A good financial plan is essential, but it's not everything: plan for more. Image: Robert Kneschke/Shutterstock.com
By: Dallen HawsI have seen 10,000’s of federal employees retire and for many, the first year of retirement is brutal.
But for others, the first year is an incredible start to a new stage of life.
What makes the difference?
Simply put, some people do the following 3 things before they retire and some figure it out too late.
3 Secrets of Retirement Success
The 1st year of retirement is often full of surprises which can be incredibly stressful for those that aren’t prepared.
But if you do the following 3 things before retirement then you’ll be much more prepared.
1. Cash to Survive the Gap
One of the best benefits of being a federal employee is your FERS pension. That is the monthly retirement check that the government will send you for the rest of your life.
It is a truly great benefit but you have to know that you won’t start receiving it immediately at retirement.
There is always a lag while OPM is processing your application.
But they don’t leave you completely high and dry.
Once OPM does a preliminary check on your application they will start sending you interim payments that are normally around 80% of what your full pension will be.
These interim payments normally start 1-3 months after retirement.
But it can take 2-6 months (if not longer in extreme cases) for OPM to process your entire application and begin sending your full pension.
To survive this lag you are going to need cash reserves to get you through.
I’d recommend at least 6 months of expenses in cash so that you don’t have to stress if it takes OPM longer than normal to get your application processed.
For those that don’t have a good emergency fund or cash reserves, the 1st year of retirement is very stressful.
2. Know Your Numbers
Having cash reserves for the beginning of retirement is critical but it won’t last long if you simply don’t have enough total retirement income to live the way you want in retirement.
To have a stress free 1st year of retirement you are going to need to know your retirement numbers like the back of your hand.
The most important numbers to know are your retirement income and expenses.
These are the most important questions to know the answer to:
● How much is your FERS pension going to be every month?
● How deductions are going to come out of your FERS pension (FEHB, Survivor Benefits, taxes, etc.)?
● When are you going to draw Social Security and what will the amount be?
● How much income can your TSP provide for you on a regular basis for the rest of your life?
● How much income do you need to have your desired retirement? A good place to start to figure this one out is to simply look at what you are living off of now.
And while some of these questions may take some work to figure out, it will be worth the confidence that will fill your life knowing that you are on track for a comfortable retirement.
There is nothing more stressful than retiring, simply hoping that you will be able to maintain your standing of living.
3. Have a Non-financial Plan
As a financial planner, I love a good financial plan but… I have to admit that it is not everything.
Great retirements are way more than good finances.
Great retirements are full of passion, energy, health, and the people and activities that you love.
What is your plan for all non-financial parts of your retirement?
What activities would you love to do everyday?
What activities will help you stay young and active?
What people and relationships light you up and fill you with energy?
What activities/people are bringing you down that you need to cut out of your life?
Greatness is No Accident
A successful retirement looks different for everyone.
But one thing is consistent across all great lives: Intentionality
Very few amazing things happen by accident.
Most great retirements are built brick by brick through intentional planning and action.
You can have an incredible retirement but it is up to you to make it happen.
Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.
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