Each financial phase of your retirement plan requires a specific strategy that anticipates the income required to cover your needs at significantly different points in your life.
The Pre-Retirement Stage: Ages 50 to 62
Usually the last 10 years of your career, this is the time to seriously assess whether or not your retirement income will cover your expenses once you’re no longer working. Estimate the net amount of your FERS annuity (pension) after deductions for insurance premiums. Then use the Online Social Security Calculator to estimate your monthly benefit. If it looks like you may have an income gap, take advantage of TSP Catch-Up Contributions starting at age 50 and consider contributing to a Roth TSP for tax-free distributions in retirement.
The Early Retirement Stage: Ages 62 to 70
This phase runs about 10 years from the day you retire and requires making decisions about “turning on” your Social Security and taking TSP distributions. Remember — you can increase your Social Security benefit by 8% per year when you delay filing until age 70.
Also consider tax planning to prepare for future Required Minimum Distributions (RMDs) from your Traditional TSP. The 2023 SECURE Act 2.0 increased the RMD age to 73 for those born after December 31, 1950. Starting in 2033, the age for RMDs will increase to 75. If you’ve made contributions to your Roth TSP balance, there’s more good news — the new law ended RMDs as of 2024.
“By the time you celebrate your 80th birthday, age-related health issues become a harsh reality.”
The Middle Retirement Stage: Ages 70 to 80
This is when your expenses should be getting lower. You’ve checked off the pricey items on your “bucket list” and you’re spending less on travel and recreation. This is a good time to re-evaluate all of your assets and make sure your estate plan is up to date. Tax-planning really pays off in the Middle Retirement Stage because it helps mitigate the “tax bomb” of RMDs.
The Late Retirement Stage: Age 80 & Up
By the time you celebrate your 80th birthday, age-related health issues become a harsh reality. You FEHB coverage provides excellent benefits for your medical needs. However, if you need non-medical long-term care in a nursing home, it’s not covered by FEHB or Medicare. If you haven’t purchased LTC insurance, you’ll have to cover the expenses out of pocket.
As you can see, retirement can be a journey of 30 years or more. Consider working with an FRC® trained advisor who can help you develop a strategic plan to provide financial security at every stage.
