In today’s changing federal landscape, many government employees are considering early retirement options. Whether motivated by agency reorganizations or the desire to begin life’s next chapter, the fundamental question remains: “Can I afford to retire early?” Let’s explore the key factors to consider when making this important decision.
Understanding Your Federal Retirement Benefits
Before making any early retirement decisions, it’s essential to understand exactly what benefits you’ll receive and how they might be affected by leaving federal service before your full retirement age.
FERS Pension Considerations
Your FERS basic annuity forms the foundation of your retirement income. Retiring early can significantly impact your benefit calculation:
- Early retirement may reduce your benefit by 5% for each year you are under age 62
- The high-3 average salary calculation is affected by when you choose to leave
- Years of service directly impact your monthly pension amount
The FERS Supplement and TSP
If eligible, the FERS Supplement helps bridge the gap until age 62 when Social Security benefits can begin. Meanwhile, your Thrift Savings Plan (TSP) will likely provide a substantial portion of your retirement income, requiring careful withdrawal planning to ensure sustainability throughout retirement.
Creating Your Retirement Budget
Income Sources
- FERS Pension
- FERS Supplement (if eligible)
- TSP Withdrawals
- Social Security (when eligible)
- Other income (part-time work, rental properties, etc.)
Expense Considerations
- Essential expenses (housing, healthcare, food, utilities)
- Discretionary spending (travel, hobbies, dining)
- Future expenses (long-term care, home maintenance)
- Healthcare costs before Medicare eligibility
The Emergency Fund Imperative
Early federal retirees should consider maintaining a larger emergency fund (12-24 months of expenses) to protect against:
- Unexpected healthcare costs
- Market downturns affecting TSP balances
- Unplanned major expenses during the transition period
Professional Guidance Makes the Difference
While these guidelines provide a starting point, determining true retirement readiness involves complex calculations and personalized analysis. The financial advisors at SBS Retirement Consultants specialize in helping federal employees navigate these important decisions.
Our team understands the nuances of federal benefits and can help you:
- Calculate your exact FERS pension amount based on various retirement dates
- Develop a sustainable TSP withdrawal strategy
- Coordinate your FEHB benefits with Medicare
- Create a comprehensive retirement budget tailored to your goals
- Evaluate your long-term care options
- Determine the optimal time to claim Social Security benefits
- Conduct “stress tests” on your retirement plan to ensure it remains solid through various scenarios
Take the Next Step Toward Confidence
Financial independence isn’t just about numbers—it’s about confidence in your future. Before making your final decision about early retirement, schedule a complimentary discovery appointment with SBS Retirement Consultants.
As specialists in federal retirement planning, we’ll help you assess your complete financial landscape and ensure all factors are considered before you make this life-changing decision. Our advisors will guide you through each step of the retirement planning process, offering valuable insights tailored specifically to federal employees.
Don’t leave your retirement security to chance. Contact SBS Retirement Consultants today at 907.374.0487 to schedule your complimentary discovery appointment.
This article is intended for informational purposes only. Advisory Services offered through Commonwealth Financial Network®, a Registered Investment Adviser.
