Can I Afford to Retire?

FEBRUARY 18, 2021

If you’re worried about being able to retire, you’re not alone. Millions of Americans are concerned about whether their retirement savings will be enough to keep them comfortable. In fact, many Americans fear running out of money more than they fear death. If you’re evaluating the decision to retire, there are a few important steps you can take now to determine whether you are on track financially. You can start with a few simple calculations.

Projected Expenses and Income

Start by estimating your expenses in retirement. By adding all your basic living expenses and desired discretionary spending, you can develop a better idea of how much money you’ll need each month. To make it easier for you to accurately estimate your expenses in retirement, we have developed a Retirement Budget Calculator that uses your current household expenses as a guide.

Another quick way to evaluate your retirement expenses is to take a flat percentage of your current spending. A common recommendation is to use 80-90% of your current preretirement monthly spending to arrive at a conservative projection.

The second step is to identify all income from Social Security benefits, a pension, and other sources. Any gap between your income and your expenses will need to be covered by withdrawals from your retirement savings.

Understanding how much can be safely withdrawn each year during retirement without running out later in life is complicated. Unfortunately, there is no simple formula or approach that you can use to determine a safe withdrawal rate. It’s important that you take a personalized approach to your retirement income strategies. There are many online calculators you can use to estimate how much you may be able to withdraw in retirement. A financial professional can also help you understand how different factors affect your calculations and develop a strategy designed to balance your cash flow against the long-term preservation of your nest egg.

What if I don’t have enough?

Have you run the numbers and think you may have a retirement income shortfall? Don’t panic. There are several strategies that can help increase your potential retirement income or reduce your expenses.

• Increasing your savings rate can help you make up an income shortfall. Are you getting your full Thrift Savings Plan (TSP) match? If you are 50 or older you may be eligible for additional contributions.
• Delaying retirement by working and adding to your TSP can help your nest egg continue to grow, increase Social Security benefits (if under age 70), and shorten the amount of time your savings must last.
• Downsizing your home can lower living expenses.
• Working during federal retirement can create extra income while keeping you active and doing something you love. Many public workers retire when they are still young and active, making a second career or part-time work attractive. While some take the skills they have developed into new careers, others pursue passions for teaching, speaking, or have part-time jobs. Keep in mind that working while collecting benefits may impact your Special Retirement Supplement and Social Security if you are younger than full retirement age.

We Are Here to Help

Retirement Benefits Institute has been helping federal employees understand their retirement options for over ten years. To speak with a Federal Benefits Analyst today, contact us at (877) 864-1145.

Gain clarity so you can retire.

About Us

Retirement Benefits Institute provides benefits and retirement training to federal employees. Our trainers and sponsors have instructed thousands of federal employees, making it possible for many of those to obtain personal consultation and receive assistance in specific federal benefit planning to maximize their assets. Contact us for more information at (877) 864-1145 or click this link to email us.

Disclosure

The information contained in this blog should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individual’s specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also President of Christy Capital Management, Inc., a Registered Investment Advisor.