When you’re planning for retirement it’s important to understand there are factors you can control and other realities you can’t control. Once you have a clear picture of what’s up ahead, you can develop strategies to grow your retirement nest egg while mitigating the potential threats to your financial security.
You Can’t Control A Volatile Stock Market
When there’s a prolonged market correction it can seriously reduce the performance of your Thrift Savings Plan (TSP) investments especially when you start taking distributions. The first rule of thumb: don’t panic. The market always recovers over time. However, when you’re a few years away from retirement you may want to consider rebalancing your TSP investments to reduce risk. The reason: a significant market drop just before you retire is harder to recover from when you’re no longer working.
“High inflation means you have less buying power because your cash is worth less. As a result you pay considerably more for essentials like food and gas.”
You Can’t Control Inflation
As the U.S. economy recovers from the impact of the COVID-19 pandemic, we’re in the midst of high inflation. High inflation means you have less buying power because your cash is worth less. As a result you pay considerably more for essentials like food and gas. If inflation spikes after you retire, it can create a retirement income gap. The gap is the difference between your higher expenses and the income you receive from your FERS annuity, Social Security benefits, and your Thrift Savings Plan (TSP). You may want to consider investment products like annuities that provide an adjustment for inflation.
You Can Control Your Spending In Retirement
Studies show a growing number of retirees are overspending in retirement. This phenomenon usually occurs in the early years of retirement. From expensive “bucket list” travel adventures, to tapping their nest egg for extravagant gifts for the kids and grandkids, overspending increases the risk of running out of your TSP funds over a long retirement. The solution: develop a realistic budget and stick to it.
You Can Control When You Retire
As a FERS participant, if you have the required number of years of creditable service, you can retire between the ages of 55 and 57. However, working until age 62 can increase your annuity by 10%, every month for the rest of your life. Working longer gives you more time to grow your TSP and get your agency match, too.
Before you make any decisions, touch base with an FRC® trained advisor who understands your federal benefits. Together you can develop strategies to build on what you can control while mitigating factors you can’t control.
