Federal CSRS & FERS Employee's Pre and Post Retirement Cost Analysis
Your expenses, pre and post retirement, must be reviewed so that you and your spouse will know how much you will have to live on after retirement. This section will help you analyze your personal situation and determine how many dollars you will have after paying for the necessities of life. You will be able to determine if your lifestyle will change dramatically. It will also help you focus on the realities of retirement and help you assess whether or not you will need to work part time to supplement your income.
Now is the time to pull together all of your receipts, pay statements, loans, credit card balances, 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:
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 an 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 analys is is available online. Notice the trend lines on the report, they are very revealing. This independent service is not affiliated with federalretirement.net.
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.
Sample Retirement Cost
NOTE: If you prefer a printable income and expense worksheet in pdf format that you and your spouse/partner can sit down at the table and complete together, download this PDF version. This version frees you from having to sit at the computer to complete the task.
|Mortgage||13800||1150||0||0||0||Paid off mortgage t|
|FEGLI 59K||237.74||19.81||237.74||19.81||0||75% reduction to $0 at 65|
|Policy 1 25K||265||22||265||22||0|
|Policy 1 25K||216||18||216||18||216|
|Policy 2 3K||0||0||0||0||0|
|Health Ins||3692||307.66||3692||307.66||1113.6||Survivor change to self only|
|CSRS Ret (7%)||3,983||331.87||0||0||Amount paid into CSRS|
|State Tax (3%)||1707||142||0||0||PA does not tax retirement|
|Fed Tax||7,567||630||3,500||291||1500||Varies per exemptions|
|TSP||3,983||367||0||0||No contributions after retire|
|Car 1||1200||100||600||50||0||Check for rate reductions|
|Clothing||1500||125||1000||83||1000||Depends on habits/etc.|