What It Means to Postal Workers That USPS Is Relying on Employee Retirement Funds to Operate
As the Postal Service leans on deferred retirement obligations and major operational overhauls to survive, postal employees need to take charge of their own benefit and retirement planning before their options narrow.
The U.S. Postal Service financial crisis is no longer a future concern — it's happening now.
Testifying before Congress in June, Postmaster General and Postal Service CEO David Steiner said the agency is running out of cash, deferring retirement obligations and relying on temporary financial maneuvers to continue providing service.
Those maneuvers include borrowing from employees' retirement funds, a move that should stop every postal worker in their tracks.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When Steiner says the agency is borrowing from those funds to stay afloat, he doesn't mean individual Thrift Savings Plan (TSP) accounts are being raided or that earned pensions have vanished.
However, it does mean the Postal Service is using deferred employer retirement obligations as a cash-management tool, which can impact every postal employee trying to make informed decisions about retirement, benefits, income and long-term security.
What postal workers can do to prepare
Postal employees have valuable benefits. This announcement isn't reason to panic, but it is reason to prepare.
Find out how potential changes could affect your pension, TSP, benefits and the financial protections you have chosen for your family. A qualified Federal Benefits Expert can help with that.
Calculate the retirement income you can realistically expect from the Federal Employees Retirement System (FERS), Social Security and your TSP, then compare it with what you actually spend each month.
The difference — whether a shortfall or a surplus — may determine how prepared you really are.
A Federal Benefits Expert can help you run that analysis, too.
Decide now how you would respond if the Postal Service announced another early-retirement offer, a restructuring or an involuntary separation. Understand what you would gain, what you could lose and whether your income, health coverage and savings could support that decision. Options are easier to evaluate before the pressure and deadlines arrive.
Prepare for the potential delay between your last paycheck and your full retirement income. We are seeing some retirement claims take six months (and occasionally as long as 12 months) to finalize.
A dedicated cash reserve can help you cover that gap without being forced into an unplanned, taxable withdrawal that depletes your traditional TSP savings.
That preparation matters because this is unlikely to be the last difficult decision involving Postal Service finances. Until the Postal Service and Congress agree on a durable plan for the Postal Service's long-term financial stability, employees should expect continued proposals that could affect operations, staffing and retirement planning.
Why we're in this situation
Deferring retirement obligations just to keep the lights on is not only indicative of a cash-flow problem for the Post Service, it's clear proof that the current funding model no longer works.
Under Title 39, the Postal Service must serve every American community, including routes that lose money year after year. Today, the agency delivers to roughly 170 million addresses, six days a week, across 233,000 delivery routes. This costs more than $65 million a week.
Steiner says 84% of city delivery routes and 52% of rural delivery routes are financially underwater, totaling a loss of more than $120 billion in the past decade.
In other words, the Postal Service is expected to operate like a business while providing service like a public utility.
The Postal Service isn't just cutting costs, it's fundamentally restructuring how it operates. Through its 10-year Delivering for America plan, the Postal Service is consolidating operations by moving letter carriers from local post offices to larger sorting and delivery centers.
These changes are already underway and have important implications for employees' careers, benefits and retirement planning. It appeared to improve efficiency on paper, but for the workers, it's often resulted in longer commutes, unfamiliar routes, new schedules and increasing uncertainty about future job security.
Although implementation has not met the Postal Service's original timeline, the restructuring has not stopped. In 2022, the Postal Service unveiled plans to consolidate up to 100,000 carrier routes into 400 to 500 larger sorting and delivery centers.
Today, with roughly half of those consolidations complete and about 133 facilities activated, its impact on employees is becoming increasingly evident.
The Postal Service says this change in operations has produced more than $1 billion in savings to date, potentially generating billions more annually if fully implemented.
But an audit from the United States Postal Service Office of Inspector General found it also created $1.4 million in added overtime costs and about $19 million in additional labor expenses.
This raises concerns about whether the savings are as clear as the Postal Service suggests.
Although postal workers' TSP accounts aren't being raided, nor are their pensions disappearing, suspending employer contributions to the FERS to save money isn't a sustainable solution.
While it might be saving the Postal Service roughly $100 million per week, or $2.5 billion in the current fiscal year, using those would-be contributions to employees' retirement funds is only multiplying future indebtedness.
Eventually, those missed payments must be restored, restructured or addressed by Congress.
For postal workers, it also raises an important question: How will the agency afford to pay back both missed and future payments?
Postal workers aren't the only ones impacted by this financial crisis. While taxpayers might not be paying the Postal Service's operating costs now, that doesn't mean they won't in the future. When a public service is legally required to serve every American address, but can't sustain itself financially, the bill gets pushed onto workers, customers, communities and potentially taxpayers.
The Postal Service can no longer afford to be expected to operate like a business while fulfilling a public mission. Unlike commercial carriers chasing profitable routes, the Postal Service is the only carrier legally obligated to deliver to every address in America — from densely populated cities to the most remote rural communities.
Unlike most federal agencies, the Postal Service does not rely on annual taxpayer appropriations to fund its day-to-day operations. Instead, it's expected to finance the majority of its operations through the sale of postage, products and services, all while fulfilling its legal obligation to deliver to every address.
It's a unique mandate that combines the responsibilities of a public service with the financial expectations of a self-supporting enterprise.
Until the Postal Service's long-term funding model is addressed, measures such as deferring retirement contributions are temporary solutions that postpone — not solve — the underlying financial challenges. If universal mail service is a national priority, then ensuring the long-term financial stability of the institution that delivers it must be a national priority as well.
If you're a postal employee, this isn't just another headline — it's your career, your retirement and your family's financial future. As the Postal Service continues to evolve, the decisions you make about your federal benefits today can have a lasting impact for decades to come. Understanding how your pension, TSP, Social Security, healthcare and insurance work together isn't just helpful — it's essential. The best time to prepare is before change leaves you with fewer options.
Related Content
- Thrift Savings Plan Contribution Limits for 2026
- I'm a Financial Pro Focused on Federal Benefits: These Are the 2 Questions I Answer a Lot
- Four Action Items for Federal Employees With $2M+ Saved
- Five Wins for Federal Employees in the Social Security Fairness Act
- The US Postal Service Does More Than Deliver Mail
