Even the most well-planned retirement can be blindsided by an unexpected financial threat. That’s why it’s important to anticipate the worst that can happen when planning for retirement.
Death Of A Spouse Reduces Retirement Income
Married couples have to consider one of the harsh realities of their golden years, how the death of a spouse can reduce their retirement income. Your household Social Security income can drop by as much as 50% when both spouses receive benefits because the surviving spouse can only receive the higher of the two amounts. If the deceased spouse was a FERS retiree, their survivor can only collect a reduced annuity of 50% or 25% depending on which survivor benefit was elected at retirement.
A “Grey Divorce” Impacts Your FERS Pension & TSP
Known as “Grey Divorce,” survey data from the U.S. Census Bureau indicates that divorces in the 55+ age range are twice the rate of every other age group. The most significant increase was among boomers aged 65 and older with the divorce rate tripling between 1990 and 2021. Once you’re divorced, your FERS pension is divided based on the number of years your federal career overlapped your marriage. When it comes to your Thrift Savings Plan (TSP) the earnings you’ve contributed to your TSP during your marriage are also considered marital property.
“Add to this, when you consider the longevity gap between men and women, underestimating your life expectancy can leave your widow with significant income loss.”
Living Longer Than You Expected
You don’t have to be a financial wizard to see the big difference in the income required for a 30-year retirement compared to a 20-year retirement. Yet, a recent survey reveals that over 50% of American adults have no idea how long people tend to live in retirement. Add to this, when you consider the longevity gap between men and women, underestimating your life expectancy can leave your widow with significant income loss.
Long-Term Care In A Nursing Facility
Statistics show that someone turning 65 today has a nearly 70% chance of needing some type of non-medical Long-Term Care (LTC) services 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 long-term care. Since non-medical, custodial care in a nursing facility is not covered by FEHB or Medicare and can run as high as $10,000 per month, without long-term care insurance the cost can take a huge bite out of your TSP.
Fortunately, there are several retirement-planning strategies that can help mitigate these financial threats. Connect with an FRC® trained advisor to learn more.
