Get Real About How Much Money You’ll Have in Retirement

Are you going to retire soon? If so, it’s important to estimate your net income from all sources of retirement money. Here are some tips for doing that. 

Compare your current net paycheck to your estimated net retirement benefit. The gross amount of your retirement benefit might look very generous, but you only get to spend your net income. 

You can get an estimate of your Civil Service Retirement System or Federal Employees Retirement System benefit from a retirement specialist in your agency’s human resources office. This estimate can show potential reductions applicable to your situation, such as a survivor benefit election or part-time work schedule proration.

The estimate will provide a review of the accuracy of your retirement service computation date, take into account an age reduction for MRA + 10 retirements, and ballpark the amount of the offset for those covered under CSRS Offset. The estimate will include the value of a FERS supplement if you are eligible for this benefit. 

You may need to further refine the estimate by reducing it to take into account court-ordered benefits to a former spouse as well as federal and state tax withholding. The IRS has a tax withholding calculator that can help you figure this out. 

Factor in premiums for insurance. Here are some tools to help:

• Federal Employees Health Benefits Program 2021 premiums
• Federal Employees Group Life Insurance calculator
• Federal Employees Dental and Vision Program 2021 premiums
• Federal Long Term Care Insurance Program calculator

Estimate your Social Security retirement income. Explore the best time between ages 62 and 70 to claim your benefit. Here are some Social Security Administration resources:

• Retirement Benefits Estimator
• Working and Social Security
• When to Start Receiving Social Security
• Income Taxes and Your Social Security Benefit

Estimate how much you will need to withdraw from your funds in the Thrift Savings Plan. Don’t forget tax withholding from these payments. Here are some TSP resources:

• TSP Calculators
• Important Tax Information About Payments From Your TSP Account
• Important Tax Information About Your TSP Withdrawal and Required Minimum Distributions

Calculate your net income from other sources. That includes potential post-retirement income from self-employment, wages from a new job and any other investment income you have. 

Consider any reductions in retirement expenses you may have. These could include paying off a mortgage, no longer having children’s college expenses, and eliminating the costs of commuting and professional clothing. 

Consider any additional expenses you will have after retirement. Suppose, for example, that you’d like to pursue hobbies or travel in the time you’ll have on your hands. 

If you find that you’re financially ready for a comfortable retirement, then congratulations on a successful career and planning effort. If not, remember that you can speed up the process by increasing your savings, making sure your investments are properly diversified, and considering moving to an area with a lower cost of living after retirement.