We spend a lot of time thinking about the accumulation stage of retirement to help ensure we’ve saved enough to cover our financial needs once we’re no longer working. But we don’t give enough thought to what the coming years will be like as we navigate through the stages of the retirement lifecycle.
The Go-Go Years – Early Retirement
This stage kicks off with your retirement party at the end of your federal career and lasts about 10 years. This is when new retirees tend to splurge on travel, dining out, and checking other pricey items off their bucket list. In fact, you may be surprised to find yourself spending more money during the first 10 years of your retirement than when you were working. During this stage, you’ll need to make two major financial decisions: when to “turn on” your Social Security benefits and when to start taking distributions from your Thrift Savings Plan (TSP).
“During the Go-Slow Years, you may start dealing with age-related, chronic health problems.”
The Go-Slow Years – Middle Retirement
Around age 70-plus you’ll likely find yourself slowing down and sticking closer to home. Once you’ve completed your bucket list you tend to settle down into a routine and spend less on travel and eating out. During the Go-Slow Years, you may start dealing with age-related, chronic health problems. That’s why it’s important to plan for the rising cost of healthcare premiums and out-of-pocket medical expenses. By now you’ve started receiving Social Security and taking TSP Required Minimum Distributions (RMDs) at age 73. As a result, you may end up in a higher income tax bracket when these benefits are combined with your annuity income.
The No-Go Years – Late Retirement
Around age 80 is when age-related health issues become a harsh reality and you may need non-medical, long-term care in a nursing home. This type of 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 take a huge bite out of your TSP nest egg. Another reality of the No-Go Years is dealing with the death of a spouse which can mean the loss of household Social Security income.
There’s also a possibility you may be dealing with a health issue that leaves you incapacitated and unable to make your own decisions. A good retirement plan includes a healthcare directive, power of attorney, and other estate-planning documents to help protect your legacy.
To make sure you have a solid plan for every stage of the retirement lifecycle, connect with an FRC® trained advisor who understands your federal benefits.
