Federal employees are fortunate to enjoy a three-tiered retirement plan. Once you retire, you will draw income from Social Security, your pension, and withdrawals from your Thrift Savings Plan (assuming you chose to contribute to it). In some ways, you’re more fortunate than many American workers, who will be depending upon only one or two forms of retirement income. But that doesn’t mean you won’t face the same retirement risks as everyone else. The following factors could greatly impact your future, so make sure to give them careful consideration before you retire.
Longevity. Thanks to improved healthcare and nutrition, people are living longer than ever. But if you live to be 85, 90, or even 100 years old (a more common occurrence now than ever), how will you live for several decades on a fixed income? Your Social Security benefits and pension should hold out, barring any unforeseen complications, but are you depending upon income from your Thrift Savings Plan? If so, it would be smart to take a closer look at that part of your plan. How long with that income last?
Healthcare. A longer life also means more opportunity to develop serious diseases or other complications. With the cost of healthcare rising steadily each year, how will you cover this expense? Medicare will pay for a portion of your expenses, but you will be responsible for co-pays, deductibles, and premiums. Can you handle the burden of rising prices?
Long-term care. At some point, many of us will need long-term nursing care. A longer life span nearly guarantees that you will need extended care at some point. Are you prepared to face this significant expense? Remember, even if you rely upon family members to care for you, the cost to their careers and personal lives can be great. It is still best to have some money set aside to cover long-term nursing care. As a federal employee, you have the option of enrolling in the Federal Long Term Care Insurance Program, or choosing a private plan to address your needs.
Inflation. Most of us barely notice the rise in prices from one year to the next. But over the course of 20 years, your cost of living could almost double! Since you can expect a relatively long retirement of 20 years or more, you should ask yourself whether your budget will accommodate a significant decrease in your spending power toward the end of your life.
For more information on how you can hedge against these risks, give us a call. We specialize in helping federal employees estimate their retirement budgets, and make changes to their plans in order to accommodate common issues such as inflation and healthcare.
