If you’re like most Americans, your biggest fear in retirement is running out of money when you’ll need it the most: in your later years. One way to put your mind at rest is to conduct a detailed analysis of what your expenses will be in retirement and the guaranteed income you can count on once you’re no longer working.
Step 1: Estimate Your Net FERS Annuity (Pension)
Start by getting an estimate of your gross annuity before deductions. Use the Federal Ballpark E$timate® calculator on the OPM website and, once you have the gross figure, start subtracting the applicable deductions:
- The survivor benefit you elected: a 10% deduction for the 50% spousal annuity or a 5% deduction for the 25% annuity.
- Your portion of your FEHB premium and your FEDVIP premium.
- If you continue FEGLI in retirement, premiums are deducted from your annuity.
- If you carry FLTCIP, premiums can be paid out of pocket or deducted from your annuity.
- State and Federal income taxes on your annuity – as much as 90% or more.
Of course, don’t forget potential income from your Thrift Savings Plan (TSP) and other investments.
“To help you decide when to file for Social Security, it also includes a chart that shows your estimated monthly benefit starting at age 62 and every year after that through age 70.”
Step 2: Estimate Your Social Security Benefit
As a FERS participant, you’re eligible for Social Security in retirement. To get an estimate of your benefit, create your online “My Social Security Account.” This gives you access to personalized information based on your birth date and earnings record. To help you decide when to file for Social Security, it also includes a chart showing your estimated monthly benefit starting at age 62 and every year after that through age 70.
Step 3: Get A Realistic Estimate Of Your Expenses
Your essential expenses include everything you need to keep your retirement lifestyle on track: rent and mortgage payments plus other expenses related to housing like utilities, property taxes, homeowners insurance, and maintenance. For groceries, you’ll likely spend the same as you currently pay. Don’t forget to add in dining at restaurants and food services. Next, calculate monthly premiums for insurance including the out-of-pocket cost of healthcare services that are not covered by insurance. Also, consider the cost of potentially needing Long Term Care. Lastly, calculate spending on non-essentials like entertainment, vacations, hobbies, gifts, and charitable donations.
The Last Step: Crunch The Numbers
If you fear your expenses may be more than your retirement income, it’s time to connect with an FRC® trained advisor who can help you tackle any income gap before it’s too late.
