Critical Steps to Take at Least 5 Years Before Retirement

These are some important retirement planning steps for federal employees to take at least 5 years before leaving the office for the last time.

Retirement may seem like a distant dream, but it generally comes faster than you think.

Some people only start thinking about retirement when they are within a year of leaving the government. While some people get away with this, it is much harder to be proactive with that short amount of time.

By starting the planning process years in advance, you’ll be setting yourself up for success by knowing exactly what your retirement will look like down the road. This will not only improve your retirement outcome but also give you time to make adjustments if needed.

Here are a few things that you should start thinking about around five years before you retire.

Don’t Go It Alone

The first thing to note is that you don’t have to go through this process alone. Make sure you involve any tax or financial adviser that you may have in this process.

Your agency is also a valuable partner in this process. They will help you gather your personal records as well as give you information about the retirement process. Agencies will also offer retirement counseling seminars which can be very helpful.

Why 5 Years?

For a number of reasons, five years out from retirement is a good time to start planning.

First, you’re close enough to have necessary information about what your life might look like to make educated decisions.

Second, you have to be enrolled in FEHB and FEGLI for at least five years before retiring to be eligible to continue these programs after you retire. Having access to FEHB in retirement can save you thousands and thousands of dollars and should not be taken lightly.

Review Your Service Records for Accuracy

You will want to review your service records at this point as well. Every employee has an official personnel folder with information about their career and benefits. Sometimes this folder is physical and sometimes it is electronic.

Here are some of the things that you should check for accuracy:

  • The beginning and end dates for each of your employment periods that will be used to calculate your benefits.
  • The beginning and end dates for each promotion or pay increase to make sure your high-3 salary will be computed correctly.
  • If there is a portion of your career where you were not contributing into the retirement plan, you will want to check those dates as well.
  • You will also want to make sure that your military service, if any, is well documented with the correct dates. If you will want to buy back your military time, you will want to think about doing this sooner than later.

Pension and Social Security

The next things that you will want to check is your pension calculation and your estimated Social Security benefit.

You can calculate your pension based on the type of retirement you are planning for with the applicable equation. You can request an estimate of your Social Security benefit at your full retirement age from the Social Security website.

These two numbers will give you an idea of what your income will be in retirement. With this information you will be able to decide what type of retirement lifestyle you can afford and if you want to make any changes to your plans. 

Many people are really excited for the amount that they calculate their pension will pay them every month, but we can’t forget all the reductions that will come out of your pension in retirement. It will be things like your survivor annuity reduction, FEHB premiums, FEGLI premiums, and taxes. Just make sure to keep these in mind when planning for retirement.

If your pension and your Social Security benefit won’t be enough to provide for your retirement expenses, the next thing to look at is your TSP. This can be a great tool to supplement your other benefits. Because everyone’s situation is so different, there is no perfect answer for the amount of money you’ll need in your TSP for retirement. You’ll have to educate yourself the best you can while looking at your personal situation.

While this short article is by no means a comprehensive retirement planning checklist, it should help you start to think about the things that will be important to you in retirement.

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.