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Health & Fitness

Federal Employees: The Looming Retirement Tidal Wave – Are You Ready?

Originally posted October 2012

Recently a news outlet published the latest statistics of federal employees turning in their retirement papers and the numbers are consistently growing at a brisk pace. Through the first nine months of 2012 86,676 federal employees elected to retire which was an 8% increase over the same time period last year.

Some of these retirements are normal, based on age and the end of a lengthy, successful career. Others represent the result of buyout offers or private sector opportunities to “double dip”. There are also those who have grown tired of the pay freezes, proposed budget cuts, and limitations on upward mobility. Health concerns or the need to care for an aging parent cause many as well. Whatever the reason, there are generally a number of items to plan before that final clock-out.

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1. Get on the same page with your spouse/significant other – They may not come out and say it, but they may not want you to retire. Even if the financial numbers look good, they may find comfort in the routine they’ve had for years now. It doesn’t mean you can’t retire, just make sure to have some frank conversations about what day-to day-life might look like. Yes, you’re going to Europe for 2 weeks, but what happens when you get back and settled in? Are you downsizing the house? What hobbies will you take up together? Who’s in charge of the dishes? Yes, this matters.

2. Create a budget – It’s difficult enough to create a budget when a household’s cash flow situation is stable. Mostly because it’s not the most enjoyable topic and it takes into account many factors like taxes, and non-monthly expenses. When you approach retirement or a transition to part time, it’s even more complicated. The reason is that in many cases the prior years are unusual compared what life will be like in retirement. You may have just spent the last 2-3 years paying for graduate or undergraduate school for the youngest child. Or perhaps you finished paying off the house, but how will that affect how much needs to be set aside for taxes due to the deduction going away? How will Social Security be taxed? Should that several thousand dollars you spent on the recent medical procedure be considered a one-time past expense or budgeted for as you grow older?

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3. Review employee benefits – There are several major decisions here as you go through the process, so the more time you have to consider the options, the better. Survivorship elections for the pension, whether to convert the group life insurance, and how to handle the accrued sick leave are just a few examples. There are also more subtle considerations like health insurance coordination and planning – between the employer plan, Medicare, and its supplements (depending on what your preferred doctors utilize), or if you will move to a new location. Perhaps you can take advantage of the Voluntary Contribution Account to accumulate tax-favored dollars for retirement.

4. Decide what you want the rest of your life to look like – Think of retirement as the first day of your new career that may last as long as your previous one did. You put everything you had into the last one because of achievements and goals you saw as possible. Retirement is really no different. And just like the day-to-day of that previous career, time will slip by without warning and you may find yourself behind schedule on everything you wanted to get done. The only difference is at the end of this “second career” there’s certainly no going back. What’s important to you? What do you want to teach your children and grandchildren? What organizations would you like to leave a legacy to, if any? Most have an idea of what they want in their mind, but now may be the time to get organized, and put it down into a plan of action.

5. Pull the team together – The team isn’t always just a Wealth Advisor, although they are usually involved and a helpful colleague. The team can be a variety of people. It could include an accountant and estate attorney, a primary care doctor, family members and friends, a personal trainer, even a life coach. Other examples may include a business start-up consultant, someone who works with people to organize their belongings and relocate, charity or organization program director, and so on. Who have you met in the past that could now act as a trusted resource in their area of specialty? Meet with them and see what they are up to.

It all sounds like a lot of work, and it is. But, it’s the opportunity of a lifetime. Even if you are not actually retiring full time, just transitioning to part-time or a private sector version of your occupation, take a moment to assess where you are in these five areas. By taking the time to develop a plan, your “second career” will be off on the right foot.

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