Anybody who wants to live comfortably during retirement – that doesn’t involve working part-time – should not rely on just Social Security income. This advice comes directly from the Social Security Administration.
According to the SSA, only a minute amount of pre-retirement earnings will be replaced, and most people need about 70 percent of their pre-retirement income to be able to live well in retirement. This income includes investments, savings and Social Security benefits. Therefore, a stable retirement plan must be supplemented income that isn’t just Social Security.
What Are Some Additional Sources of Income You Should Consider?
Federal employees are rather lucky because their benefits include an array of retirement income sources. Social Security is considered a part of the income sources but only a minute amount. What are some other income sources federal employees need to consider?
Federal Employees Retirement System
The FERS offers benefits from three source – Thrift Savings Plan, general benefit plan and Social Security. Two parts of the FERS include the TSP and Social Security moves with you if you decide to transfer to another federal job before you retire.
With FERS, you must pay your fair share every pay period. The agency takes out a general benefit and Social Security from your paycheck, noting it as payroll deductions. The agency pays its dues as well. After retirement, you get annuity payments every month. How much you receive is dependent on how long you worked with the Federal Government, the age you decide to retire and the amount you earn.
Thrift Savings Plan
The TSP is considered a distinct contribution plan, which means the income you receive in retirement from the TSP account depends on the amount you and the agency put into it while you worked and the amount you accumulated during that time.
The TSP of FERS is something the agency sets up right away. With each pay period, the agency puts one percent of basic pay into the account. While you can contribute to the TSP account yourself, the agency will deposit a matching contribution.
How Your TSP Account Can Help You Become A Millionaire
The TSP is a somewhat significant retirement income source. Therefore, making regular contributions to it during your career while completely taking advantage of the matching part from the government could lead to considerable wealth. Of course, that means making sure the money is invested well in the first place.
A good number of federal employees earn more than $1 million from their TSP accounts – just by investing and saving wisely even when the market doesn’t do well. It’s not that hard to become a millionaire when you invest wisely in the TSP.
Federal employees can also contribute to an IRA away from the TSP, which lets them invest even more of their money and increase it in a tax-deferred or tax-free account.
Civil Service Retirement System
When it comes to Social Security under the CSRS, it’s treated in another way for federal workers.
How Viable Is Social Security?
Government reports suggest that the Social Security program is rather unstable, making it an unstable option for retirement. With that in mind, people must do their due diligence and save money on their own for retirement.
According to the 2017 Social Security Trustees report, the program’s reserves are slated to be drained in 2034. A poll shows that 80 percent of millennials are concerned they will not have any Social Security when they are ready to retire because of the financial instability facing the program today.
Will the Social Security income still be viable? And, if so, for how long will it stay that way? The SSA is trying to get people to understand that the payments they receive is not meant to replace the retirement income but supplement it. People are urged to invest and save as much as they can to enjoy their golden years.