In 2024, over 12,000 Baby Boomers will turn age 65 each and every day of the year. With a significant number of Americans currently entering their golden years, it’s more important than ever to plan ahead for the realities of retirement. Unfortunately, surveys show far too many pre-retirees make unrealistic assumptions about their retirement.
Assuming Your Net FERS Annuity (Pension) Will Be A Higher Amount
As a FERS participant you can rely on two sources of guaranteed income: your FERS annuity (pension) and your Social Security. This is in addition to distributions from your Thrift Savings Plan (TSP). However, if you miscalculate the amount of your net FERS pension after deductions, you may end up with an unexpected retirement income gap. This puts you in the position of withdrawing more from your TSP and depleting your nest egg even faster.
Assuming You Won’t Need Non-Medical Long Term Care
No one likes to think about the possibility of becoming unable to take care of our basic needs like bathing, getting dressed and eating a meal. However, a study cited by LongTermCare.gov indicates a person turning 65 today has a near 70% chance of needing some type of long-term care in the future. Yet, according to the National Council on Aging, 80% of adults over age 60 do not have the financial resources to cover the out-of-pocket cost of non-medical, long-term care in a nursing facility.
“If you’re in good health and longevity runs in your family, you have a good chance of living until age 90.”
One possible reason pre-retirees are not planning for the expense of long term care is that they underestimate their longevity. According to Statistica.com, a man turning 65 today can expect to live 17 years longer while a woman celebrating her 65th birthday can live over 19 years more. If you’re in good health and longevity runs in your family, you have a good chance of living until age 90. Living even two or three years longer than you’ve estimated can cost far more money when you factor in rising inflation over the next 20 years.
Assuming You Can Work Longer
If you’re counting on working well beyond your FERS Minimum Retirement Age (MRA), you’re running a risk. According to a recent article on the USA Today website, the average over-50 worker expects to retire at 67 but, in reality, the average American retires at age 62. The top reason for retiring earlier than planned is unexpected health problems. If you haven’t saved enough for a longer retirement, what will be your contingency plan?
Get a second opinion on your retirement plan — connect with an FRC® trained advisor to learn more.
