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The Biggest Retirement Fear

Brad Bobb CFP® | April 25, 2018

Many studies about retirement fears show that retirees’ biggest fear is running out of money. Running out of money as a valid fear for retirees, but should it be a valid fear for federal retirees?

Although it is possible for federal employees to run out of money, it is much less of an issue than it is for the private sector. Why? Federal employees have a large amount of guaranteed income that they can count on as a steady stream of cash flow in retirement.

But here’s the catch: although federal employees have a larger amount of guaranteed income, that doesn’t mean they are immune to the risk of running out of money.

One of the most common retirement studies that has been done is one on sustainable withdrawal rates. These studies are based on a number of factors such as what the best investment mix of stocks and bonds is, how markets have performed in the past, inflation, and the sequence of market returns. The analysis is designed to provide a percentage that can be safely withdrawn from an investment portfolio without running out of money.

The most common number studies have come up with is 4%. This would mean that a retiree with a portfolio of $500,000 can withdraw $20,000 in the first year of retirement and increase that amount by approximately 3% yearly to adjust for inflation. This number isn’t an “end all be all” number, but rather a helpful guideline to use.

What is the Real Risk for Federal Employees?

The real risk for federal employees should be a reduction in income.

A career spent working for the federal government should provide an income from a FERS annuity and Social Security that would cover approximately 60% of preretirement income. If an employee can retire on 80% of their preretirement income, then investment income needs to account for approximately 20%.

With 60% of preretirement income coming from guaranteed sources, the risk of running out of money should be significantly lower void of a major catastrophe or a spouse needing long term care.

The real risk should be a lifestyle adjustment. A lifestyle adjustment, or a change in spending could be necessary to avoid running out of money. This is definitely a retirement risk.


Everyone has heard the definition of insanity is doing the same thing over and over and expecting a different result. If you retire and spend the same amount of money year after year and see your portfolio decrease every year, you are definitely risking running out of money. Stop the insanity!

If you find yourself in this situation, you need to adjust your spending. This can be hard to do on your own and is an element that an advisor can help with. One of the most important things an advisor can do is challenge clients when their behavior is damaging their future. Do you need to adjust your spending after one down year? What about two? Maybe 5? These are questions that you may need answers to at some point.

The ability to adjust spending can be boiled down to control of your expenses. Controlling your expenses in retirement gives you the ability to adjust spending when needed. If you can eliminate debt payments before entering retirement, a substantial portion of your spending will be discretionary which should make it relatively easy to adjust if needed.

Going back to the question above, research has proven that there are times when it is in your best interest to adjust your withdrawals. Here is a link to one of my favorite retirement income studies.


Retirement and distribution planning are a completely different world than what people have grown accustomed to. It is no longer about building a nest egg, but instead drawing income from it or depleting it. Retirees need to do their due diligence when it comes to distribution planning. There may be times that a reduction in income is necessary in order to preserve assets, yet there also may be times that a retiree can afford an increase in retirement income.

Knowing when to do these things, as well as where to draw the income from can help prevent a retiree from running out of assets in retirement. If you would like a partner to assist you in the distribution phase of life, you are welcome to set up an introductory call with Brad.

Brad Bobb, CFP® is the owner of Bobb Financial Inc, and an expert in retirement planning for federal employees.