Four Action Items for Federal Employees With $2M+ Saved
I remember the feeling in early 2020 as I watched the markets drop by 35% in a matter of weeks. With it, down came our client accounts (thankfully not by 35%) and, as a firm owner, my personal income.
The lack of power to change things was what was most uncomfortable for me. I learned to control what I could, which largely had to do with diet, exercise, sleep and my environment. I am sure many of you can relate.
If you’re a federal employee and you have $2 million or more saved, you’re probably SES (Senior Executive Service) or an agency equivalent and are sitting in a pretty senior position. Odds are that your team is asking you for guidance. Odds are you can’t or don’t know how to provide it.
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It may feel sort of like 2020 with things falling all around you. This article is meant to serve as guidance on the financial items you and your team can control.
1. Figure out your expenses
No, I am not asking you to spend five hours creating an itemized budget. For the purposes of this article and the bigger question of “do I have to take this abuse?” you just want to know the total amount you spend.
At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
The easiest way: Look at two years of total debits from your bank account and divide by 24. That’s what you spend monthly. You may have a number in your head that you’ve calculated in the past, but if you haven’t done this exercise in the last two years, that number is too low, thanks to inflation.
2. Make sure your asset allocation is where it should be
Depending on the indexes you’re looking at, stock returns were roughly 10x what bonds were last year. Without knowing it, you may have drifted from the slow lane to the fast lane. I’m here to tell you you’re going 90 mph.
We have seen more market volatility this year than last, but this is not a crystal-ball prediction. It’s simply that your financial plan should dictate a proper asset allocation or stock exposure for each account. If you have not rebalanced in 2025, it’s not where it should be, even if it was last year.
The federal Thrift Savings Plan (TSP) is easy to adjust with five core funds that clearly explain what you’re investing in. The thing that folks often miss is that if you’re rebalancing, you need to make sure that you’re doing it for your existing account balance, not just future contributions.
3. Calculate your current pension
The good news is that if you haven’t done the calculation or requested an estimate recently, this number is likely higher than you thought. The FERS pension is a “unit benefit formula,” which, in English, means you multiply your high-three salary (your highest three years of consecutive earnings) by your years of service by a multiplier that depends on your age. All three of those can increase over time, making this number more generous than many expect.
4. Build out a high-level plan
From a quantitative standpoint, if you can’t take the madness, you just want to ensure that you have enough money to maintain your lifestyle in retirement without running out of money. Here’s where the $2 million from the headline comes into play: You just may be able to. It will all depend on what we covered in point number one: your expenses.
Here’s an example:
Annual income:
- $70,000 from Social Security for a couple
- $55,000 from OPM annuity (pension). Assumes SES, 25 years of service and a 1.1% multiplier. Obviously, actual high-three matters.
- $80,000 from $2 million in investments, using the 4% guideline for simplicity’s sake. There are other strategies that allow you to pull more if you’re willing to reduce or increase distributions based on market movements.
In this example, the pre-tax income adds up to $205,000 per year. Let’s assume a 25% effective tax rate. Even if everything is taxable, that would be $153,750 per year, or $12,812 per month. I know many people who would be comfortable with that in retirement.
I would never encourage someone to make such an important decision using this back-of-the-envelope approach, but I do think it’s a quick and easy method to figure out if you’re in range to make an Office Space-style exit.
For our clients, we rely on a financial planning and tax software to ensure you can walk away confidently. You can access a free version.
I am fortunate to have had only one year in my professional career when I was dealing with chaos and employee turnover on a regular basis (due to an unreasonable leader). I met with a mentor, who encouraged me to stick it out for an entire year before making any decisions. I couldn’t do it.
However, I knew that I could walk away — that is, financially. That was the birth of Exit 59 Advisory. I can’t ensure that you won’t regret not “waiting it out,” but I can tell you that I haven’t regretted it for a minute.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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