A survey conducted by the Federal Retirement Thrift Investment Board (FRTIB) revealed a number of interesting viewpoints on this topic among Thrift Savings Plan (TSP) participants in the Federal Employees Retirement System (FERS).
Approximately 59% of currently employed FERS workers say they are comfortable with the amount of their retirement savings. However, just 48% of TSP participants who are currently working say they’ve calculated the income they’ll need to achieve financial security in retirement.
The bottom line: if you haven’t figured out how much income you’ll need to cover all of your expenses over a 30-year retirement, there’s no way of knowing if you’ll outlive your money.
The Top Three Risks To Your TSP Retirement Savings
There tends to be a lot of panic among TSP participants when there’s an extreme downturn in the stock market. In fact, many pre-retirees believe that stock market volatility is the biggest risk to their TSP nest egg.
However, according to a study conducted by the Center for Retirement Research at Boston College, the majority of people overestimate stock market volatility as a significant risk to their retirement savings. In reality, the top three risks in order of importance are:
- Longevity
- Health
- Stock Market
Researchers found that older adults headed toward retirement greatly underestimate their own longevity due to being “pessimistic about their survival probabilities.” And when it comes to medical expenses, they also tend to underestimate the probability of a health crisis creating the need for long-term care as they age.
Living Longer Costs More Money
If you only plan on your retirement lasting until you turn age 80 or less, what happens if you live until age 84 or 85? According to the Social Security Administration, a man turning 65 today can expect to live to age 84. And a woman turning 65 today can expect to live to age 86.7.
You may be surprised to learn that, thanks to advances in medical treatment, each year, more and more people live until age 90. In fact, the Census Bureau predicts as much as 10% of the U.S. population will reach age 90 in the year 2050. Living longer costs more money. No matter what your personal life expectancy may be, it’s far better to over-estimate your longevity than take a chance on outliving your money.
Touch base with an FRC® trained advisor who understands your federal benefits and can help you plan for financial security that lasts for the rest of your life.
Source: https://crr.bc.edu/briefs/how-well-do-retirees-assess-the-risks-they-face-in-retirement/
