A lifetime federal employee would be likely to count on a combination of FERS and Social Security to generate $50,000 of income. That’s the equivalent of having saved up $1,250,000! Image: Andrii Yalanskyi/Shutterstock.com
Do you have $1,460,000 saved up for retirement? According to a study conducted by Northwestern Mutual, this amount is what U.S. adults believe they need to retire comfortably. The study goes on to say that the $1.46 million amount is 15% higher than last year’s survey, and 53% higher than the results from 2020.
I bet that very few readers have this amount of money saved up – but that’s OK, there’s no need to panic. The value of our FERS annuity and Social Security payments will make up a lot (if not all) of the $1.46 million.
Using the relatively cautious 4% withdrawal rate “rule”, $1.46 million would result in an annual income of $58,400. This amount is slightly higher than what the Bureau of Labor Statistics (BLS) reports the average retiree spends each year. Recent BLS data says that $52,141 is the average annual spending of a retiree.
To determine the future value of our FERS annuity and of our Social Security payments, we can also utilize the 4% “rule”. $20,000 per year (let’s say that represents your FERS annuity) would have required you to save $500,000. If your annuity was $30,000 per year, the savings required to safely generate that amount would be $750,000.
A lifetime federal employee would be likely to count on a combination of FERS and Social Security to generate $50,000 of income. That’s the equivalent of having saved up $1,250,000! The mandatory contributions to both Social Security and FERS have a big payoff once we retire!
Assuming that we have $50,000 from FERS and Social Security, we would need to save only $210,000 in our TSP (and/or other sources) to reach the survey’s $1,460,000. I bet that we’ll have multiples of that amount saved by the time you retire.
Next time you hear that you need to save some large amount of money to have a comfortable retirement, be aware that those articles are being written for “average” individuals who do not have an employer provided defined benefit plan such as FERS. Thank your lucky stars that, like the children in Lake Wobegon, we feds are above average.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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