Though retirement seems like a relief, there is more to think about the unemployed life afterward. Some people retire early, even before their 60s. On the other hand, some people extend their employment up to seven years. However, 65 is considered the best age to retire from federal service all over the US.
It’s a common practice to leave service at 65, but many people need future financial planning to do it. And that’s a crucial mistake. Even though you have your TSP funds and other bonus to cope with your expenses, you need more than that to keep your cash inflow and outflow balanced. Therefore, we are here with key points to focus on if you turn 65 in 2023 and are planning to retire from federal service.
Secure Your Assets Against Market
Most retirees are unlikely to have the opportunity to live off the investment income without touching the principle. Therefore, it’s crucial to ensure that any money you will want soon (or at least during the coming year) is guarded against the marketplace. It would help if you didn’t depend on the market to rise (so you may sell shares) to pay your bills, as 2022 tragically showed.
For instance, if you require $35,000 in cash but only have $30,000 in annual retirement income from Social Security and other sources, you should save $5,000 in savings and investments that are safer than bank deposits. You can also save the cash by keeping it in a high-yielding interest-bearing account or a short-term CD to make it worthwhile and make money until you need it.
Enroll in Medicare
Once you reach 65, you become eligible for Medicare healthcare insurance. You have seven months to sign up for Medicare first, starting 90 days before your 65th birthday and concluding 90 days after that. You can incur a lifetime fee on your Part B payments if you don’t enroll in Medicare early. However, you are not required to sign up for Medicare when you turn 65.
Your company may continue providing health insurance if you’re still employed at age 65. And you may put off signing up for Medicare without worrying about surcharges until you participate in an eligible health insurance policy.
Sign Up for the Medicare Part A Plan
Medicare Part A, which includes hospital care, does not cost anything for most beneficiaries. Even if you have your health plan at your fingertips by the time you turn 65, you can enroll in Part A alone since it is free of cost. The advantage of doing this is that Part A can act as backup insurance if you accrue medical expenses that your primary insurance cannot pay for.
Besides, you must know that you can’t contribute to a health savings account (HSA) after enrolling in Medicare. Therefore, delaying your Part A enrollment might pay off if you wish to continue contributing to your HSA and benefitting from the associated tax benefits.
File for Social Security Benefits
As soon as you are 62, you can apply for Social Security benefits. However, you will be eligible for your month-to-month Social Security payment once you’ve reached your retirement age (FRA), which is determined by your individual employment history.
Your federal retirement age is 66 years and eight months if you reach 65 in 2023 and were born in 1958. It will reduce your payments by around 9% if you begin receiving Social Security at age 65. And that price cut will last the remaining lifetime. Now, you might not be allowed to defer your application if you require your Social Security payments at age 65 because you’re retiring. However, if you’re still working hard, wait to collect Social Security, so you don’t permanently reduce your monthly income.
Additionally, if you begin receiving Social Security benefits at age 65 while working, you risk having certain payments reduced if your income rises above a particular level. It is a good excuse to postpone filing your claim, too.
Many individuals find creating a retirement plan intimidating, especially if they need more money or can’t retire the way they want. However, you can achieve more than you realize. Besides, you can also modify your financial plan to increase your savings.
For over 30-years Joe Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants.
We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.
Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.