Are You Rich Enough to Retire Poor?

5 Hidden traps that silently erode federal retirements.

May 09, 2025

You’ve done the hard part:

You saved consistently, maxed your TSP, and locked in a solid FERS pension.

But here's a question almost no one asks:

Are you managing that wealth in a way that protects your freedom—or quietly sabotages it?

Because many federal retirees with strong portfolios still end up living with less… or working longer than they wanted to.

The Myth of "Enough":

We’ve been told a number—$1 million, $1.2 million, $1.5 million.

But here’s the reality:

✅ $1M in the TSP doesn’t guarantee income security
✅ A pension doesn’t ensure inflation protection
✅ A Roth balance doesn’t mean tax flexibility if you use it wrong

Retiring rich on paper is different from retiring strategically.

And the difference can mean thousands lost each year—without you realizing it until it’s too late.

Example Scenario:

Let’s take a federal employee who retires at 62 with:

  • $1.1M in TSP

  • $2,800/mo FERS pension

  • $60,000 in Roth TSP

  • No plan for withdrawals or inflation beyond CPI

On paper, they're set.

But without adjusting for sequence of returns risk, understanding how TSP RMDs work, or knowing how to coordinate with Social Security, this person could end up:

  • Paying tens of thousands more in taxes than necessary

  • Getting locked into a low withdrawal rate due to early market dips

  • Watching their TSP balance erode faster than projected—especially in high-cost-of-living areas

All while thinking, "I thought I was doing everything right."

5 Silent Threats That Erode Federal Retirement Wealth:

  1. Poor Withdrawal Order – Choosing the wrong sequence between TSP, Roth, and other accounts can increase your tax bill.

  2. Underestimating Healthcare Inflation – FEHB helps, but costs will rise faster than general CPI.

  3. Relying on Averages – Average returns ≠ actual results. Sequence matters more than you think.

  4. Waiting Too Long on Roth Conversions – Miss the early retirement tax window? Say hello to big RMDs later.

  5. Not Planning for Widow/Widower Taxes – Your income may drop, but your tax rate might not.

What You Can Do Right Now:

💎 Run a Withdrawal Stress Test: Look at how your portfolio performs under poor early returns.

💎 Audit Your Tax Timing: Are there 5–10 low-income years where Roth conversions would be optimal?

💎 Map Out a 3-Bucket Income Strategy: Include guaranteed income (FERS/SS), growth (TSP/C Fund), and flexibility (Roth/cash).

💎 Revisit Your TSP Allocation in Retirement: Target-date funds aren’t always optimized for drawdowns.

💎Plan Social Security With Taxes in Mind: Sometimes delaying isn't the best move.

You’ve built wealth.

Now it’s time to protect it strategically, so you don’t accidentally retire “poor” in the ways that matter most.

Best,
Federal Wealth Retirement