Most federal employees approaching retirement have a decent idea of what they are leaving behind. What many have not fully mapped out is whether their guaranteed retirement income will actually be enough to support the lifestyle they want once the paychecks stop.
Your Guaranteed Income Floor
For most FERS employees, guaranteed retirement income begins with two primary sources: your pension and Social Security.
Your FERS annuity is based on your High-3 average salary, years of creditable service, and retirement multiplier. Most employees receive a 1% multiplier, though that increases to 1.1% for employees who retire at age 62 or later with at least 20 years of service.
A federal employee with a $135,000 High-3 salary and 25 years of service retiring at age 62 could generate a FERS pension of roughly $37,000 annually. Add Social Security at an estimated 22% replacement rate and that same employee receives approximately $29,700 more — bringing combined guaranteed income to about $66,700 per year.
For someone earning $135,000 before retirement, that leaves a meaningful gap.
Understanding the Gap
Many retirement planning models suggest retirees need anywhere from 70% to 100% of pre-retirement income depending on lifestyle, healthcare, and long-term goals.
- At 80% income replacement, the target is $108,000 annually
- At 100%, the target is $135,000 annually
The difference between $66,700 in guaranteed income and either of those targets must come from personal savings — primarily the TSP.
The Challenge With the TSP
When retirees depend heavily on the TSP for monthly income, many shift toward conservative allocations to reduce volatility. The challenge is that conservative allocations may also reduce long-term growth potential, creating a balancing act that is difficult to sustain over a 25 or 30-year retirement.
A Different Approach
Some retirees address this by separating their income needs from their long-term investment strategy — strengthening their guaranteed income floor first so their TSP can remain focused on growth rather than paying the bills.
Common strategies include working part-time after leaving federal service, delaying Social Security, adjusting retirement timing, reducing debt, or using portions of savings to create additional income streams or purchase guaranteed income products. The right combination depends on your age, expenses, health, and goals.
A Federal Retirement Consultant (FRC®) can help you estimate your income floor, evaluate your gap, and review strategies to strengthen your overall retirement picture. Schedule your complimentary benefits review today.
