When it comes to retirement, many federal workers are eager to plan Bucket List adventures for the first few years after they separate from service. But what about the rest of your golden years? Since you’re eligible to retire under FERS at a relatively young age, it’s important to understand your retirement may run well into your 80s. That’s why it’s important to have a financial plan for every stage of a long retirement.
The Early Retirement Stage
Often called the Go-Go years, this stage can run 10 years or more from the day you separate from service. New retirees tend to spend more on expensive vacations, dining out and pricey gifts for their kids and grandkids. When every day feels like the weekend may retirees spend more during the Go-Go years than when they were working. A strategic retirement plan anticipates early retirement expenses to protect against burning through your nest egg.
“Once you’ve completed your bucket list, you’ll likely settle down into a daily routine and spend less on travel and eating out.”
The Middle Retirement Stage
The Slow-Down phase kicks in at around age 70. Once you’ve completed your bucket list, you’ll likely settle down into a daily routine and spend less on travel and eating out. In your 70s, you may start dealing with chronic health issues that send you to the doctor more often. And you may find yourself paying higher out-of-pocket deductibles as inflation continues to drive up the cost of health care.
By the time you enter this stage, you’ve started receiving Social Security. By age 73, you must begin taking Required Minimum Distributions (RMDs) from your TSP. Combined with your monthly FERS pension, you may end up in a higher income tax bracket. This is why tax-planning for a long retirement is a crucial component of your overall plan.
The Late Retirement Stage
Often called the twilight years, more serious age-related health issues become a harsh reality around your 80th birthday. If you’re unable to handle your day-to-day needs like dressing and bathing, you may need long-term care in a nursing facility. Keep in mind that non-medical, custodial care is not covered by FEHB or Medicare. If you haven’t purchased Long-Term Care (LTC) Insurance, or an annuity with an LTC rider, the out-of-pocket cost can wipe out your TSP nest egg.
Another consideration is being hit with a health crisis that leaves you incapacitated and unable to make your own decisions. A good retirement plan includes a healthcare directive and other crucial estate-planning documents to help protect your legacy.
To learn more about planning for every stage of your federal retirement, connect with an FRC® trained advisor.
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