Retirement Costs

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2012 COLA Update

Federal retirees in the CSRS retirement system will receive a COLA increase of 3.6 percent in their annuities in 2012, while FERS retirees will receive a 2.6 percent increase. Complete COLA information is available on this site.

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Many job opportunities are available for federal retirees − and those planning to retire soon − to earn additional income in retirement. Our Jobs Board has updated listings targeted to federal retirees. Many companies seek out retired federal employees due to their government experience and contacts. You can also explore high paying opportunities for those that hold current Security Clearances.  

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Retirement Costs Menu

• Introduction (Retirement Costs Continued)
  • Retirement Cost Analysis Spreadsheet
• FREE Report - How to be Financially Prepared When You Retire
• Retirement Cost Spreadsheet (Use this free Excel spreadsheet along with the sample below to estimate your income and expenses in retirement.)
• Retirement Savings and Wealth Management
  • Saving Grace and Fear of the Unknown, article by Dennis Damp
  • When CDs Come Due earn Higher Interest Rates, article by Dennis Damp
  • Retire Mortgage Free
• Return to Financial Planning Home Page
• Go to Probate Avoidance
• Go to Estate Planning
• Retiree Online Educational Opportunities - Explore your interests 
• Retirement Planning Assistance - Receive a FREE "Personal Summary of Benefits Analysis"
   

  

Introduction (Continued)

Now is the time to pull together all of your receipts, pay statements, secured and unsecured personal loans and bank account information. There are many things to consider for both CSRS and FERS federal employees and the sample spreadsheet included on this page will help you see the value of completing this form. A copy of the Microsoft Excel Retirement Cost analysis spreadsheet is available on this site. You can save the spreadsheet to your local computer hard drive and work on it off line. This spreadsheet shows approximately what you will have left over after you pay all of your bills before and after you retire. The last column represents what your survivor will have remaining from their reduced annuity after you die. This exercise provides an opportunity for you to review and make changes to increase you retirement income.

Gather Up the following Documents in preparation for completing this spreadsheet:

• Pay Stubs
• Insurance Policies
  • Life
  • Auto
  • Home
  • Umbrella
  • Long Term Care
• Loans
• Utility costs
• Other expense items
• Last years taxes

Table R1, listed below, is not all inclusive and you can add or remove expenses as you see fit on the downloaded version. The sample here is for a federal employee who will soon retire at age 55. He is a CSRS employee and worked 35 years for Uncle Sam. His top grade was a GS-11, step 6.

All expenses are listed on the chart for pre retirement per year and month and again for post retirement per year and month. The last column is for calculating what your spouse will have to live on with current expenses after you pass on. This is a very revealing analysis. Note that in retirement this person will be living on an annuity of approximately $36,985. His total expenses after retirement are $33,835 leaving him with a buffer of just over $3,000 for emergencies. If there are unanticipated expenses or increased costs this person will need to be able to tap other retirement savings such as savings bonds, his Thrift Savings plan, or other investment income. The other option, if you don't have much in your other savings plans, is to continue to work at least part time some where.

NOTE: The example leaves out the spouses income in this example so the retiree will know what their total expenses will be based on the annuitants income only. A spouse could be laid off or stop working for other reasons. This example shows that the total expenses pre retirement are greater than the employee's gross pay and can be typical with working couples. Just one more reason to plan ahead for retirement.

After completing this chart you may determine that it is not feasible for you to retire if you were depending 100% on annuity income. Most in the federal sector have the Thrift savings plan which can substantially augment your retirement income. Others purchased savings bonds through payroll deduction and you and your spouse may be eligible for social security when you reach age 62 or older if you worked over 40 quarters, 10 years, in the private sector. If you are in the FERS system and retire at or after your eligibility date a social security supplement may help you make ends meet. Download our FREE Report - How to be Financially Prepared When You Retire. This report includes the sample cost analysis spreadsheet from this section.

The last column is significant to the surviving spouse. In this example, the surviving spouse's annuity reduces to 55 percent of the retiree's annuity, or $20,341. The survivor has expenses totaling $19,680, way to close for comfort. Ideally, insurance would add a blanket of security for the survivor along with social security, Thrift Savings and other investment income. The survivor may have to change their lifestyle considerably to live comfortably in retirement.

For a professional comprehensive review of your personal situation a Benefits Specialist can prepare a free analysis of your benefits, income and expenses with trend lines that reveal you and your spouses expenses verses total retirement income from all sources. A sample analysis is available online. Notice the trend lines on the report, they are very revealing. This independent service is not affiliated with federalretirement.net.

Request Your FREE Analysis

The above discussion should get you thinking about where you need to go from here. You can cut unnecessary expenses, possibly move to a less expensive home, sell the second car. There are lots of options. Also, in the survivor's case, there are a number of cost cutting things they can do immediately such as change their health insurance from a family plan to self only. This one action alone can save thousands each year. A full survivor annuity election will decrease your net monthly payment buy approximately 10%. Visit our Survivor Concerns page for a complete discussion on this subject.  

Calculators that will help you with this process

• Federal Income Tax
• FEGLI Cost Estimates
• TSP Annuity Calculator
• Calculate the tax free portion of your annuity
• Federal Annuity
  • FERS Calculation (Manual Method)
  • CSRS Calculation (Manual Method)
  • Calculator
    • Download a free trial version of their CSRS and FERS Benefits Calculator and Retirement Planner software program. For assistance with this process you can request a FREE Personal Summary of Benefits Analysis from a local expert.

Sample Retirement Cost Analysis Spreadsheet
(Table R-1)



Download our free sample Excel spreadsheet to estimate your income and expenses in retirement. Also review the Assset Allocation Chart for ways to protect your assets for your heirs.

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