Planning for retirement can feel overwhelming, but it doesn’t have to be. Whether you’re 5, 10, or even 20 years away, having a clear framework to assess your retirement income is crucial—especially for federal employees who have unique benefits.
This guide will walk you through creating your own Retirement Income Worksheet, looking at calculations to estimate what you’ll have coming in when the time comes.
Step 1: Assess Your Expenses
Before diving into income, it’s essential to understand your expenses. Start by analyzing your current spending habits. This step gives you a baseline for how much you might need in retirement.
How to Calculate Your Expenses
- Review Spending: Take your last 6–12 months of bank and credit card statements and categorize your expenses:
- Fixed Expenses: Housing, utilities, insurance, etc.
- Discretionary Expenses: Dining out, hobbies, travel, etc.
- One-Time Expenses: Major purchases or unexpected costs.
- Annual Total: Add up these categories to see where your money is going.
- Projection for Retirement: Plan for 80–100% of your current spending as your retirement target. While some costs (like a mortgage) may decrease, others (like healthcare or travel) often increase.
Example
If your annual expenses today are $60,000, a retirement spending target might range between $48,000 and $60,000.
Step 2: Identify Your Income Sources
Federal employees typically have three primary income sources:
- FERS Basic Annuity
- Social Security
- Investment Income
Let’s break down each source of income.
FERS Basic Annuity
Your FERS pension is a cornerstone of your retirement income. Calculating it involves this formula:
FERS Annuity = High-3 Salary × Years of Service × Multiplier
- High-3 Salary: The average of your highest three consecutive salary years.
- Years of Service: Your total federal employment years.
- Multiplier: Usually 1% or 1.1%, depending on your age and years of service. (SCE may use 1.7% for the first 20 years, 1% thereafter)
Eligibility Rules
Unreduced Immediate Annuity
- MRA (Minimum Retirement Age) + 30 years of service.
- Age 60 + 20 years of service.
- Age 62 + 5 years of service.
Immediate Annuity with Reduction
- MRA + 10 years of service would result in a reduced FERS Basic Annuity. The reduction is 5% for every year you are under the age of 62. You may avoid the reduction by postponing your annuity until age 62.
*MRA ranges between ages 55-57 and is based on your birth year. Check out this chart to confirm your MRA.
Example
Let’s assume:
- High-3 Salary: $100,000
- Years of Service: 25
- Multiplier: 1%
Your FERS Annuity would be:
$100,000 × 25 × 1% = $25,000/year
If you qualify for the 1.1% multiplier (age 62 with 20+ years of service), the calculation changes:
$100,000 × 25 × 1.1% = $27,500/year
Special Retirement Supplement (SRS)
If you retire before 62, you may qualify for the Special Retirement Supplement (SRS) to bridge the gap until becoming eligible for Social Security.
To estimate:
SRS = Estimated Social Security Benefit at 62 × Years of Federal Service ÷ 40
Example
- Social Security Benefit at 62: $1,200/month ($14,400/year)
- Years of Federal Service: 25
SRS = $14,400 × 25 ÷ 40 = $9,000/year
*Important to note: These calculations may vary by agency. There is no cost of living adjustment (COLA) on SRS. There is an earnings test for SRS, so if you go back to work post-retirement, your benefits may be impacted. Check with the Office of Personnel Management (OPM) for your official estimate.
Social Security
Social Security adds another layer to your income. Your benefit depends on when you claim:
| Age to Claim | % of Full Benefit |
| Age 62 | 70% |
| Full Retirement Age (67) | 100% |
| Age 70 | 124% |
How to Calculate
Check your benefits on SSA.gov. You will need to adjust for inflation if your retirement is still years away.
Example
If your Full Retirement Age benefit is $2,000/month:
- Claiming at 62: $2,000 × 70% = $1,400/month
- Claiming at 70: $2,000 × 124% = $2,480/month
Delaying Social Security may boost survivor benefits for a spouse, making it a strategic decision.
Investment Income
Your TSP, IRAs, and other investments provide flexibility in retirement. A common strategy is the 4% withdrawal rule, meaning you withdraw 4% of your portfolio annually. The idea behind this strategy is that 4% is a generally safe withdrawal rate that allows you to withdraw income from your investment portfolio annually without outliving it, but it’s not a hard and fast rule, it’s just a starting point to consider. Your underlying investment mix is also very important.
How to Calculate Investment Income
- Estimate Portfolio Size: Use your current balance, annual contributions, and expected rate of return. Keep in mind that straight line projections do not account for fluctuations in the market from year to year.
- Apply the 4% Rule: Multiply the total portfolio by 4%.
Example
- Portfolio at retirement: $500,000
- Annual withdrawal: $500,000 × 4% = $20,000/year
Use a future value calculator to project your portfolio’s growth. For example:
- Starting balance: $300,000
- Contributions: $15,000/year
- Growth rate: 7%
- Time: 20 years
- Adjust this figure based on when you want to retire.
Projected value: ~$1,818,993, allowing ~$72,755/year under the 4% rule or $90,949 if you were to withdrawal 5% per year.
Step 3: Add It All Up
Once you have estimates for each income source, total them to see if they meet your expense target.
One very important note: You’ll need to adjust each income source for taxes and any other reductions that may apply (survivor benefits, etc.).
Example
- FERS Annuity: $25,000/year
- Social Security: $24,000/year (at Full Retirement Age)
- Investment Income: $20,000/year
Total: $69,000/year
If your retirement expense target is $60,000/year, you’re in great shape! If not, you’ll need to adjust by saving more, delaying retirement, or reducing expenses.
Final Thoughts
Creating a retirement income worksheet helps you plan confidently for the future. Revisit it periodically to adjust for changes in expenses, savings, or income projections.
One thing we didn’t touch on very much in the associated video or this article is taxes. Your income sources are likely to be subject to taxes depending on your specific situation; up to 85% of your Social Security benefits could be subject to taxes, TSP withdrawals of pre-tax funds, and pension payments are also subject to taxation.
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The content is developed from sources believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
