Many Federal employees make these 5 fatal mistakes when planning their retirement. Read what these mistakes are and how we can help you avoid them.
The average retirement age among federal employees is 61. You probably have a few more years before you retire, but that does not mean you should not be thinking about retirement yet. If you want to live comfortably when you retire, you should start planning now. Avoid these retirement mistakes.
Avoid These 5 Retirement Planning Mistakes
1. Carrying Debt Into Retirement
Carrying debt or acquiring debt into retirement is a bad move many Federal employees make. Ideally, your retirement income should be allotted to your daily needs, not for paying off debt. If you are in a financial emergency that your emergency fund cannot cover, choose a low-cost loan, such as Access Loans’ employee loan programs, that you can pay off before you retire. You’ll also enjoy manageable monthly payments, so you can still save up while paying your debt.
2. Not Saving Early On
Federal employees have the advantage of the Thrift Savings Plan (TSP) or a Roth TSP where they can contribute a percentage of their salary before-tax. Agencies match employees’ contribution to the TSP of up to 4% of their gross pay. For FERS-covered employees, the TSP and its tax-free counterpart, Roth TSP, will serve as their retirement income, so Federal employees should maximize this benefit as early as possible.
3. Tapping Into Retirement Accounts Early
A common mistake is excitedly squandering one’s retirement income upon retirement. While you are entitled to using your retirement income, some planning is necessary to truly maximize these your income well into your old age. For instance, you can file for Social Security as early as 62 but you’ll receive maximum benefits if you wait until full retirement age at 66 or 67 depending on the year you were born. Plan when it is best to withdraw from your accounts to maximize your retirement income.
4. Poor Tax Planning
Taxes are another factor Federal Employees should consider because it can eat up a substantial percentage of your retirement income. As mentioned, you have the option to convert to Roth TSP, which for many makes sense when you take taxes into consideration. A Roth TSP lets you have a tax-free retirement income, so it is one great option if you expect to be in a higher tax bracket upon retirement.
5. Not Planning For Healthcare Costs
Your retirement age will most likely be riddled consumed with various healthcare needs, so not planning for future healthcare costs is not a good idea at all. Check how you can stay covered by Federal Employees’ Health Benefits (FEHB), but you should also consider maintaining health insurance, and having emergency funds to tap into in the future.
It’s never too early to plan for your retirement. Start planning for your future as early as now!
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