Will I make money in retirement?

Mar 6, 2024 | Retirement Income, Retirement Planning

One of the key questions on every federal employee’s mind is, “Will I make in money in retirement?” Especially in the current economy, you may be wondering if you’ll be able to retire comfortably. As a federal employee you have several income sources that you will need to plan for and manage. Additionally, some of the deductions you have while employed will go away as you transition from employment to retirement. Let’s explore how what makes up your retirement income and how it has the potential to come close to or exceed your income while employed.

Income Sources in Retirement

Federal Employees Retirement System (FERS):

Most federal employees are enrolled in the FERS, which provides a defined benefit pension based on the employee’s years of service, salary history, and the FERS annuity formula. Your pension is a fundamental source of income as a retiree.

FERS Supplement:
Retiring before the age 62? The Federal Employees Retirement System (FERS) supplement is a benefit provided to certain federal employees who retire before they are eligible to receive Social Security benefits. If you fall into that category, it’s designed to bridge the gap between the time you retire and the age at which you become eligible for Social Security benefits. The supplement is calculated based on the your years of FERS service and is intended to approximate what you would receive in Social Security benefits if you were eligible.

Social Security:

Federal employees also contribute to Social Security during their working years. Upon retirement, you’ll receive Social Security benefits based on your lifetime earnings. The decision of when to start receiving Social Security benefits is a personal one and depends on various factors. Federal employees, like all individuals, can generally choose to begin receiving Social Security benefits anytime between ages 62 and 70.

Thrift Savings Plan (TSP):

The TSP is a retirement savings plan for federal employees, similar to a 401(k). You can choose various withdrawal options from the TSP, including a lump sum, annuity, or systematic withdrawals. The TSP is a vital component of retirement income for federal employees.

Deductions in Retirement:

While federal employees enjoy various income sources in retirement, you’ll also experience changes in deductions. Several deductions that are part of the working years may no longer apply in retirement:

Social Security and Medicare Taxes:

Federal employees contribute to Social Security and Medicare during their working years. However, once you retire and start receiving Social Security benefits, you no longer pay these payroll taxes.

Thrift Savings Plan Contributions:

During employment, federal employees contribute to the TSP to build your retirement savings. In retirement, these contributions cease, and you can start withdrawing from their TSP accounts.

Federal Employee Retirement Contributions Act (FERS) Contributions:

FERS requires federal employees to contribute a percentage of their salary to your retirement plan. Once retired, these contributions cease, and you’ll begin receiving your FERS pension.

As a federal employee, understanding the various income sources and changes in deductions during retirement is crucial for effective financial planning. The combination of FERS, Social Security, TSP, and other potential benefits forms a comprehensive retirement income strategy. By considering these factors, you can make informed decisions that ensure you are on the path to meeting your financial goals.

Looking for assistance? We can help!

If you are looking for a guide to help you navigate retirement and determine what your income will look like in retirement, Benchmark Financial Group can help. It all starts with gathering your information, discussing your goals, and preparing a plan so that we may help you maximize your income in retirement. With the right strategy, you may get your income equal to or exceed your pre-retirement net income. To get started, schedule an appointment today with Benchmark Financial Group by filling out the form online or calling David Raetz at 913-534-8256 to discuss your financial needs. Benchmark Financial Group is happy to help you navigate your options and determine the best path to move toward your financial goals.

*Securities and Advisory Services Offered Through CreativeOne Securities, LLC  Member FINRA/SIPC and an Investment Advisor.  Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.

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Overland Park, KS 66210

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