3 Retirement Questions Federal Employees Should be Asking Now
Making the transition from the workforce to retirement is a big decision. After years of service, you are close to settling into a more comfortable and less stressful, and demanding lifestyle. As professional financial advisors specializing in the retirement of Federal employees, we understand the challenges that may lie ahead and present this article to help you begin to answer some of your most pressing questions.
Planning for Retirement
A fluctuating market, political instability, and an unclear vision of your financial future – these are all factors that may shake your confidence as you plan to enter retirement.
An increasing number of Americans, including Federal employees, are wondering if they can afford to retire. Will my savings last? Is Social Security a dependable and adequate supplemental income? How will my pension and other benefits fit into my retirement puzzle?
Add to this potential new tax laws, survivor benefits, health care, leaving behind the familiar routine, unplugging from workplace friends, and suddenly retirement dreams may become cloudy.
Developing a retirement strategy may help provide you with a deeper sense of financial stability and greater confidence in achieving your retirement goals and dreams and a bright future.
1. What Does Retirement Look Like?
You have seen them in grocery stores, restaurants, and other places of business. These are the older folks whom you think should be retired but obviously are not, otherwise they would not be working, right?
Well, maybe.
They could be working because they want to. After all, many are not ready to give up the activities and colleagues they have spent a lifetime developing. They will work as long as they feel productive and able to contribute.
Or yes, they may be working because they do not have any choice. Their savings may have run out, they may not have planned well. Perhaps the rising cost of living or unfortunate circumstances forced them back to work.
Another scenario may be involving retirees who made adequate plans but later learned that retirement was not for them. They are wired for a higher level of activity and interaction with others and chose to get back in the workforce.
Are you ready to seriously plan for both the personal and financial aspects of retirement?
Let’s assume as a Federal employee, you’ve reached the point where you are ready to make the decision. What do you do next?
First, do the numbers. Identify your income streams and projected expenses. How much income will your pension generate, Social Security, TSP and other investment balances? How much will you need monthly to cover your fixed and variable expenses? (We can provide you with a worksheet to assist in this process by request).
Secondly, what are your retirement plans? What type of lifestyle do you expect? Are you looking to travel? Do you want to move to a warmer state or closer to children?
2. Can I Afford to Retire?
The worries and questions government workers have when considering retirement are the same as those in the private sector. Will I have enough income and assets to retire comfortably and remain comfortably retired? Will I have to be dependent on children or even worse – welfare?
How much money you will need to retire depends on your personal lifestyle, spending habits and your sources of retirement income. Our work begins with a conversation. Listening to you about your dreams, so that together we create and define your goals. MORE importantly, work with you to maintain a plan for a comfortable retirement.
How much money will I want to retire?
The problem is that there is no magic number that is right for everyone.
Let’s assume that you have diligently saved, invested well, have been very fortunate, and accumulated a nice sum of capital: Is that enough to retire and stay comfortably retired? Those last 3 words change the picture a little, don’t they?
Without an effective retirement plan, you run the risk of outliving your savings and not being able to maintain your desired lifestyle throughout your retirement years.
What is your vision for the future?
What will your expected standard of living be during retirement? Together we will examine what are you currently spending for housing, food, utilities, etc. and we will look at what you expect to spend once you retire.
We will discuss paying off your mortgage or renting; remaining at your current address or moving to a new location? Some of our clients move to states with a more favorable tax structure or lower cost of living. Sometimes they move just to be closer to children or other relatives.
How much do you need to be comfortable and content?
One of our first lessons on entering the field many years ago came from one of our mentors, he explained to us: “Once you retire, your money must work for you or you must go back to work!!” It has a ring of truth to it, doesn’t it? We assist our clients in investing their savings to get the desired returns and to protect those assets from unforeseen events.
In our opinion, deciding and defining your retirement is the single most important financial decision of your life. Most of us don’t get a “do-over”. We often say: “not planning for your retirement may be hazardous to your wealth”.
3. What are My Sources of Retirement Income?
If you are a FERS employee, you are probably aware that your retirement income is structured like a three-legged stool with these components:
Pension
(defined benefit plan) provides guaranteed benefits to you based on age, years of working, and salary range. The government oversees contribution to the pension funds and retirement benefits do not depend on investment performance.
You may request a projection that will outline your pension income and your survivorship options. This is an important piece to an analysis of your future retirement income.
Social Security Income
The first step in the Social Security analysis is to find out approximately how much income you will receive at different ages. Social Security mails you an estimate once a year if you are approaching retirement age, but you can obtain an estimate any time from Social Security at: SSA.gov. It is simple to do and only takes a few minutes.
There’s a lot to consider when deciding the best time to start collecting Social Security benefits. The analysis is beyond the scope of this article. Social Security decisions should be part of a comprehensive retirement plan that addresses all the areas of your unique financial position.
Thrift Savings Plan (TSP)
The amount you have saved in your TSP is the third leg of your retirement income stool. The TSP can be converted to an income stream to provide an additional source of income.
Deciding when to retire is one of the most important decisions you will ever make. When you work with any of the advisors at Medallion Financial Group, we can help you chart a course through the complex world of wealth management and investment planning. We work together to build a dedicated, long-term, and disciplined approach that is tailored to your unique needs and objectives. Are you ready to start the conversation? Contact us for a free consultation.
About the Authors
John and Laura Stohlman have been working with clients to help them achieve retirement success since 1987. Both John and Laura have the following designations: Certified Financial Planner (CFP®) and Chartered Federal Employee Benefits Consultant (ChFEBC®).
For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.
Our focus is twofold: first and foremost, we stand against any violation of laws, values and ethics. Second, we treat our clients as part of our family, putting their needs before our own. We strive to exceed client’s expectations – because we have high expectations of ourselves.
in