Once you retire from your federal career, it may feel like you’ve already done all the hard work required to ensure a financially secure future. Then again, there are pitfalls ahead that may put you in danger of running out of money.
Applying For Social Security At 62
Under Social Security rules, your Normal Retirement Age (NRA) is when you’re eligible for 100% of your earned Social Security benefit based on your birth year. Now, you can start receiving Social Security benefits as early as age 62 but when you file before your NRA, you’re leaving money on the table. Filing early reduces your Social Security benefit by one-half of one percent for each month you receive your benefit before your NRA. For example, if you were born in 1960, your NRA is age 67. However, if you file early at age 62, your benefit is reduced by 30% for the rest of your life.
“Considering that all of your federal retirement income is subject to federal income taxes, you may be in for a big shock.”
Underestimating Your Taxes In Retirement
According to one survey of recent retirees, 36% said that taxes were a larger expense than they had anticipated while 23% did not plan for taxes at all. Considering that all of your federal retirement income is subject to federal income taxes, you may be in for a big shock. Add to this, depending on your state tax laws, you may also owe state income taxes on your FERS annuity, Social Security, and Thrift Savings Plan (TSP) distributions.
Struggling With The Expense Of Aging In Place
A growing number of new retirees say they plan to age in place. However, even if you’re mortgage free, it’s important to determine if you can cover all the costs related to homeownership when you’re living on a fixed income. With inflation driving up your living expenses year after year you’ll likely be paying more for utilities, home repairs, and maintenance. As the saying goes you may end up “house rich and cash poor” but does it make sense? If you sell your home, the proceeds can be used to help fund your retirement.
Not Adapting To The Retirement Lifestyle
When every day feels like the weekend, far too many retirees actually spend more than when they were working. From expensive vacations and pricey restaurants to overly generous gifts for the kids and grandkids, splurging on your bucket list puts you at risk of draining your nest egg faster than you should.
These are just a few of the pitfalls that can throw your retirement off track. To learn more, connect with an FRC® trained advisor.
