When it comes to retirement, everyone has different needs, circumstances and lifestyles. However, one rule-of-thumb applies to all: expect the unexpected.
“If I’m Debt-Free Before I Retire, I’ll Spend Less In My Golden Years.”
Not true. There may be any number of unplanned expenses over a 20-to-30-year retirement. Inflation tops the list. Currently, federal COLAs are not keeping up with the rising cost of just about everything, especially healthcare. That’s why it’s important to understand how FEHB works in retirement if the unexpected happens.
“I’ll Be In A Lower Tax Bracket Once I’m No Longer Working.”
Many retirees are shocked to find how much Uncle Sam taxes FERS, CSRS and Social Security income. Since your TSP is funded with pre-tax income, withdrawals will be subject to federal taxes, too. Then there are state income taxes to consider. Some states tax retirement benefits while others don’t. Without a retirement tax plan, you may be in for an unpleasant surprise.
“Once I Retire, I Can Stop Growing My Nest Egg.”
Consider this: are your retirement assets really enough to sustain you for the next 20 or 30 years if the unexpected happens? A major medical event, a divorce, or the loss of a spouse, can dramatically change your financial picture at any time. Once retired, you may want to consider saving or reinvesting a portion of your federal retirement income to continue growing your nest egg.