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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.
Bruce is 64. He retired two years ago at 62, after 31 years with a county public works department. PERS Plan 2, and with more than 30 years of service he walked away at 62 with a full benefit, no early retirement reduction [1]. His pension shows up on the last business day of every month, the way it will for the rest of his life [1]. He hasn't filed for Social Security yet, on purpose. And he has a DCP balance he spent three decades building. That balance is almost exactly where it was the day he separated. Two years in. He didn't need it, he tells me. The years went fine. So I asked what he and his wife had been putting off. He mentioned a trip to Colorado to see their daughter. They'd talked about it twice. They hadn't booked it. We stopped talking about withdrawal rates after that. Your pension and your DCP don't feel like the same money There's research on this I keep coming back to, because it explains something I see constantly with public employees. David Blanchett and Michael Finke studied how retirees actually fund their spending, using data from the Health and Retirement Study. They found people spend roughly 80% of their lifetime income, meaning Social Security, pensions and annuity payments. From savings, they spend only about half of what they could [2]. Up close it's sharper. For a 65-year-old married couple in that data, the observed withdrawal rate from savings ran around 2%, well under the 4% figure that gets quoted in most retirement articles [2]. Your DRS pension arrives monthly, automatically, without you deciding anything. It usually goes up each July [3]. It behaves like the paycheck it replaced, so you spend it like one. Your DCP is a number on a screen. Taking money out means watching that number go down. Same dollars, completely different feeling about using them. The expense nobody can name When EBRI asked retirees why they weren't spending down their assets, running out of money wasn't the top answer. That came in at 27%. The most common answer, at 38%, was saving for an unforeseen cost later in retirement [4]. I find that distinction useful. Running out of money is something we can model. Your pension and your Social Security timing are knowable, and the DCP has to cover whatever gap is left over. An unnamed future expense is different. It has no size and no date. There's no balance large enough to satisfy it, because it was never a number in the first place. Delaying Social Security only works if something covers the gap Bruce is doing something smart. Every month he waits past full retirement age, his eventual benefit grows, and it keeps growing until he turns 70 [5]. But delaying isn't free. Those years still have to be paid for by something. That's the DCP's job. It's a 457(b), and once you've separated from service there's no early withdrawal penalty, which isn't true of an IRA before 59½ [6]. You can take it as a lump sum, in installments, or roll it out [6]. Bruce also has one more year of paying for health coverage himself before Medicare starts at 65 [7]. Those same years are usually the lowest-income years of your retirement, which makes them the best window you'll get for Roth conversions or for pulling pretax money at a low bracket. So Bruce is delaying a benefit to make his income larger later, while refusing to spend the money that's supposed to bridge him there. Both decisions are defensible on their own. Together they cancel out. Three questions that beat running the numbers again When someone's plan says yes and they still can't pull the trigger on a trip, another projection doesn't help. I've watched people look at a forecast that says they're fine, then go home and not book the trip. So I ask different questions. What have you not booked yet? I want a specific answer. The trip with an actual destination, or the person you've been meaning to see. What is this balance protecting you against? Say it out loud. If it's long-term care, we can size that and plan for it, and then it stops being a reason to sit still. If it's a general unease about spending, that's worth knowing too, and it's a different problem. If your DCP never grew another dollar, what would you change about this year? For a lot of people the honest answer is nothing. If growth wouldn't change anything, it's fair to ask who the growth is for. Bruce booked the Colorado trip. Nothing in his plan changed. Where to start Pull up your DCP balance from the day you separated, or from a year ago if you're still working, and put it next to today's number. If it hasn't moved, sit with that before you do anything about it. For some people the plan is working exactly as designed. For Bruce, it meant he'd built a bridge and spent two years not walking across it. Sources
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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
October 2026
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