Knowing when to retire is a struggle for many federal employees. Feeling uncertain about retirement eligibility, wondering if there is enough money saved, or having questions about health insurance can leave you stuck between a desire to retire and a feeling of inability to do so. We’ve even seen employees who—due to confusing service history issues—weren’t even sure how many years of service they had. Even if you have all the financial issues of retirement figured out, there’s still the emotional side. For some, this isn’t even a question; as soon as they are financially ready, they are out the door. Others enjoy their jobs and the comradery they’ve established after years with coworkers and friends. Whether your struggle is financial, emotional or both, we’ve listed a few ways to know when it’s time to retire.
COULD YOU LIVE ON A RETIREMENT BUDGET TODAY?
Whether through your agency or with our own Federal Benefits Analysis, you should be able to obtain a reasonable estimate of your retirement income. Remember that FERS retirees primarily draw from a FERS pension, Social Security, and TSP in retirement. CSRS retirees largely rely on their CSRS pension; although TSP and Social Security do sometimes apply.
After you have a good idea of what your income in retirement will be, the next step is to ask yourself, “Could I live on this income today?” If the answer is “no,” then you likely are not yet ready to retire. Keep in mind all that needs to be accounted for in the retirement budget: car and house payments; trips and vacations; presents for children and grandkids; and more.
Don’t forget that health premiums through FEHB will not technically increase, but since premium conversion occurs at retirement, you will now have to pay health premiums with after-tax funds. Generally, expect to pay more in retirement for FEHB than you do while employed.
ARE YOU READY TO LEAVE WORK BEHIND?
For some, as soon as the finances are taken care of, they are ready to be out the door and enjoying their retirement. Yet, for many employees we speak with, this is not the case. Some have established wonderful comradery in the office and genuinely enjoy their work. Many find a great sense of purpose and drive in what they do. If you fall into either of these categories, walking away from work may require more than just knowing that the numbers line up.
So how do you know if it’s time to retire? At RBI’s 10th anniversary celebration, one retiree made this comment, “If you’re still thinking about it, it’s not your time.” It’s important to know what’s keeping you from leaving the workforce. Retirement is not simply reaching a certain age or having a set amount in your bank account. It’s a very personal decision that involves a great deal of thought and likely input from those closest to you.
It’s also vital to keep in mind that as you leave work behind, you need to turn toward something. Bob Buford’s Halftime and Chris Hogan’s Retire Inspired are two great resources to flesh this idea out.
DO I NEED TO SPEAK WITH A FINANCIAL PROFESSIONAL?
The answer to this question comes down to the individual. If you understand the tax implications of your FERS pension, Social Security, and TSP withdrawals, then you may be fine on your own. If you are unfamiliar with the impact these three key areas have on your overall tax bill, or have no plan for how to coordinate these three legs of your retirement stool, it may be wise to speak with a financial professional. Though not necessary for everyone, financial advisors may help you work through the monetary aspects of retirement. Some financial professionals with a more holistic approach can even be an aid in not just the financial aspect, but the more emotional side of the question, “How do I know if it’s the right time to retire?”