My federal retirement plan – why a retirement budget is important.
When considering my federal retirement plan, why is a retirement budget important? As federal employees begin thinking about federal retirement, it is important to remember that income whether it is a federal pension, Social Security, or withdrawals from savings, is only half of the retirement planning equation. The money coming in is just as crucial as the money going out. When drawing up a retirement budget, first ask the question: What will I need to live on in retirement?
Budgeting is not something most people would describe as pleasant. However, it is important in your federal retirement plan to create a retirement budget while working so that as a federal employee you can get expenses under control before retiring. Making these decisions about retirement beforehand can relieve some of the financial stresses of making the big decision to retire. However, delaying planning could close off options that federal employees might have otherwise had.
Federal employees should start planning a retirement budget by examining how they are currently spending money. Build a basic framework for budget that includes household expenses, auto expenses, groceries, dining out, clothing, etc. The next step is to calculate your retirement income. A professional can help federal employees come up with an accurate estimate. Once the federal employee has an estimate of their retirement income and a comprehensive budget that takes into account all of the current expenses, he or she can begin to formulate a retirement budget.
There are three tips Retirement Benefits Institute recommends everyone heed in their federal retirement plan while creating that ever-so-important retirement budget:
- Consider whether your home and car fit into your long-term plans. Retirement Benefits Institute has found that earlier in their careers, federal employees purchase a larger home. The reason being is because the family is just starting out. However, as families grow older and time passes the home remains the same size but the family living in it downsizes. As a result some federal employees decide they no longer want to live in a large home in retirement. Many federal retirees decide not to own a home at all in federal retirement. Instead they rent. Doing so reduces the stress of having to keep up a home. Likewise, federal employees most likely will not need a large SUV anymore if it’s just the federal employee and their spouse traveling around the world. It’s important to ask, “Why pay for what I don’t really want or need?”
- Plan for non-monthly expenses. Do not forget to include all expenses in the budget, whether they occur monthly or not. Birthdays and Christmas come once a year, but the expense is a common occurrence. Also don’t forget car registration and repair costs. Include any annual vacations. Include everything. This may help federal employees divide regular non-monthly payments down to their monthly costs. For example, if a federal employee spends $3,000 a year on summer vacation, block that out as $250 a month.
- Get the entire family involved. When drafting a budget, the most important family member to include is, of course, the federal employee’s spouse. Financial pressures are one of the largest drivers of marital conflict. Although including the spouse in all aspects of a federal employee’s retirement planning may be an unpleasant process at first, it’s of paramount importance that bot the federal employee and his or her spouse are on the same page. Even if the federal employee is the one monitoring and planning finances alone, the spouse can help keep their significant other accountable and on track—but only if he or she is kept informed.
These tips and strategies can help federal employees put together a retirement budget that’s accurate and comprehensive. Managing expenses and cash outflow is just as important as planning a retirement income. Do not delay the federal retirement planning process, and don’t hesitate to see a professional who can help you plan for the future.
If you would like further assistance as you develop your federal retirement plan and you are within 3 years of retirement, analysts at Retirement Benefits Institute would be happy to help you. Use the form below to request assistance or call us at 877-864-1145.
Retirement Benefits Institute provides federal benefits and federal retirement training. Our trainers and sponsors have provided training to thousands of federal employees. The team includes former federal management staff (CSRS & FERS), CPAs, and retirement planners ready to assist you. Federal retirement training classes are available for all federal employees and spouses. Please join us
at one of our upcoming training events near you.
The information contained in this article should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also president of Christy Capital Management, Inc. (CCM), a registered investment advisor.