Retirement planning can be stressful. There is so much info/noise out there that it is hard to know what to actually do. That is why we created the ultimate retirement checklist outlining exactly what you should be thinking about 10, 5, 3, and 1 year before retirement.
Ten Years Out
Ten years out is an important time for federal employees to start planning, and here are the most important things to do.
When Are You First Eligible?
The first step in retirement planning is to find the exact date when you’re first eligible to retire with a full-blown retirement as a federal employee.
If you are a traditional Federal Employees Retirement System (FERS) employee, here are the requirements:
- 30 Years of Service at your MRA (minimum retirement age) or later or
- 20 Years of Service at age 60 or later or
- 5 Years of Service at age 62 or later
If you are special provisions then here are your requirements:
- 20 Years of Service at age 50 or later or
- 25 Years of Service at any age
So now is the time to pull out the calendar and figure out the exact date that you hit the age and years of service requirements to retire, but if you were hoping to retire before the date you find then you’ll want to check out these 3 ways that federal employees can retire early.
That date will help you plan your career and retirement with much more clarity.
Estimating Your Pension
It’s hard to know exactly what your pension is going to be ten years out. However, you can run a preliminary estimate for your pension, whether through your HR office or by yourself, to get a preliminary check for what that’s going to be.
Many people are shocked by how much or little it comes out to be depending on what you were expecting.
Clearing Up ‘Years of Service’ Issues
Ten years out is a great time to start clearing up any years of service issues. For example, if you have military time that you haven’t bought back, or you have old temporary time that potentially could be bought back if it was before 1989, then you would want to address these issues.
Or if you have any part-time service, figure out how that affects you. If you have any non-standard service, this is the time to figure out how that impacts your retirement.
Assessing Social Security Benefits
The first step to understanding Social Security is by getting a Social Security statement. To do so, go to ssa.gov, make an account and pull a statement.
Social Security benefits often provide a significant portion of your retirement income, so understanding what you’re entitled to can help you plan accordingly.
Creating a Debt and Mortgage Payoff Plan
If you have any debt, come up with a plan to have them paid off ASAP. Being debt-free in retirement can provide you with greater financial security and freedom.
Evaluating Life Insurance Needs
What life insurance do you have? Is it enough coverage? Too much coverage or not enough?
You want to get the coverage you need before you develop health issues that would limit what insurance you could qualify for.
Estate Documents
We all know we need to get them done, but now is the time to actually do it. Go find a local attorney or find an online service that can help you get the documents you need to take care of yourself and your family.
Dial in the Thrift Savings Plan (TSP)
With only 10 years until retirement, you don’t have a lot of time to recover from mistakes. You want to nail down how much you should be putting into the TSP and how you should be investing your TSP money.
Discussing Retirement Plans with Your Spouse
To have a wonderful retirement you and your spouse have to be on the same page. Discussing each other’s plans, dreams, and expectations about the future and retirement is essential.
Consider discussing things like:
- Where do you want to live in retirement? Close to kids? Far away?
- What do we want to do once we retire? Lots of travel?
- How much income do you need to have the retirement you want?
5 Years Out
5 years out is crunch time! Here are the biggest things to consider.
Income Check
Now’s the time to review all the income that you’ll have in retirement to make sure it is looking like it will be enough.
Your 3 big income sources will probably be your FERS Pension, your Social Security, and your TSP.
Even if you checked these income sources 5 years ago (at 10 years out), they all have certainly changed and you’ll want to review them at least once a year between now and retirement to make sure you are on the right track.
FEHB Eligible?
To keep your health insurance under the Federal Employees Health Benefits (FEHB) program into retirement, you must be covered under FEHB for at least five consecutive years before retirement
Cash is King!
How is your emergency fund doing? How is your high-interest debt (credit cards, etc.) doing?
Retirement is a time when having cash reserves on the side and now debt is an absolute lifesaver. This is especially important for federal employees who can wait months before they start receiving their pension in retirement.
3 Years Out
Almost there! Here are the most important things to check 3 years out.
Testing Retirement Locations/Plans
What is your retirement dream? Move to Florida and spend all day on the beach? Buy an RV and roam the country? Or just read books all day?
Now is the time to sample those dreams while you are still working. This could mean renting an RV for a long weekend or renting a vacation home in the same Florida town that you’d like to retire to.
Sampling your retirement plan serves two important purposes:
- It allows you to see if that is truly the sort of retirement you want as some people realize that they don’t enjoy RV-ing as much as they thought
- It lets you get a sense of the cost of living the way you might like to in retirement to make sure you can afford it.
Planning for FEHB and Medicare
What is your plan for health insurance now and throughout retirement? Are you keeping FEHB, jumping on Medicare, or both? Are you on Tricare from your military days or are you covered by the VA? You will want to have a plan for FEHB and Medicare in retirement.
12 Months Out
Just 1 year away! Congrats! Just a few more things to finalize.
Retirement Application Preparation
You make some key decisions on your retirement application like what you want to do with survivor benefits and life insurance.
It is best to review the application early to make sure you understand it and are comfortable filling out all the sections.
Social Security
You want to reach out to Social Security about 4 months before you want to start benefits, so if you want to start benefits right at retirement, then you’ll be reaching out to Social Security while you are still working.
Thrift Savings Plan (TSP) Withdrawal Options
The TSP is a great tool in retirement, but in order for you to use the TSP, the money needs to come out. You’ll want to make sure you understand your withdrawal options as well as how you want to manage your investments in retirement.
Estate Documents
Are your estate documents still up to date? Have there been any family changes that have changed how you’d like things set up? Are all your beneficiaries (TSP, Life Insurance, etc.) updated?
Annual and Sick Leave Planning
If you have unused leave at retirement then the government will pay you for it. However, unused annual leave is paid in a lump sum while sick leave goes to increasing your pension. This article will walk you through exactly how both of these work and how to get the most out of it.
Conclusion
Retirement planning has a lot of different steps/parts but just take it one step at a time. Just take the next small step that you know you need to do and before you know it you’ll be ready and prepared for a great retirement.
