Contemplating worst-case scenarios may not be pleasant, but it is an essential step when planning for retirement. Before entering this significant phase of life, it is crucial to delve into the numbers and ensure your financial strategy can withstand unforeseen challenges. Here’s why stress-testing your retirement plan is a necessity.
Evaluating Longevity: Can Your TSP Nest Egg Endure Till Age 90?
Surviving until the age of 90 might seem like a positive prospect, but if it leads to outliving your savings, it can pose a severe financial threat. Extended life expectancy comes with increased costs, especially related to potential health issues and out-of-pocket expenses for long-term care. If projections reveal your TSP may deplete before reaching age 90, it’s imperative to recalibrate your retirement plan promptly.
Addressing Income Gaps: The Impact of a Spouse’s Passing on Household Income
For married couples entering retirement, the potential loss of a spouse can significantly impact household income. The survivor of a federal retiree may face a reduction of up to half of their deceased spouse’s FERS/CSRS annuity (pension). Additionally, household Social Security income for FERS participants could decline by as much as 50%, and the surviving spouse may face an increased income tax burden due to the shift from joint to individual filing. Identifying income gaps in the event of a spouse’s passing is crucial, requiring course correction before retirement.
Incorporating Long-Term Care Costs: A Vital Component in Your Retirement Plan
Long-term care, encompassing assistance with daily activities like dressing and bathing, is a critical consideration often overlooked. Uncovered by FEHB or Medicare, this custodial care is provided in assisted living facilities and nursing homes. Research indicates that 70% of adults aged 65 and older will require long-term care, with associated costs averaging $4,640 per month for assisted living and $9,034 per month for a private room in a nursing home. Without Long-Term Care Insurance, these expenses become out-of-pocket obligations.
Remember, preparing for the unexpected ensures that your retirement plan is robust and capable of weathering potential challenges. An FRC® trained advisor can offer valuable insights and assist in refining your plan to better withstand unforeseen financial stresses.
