If you’re thinking about retiring soon, there are several realities to consider before you submit your FERS retirement application.
Will You Have Enough Income For a 30-Year Retirement?
To determine if you’ll have enough income to cover expenses over a long retirement, you need to have a clear idea of what your expenses will be when you’re no longer working. Start tracking your daily spending to see what it takes to support your current lifestyle. Though you may think you’ll spend less after retiring, it turns out that retirees often spend more, especially in their first year when every day feels like the weekend.
Will You Be Carrying Consumer Debt Into Retirement?
A growing percentage of current retirees are carrying credit card debt into retirement and the balances they owe are getting higher, even when adjusted for inflation. A high debt load may cause you to withdraw more funds at a faster pace from your Thrift Savings Plan (TSP). This could put you at risk of running out of money when you need it the most: in your later years. If your debt load is high when retiring, you may need to seriously consider working longer to pay it down.
“Considering that all of your federal retirement income is subject to income taxes, you may be in for a big shock if you don’t work with a professional to develop a strategic tax plan.”
Do You Have A Tax Plan?
According to a 2022 survey conducted by the Senior Citizens League, approximately 75% of Americans approaching retirement seriously underestimate the income taxes they’ll owe on their retirement income. Worse, nearly half believe they won’t owe any taxes on their Social Security. Considering that all of your federal retirement income is subject to income taxes, you may be in for a big shock if you don’t work with a professional to develop a strategic tax plan.
Are You Prepared For The Rising Cost Of Healthcare?
According to the Bureau of Labor Statistics, from 2005 to 2022 the CPI for medical care increased by 67.8%, an average annual increase of 3.1%. In addition to the rising cost of FEHB and Medicare premiums, you need to consider the skyrocketing cost of prescriptions.
The US Department of Health and Human Services reports that from January 2022 to January 2023, more than 4,200 prescription drugs had price increases and nearly 50% of these increases were higher than the overall rate of inflation. This type of healthcare inflation threatens your financial security in retirement because, as you age, you’re more likely to have chronic health issues.
If you answered, “No,” to any of the above questions, it’s time to talk with an FRC® trained advisor to establish a secure retirement plan.
