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4 things to do to get ready for your first year of retirement

Be strategic and be prepared.

According to a recent article in Moneywise, there are four things you need to do to prepare for in your first year of retirement. Below is their list, with some important modifications for the specific situation of federal employees. 

Be prepared for an income adjustment. According to MoneyWise, many people need to adjust to far less money coming in and more going out. Thanks to a relatively generous federal retirement benefit, along with Social Security and savings in the Thrift Savings Plan (with agency matching funds), this may not be as big of an adjustment for federal workers. Many feds have spent their entire career in federal service, earning a lifetime stream of income.

Still, you need to look before you leap into retirement. Crunch the numbers to make sure your net retirement income reflects any reductions to your retirement benefit for part-time service, survivor benefit elections, former spouse apportionments and other factors. And remember that your benefit will have withholdings for various types of insurance, and federal (and possibly state) income taxes. 

For new retirees, it can be a smart idea to meet with a financial adviser to help take stock of your situation, especially if you need to make big changes to adjust to your retirement income flow.

Prioritize your expenses. This one is near and dear to me. In my family, I live for the “wants” and my husband sometimes has to remind me there are “needs” that take priority. One of the ways to prepare for big expenses like travel and home renovations that may be on your wants list is to plan ahead and shop around. (This is good advice for needs, too.), For example, my husband and I put a date on the calendar every year to check in with our cable provider to see if there is a special deal happening that can lower our bill.

Insurance is also among the items on which you can save money by shopping around. According to data from Forbes, the national average cost for car insurance in 2023 is $176.50 per month. But depending on which state you live in, your driving history and the make and model of your car, there are some insurers that can offer you as little as $22.

Keep adding to your savings. Although retirees can’t add to their investments in the TSP, there are other ways to continue saving. If you’re working in the private sector after your federal retirement, you can participate in a 401(k) plan or put the maximum allowed in an IRA. And delaying withdrawals from your TSP account can increase your savings in the early years of retirement by allowing your balance to grow (or recover from recent losses in the market). 

According to Investopedia, in deciding how much money to take from your retirement plans to supplement your other income, you should consider your safe withdrawal rate. That’s how much you can take out without running the risk of outliving your money. For many years, the rough guideline was 4% per year. The number that’s right for you will be influenced by your age, health and the diversification of your account between cash, stocks and bonds.

Have a Social Security strategy. I’ve written about Social Security withdrawal strategies in the past. Here are some recent articles:

According to the Social Security Administration, if you take your benefit starting at age 62, you’ll miss out on additional funds you’d reap at a later retirement age. If you wait until you hit your full retirement age (67 for those born in 1960 or later), SSA calculates you’d reap $1,000 instead of $700 per month. Further, you could receive delayed retirement credits of 8% per year if you wait until you turn 70. 

In addition to setting your Social Security claiming strategy, it’s also important to consider the best time to begin receiving your government pension, especially for those under the Federal Employees Retirement System. If you’re considering retiring at the FERS minimum retirement age (57 if you were born in 1970 or later), be sure to do the math on your benefit. Waiting until 62, when more generous benefits kick in, along with higher cost of living adjustments, can make a big difference.

If you follow all of the above advice, you might just be able to fill both your needs and at least some of your wants.