As a FERS worker, you have excellent retirement benefits plus your pension (annuity), Social Security and your Thrift Savings Plan (TSP). But, as the saying goes, it’s important to expect the unexpected and make sure your retirement plan can cover any curveballs life may throw at you down the road.
An Unexpected Death of a Spouse
When a spouse passes away unexpectedly, the shock and grief can be exasperated by a reduction of retirement income that leads to financial pressures. A comprehensive retirement strategy should include life insurance and other insurance products to help cover the needs of the surviving spouse and other dependents you may have.
An Unexpected Health Crisis Requiring Long Term Care
Unexpected medical bills, expensive prescription drugs, and costly long-term care that’s not covered by insurance, can quickly drain your TSP nest egg. Surveys show healthcare is still one of the largest expenses for retirees as the overall cost continues to rise year after year. According to the National Council on Aging, 80% of seniors have at least one chronic health condition and 70% have two or more. Chronic diseases can result in the need for institutional care, in-home caregivers, or other long-term healthcare services. Purchasing Long-Term Care insurance can help cover the expense of non-medical, custodial care that’s not covered by FEHB or Medicare.
“To protect yourself, you need to calculate how inflation will impact your income over a 20-to-30-year retirement.”
Unexpected Spike In Inflation
As we all experienced in 2021 and 2022, an unexpected spike in inflation can be really tough on retirees living on a fixed income. Add to this studies show Cost of Living Adjustments (COLAs) on Social Security and your FERS pension are not keeping up with inflation. To protect yourself, you need to calculate how inflation will impact your income over a 20-to-30-year retirement.
Unexpected Taxes In Retirement
Studies show approximately 75% of Americans approaching retirement seriously under-estimate the income taxes they’ll owe on their retirement income. When it comes to your FERS pension, as much as 90% or more is taxable because it’s comprised of the government’s untaxed contributions to your retirement plus taxable earnings that accrue on both your contributions and the government’s contributions. Up to 85% of your Social Security income is also subject to taxes when your combined income exceeds IRS thresholds. And, of course, 100% of the money withdrawn from your traditional TSP is subject to federal income taxes. You may also owe state income taxes depending on where you live.
An FRC® trained advisor can help you prepare for the unexpected and develop strategies for the financially-secure retirement you’ve worked long and hard to earn.
