There’s a new movement in retirement planning called F.I.R.E. It stands for “Financial Independence, Retire Early.” It’s based on a strategy to save and invest aggressively during your working years, then leave the workforce years before the usual 60-something retirement age.
As a FERS participant, if you have the required number of years of creditable service, you can retire between the relatively young ages of 55 and 57. Even better – you can separate from service with a full, unreduced annuity plus your Thrift Savings plan next egg. However, there are some drawbacks to retiring early.
Retiring Early Can Put A Strain On Your TSP
There’s a general rule of thumb that a retiree only needs around 80% of their pre-retirement income to live comfortably. But recent studies show that retirees tend to overspend in the early years of their retirement.
When every day seems like the weekend it can lead to more recreational shopping and eating out than you ever did during your working years. If there’s longevity in your family, you may well live until 90. When you retire early, it gives you less time to grow your TSP and may increase the odds of running out of money toward the end of your life.
“Far too many retirees are under the impression that filing early at age 62 doesn’t make much of a difference – wrong.”
Lower Social Security Benefits If You File Early
As a federal employee covered under FERS, you have two sources of guaranteed income: Social Security and your monthly annuity. After a few years into a relatively early retirement, you may you decide to file early at age 62 for your Social Security benefits. Far too many retirees are under the impression that filing at age 62 doesn’t make much of a difference – wrong. In fact, when you file at age 62 it results in a 30% reduction in your Social Security check for the rest of your life.
Retiring Early Can Impact Your Mental & Physical Health
According to the National Bureau of Economic Research, retirement can lead to declines in mental health and mobility while increasing the possibility of other health issues. In fact, other studies show that boredom in retirement can create a range of issues including depression and alcohol abuse. Those first couple of bucket-list years may be fun but what will you do to fill the remaining years when you retire early?
Before you submit your retirement application to OPM, touch base with an FRC® trained advisor who understands your federal benefits. Together you can crunch the numbers to see if retiring early is good strategy for you.
