When it comes to determining how much savings you’ll need for a financially-secure retirement, everyone seems to have a different opinion. Some advisors say federal workers need 70% of your pre-retirement income while others claim you’ll need 80% or more. Then there’s the advice that anything less than a $1-million nest egg won’t be enough.
In Reality, There’s No Singular “Magic Number”
Much like the fairy tale of “Goldilocks and the Three Bears,” the answer to the question in the title above depends on your needs. For some retirees, a $1-million nest egg may be too small, for others, it will be far too large. Then again, $1-million may be just right for a yet another segment of retirees. Ultimately, the amount of money you’ll need in retirement needs to be calculated according to your personal expenses, your longevity and health, plus the debt you’ll still be paying off once you’re no longer working.
What Type Of Retirement Do You Envision For Yourself?
First, at what age do you plan to retire? FERS participants can retire with an unreduced annuity (pension) as young as 55 to 57 depending on their birth year and years of creditable service. If you plan to work either part-time or full-time after you separate from federal service, you may need far less than a fed who decides to travel extensively and never work again.
“Let’s face it — a 30-year retirement costs a lot more than a 20-year retirement.”
What’s your ideal location for retirement? Housing, property taxes and the cost of living can vary quite a bit depending where you choose to live for the rest of your life. Longevity is another important factor to consider. Let’s face it — a 30-year retirement costs a lot more than a 20-year retirement. The longer you live the more likely you’ll need long-term care that’s not covered by FEHB or Medicare. Once you start answering these questions for yourself, you’ll get a better idea of how much you’ll need.
Whatever You Do, Don’t Panic
If you’re getting close to retirement and worried you won’t have enough saved when you separate from service, resist the tendency to panic. You can always work a few more years to save more in your Thrift Savings Plan (TSP). Even better — as a FERS-covered employee, if you wait to retire at age 62 (or older) with at least 20 years of service, your monthly pension gets a 10% Bonus.
Connect with an FRC® trained advisor who can help you crunch the numbers. Together, you can figure out how much your “magic number” needs to be for a financially-secure retirement.
