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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Tracy’s real question Tracy is 54, a permitting supervisor for a county planning department, and has 27 years in PERS 2. She wants to retire at 58. On our call she shares her screen. Someone at a retirement workshop suggested she move a chunk of her DCP into an annuity, and she’s been sitting with it for weeks. Her question isn’t really whether the math works. It’s whether she’ll be able to watch an account balance fall in a bad market and not do something she regrets. Two preferences that shape everything else A few years back, researchers Alejandro Murguia and Wade Phau went looking for why well-informed people reach completely different conclusions about how to fund a retirement. They ended up with 2 preferences that account for most of the difference1. The first is where you want the income to come from. Some folks are comfortable relying on market growth over a long horizon. Others want essential spending covered by contractual income that arrives no matter what stocks do. The researchers call that probability-based versus safety-first1. The second is how willing you are to lock a decision in. Flexibility matters enormously to certain people. Others would rather commit once and stop revisiting it1. Combine them and you get 4 approaches: total return, income protection, time segmentation, and risk wrap1. Preferences also held steady as people aged, and they didn’t shift once people actually retired1. About two-thirds of people want more certainty than a withdrawal plan alone can offer1. She already owns most of what she’s being sold For Tracy, a lot of work is already done. PERS 2 pays 2% times her average final compensation, every month for the rest of her life with a cost-of living adjustment2. Let’s assume her average final compensation is $8,200/month. Retiring at 58 puts her at 31 years of service credit, and because she started before May 2013, her early retirement factor is 0.892. That puts her pension at roughly $4,525 a month. Now let’s add in Social Security which will be $2,500/month at 67. That puts her total income at $7,025 before factoring any income that can be generated from her DCP. If her essential spending runs $6,000 a month, Tracy isn’t short, she’s covered with room to spare. An annuity can still be the right call for some people. It’s just that the gap being sold is usually smaller than it looks, and for someone with Tracy’s service credit it may not be there at all. Washington’s own annuity option If income protection is Tracy’s instinct, there’s something inside DRS I’d want her to look at first. When you retire, you can use pre-tax DCP savings to buy a plan annuity that gets added to your pension payment2. You give something up for that. Once the purchase is complete you can’t get those dollars back, and you have 15 days to cancel2. Seven years that need to stay flexible Retiring at 58 means seven years before Medicare. Those are the years I’d be the most careful about committing money permanently. PEBB retiree coverage has a hard deadline. The enrollment or deferral form must reach the program within 60 days after your employer paid COBRA, or continuation coverage ends3. Her DCP is unusually flexible during that same stretch. Distributions from a 457(b) generally aren’t subject to the 10% additional tax on early distributions, before 59 ½ 4. That exception doesn’t extend to dollars she rolled into the plan from a 401(k), 403(b), or IRA4. Those DCP dollars are doing 2 jobs at once. They can bridge her income before Social Security, and they can create room for Roth conversions while her taxable income is low. Money put into an annuity losses important flexibility. Where to start Before you look at any product, get clear on which expenses you want covered no matter what markets do. Housing, groceries, insurance, and healthcare. Then ask which dollars might need to do a completely different job ten years from now, whether that’s a move or health event. And be honest about the risks you’d rather pay someone else to carry than hold yourself. Once you have those answers, use the DRS benefit estimator or request an official benefit estimate and set your covered income next to your essential spending. If there’s no gap, you have your answer. If there is one, you at least know what you’re solving for. Sources 1.Murguía, Alejandro, and Wade D. Pfau. "Risk Tolerance Questionnaires and Retirement Income Concerns." Retirement Income Institute, Alliance for Lifetime Income. December 2022. https://www.protectedincome.org/wp-content/uploads/2022/12/RP-18C_Murguia_Pfau_Dec_v3.pdf 2.Washington State Department of Retirement Systems. "PERS Plan 2." https://www.drs.wa.gov/plan/pers2/ 3.Washington State Legislature. "WAC 182-12-171: When may a retiring employee or a retiring school employee enroll or defer enrollment in PEBB retiree insurance coverage?" https://app.leg.wa.gov/wac/default.aspx?cite=182-12-171 4.Internal Revenue Service. "Retirement topics — Exceptions to tax on early distributions." https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-on-early-distributions -Seth Deal
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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Rhonda pulled up a retirement calculator during our call and shared her screen. She's 54, a permit supervisor for a public works department, 28 years in PERS 2. She'd like to retire at 57. The calculator had given her a goal savings number. It was roughly double what she had saved. She'd been looking at it for a week. Then she asked me a question. “Am I behind.” I asked her where she had entered her pension. She hadn't. There wasn't a field for it. The number was built for somebody else Most retirement math starts from an assumption that doesn't describe you. It assumes the money you live on in retirement comes from one place, the pile you saved. When the pile has to do all the work, the pile has to be enormous. Your pile isn't doing all the work. If Rhonda leaves at 57 with 31 years of service, her PERS 2 benefit is 2% times her service credit years times her average final compensation, then multiplied by an early retirement factor. With 30 or more years and a hire date before May 2013, the 2008 early retirement factor at age 57 is 0.861. So she takes a 14% haircut for going 8 years early, and keeps a monthly benefit for the rest of her life with a cost-of-living adjustment attached2. That's not a small footnote to her plan. That's the floor her whole plan sits on, and the calculator never asked about it. Where the pension changes the answer There's a new piece of research worth knowing about here. Vanguard published work in early 2025 identifying people who may benefit from claiming Social Security early, which cuts against the usual advice to wait as long as you can. One of the four groups they name is pension holders whose payments cover their spending needs3. The logic is that early Social Security reduces what you have to pull from your portfolio in those first vulnerable years, which leaves more invested and lowers the odds you're selling into a bad market to pay the electric bill3. I want to be careful here, because this gets misread fast. Claiming at 62 with a full retirement age of 67 permanently reduces your monthly benefit by 30%4. That's forever, and it follows your survivor too. Vanguard isn't saying everyone should claim early. They're saying the calculation looks different when guaranteed income is already covering your essentials. For a lot of the people I work with, that's a genuinely different starting point than the one the internet assumes. Where I'd push back on the popular version of this The common argument for retiring earlier with less goes like this: your spending naturally falls as you age, so you need less than you think. The research on that is more specific than the way it usually gets repeated. Researchers at the Center for Retirement Research at Boston College found that household consumption declines about 0.7% to 0.8% a year across retirement5. Here's the part that gets left out. Households in the top third by wealth declined about 0.35% a year. Households who reported very good or excellent health at retirement declined about 0.65% a year. Wealthy and healthy together, roughly 0.3% a year, which is close to flat5. The authors' conclusion was that the observed spending drop mostly reflects constraints rather than preference. People spend less because they run short or their health limits them, not because they wanted to5. When I build plans, I don't count on a declining spending curve. I'd rather assume you keep living the way you like and be pleasantly surprised. The bridge nobody tells her about The years between 57 and 62 are the actual problem in Rhonda's plan, not the size of her nest egg. That's the stretch with no Social Security, health coverage to buy on her own, and a reduced pension carrying part of the load. Her DCP account is built for exactly that stretch. Once you separate from the employer you were contributing to DCP at, you can take withdrawals without a 10% early withdrawal penalty6. What I'd do before touching another calculator Request an official benefit estimate from DRS, which you can do within 12 months of your retirement date1. Then write down what you actually spend, separating what you must cover from what you'd like to cover. Compare the essentials against the pension. Whatever's left is the number that matters, and it's the only one worth stress testing. Rhonda may still not be able to leave at 57. I don't know yet, and neither does she. But she'll find out from her own numbers instead of somebody else's. Sources 1. Washington State Department of Retirement Systems. "PERS Plan 2." https://www.drs.wa.gov/plan/pers2/ 2. Washington State Department of Retirement Systems. "Cost of Living Adjustment (COLA)." https://www.drs.wa.gov/life/retired/cola/ 3. Vanguard. "Social Security: For some, early claiming is better." February 27, 2025. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/social-security-for-some-claiming-early-better.html 4. Social Security Administration. "Program Explainer: Benefit Claiming Age." https://www.ssa.gov/policy/docs/program-explainers/benefit-claiming-age.html 5. Chen, Anqi and Alicia H. Munnell. "Do Retirees Want Constant, Increasing, or Decreasing Consumption?" Center for Retirement Research at Boston College, WP 2021-21. December 2021. https://crr.bc.edu/wp-content/uploads/2021/12/wp_2021-21.pdf 6. Washington State Department of Retirement Systems. "DCP – Deferred Compensation Program." https://www.drs.wa.gov/plan/dcp/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Cheryl is 57, has 31 years in PERS Plan 2 with a county public works department, and she brought a spreadsheet to our first call. One tab. A single number for annual spending. Then 35 rows of that number growing 3% a year until she turns 92. She built it herself over a couple of weekends, and she should be proud of it. Most people never get that far. But when I asked what she actually spent last year, she said something I hear all the time. “Roughly that. Except we put on a new roof, so that year was weird.” Every year is weird. That's the part a single row can't hold. Six in ten J.P. Morgan had a way to check. They pulled anonymized transaction data from more than 280,000 Chase households and watched what left the accounts1. Then they compared each household's spending in the 12 months before retirement to each of the first three years after. Six in ten landed in what the researchers called volatile spending. Their spending temporarily rose or fell by 20% or more compared to that final working year1. Only 18% stayed within 20% of their old number all three years1. The researchers nicknamed that group the Steady Eddies, and they're the only ones who spend the way a plan assumes. It doesn't calm down as fast as you'd hope. Among retirees between 75 and 80, about half were still seeing volatility in their spending1. Cheryl's average was probably fine. The shape was the problem. Nobody clocks out on a Friday and never works again The finding that surprised me most had nothing to do with spending. More than half of the households in the study, 53%, didn't retire all at once1. One spouse stopped and the other kept going. Or someone left a career and picked up part-time work while a pension started. I see that constantly with public employees, and Cheryl is one of them. Her husband is staying another two years. The study also found that the post-retirement spending surge showed up in households with pre-retirement income under $150,000 and disappeared entirely above that1. Cheryl and her husband are above that line, so I'm not going to sit on a Zoom call and warn her she's about to blow through her budget. What I'd watch for her is the lumpiness. The bill that climbs faster than your COLA Then there's healthcare, which runs on a different clock than everything else. If Cheryl retires next year at 58, she has seven years before Medicare. If she carries PEBB retiree coverage, the 2026 rate for Uniform Medical Plan Classic covering her and her husband, neither of them on Medicare, is $1,935.11 a month2. That's about $23,200 a year before dental, vision, deductibles, or anything she uses. It's one of the largest line items in her plan, and it doesn't behave like the rest of her budget. For planning purposes, J.P. Morgan suggests assuming roughly 6% annual increases on Medicare-related costs1. Healthcare has a long history of outrunning general inflation. Her PERS 2 pension carries a cost-of-living adjustment capped at 3% a year3. When inflation runs higher than that, the excess gets banked for a future year when inflation comes in lower3. The biggest expense of her early retirement can climb at roughly twice the rate of the only automatic raise her pension will ever give her. That gap doesn't appear anywhere in a spreadsheet built on one growth rate. What we changed Her spending number barely moved. The average was close. What we did was pull the lumps out of the average and give them their own lines. The truck is on borrowed time. Her daughter's wedding is coming whether it's in the plan or not. And there's the trip to Ireland she's been putting off since that daughter was in high school. Each one got a year and a dollar amount instead of being smeared across three decades at 3%. Then we built liquidity to cover them. Because the danger in a year where you spend $40,000 more than planned isn't the $40,000. It's selling investments to fund it while the market is down 18%. That's how a temporary spending bump turns into a permanent loss, and it does the most damage in the first few years, when the balance is highest and there's the least time to recover. Start with your bank statements If you're within five years of retiring, give this an hour. Pull your last three years of real spending. Whatever cleared the account, however uncomfortable that number turns out to be. Then write down every expense over $5,000 you expect in your first five years of retirement, with the year you expect it. If your plan can absorb all of them landing in a bad market, you have a plan. If it only works when they land in a good one, you have a forecast. Sources 1. J.P. Morgan Asset Management. "Three new spending surprises: Additional insights into retirement spending behaviors." 2024. https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/retirement-insights/ri-3-spend.pdf 2. Washington State Health Care Authority. "2026 PEBB Retiree Monthly Premiums, Effective January 1, 2026." https://www.hca.wa.gov/assets/pebb/51-0275-retiree-monthly-premiums-2026.pdf 3. Washington State Department of Retirement Systems. "COLA: Cost of Living Adjustment." https://www.drs.wa.gov/life/retired/cola/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. The spreadsheet that grows forever Doug shares his screen and pulls up the retirement spreadsheet he has been building since March. He's 54, a public works supervisor with 29 years in PERS Plan 2, and he's clearly put real hours into this. Color coded tabs. Formulas stacked on formulas. I scroll down to the spending column and stop. Every year from 58 to 95, his expenses grow by 3 percent. Groceries at 87 cost more than groceries at 68. So does travel at 91. "That's what inflation does," he says. It is. But that isn't quite what happens to retirees. Doug built the same assumption almost every retirement calculator builds. I've built it into plans myself without thinking twice about it. The spending peak comes before retirement The simplest version of the evidence comes from the Bureau of Labor Statistics, which tracks household spending by age. Spending peaks for households headed by someone between 45 and 54, then declines for every older age group after that1. Doug is sitting in the highest spending decade of his life right now. You might expect the opposite. Healthcare takes a bigger bite as people age, and prices there have a long history of rising faster than everything else. The government even maintains a separate research inflation index built around households 62 and older to reflect that2. So the raw ingredients point one direction and the actual spending goes the other. A snapshot by age group has limits, though, because it compares different households at a single moment. Maybe today's 80 year olds simply grew up more frugal. Researchers went further and followed the same households for two decades. A study published this year in the Financial Planning Review by David Blanchett, using the Health and Retirement Study, found that inflation adjusted spending declines steadily through retirement for the typical household3. Stretch the window to ten years and as many as 85 percent of retiree households were spending less in real terms than they had a decade earlier3. That doesn't mean fewer dollars leave the checking account. Most retirees still spend more actual dollars each year. Their spending just doesn't keep full pace with prices. They aren't all cutting back because they have to This is the part I kept thinking about after I read it. If retirees spend less because the money ran out, then building declining spending into a plan is a mistake. You'd be planning to fall short. But the study sorted households by how well funded they were, from badly underfunded to very overfunded. The underfunded households cut hard, which is what you'd expect. The adequately funded households still trimmed their real spending. So did the overfunded ones3. Only the most overfunded group increased spending at all, and barely. Nowhere near what their resources allowed3. There's also a pattern worth noticing if you're reading this. Households spending $80,000 or more per year reduced their real spending regardless of how well funded they were3. Diligent savers with comfortable plans, still pulling back. Why your DRS pension changes this math That pattern lands differently when you have a pension. Your Plan 2 or Plan 3 benefit receives an automatic COLA each July once you've been retired a year, and that COLA is capped at 3 percent, with anything above the cap banked for future years4 5. Social Security adjusts annually as well6. Members raise that 3 percent cap with me constantly. What happens in a year like 2022? It's a fair concern and I'm not waving it off. But the research changes the size of it. If your real spending drifts down over time instead of climbing with inflation for 35 straight years, a capped COLA has less ground to make up than the worst case in your head suggests. There's a second piece. Your pension and Social Security tend to cover the essentials, which are the most inflation sensitive part of your budget. Your DCP and personal savings fund the flexible spending. Travel, hobbies, the camper, the grandkids. Flexible spending is exactly the category that fades with age. What I told Doug I didn't tell him to delete the inflation column. The fix is to stop applying it uniformly out to 95. If he retires at 58 and his most active decade runs from 58 to 68, the plan should show higher spending in those years and lower spending later, rather than a smooth line that overstates 85 and understates 60. The healthcare tail needs its own line. Most retirees never face a catastrophic late life medical event, but a meaningful minority do, and it's expensive3. That risk belongs in the plan as a funded item, whether through long term care coverage or a dedicated pool of assets. It shouldn't sit there as a vague fear that quietly shrinks every year of spending. None of this touches the bridge, either. Doug retires seven years before Medicare, and PEBB continuation or a marketplace plan is a real cost in exactly the years his other spending will be highest. Lower spending at 82 does nothing for the premium at 59. Where to start Open your own projection and find the spending column. Ask what growth rate it uses, and whether that rate changes anywhere between 60 and 95. If it grows at a constant rate for three and a half decades, you're looking at an assumption rather than a forecast. Then ask a harder question. What would you do differently at 60 if the plan gave you room to? Doug's answer was a fly fishing trip he'd been putting off for six years. Nothing in this research says he has to take it. It just takes away one of the reasons he wasn't. Sources1. U.S. Bureau of Labor Statistics. "Consumer expenditures vary by age." Beyond the Numbers. https://www.bls.gov/opub/btn/volume-4/consumer-expenditures-vary-by-age.htm 2. U.S. Bureau of Labor Statistics. "Research Consumer Price Index for Americans 62 Years of Age and Older (R-CPI-E)." https://www.bls.gov/cpi/research-series/r-cpi-e-home.htm 3. Blanchett, David. "How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?" Financial Planning Review, 2026. https://onlinelibrary.wiley.com/doi/full/10.1002/cfp2.70032 4. Washington State Department of Retirement Systems. "COLA: Cost of Living Adjustment." https://www.drs.wa.gov/life/retired/cola/ 5. Washington State Legislature, Office of the State Actuary. "Cost-of-living adjustments." https://leg.wa.gov/studies-audits-and-reports/actuarial-reporting/pensions/funding/cost-of-living-adjustments/ 6. Social Security Administration. "Cost-of-Living Adjustment (COLA) Information." https://www.ssa.gov/cola/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. I am a CPA and financial advisor, not an attorney, and this article is educational and not legal advice. Documents like powers of attorney should be drafted or reviewed by a licensed estate planning attorney.
A phone call about her father Wendy calls me on a Tuesday morning, and I can tell right away this one is different. She's 54, a county employee, PERS Plan 2, planning to retire at 59. Usually we talk about her pension timing and her DCP balance. Today she wants to talk about her dad. He had a small stroke over the weekend. He's going to be okay. But the bills keep coming, and when she called his bank to help, they wouldn't talk to her. She's his only daughter. She has a key to his house. None of that mattered to the bank. "I thought being family was enough," she says. It almost never is. Love and trust are not the same as legal authority Here's the part that surprises people. You can be the most trusted person in someone's life and still have no legal right to manage their money. The tool that fixes this is a durable power of attorney for finances. It lets someone you choose (your agent) step in and handle bills and accounts while you're alive.1 "Durable" is the important part. A regular power of attorney generally stops working the moment you become incapacitated, which is often the exact moment help is needed. A durable one keeps working through it.2 Some of these documents take effect the day they're signed. Others "spring" into effect only after a doctor certifies incapacity.2 Springing sounds safer. In practice, getting that certification during early memory loss can be slow and frustrating, right when a family is already stretched thin. Wendy's father, it turned out, had signed a durable power of attorney years ago. We just had to find it and get it to the bank. What happens when the document doesn't exist Plenty of families never get there. One national study found that only about 41 percent of parents expect their children to hold financial power of attorney for them.3 A common reason is simple: spouses name each other and never name a backup. When there's no valid power of attorney and someone loses the capacity to sign one, the path forward usually runs through the courts. In Washington, that means a conservatorship under Chapter 11.130 RCW, where a judge decides who can manage the person's finances.4 It works, but it's a different experience. It becomes public record. It can take months. And the conservator often has to file an annual accounting with the court for as long as it lasts.4 A power of attorney signed ahead of time avoids most of that. The only thing that decides which path a family takes is whether the document got signed while it still could be. Then Wendy asked the better question We sorted out her dad. Then she got quiet for a second and asked the question I was hoping she'd ask. "Wait. If something happened to me, could Mark even touch my accounts?" Mark is her husband. And this is where it gets specific for public employees. Your DRS accounts don't work like a joint checking account. For your agent to act on your pension or DCP, DRS requires two things: a valid power of attorney and a notarized Affidavit of Attorney in Fact. The power of attorney also has to meet Washington's requirements under Chapter 11.125 RCW.1 Being married doesn't override that. Without the right documents on file, even a spouse can hit a wall. The powers people forget to include There's one more layer, and it's easy to miss. Washington law treats certain powers as "hot powers." Things like making gifts or changing a beneficiary designation only work if the document specifically grants them. A general power of attorney doesn't cover them automatically.5 Why does that matter for you? Because so much of your retirement passes by beneficiary designation, not by your will. Your DRS benefits go to the people you name, and if you name someone other than your spouse, state law may still require DRS to pay your spouse.6 If nobody can legally coordinate those designations when you're unable to, a small oversight can become a permanent one. A few measured steps None of this needs to happen this week. But here's where I'd point Wendy, and where I'd point you. Find out what you already have. Pull the actual documents. Are they durable? Immediate or springing? Nobody remembers until they read the fine print. If you have an immediately effective power of attorney, consider getting it to your institutions now, including DRS, so you learn about any problems while they're still fixable. Look at your beneficiary designations on your pension, your DCP, and any IRAs, and make sure they still match your life today. If you're the agent for a parent, keep clean records and sign as the agent, not as yourself. The format is their name, by your name, as attorney-in-fact.7 And when it's time to actually draft or update these documents, work with an estate planning attorney. I'm a CPA and financial advisor, not a lawyer, and this is one place where the right document, drafted correctly, is worth it. The real point None of this is really about paperwork. It comes down to whether the person you'd want helping you, or helping your parents, is actually able to when the time comes. Wendy got off that call with a short list and a lot less worry. That's how most of these end once someone can see the whole picture. Sources 1. Washington State Department of Retirement Systems. "Power of Attorney.." https://www.drs.wa.gov/sitemap/poa/ 2. American Bar Association. "Power of Attorney.." https://www.americanbar.org/groups/real_property_trust_estate/resources/estate-planning/power-of-attorney/ 3. Fidelity Investments. "2025 Family and Finance Study.." https://institutional.fidelity.com/app/literature/view?itemCode=9922495&renditionType=PDF 4. Washington State Legislature. "Chapter 11.130 RCW: Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act.." https://app.leg.wa.gov/RCW/default.aspx?cite=11.130 5. Washington State Legislature. "RCW 11.125.240: Authority that requires specific grant.." https://app.leg.wa.gov/RCW/default.aspx?cite=11.125.240 6. Washington State Department of Retirement Systems. "Beneficiary information.." May 23, 2024. https://www.drs.wa.gov/beneficiary/ 7. American College of Trust and Estate Counsel Foundation. "Guide for Agents Acting Under Durable Financial Powers of Attorney.." https://www.actec.org/wp-content/uploads/2023/08/Guide_for_Agents_Acting_Under_Durable_Financial_Powers_of_Attorney.pdf Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The moment the numbers finally work There is a moment on a planning call I have learned to watch for. We have gone through the DRS pension estimate. We have modeled the DCP withdrawals, the healthcare bridge to Medicare, the Social Security timing. The plan holds. I have been sharing my screen for twenty minutes, walking through the projection, and I say some version of, “You can do this.” And what comes back is not relief. It is a long pause. Not every time. But often enough that I have stopped being surprised. Take Curt. He is 51, a fire captain with 27 years of service credit in LEOFF 2. His savings are solid. His plan works. He is quiet for a few seconds. Then he says, “Okay. But what would I actually do?” That question is the one most retirement plans never answer. The fear is not about the money Teresa Amabile, a Harvard Business School professor emerita, spent a decade studying how people move through retirement, drawing on more than 200 interviews with 120 professionals1. Her finding is one I keep coming back to. When healthy, financially secure, accomplished people hear the word retirement, what surfaces is fear, uncertainty, and a sense of losing who they are2. Money is rarely the source of it. So Curt’s pause makes sense. He is not scared of running out. He is scared of Tuesday. Retiring is four tasks, not one date Amabile’s research frames retiring as four pieces of work rather than a single event: deciding when and how to go, detaching from work practically and psychologically, building a first draft of a new life structure, and eventually settling into one that holds1. Washington State public employees carry something extra through all four of those. Twenty-seven years in one department does something to a person. The shift schedule that has organized your family’s life since your kids were small. The crew. The role you play at three in the morning when nobody else can. You do not just turn in gear. You turn in a version of yourself. Where the DRS calendar helps, and where it lies Here is what I find useful about the DRS system. It gives you a date. Under LEOFF 2, full retirement comes at age 53 with at least five years of service credit. You can go as early as 50 with 20 years, but the benefit is reduced by up to 3% for each year before 533. That is a smaller haircut than most plans impose. PERS 2, TRS 2, and SERS 2 members generally wait until 55 with 20 years, with steeper reductions before 654. For Curt, that means he is already eligible. Right now. Two years from a full benefit, and eligible today at a reduction he can afford. The date feels like an answer. It is not. It is a window opening. Eligibility tells you when the pension math permits you to leave. It says nothing about whether you have anything to leave toward. I have watched people treat those as the same thing, and it usually surfaces about eight months in. What actually helps, before the last shift Separate the decision from the date. I ask clients to name their earliest eligible date, then deliberately set it aside for a session. If you would still want out on that date after the pension question is fully settled, that tells you something. If you would not, that tells you something too. Detach in pieces. Amabile’s research found the psychological detachment from a long career is the hard part, and it rarely happens cleanly on a final Friday1. Curt starts teaching a fire science course at the community college two years before he plans to go. It is not a side gig. It is a rehearsal. Expect the first version to be wrong. The third task is building a provisional life structure, and provisional is the operative word1. People try something, find it does not fit, and rebuild. That is the process working. Fund the life you describe, not a generic one. Once Curt tells me he wants to teach part time and take two long steelhead trips a year, the plan changes shape. The teaching income shifts his Roth conversion window. The travel front-loads spending in exactly the years he is paying his own health premiums. Those years have hard deadlines attached. PEBB must receive your retiree enrollment form no later than 60 days after your employer-paid or COBRA coverage ends, and you have to be vested and eligible to retire under a Washington State plan when that coverage ends5. Miss the window and you can lose the option. The money follows the life. Not the other way around. The question I ask It is not “what are your goals for retirement.” Nobody can answer that. I ask people to describe a Tuesday. Not the first week, when everything still feels like vacation. A Tuesday in October of your second year. What time do you get up? Who do you talk to? What is on the calendar that you would be disappointed to miss? Most people cannot answer at first. Curt got about as far as coffee. That is fine. It is a diagnostic, not a test. The blankness after coffee is the work that is left, and it is far better to find it two years out than two months in. Where to start Pull your DRS benefit estimate and find your earliest eligible date. Write it down. Then stop looking at it. Instead, try describing that Tuesday out loud to your spouse. Notice where you run out of things to say. Bring that gap into your next planning conversation. It belongs there as much as the pension option election does. The plan I build for Curt is not really a withdrawal strategy. It is a funding mechanism for an answer he has not finished writing. That is the part worth getting right. Sources 1. Harvard Business School. “Retiring: Creating a Life That Works for You.” Amabile, Teresa M., Lotte Bailyn, Marcy Crary, Douglas T. Hall, and Kathy E. Kram. https://www.hbs.edu/faculty/Pages/item.aspx?num=66672 2. Amabile, Teresa M. “The Surprising Realities of Retirement.” Thought Sparks. April 2026. https://thoughtsparks.substack.com/p/the-surprising-realities-of-retirement 3. Washington State Department of Retirement Systems. “LEOFF Plan 2.” https://www.drs.wa.gov/plan/leoff2/ 4. Washington State Department of Retirement Systems. “Twenty years might be your retirement milestone moment.” August 2025. https://www.drs.wa.gov/twenty-year-milestone-moment-newsfeed/ 5. Washington State Health Care Authority. “Retiree eligibility.” https://www.hca.wa.gov/employee-retiree-benefits/retirees/retiree-eligibility Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. A quiet moment on a Tuesday call Marcus went quiet during a meeting recently. He is 55, a facilities manager for the county, and he has 28 years in PERS 2. He and his wife have done everything right. They maxed the DCP for years. They saved outside of it too. On my screen, the plan looked healthy. More than healthy. So I told him the truth. His plan could support a good deal more spending than he was doing now. That is when he got quiet. Then he said, “But what if something happens?” I have heard some version of that sentence more times than I can count. And it almost always comes from the people who are in the best shape to retire. The savers have the hardest time Here is the part that surprised me when I first started paying attention to it. The clients who struggle most with spending are usually the ones who saved the best. Decades of the same habit. Save, and then save a little more. That habit does not switch off the day you retire. The numbers here are almost hard to believe. Following the well-known 4% rule, retirees finish with more than double their starting wealth in about two-thirds of historical scenarios, and they are more likely to end up with five times what they started with than to end up with less1. Most diligent savers never come close to running out. They are far more likely to reach the end with plenty left over and a long list of things they never let themselves do. Why this hits Washington public employees harder If you are in PERS, SERS, TRS, LEOFF, or PSERS, you have something most private-sector savers do not. A pension. Your Plan 2 or Plan 3 pension pays a guaranteed monthly benefit for the rest of your life2. That is a paycheck that shows up whether the market is up or down. And that quietly changes the math. Research from the Employee Benefit Research Institute found that retirees with pension income held onto their assets far more tightly than those without one. Pensioners' assets fell only about 4 percent over 18 years, compared with 34 percent for everyone else3. So the pension that gives you security can also make you too careful. Your bills are already covered by the pension and Social Security. Your savings just sit there. And for a lot of public employees, that money never gets used for the life it was meant for. Why “enough” keeps moving Brian Portnoy, a behavioral finance writer, draws a distinction I come back to often. Being rich is the pursuit of more. Ask someone with a million dollars what “enough” looks like, and they will usually say two. Get to two, and the number becomes five. The finish line keeps moving. Wealthy is different. It means having enough to fund a life that actually matters to you. The kind of life you would design for yourself if no one else were watching. For most of the public employees I work with, that life is not extravagant. It is more time with the grandkids, or the cabin near the water they have been talking about for years. Often the things that matter most cost the least. The same fear shows up in your portfolio That instinct to protect what you have does not stop at spending. It shows up in how people invest, too. A properly diversified portfolio always has something lagging at any given moment, and the temptation is to react to whatever is down. Portnoy put it memorably once: diversification means always having to say you're sorry4. Learning to sit with that discomfort, instead of bailing on a sound plan because one piece is underperforming, is the same muscle that lets you spend with confidence later. What actually helps I don't have a trick that flips the switch. But a few things move people from scared to spend toward comfortable. Name it out loud. Knowing that great savers commonly feel this way takes some of the shame out of it. It is normal. In a way it is just what happens after doing the hard thing well for 30 years. Run the numbers with someone. There is real clarity in seeing your pension, your Social Security, and your savings laid out together as one paycheck. Most of the fear lives in the gap between what people assume and what the plan actually shows. Write down what your version of “enough” looks like. Not dollar figures. The experiences. Once it is on paper, it stops being a vague someday and becomes a plan. Then practice. This is the one that stays with me. You don't have to wait for the retirement date to start living a little. If you plan to retire at 58, start leaning into that life at 55. Where to start There is no 30-day plan here and no urgency. This is a slow shift, and it should be. Pull your most recent pension estimate from your DRS online account so you know your real number. List the two or three things you would actually want to spend on if you gave yourself permission. And if a specific “what if” is what holds you back, bring that worry to a planning conversation and stress test the plan against it. See what actually happens. Marcus is still working through it. But on our last call, he mentioned he and his wife finally booked the trip they had been postponing for six years. That is the whole point. Sources 1. Kitces, Michael. “The Consumption Gap In Retirement: Why Most Retirees Will Never Spend Down Their Portfolio.” Nerd's Eye View, Kitces.com. https://www.kitces.com/blog/consumption-gap-in-retirement-why-most-retirees-will-never-spend-down-their-portfolio/ 2. Washington State Department of Retirement Systems. “Choosing Plan 2 or Plan 3.” https://www.drs.wa.gov/choice/ 3. Employee Benefit Research Institute. “Asset Decumulation or Asset Preservation? What Guides Retirement Spending?” April 3, 2018. https://www.ebri.org/content/asset-decumulation-or-asset-preservation-what-guides-retirement-spending 4. Portnoy, Brian. “Diversification Means Always Having To Say You're Sorry.” Forbes, March 9, 2015. https://www.forbes.com/sites/brianportnoy/2015/03/09/diversification-means-always-having-to-say-youre-sorry/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. The moment right before someone pulls the trigger By the time a client is ready to retire, most of the hard work is already done. The pension option is chosen. The savings are in place. We have mapped out the income, the taxes, the healthcare bridge to Medicare. And then, right before retirement, the same thing happens almost every time. They pause. Then comes the question, usually some version of the same one. What if I do this, and the market drops the week after? Take Cheryl. She is a hypothetical county employee in her late 50s with about 30 years in PERS 2. She has done everything right. Saved steadily. Lived within her means. She is not scared of running out of money someday. She is scared of starting at the wrong moment. What the history actually says about timing So let me tell you what the research shows. Peter Lynch, who ran Fidelity's Magellan fund for years, once looked at what would happen to an investor with almost comically bad luck. Imagine you invested money every year for 30 years, from 1965 to 1995, but you always bought on the single worst day of the year. The very top, every time. You would have earned about 10.6 percent a year.1 Now imagine the opposite. Perfect timing, buying at the lowest point every single year. Your return would have been about 11.7 percent a year. Thirty years of the worst luck imaginable trailed thirty years of flawless timing by roughly one percentage point. The thing people lose the most sleep over turned out to matter far less than simply staying in the market. Why retirement changes the math Here is where I have to be honest, though. That study is about someone still working and adding money for decades. Time was on their side. When you are retired and pulling income out, you do not have 15 years to wait for a bad market to recover. The order your returns show up in starts to matter. A steep drop in your first few years, while you are selling to pay bills, can do lasting damage. So the goal is not to time the market perfectly. Nobody can. The goal is to never be forced to sell at the bottom. And that is exactly where being a Washington public employee gives you an advantage most people never have. What your pension really does Cheryl's PERS 2 pension pays her a guaranteed monthly benefit for the rest of her life. It is not tied to how the stock market performs.2 Read that again, because it is the whole point. Her paycheck in retirement does not care what the market did last week. It shows up the same in a boom and in a crash. When your core bills, the mortgage, the groceries, the utilities, are covered by a check that arrives no matter what, a falling market becomes something you can watch and wait out instead of react to. You are not a forced seller. That is a very different position than a private-sector saver whose entire retirement income depends on their portfolio. When the market drops 30 percent, they may have to sell investments at a loss just to cover the month. You do not have to sell anything. The war chest that fills the gap Of course, the pension rarely covers every dollar, especially in the early years before Social Security starts. That gap is what actually worries people. And it is fixable. For the money Cheryl will spend over the next several years, we do not leave it exposed to stocks. We hold it in what I call a war chest, roughly five years of planned withdrawals kept in high-quality, short-term bonds. When stocks fall, she spends from the war chest and leaves her stock investments alone to recover. When markets settle, we refill the bucket. There is a quiet bonus here too. Holding both stocks and bonds means that when stocks drop, we can rebalance, trimming the bonds that held up and buying stocks while they are cheap. It feels backward in the moment. It is one of the most powerful things a disciplined investor can do. The pension is the floor. The war chest is the buffer. Together they are why Cheryl can leave her stocks alone long enough for time to do its work. A few measured next steps So the fear that keeps people up at night, the fear of one bad day, is mostly the wrong thing to worry about. The better question is not “what if I pick the wrong moment?” It is “what am I forced to sell when the market drops?” For a Washington public employee who plans ahead, the honest answer can be nothing. If you are somewhere near where Cheryl is, start here. Map your expenses into two buckets: what your pension will cover, and what your portfolio needs to handle. Then make sure the money you will spend in the next several years is not sitting in the stock market. And remember this is one piece of a larger plan. When you claim Social Security, how you sequence withdrawals, and how you handle taxes all work alongside the pension. But it starts with knowing your floor. Get that right, and the next market drop becomes something you read about, not something you fear. Sources 1. PBS Frontline. "Betting on the Market: Interview with Peter Lynch." https://www.pbs.org/wgbh/pages/frontline/shows/betting/pros/lynch.html 2. Washington State Department of Retirement Systems. "Choosing Plan 2 or Plan 3." https://www.drs.wa.gov/choice/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The client who kept saying “one more year” Ron showed up to our call last fall with a spreadsheet he’d clearly been staring at for months. He’s 57. Public works supervisor for his county, nearly 30 years in PERS 2. Between his pension, his DCP balance, and what he and his wife have saved, the numbers worked. We ran them again. They worked again. Then he said the thing I hear more than almost anything else. “Let’s just give it one more year.” I asked him why. Markets felt shaky. Maybe a little more cushion. You know how it is. But I’d heard him say “one more year” the year before. And the year before that. At some point it stops being a financial decision. (He knew it too. He just hadn’t said it out loud yet.) When the math is done arguing with you Here’s what I’ve come to believe after working with public employees who are this close to the door. If you’ve got a pension coming, a DCP balance, and money in the bank, and the plan still checks out, no new number is going to set you free. A behavioral finance researcher named Daniel Crosby puts it bluntly. He says if you handed someone like Ron a crystal ball that guaranteed he’d be financially secure for the rest of his life, most people in his shoes still wouldn’t retire tomorrow. Sit with that for a second. If certainty isn’t the thing holding you back, then the problem was never the money. And no spreadsheet I build is going to fix a problem that isn’t on the spreadsheet. The two questions I started asking instead So now, when a client is clearly ready on paper but stuck in real life, I stop running projections for a minute. I borrow two questions from Crosby’s work. The first: if you knew for certain you’d be fine, would you walk away tomorrow? When the honest answer is no, that tells us something. There’s something work is giving you that doesn’t show up on a balance sheet. The second: what is that something? For a lot of folks, especially the ones who’ve spent decades inside one agency, work is where the people are. It’s the team. The problem to solve. The quiet pride of being good at something. Take that away on a Friday with nothing waiting on Monday, and the pension doesn’t help much. Crosby points out that men in particular tend to walk into retirement without much of a social life outside the job. I see it constantly. The financial plan is airtight and the life plan is blank. It doesn’t have to be a light switch One thing that’s helped my clients more than any withdrawal strategy is realizing retirement isn’t on or off. You don’t have to grind full-time until a Friday and then do nothing forever. Some of the happiest retired public employees I work with eased out of it. They went part-time first. Picked up some consulting. Kept one foot in the thing that gave them purpose while finally making room for the rest of their life. That middle path has a financial bonus too. Every year you hold off tapping your DCP or your personal savings is a year that money keeps working. Your pension gives you a foundation most private-sector folks would envy, which means you have more freedom to design a slow exit, not less. What actually fills the gap Crosby talks about five things the happiest retirees tend to have lined up before they leave. I think about them with clients now almost as much as I think about Roth conversions. Fun and leisure, the part everybody plans for. The social side, which most people don’t. Some kind of deep, absorbing work, paid or not, that makes you lose track of time. Something bigger than yourself, like volunteering or faith or community. And a reason to keep growing instead of coasting. Money really only buys the first one. The other four you have to go get on your own. That’s usually the part nobody warned them about. Where the planning actually comes in I’m a CPA, so I won’t pretend the numbers don’t matter. They do, and there’s real work to do before you leave. You have a pension option to lock in, and that survivor decision is permanent. You have a healthcare gap to bridge from your late 50s to Medicare at 65, and the PEBB rules deserve a careful look before you assume anything. You have Social Security timing to coordinate with everything else, and that one tends to reward patience more than people expect. That’s where I earn my keep. That’s the part I can build for you. But I’ve stopped pretending it’s the whole picture. A few honest next steps If you’re the one saying “one more year,” try Crosby’s first question this week. If certainty wouldn’t change your answer, the thing in front of you isn’t financial. Start sketching the life side while you’re still working. Who you’ll see. What you’ll build. What’s going to get you out of bed on a Tuesday in February. And let’s lock down the financial pieces so they can’t be the excuse: the pension election, the PEBB-to-Medicare bridge, the income plan that pulls from the right account at the right time. Ron and I are still working on his. The numbers were never really the holdup, and once he admitted that, the planning got a lot more useful. The plan on paper matters. I’ll always make sure yours is solid. But the retirement you actually want to live is a separate project, and it starts with being honest about what’s really keeping you at your desk. Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
Dale comes to our first video call with his statements already pulled up on his screen. He's a facilities manager for the county. Twenty-six years in, PERS 2, hoping to retire at fifty-eight. He's done the hard part. He saved steadily in his DCP. The money is there. So we start going through what he actually owns. Almost all of it sits in funds from one big, famous fund company. The kind of name you'd recognize from a commercial or a stadium. I ask him why those funds. He pauses. “I'm not sure,” he says. “They're a name I trust. I've seen them around forever.” I hear some version of that more often than you'd think. And it makes complete sense. We're wired to reach for what feels familiar. But familiar and better are not the same thing. And the space between them can quietly cost you. What the research actually found There's a simple experiment that shows this better than anything I can say. Researchers handed people two index funds and asked how they'd split their money. Same holdings. Same fee. Line by line, the exact same fund. The only difference was the name on the label, one familiar and one generic. There's no financial reason to prefer one over the other. The money should land somewhere near 50/50. It didn't. People put 65% into the familiar name and just 35% into the identical generic version1. They even guessed the unfamiliar fund was more likely to lose money, for what was literally the same investment1. The name didn't change anything inside the fund. It only changed how people felt about owning it. Why does that happen? Because familiarity lowers our sense of risk, whether or not the actual risk is any different2. We don't study the unfamiliar fund and decide it's riskier. We feel that it is, and then we look for reasons to back up the feeling. And before you assume this is a rookie mistake, it isn't. Even advisors managing money for wealthy clients show the same pull toward brand-name choices5. It's human, not amateur. Why the famous names tend to fall short Here's the part that surprises people. When you line up the actively managed funds from the big, famous fund families against the benchmarks they're trying to beat, most of them fall short. One analysis found that 69% of Goldman Sachs active funds lagged their benchmark or didn't survive. Even at Vanguard, a firm practically synonymous with smart investing, 63% of its active funds underperformed1. The star manager doesn't hold up much better. S&P tracks whether top funds stay on top, and not one of the top-performing U.S. stock funds at the end of 2020 was still in the top group four years later3. Not one. It gets worse once you realize the lineup you see today is already the highlight reel. The funds that stumbled badly were quietly closed or merged away, and their track records went with them1. So why do the recognizable names so often trail? Part of it is just math. Back in 1991, economist William Sharpe showed that after costs, the average actively managed dollar has to underperform the average index dollar by the amount of those costs4. Active and passive together own the whole market, so as a group the active side can't beat it after fees. Part of it is the business model. A big fund company gets paid for gathering assets, not for beating the market. A fund that grows from one billion to ten billion collects far more in fees whether or not it ever outperforms. And the name is recognizable largely because the firm spent a fortune making it that way. That spending comes out of someone's returns. Usually yours. This shows up beyond fund companies, too. Even in the “independent” advice world, private equity now controls close to a quarter of the assets under management6, which brings its own pressure on fees and service. None of that makes a firm bad. It just means the name on the door doesn't tell you whose interest comes first. What to do instead I don't want to leave you with a pile of discouraging data and no path forward. There's a better way to approach this. It just means trusting a different set of signals. Start with your pension. Your DRS pension is a stable, lifelong foundation that most private-sector savers will never have. That foundation is exactly what lets the rest of your money take sensible market risk, instead of reaching for whatever feels safest. From there, own broadly instead of betting narrowly. Almost no one beats the market reliably, and you can't know in advance who will, so own a wide slice of it and let it work. Then control the things you actually can. As a CPA, this is the piece I push hardest on. You can't dictate next year's return, but you can control what you pay in fees and taxes, and over a long retirement those add up. And ask better questions, of a fund or of the person recommending it. What does this fund cost? Can you explain why it's in my portfolio without pointing to a famous name or a recent hot streak? Are you a fiduciary, legally required to put my interest first? A measured next step is simple. Pull up your DCP and any IRA statements and write down what you own and what each piece costs. For every holding, ask whether you can explain why it's there, beyond the name. If you can't, that's worth a conversation, not a panic. Trusting the right things The point of all this isn't to stop trusting. Trust matters enormously in investing, because it's what keeps you in your seat when markets get scary. The problem is never that people trust. It's that so many of us trust the wrong things. So aim it carefully. Trust the weight of the evidence over the comfort of a logo you happen to recognize. When Dale and I rebuilt his portfolio, nothing about it would impress anyone at a dinner party. There were no names he'd recognize from a stadium. But he could explain every piece of it, and why it was there. That's the part that actually matters. Sources 1. Index Fund Advisors. “The Psychology of the Label: Familiar Names Can Make Poor Investments.” January 20, 2026. https://www.ifa.com/articles/psychology_label_familiar_names_make_poor_investments 2. Weber, E. U., Siebenmorgen, N., & Weber, M. “Communicating Asset Risk: How Name Recognition and the Format of Historic Volatility Information Affect Risk Perception and Investment Decisions.” 2005. https://scispace.com/pdf/communicating-asset-risk-how-name-recognition-and-the-format-2f8flbykyg.pdf 3. S&P Dow Jones Indices. “U.S. Persistence Scorecard.” https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/ 4. Sharpe, William F. “The Arithmetic of Active Management.” 1991. https://web.stanford.edu/~wfsharpe/art/active/active.htm 5. Kostovetsky, L., & Warner, J. B. “Measuring Innovation and Product Differentiation: Evidence from Mutual Funds.” Journal of Finance, 2020. https://onlinelibrary.wiley.com/doi/10.1111/jofi.12853 6. AdvizorPro. “Private Equity Ownership in the RIA Space – 2025 Trends.” September 4, 2025. https://advizorpro.com/post/private-equity-ownership-ria-space |
Content is for informational purposes only and does not constitute personalized financial or investment advice. Consult with a qualified financial advisor to discuss your individual circumstances before making any financial decisions.
AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
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