When does the journey towards retirement truly commence? The IRS’s provision for Catch-Up Contributions to your TSP at age 50 marks a pivotal milestone in your retirement timeline, making your fiftieth birthday an opportune moment to commence if you haven’t already.
While retirement might appear distant when there’s still over a decade to go, neglecting to strategize for your golden years can leave you vulnerable financially. Let’s delve into the initial steps of this process.
Commence Estimating Your Retirement Income Requirements
It’s fundamental – without a clear understanding of the amount necessary to sustain your lifestyle post-retirement, you can’t ascertain if your current savings are adequate. Without crunching the numbers, you’re essentially navigating blindly.
The oft-cited notion that you’ll require around 80% of your present income in retirement may not hold true if you’re burdened with substantial consumer debt like credit cards, auto loans, and student loans.
“Once you start withdrawing tax-deferred funds from your traditional TSP, you’ll be liable for taxes to Uncle Sam.”
Develop a Tax Strategy for Retirement
Assuming you’ll drop into a lower tax bracket post-retirement from your federal career is unwise. The tax-deferred contributions you’ve made to your traditional Thrift Savings Plan (TSP) have undoubtedly reduced your federal tax liability during your active years.
Conversely, when you begin withdrawing tax-deferred sums from your traditional TSP, the IRS will claim its share. Additionally, as a FERS participant, you’ll be subject to income taxes on your pension (annuity) and Social Security benefits.
Additional Aspects of a Federal Retirement Blueprint
Navigating federal retirement planning entails several crucial decisions:
- Deciding whether to maintain FEHB and FEDVIP coverage post-service separation.
- Evaluating the necessity of retaining FEGLI coverage.
- Determining the optimal timing for commencing your Social Security benefits.
- Effectively managing your TSP investments and distributions throughout retirement.
- Safeguarding against the exorbitant costs of long-term care in institutional settings.
And this only scratches the surface. Procrastination imperils your retirement security. Collaborate with an FRC® trained advisor proficient in federal benefits to craft a comprehensive plan ensuring a financially stable retirement.
