As individuals approach the culmination of their federal careers, the emphasis often shifts towards maximizing savings within their Thrift Savings Plan (TSP). However, alongside this focus, it becomes imperative to strategize the withdrawal of funds from the TSP, in conjunction with the FERS pension (annuity) and Social Security benefits, to adequately cover all post-retirement expenses.
One prevalent guideline advises aiming for approximately 80% of the current income in retirement, factoring in the cessation of certain deductions such as TSP contributions and FERS pension deductions. Yet, accounting for the inevitable rise in the cost of living and inflation, retirees might find their monthly expenses remain relatively unchanged from their working years.
“Data from the latest Consumer Expenditure Survey by the U.S. Bureau of Labor Statistics reveals that the average monthly expenses for American households stand at $6,081”
Assessing Current Monthly Expenses
Data from the latest Consumer Expenditure Survey by the U.S. Bureau of Labor Statistics reveals that the average monthly expenses for American households stand at $6,081. This encompasses a spectrum of expenditures ranging from mortgage payments and utilities to credit card bills and miscellaneous costs. In comparison to figures from 2013, this reflects a notable increase of $1,822. With the average annual household income for 2022 totaling $83,195 post-taxes, Americans are expending approximately 88% of their after-tax income.
Essential Expenses: A Breakdown
Essential expenses encompass the fundamental costs crucial for maintaining one’s desired retirement lifestyle:
- Housing: Encompasses mortgage payments, property taxes, and homeowners insurance.
- Utilities: Includes gas, electricity, water, heating oil, telecommunications, and internet services.
- Home Maintenance: Covers upkeep expenses such as pool maintenance, lawn care, and housekeeping services.
- Food: Encompasses groceries, dining out, and food delivery services.
- Transportation: Includes auto insurance, fuel expenses, and average monthly vehicle maintenance.
- Healthcare: Comprises healthcare insurance premiums, out-of-pocket medical costs, dental expenses, and other uninsured medical expenditures.
- Debt: Covers credit card payments, car loans, TSP loans, and any outstanding college loans.
Calculating Discretionary Expenses
Discretionary expenses encompass non-essential expenditures within an individual’s control:
- Personal Care: Encompasses clothing purchases, personal care products, and service expenses like gym memberships.
- Pet Care: Includes pet food, supplies, veterinary services, and pet-sitting expenses.
- Sports, Entertainment & Restaurants: Covers leisure activities such as sports fees, entertainment events, dining out, etc.
- Travel & Vacation: Encompasses costs associated with travel, including hotel accommodations, car rentals, and airfare.
- Miscellaneous: Includes expenses related to apps, hobbies, gifts, and charitable donations.
