and 401(k) plans. However, we can compare government retirees' incomes, including Social Security, with those of workers in their state. This is a more conservative approach, since retirees need a significantly lower income to maintain their standard of living.

Data from the Bureau of Labor Statistics' Occupational Employment Statistics survey show that the average retired state-government employee has an income higher than 72% of full-time workers in his state. Generous public pensions ignore political bounds. A retired full-career California state worker takes home more than 87% of full-time workers' incomes, but the same is true for Alabama and Texas. Oregon pays its retirees more than is earned by 90% of employees in that state.

Unions claim that no one works for government to get rich, but many public employees become "pension millionaires" along the way. In Nevada, an average full-career state worker can expect to receive $1.3 million in lifetime pension benefits. Alaska, California, Colorado and Oregon all pay lifetime benefits exceeding $1.2 million. A wealthy, high-cost-of-living state such as Connecticut offers more than $1 million in average lifetime benefits to full-career employees who retire today; so does a relatively low-cost state such as West Virginia.

According to the Social Security Administration, financial advisers recommend a retirement income equal to 70% of pre-retirement pay. But 30 states pay replacement rates above 85%, and in five states—Oregon, California, Texas, New Mexico and West Virginia—an average full-career employee retiring today receives a retirement income higher than his final salary.

This isn't to say that every public employee receives a generous pension. Due to vesting provisions and a "back-loaded" benefit formula, long-term employees receive generous benefits but government workers with shorter careers receive far less. Nearly half of government employees leave without any right to future pension benefits. Shorter-term employees would do better with a 401(k) or cash-balance plan, but public employee unions—dominated by long-career employees—oppose most pension reforms.

Pension reform should do three things. 

1. First, make the true costs and generosity of government pensions more transparent, so policy makers and voters have a better understanding of what they have promised.
2. Second, bring the generosity of pension benefits more in line with the private sector. Some state governments might have to pay more generous salaries to attract and retain workers—but most wouldn't.
3. Third, public pensions should treat short and long-term employees more equitably. It is bizarre that state governments, despite per-employee pension spending that dwarfs that of private firms, allow many employees to leave public service with practically nothing set aside for retirement.

Government Pension ‘Millionaires’ Outearn Private Sector

Average public employees in eight states are pension ‘millionaires’; average replacement income 87% of final earnings, AEI study finds 

March 25, 2014

ThinkAdvisor - A private sector worker would have to retire with a 401(k) balance of $768,940 to match the retirement income of an average career state government employee.

That is one of the key findings of a new study by Andrew Biggs, a pension and Social Security expert at the American Enterprise Institute, a free-market oriented think tank.

The study compared total retirement income for full-career state employees, including both pensions and Social Security income (where applicable) among the 50 states, but more critically in relation to career private-sector workers, and found an inequitable distribution of income in favor of government employees.

“Full-career public employees retiring today … receive pension benefits that place them among the highest-income retirees in their states,” Biggs writes.

A second key inequity Biggs found was between state employees of varying career lengths, with benefits calculated in a way that heavily advantages career state employees.

Thus, as a result of policies such as lengthy vesting periods, “shorter-term public employees greatly subsidize the generous benefits received by full-career government workers,” he writes.

But the focus of Biggs’ study is the gap between state workers and the private-sector workers who, directly or indirectly, fund their generous retirement income benefits.

That gap was considerable in that Biggs found that “an average full-career state government employee has a combined pension and Social Security income higher than 72% of full-time employees working in that state”—based on the most recent data and for the average state.

Those numbers skew much higher for states like Oregon, where state employee benefits exceed that of 90% of nongovernment workers. West Virginia, California and Nevada were close behind in the high retirement-income percentile inhabited by state employees.

Biggs emphasizes that his estimates are conservatively calculated because they exclude potential sources of additional income for government workers, such as retiree health coverage. He notes for example that California’s own Department of Human Resources advertises that employees can expect a half-million dollars in health benefits over retirement.

Calculating a present value of lifetime retirement benefits, the pension expert found that average career employees in eight states were pension “millionaires.” Nevada led the pack with its average full-career employee receiving more than $1.3 million in retirement benefits, with Alaska, California, Colorado and Oregon state workers exceeding $1.2 million.

“A wealthy, high-cost state such as Connecticut offers a typical full-career employee more than $1 million in lifetime benefits,” he writes, “but so does a relatively low-cost state such as West Virginia.”

Biggs labels as “false" claims by government employee unions like AFSCME that its average member receives a pension of just $19,000 annually, saying the average career state employee receives roughly twice that amount but that partial-career workers are treated particularly inequitably.

The pension analyst does not claim that public retirees are “so well off, but that other retirees are barely getting by.”

He performs an analysis favored by financial advisors, who typically recommend a level of retirement income equal to about 70% of preretirement income in order to “smooth consumption from work years through retirement.”

Here again state government workers do exceedingly well, with the average career public employee enjoying a replacement income of 87% of final earnings.

Indeed, employees of 14 states wind up in the 90% to 100% range, three (Oregon, California and Texas) in the 100% to 110% range, while New Mexico and West Virginia public retirees enjoy far higher standards of living than in their working years — with replacement incomes of 113% and 115%, respectively.

Biggs briefly touches on possible reforms, including more transparent valuations of defined benefit pensions or a shift to the same defined contribution plans that private sector workers typically get.

While noting that higher pensions in some cases compensate state employees for lower pay, “it appears that in a number of states more-generous pension benefits are sufficient to push overall public-sector compensation well above private-sector levels.”

Ultimately, Biggs asserts the pension gap is a matter of fairness.

“Public employees should be willing to accept—and private-sector workers to demand—more equity in the generosity of their pension plans,” he concludes.