Determining Your Income Needs in Retirement

Posted by Gary Raetz Determining Your Income Needs in Retirement

As a federal employee, you enjoy one of the best retirement systems in the nation. However, don’t let that fact mislead you into thinking that you don’t need to plan for retirement! Some people have made the mistake of simply assuming that they will have “enough” income, without defining what “enough” actually means.

So, how much income do you need in retirement?

This can be a difficult question to answer in a single blog. Obviously, we don’t know your individual circumstances, but you definitely need to consider three primary factors:

  • Needs – how much money do you need to live? Consider your rent or mortgage, food, bills, and so on
  • Wants – what do you want to do throughout your retirement years? ‘Do you hope to travel, pursue a particular hobby, or purchase a beachfront home?
  • Unexpected expenses – at some point, many retirees experience an increase in out-of-pocket medical expenses, or the need for long-term nursing care, or some other emergency. Can you access an insurance plan to meet those needs, or will you have money set aside in an easily accessible account? Can your budget adjust to accommodate new circumstance?

Once you can establish monthly and annual budgets, you can work backward from there, to see how your retirement benefits will stack up. Will you be able to generate enough income to meet your budget, when you account for your pension annuity payments, Social Security benefits, and withdrawals from your Thrift Savings Plan?

If it doesn’t look like you can meet your expected budget, you have several choices:

  • Bump up your TSP contribution rate
  • Cut expenses from your budget, if you’re willing or able to make sacrifices
  • Work longer, so you can potentially save more money and increase certain retirement benefits such as Social Security
  • Find a way to generate additional income in retirement

Yes, it’s a complicated web of decisions and adjustments, but we can help make the process easier for you. Give us a call, and we will help you sort through your options and decide which path is best for your situation.

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