Planning for Retirement

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rakendzior

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First, my profound thanks to the powers that be who invited me to participate and talk about retirement. My life today is about helping others get ready for their transition from working for money to having money work for you. Lots of questions to ask, and answer, before that happens. Don't ever hesitate to ask me questions and I'll do my best to give you my thoughts.
 
Well, I'll bite... every time I try to tackle Question 1, "How much do I need to have saved up for retirement?" I am struck by the fact that financial sites tend not to even mention pensions, which surely must affect how much of a lump sum one should have on retirement day. Heck, I don't even know if having a pension puts me in the minority or not these days. But I think most, if not all, of us feds have a pension. So, how do I calibrate in my pension (if at all) when trying to answer Question 1?
Rick
 
Great question! I could live pretty well on my retirement and social security but I use TSP withdrawals to pay my mortgage and expect it to provide security for unknown financial of health issues in the future. ​
:smile:
 
pmaloney - first check out my reply to boygolong. Some of what I said there may not apply to you since you say you could live pretty well on what you expect from a pension (?) and SS. Right now I have no idea how old you are, which in turn leads to how many years you have to go before you qualify for a pension and/or reach your SS FRA (Full Retirement Age), one thing you might focus on is if you expect to live in your current home and whether or not you still have mortgage payments. If you do, I encourage you to recalculate your current mortgage payments such that it's completely paid off on the date you retire. A relatively simple calculation will give you that number. And without trying to get too deep into the weeds, that opens up the possibility of using some of your equity to finance the GO-GO years of retirement, before you fall into the SLOW GO years, etc.
 
Thanks to all involved in starting this thread and thanks to Tony for taking an interest in sharing some of his secrets to retirement. When stating that one needs to construct a financial roadmap of retirement funds, I'm a bit confused because I have some 401ks from my working career prior to government. I guess its safe to say that nothing in written in stone, but one should at least know the ballpark figure of the various financial streams, and know when to withdraw from them. My problem is figuring how much I need in retirement.
 
boygolong said:
Well, I'll bite... every time I try to tackle Question 1, "How much do I need to have saved up for retirement?" I am struck by the fact that financial sites tend not to even mention pensions, which surely must affect how much of a lump sum one should have on retirement day. Heck, I don't even know if having a pension puts me in the minority or not these days. But I think most, if not all, of us feds have a pension. So, how do I calibrate in my pension (if at all) when trying to answer Question 1?
Rick
Click to expand...
Well, to figure the "present value" of an annuity, I'd recommend using the formula for that - pretty simple and you can look it up (MS Excel has standard equation for that, or TSPtalk links perhaps even the TSP.gov site or your Credit-Union/bank site). Estimate your retirement annuity amount (convert from Months/Years as needed and include some modest annual assumed COLA increase) and your estimated years of retirement life, plug those figures/values in and you'll get the Present Value (PV) of that for your assume year of retirement. Then you could also calculate that PV in x-future years in the future to TODAY's PV (equations for that and factor in some reasonable annual inflation estimate between now and year-x). Can do the same for your estimate SS, etc. etc..
 
TSP Calculators can be very helpful https://www.tsp.gov/PlanningTools/index.html Remember that FERS was compared to 3 legged stool--pension, TSP and Social Security. A starting point for how much you will need in retirement is to take a look at your current salary minus SSA & Medicare Deductions minus TSP Savings

Some Retirement Planning Tools/Calculators
https://www.i-orp.com/bequest/index.html
https://firecalc.com
https://www.flexibleretirementplanner.com/wp/

Boggleheads has a lot of info on planning for retirement: https://www.bogleheads.org/wiki/Bogleheads®_retirement_planning_start-up_kit
Retirement Spending https://www.bogleheads.org/wiki/Retirement_spending
Withdrawal Methods https://www.bogleheads.org/wiki/Withdrawal_methods
 
Rick/boygolong - I think I tried to answer your question about pensions. I thought I had already done so but maybe not so here goes... Pensions are by definition known as 'defined benefit' plans. What you get is determined by a formula that is usually a function of how many years you have earned as an employee, your average salary over the past X years, how old you are when you claim an income from the plan. It may or may not have a build in cost of living adjustment. To top off all that, you usually have the option of taking an income for life or for a period certain. Like 20 years. Then there is an option if you have a spouse to whom you want payments made if you die first. That also involves his/her age etc. You make those choices just before you tell them to start sending you money. At some point, you need to ask pension administration for information so you can make an informed decision about all that. Meanwhile, Question 1 is still out there.
 
felinecri - this is Tony attempting to answer you. A critical element in planning for a retirement is an understanding of the difference between strategic decision making and tactical decision making. Here's an example: You need to be able to get to work every day. Do you drive yourself or ride the bus? That's a strategic decision. If the decision is to drive yourself, then a tactical decision is to purchase or lease a car. If the answer is to purchase a car, also a strategic decision in this case, the tactical decision becomes either a new one or a used one or which brand to buy/lease. IN the retirement context, I encourage people to develop a strategic framework, either written down or in their head, build upon such questions as WHEN do I want to retire, WHERE do I want to live, how LONG am I likely to live, will I have a spouse that's dependent on me if I die first. I want people to focus on these and other questions before they commit to new stuff that surfaces more and more as the retirement date gets closer. It should be baked into the psyche long before then. The idea is to have a worry free and financially secure retirement, but it won't happen if you rely too heavily of HOPE and GOOD LUCK.
 
OK, I’ll bite too. So you run Florida Wealth Advisors and are going to offer free retirement advice. Good for you.

I retired from Federal service at the end of last year. I made a couple of minor mistakes which cost me around $500 and several sick days I could have used. About those sick days, you have to make a choice at some point about yourself and the job you hold and tying up those loose ends. Those mistakes are documented in my retirement thread.

My annuity has been finalized so I know what I will receive per month. I will live off this income plus the annual leave I sold back for a few months. By August I will have to either start receiving social security or withdrawing from my TSP to meet my income goals. The goal is simple, have the same amount coming in as the net amount while I was working as a fed.

I am currently 66y 10m old. My “full retirement age” according to social security was 66y 0m.

I get a lot of conflicting advice about tapping the TSP and waiting until I am 70 to receive social security or starting to receive social security at 67y 4m.

I also get conflicting information about the amount my wife will recieve from social security based on her earnings v 50% of my payment after I apply. She is 63yo.

PO
 
Thanks for biting. By now you’ve realized the transition to ritirement is complicated. Dozens of moving parts, many of which are unique to you which makes giving advice problematical.

You’ve already started your transition and many of your variables are now etched in stone. You raise the issue of starting SS benefits or withdrawing from TSP. Here’s my initial thoughts: Under ‘normal’ circumstances, one should not take SS benefit before one’s full retirement age. And that applies to your wife too.

Having said that, if you wait beyond your FRA, the benefit increases .667% every month, or 8% annually until you reach age 70. If you think that’s better than what you’ll generate with your TSP money, then draw down the TSP if you need it and hold off on your SS benefits.

Statistically for a reasonably health man and woman, there’s roughly a 93% chance that one of them will be alive at age 93. If you think of Social Security as a defined benefit pension plan with a cost of living rider, you can expect that benefit to be there.

If you’ve died first, then she will get the larger benefit (yours) for the rest of her life. Over that span, your TSP money will probably grow faster that the COLA benefit, if you’re not too conservative. If you want to know my thoughts about the future of Social Security, I’ve written blog posts about this. Here’s one of over 130 post I’ve written about Social Security; https://tinyurl.com/yy9ga2bx
 
Essentially what this means, assuming I understand it, is that for some people, a pension benefit attributable to earned income not subject to Social Security FICA withdrawals is considered a 'substitute' for what for most people is a traditional Social Security retirement benefit. To the extent you have such a pension income, you can expect it to effectively reduce or eliminate any Social Security income that's not as a result of a disability or other qualifying circumstance. Tony
 
rakendzior said:
Essentially what this means, assuming I understand it, is that for some people, a pension benefit attributable to earned income not subject to Social Security FICA withdrawals is considered a 'substitute' for what for most people is a traditional Social Security retirement benefit. To the extent you have such a pension income, you can expect it to effectively reduce or eliminate any Social Security income that's not as a result of a disability or other qualifying circumstance. Tony
Click to expand...

I think you are referring to the CSRS vs. FERS post. Makes it easier to know which post you're talking about if you say post "so and so" or you can click on the lower right "Reply With Quote". Yes you are correct. If your retirement program was CSRS you didn't pay into SS.
 
rakendzior said:
Thanks for biting. By now you’ve realized the transition to ritirement is complicated. Dozens of moving parts, many of which are unique to you which makes giving advice problematical.

You’ve already started your transition and many of your variables are now etched in stone. You raise the issue of starting SS benefits or withdrawing from TSP. Here’s my initial thoughts: Under ‘normal’ circumstances, one should not take SS benefit before one’s full retirement age. And that applies to your wife too.

Having said that, if you wait beyond your FRA, the benefit increases .667% every month, or 8% annually until you reach age 70. If you think that’s better than what you’ll generate with your TSP money, then draw down the TSP if you need it and hold off on your SS benefits.

Statistically for a reasonably health man and woman, there’s roughly a 93% chance that one of them will be alive at age 93. If you think of Social Security as a defined benefit pension plan with a cost of living rider, you can expect that benefit to be there.

If you’ve died first, then she will get the larger benefit (yours) for the rest of her life. Over that span, your TSP money will probably grow faster that the COLA benefit, if you’re not too conservative. If you want to know my thoughts about the future of Social Security, I’ve written blog posts about this. Here’s one of over 130 post I’ve written about Social Security; https://tinyurl.com/yy9ga2bx
Click to expand...
Thanks for the reply. I understand that everyone’s retirement situation is different which is why we post minutiae in our threads that only apply to ourselves but in some cases apply to someone else’s situation. Makes it difficult to decipher it all but the fed that the detail apples to will understand it.

I understand the .667% monthly increase in social security if I wait until May 2022 v applying in Aug 2019. 23[SUP]1/3[/SUP]% is not to be taken lightly. The desired amount would be about $3500 per month taken from the TSP in that 2year 9month period.

The question is not about my wife’s ss benefits after I have died. She believes that if she starts collecting ss before I do that she will get close to what her estimated benefits statement shows as the amount. True. She believes that if I start collecting ss benefits before she does that her estimated amount will be 50% of my benefit. I have not been able to find out if this is true. Chatting with ss people on their site tells me to apply and see what happens. If my wife starts receiving ss benefits, which amount will she receive assuming I am not dead and haven’t started receiving benefits. After I start receiving benefits will her amount go up to 50% of my benefit?
 
in regard to social security...my wife plans to take her lower spousal benefit at 62...i will take mine at 70
She can draw her spouse benefit at age 62 (and I will be age 72) which will be 32.5% of my increased full benefit. Upon your death, her benefits will increase to my benefit amount if she is at least age 67.

I am 10 years older than her
 
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