Retirement ready or retirement regrets?
As more and more federal employees start eyeing retirement, their focus begins to shift to what’s next. Regrets creep in and thoughts turn from worry over their usual workday routine to concerns about how to fund their golden years. Retirement regrets have real consequences, do what you can now to get ahead of the game.
Many American retirees worry about how they saved for retirement and are finding they are unable to maintain their pre-retirement standard of living.
According to the recent report, “State of Retirement Finances: 2021 Edition (updated 2023),” retirees have saved only about 39 percent of what they are expected to need to fund their retirement.* The survey, which polled 1,500 Americans about their retirement funds, debt and financial worries, found retirees on average have about $179,000 in retirement funds, far less than the $465,000 recommended by experts, said the report.
What does this mean for federal employees?
How prepared are you? How much money do you really need to retire? Do you know the ins and outs of your pension? How about your Thrift Savings Plan (TSP) and other retirement accounts that make up your nest egg?
We often hear these 7 regrets from federal employees attending our retirement workshops. Take a look to see if any sound familiar.
1. I am starting too late. Most people never feel really ready to contribute, especially a large amount of money, into an investment product. And so if we wait until we’re ready, we’re going to find ourselves not having a lot of money when we retire. A relatively small sacrifice now will serve you well later!
2. I didn’t contribute more and do it sooner. If you’re not quite to the 5% match level, get there. Whatever you’ve got to do, get there, because that is free money that you’re getting from your agency. If you’re already at a 5% contribution level, how could you get to 10%? If you’re already at 10%, how could you press it and max out the TSP at the $23,500? And when you’re approaching age 50, how can you stretch your budget to be able to contribute that extra $7,500 in catch-up contributions? Then at from ages 60-63 you can make catch-up contributions of $11,250. Find a way to up your game, and push yourself a little bit. Your future self will be very glad that you did!
3. I missed out on my agency match. Remember: 5% every single pay period. We need to understand how important the agency match is. This is free money. Make sure that you’re getting this. Don’t leave your money lying on the table.
4. I was too aggressive or too conservative. Try to keep your emotions out of your decisions. Let’s say you are conservative, but had your money in the market-based funds like the C, S and I funds when the stock market tanked. You probably got really scared because of your conservative fiscal nature. So what did you do? You probably yanked money out of the TSP, or moved it over to the G Fund. As a result, you ended up creating a big mess for yourself by locking in true losses on your money.
5. I tried to time the market. Just stop it! We are not smarter than the people who watch the markets every day. The idea that we (as lay people) can consistently time the market perfectly so that we buy low and sell high is just not reality. Think long-term when investing.
6. I didn’t take tax diversity seriously. If you’re not already contributing to the Roth TSP, at least consider the strategy and see how it may affect you both in the short-term and in the long-term. Check out the FedImpact Webinar about the Three Tax Buckets.
7. I didn’t seek professional advice. Tip the odds in your favor. Do it now. Don’t wait until you’re stepping into retirement to ask for help, because at that point you’re just doing damage control. Get the advice of a financial professional who operates in the federal space who understands not only the TSP, but all of your other benefits and can put you on a great path to get the retirement that you want.
What do you do now?
While it’s not possible to anticipate everything that may arise once you close your office door behind you, acknowledging these 7 retirement regrets now can help make sure that the last decades of your life will be smoother sailing.
Retirement is something to look forward to at the end of a long career, but without proper planning, you may find your golden years fraught with disappointment. By taking a lesson from these retirement regrets, you can plan ahead now to ensure you have the best retirement possible, no matter where life takes you.
*Source: State of Retirement Finances: 2021 Edition
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