A retirement readiness study conducted by the Office of Personnel Management (OPM) shows that less than half of federal employees surveyed have calculated how much they need to save for a comfortable retirement. Ask yourself the following questions to determine if you’re truly ready to retire.
Have You Calculated Your Expenses In Retirement?
If you don’t have a clear idea of how much you spend monthly while working, you won’t have a realistic idea of what you’ll need to support your lifestyle in retirement. Start with adding up fixed monthly expenses then track your spending on eating out, entertainment, hobbies, and other discretionary expenses.
Don’t forget to add in any consumer debt, car loans, and student loans you’ll be carrying into retirement. Outstanding debt can be a huge drain on your financial security in retirement and put you at risk of outliving your money. Before you retire, make sure you put a plan in place to pay down your debt ASAP.
“Make sure to factor in deductions from your pension for insurance premiums and the spousal benefit you elected.”
Have You Calculated Your Retirement Income?
Next, get an estimate of the income you can count on in retirement:
- Your FERS annuity (pension)
- Social Security benefits
- Thrift Savings Plan (TSP)
- Plus retirement income your spouse may have from a 401(k)
You can use online tools like The Federal Ballpark E$timate (FBE) to get an estimate of your projected FERS annuity (pension) and TSP benefits. Make sure to factor in deductions from your pension for insurance premiums and the spousal benefit you elected. For an estimate of your Social Security benefit, use one of these Social Security Benefit Calculators.
Do You Have An Emergency Fund?
Can you cover the cost of an emergency once you’re retired? If you plan on withdrawing money from your traditional Thrift Savings Plan (TSP) every time there’s an emergency, you risk burning through your TSP nest egg faster than you’ve planned. Worse – 100% of your withdrawal will be subject to federal income taxes. And if you use a high-interest credit card, your monthly expenses may start to exceed your budget. Both of these options are risky when you’re living on a fixed income.
If You Answer “No” To Any Of These Questions You May Not Be Ready To Retire
Think about it – if you have no idea what your retirement income and expenses will be when you separate from service, how can you know if you can afford to retire? Before it’s too late, connect with an FRC® trained advisor who can help you crunch the numbers and develop a plan for financial security in retirement.
