The question is, can I retire now, and can I afford to retire? Well, that’s a question that many have considered a lot lately. But first and foremost, you should know how much do you cost? In other words, in retirement, typically, you pay yourself every month, creating your own income check, but how much do you need? And oftentimes, the first decade of retirement could be your go-go years, we call it, where you want to get out there and travel and do those things that you want to do, bucket list items. And if so, you might need even a little more income than usual.

One of the ways we figure out the amount is by examining your leave and earnings statement and pay stubs, and establishing what is your net take home pay, and add that up. If there’s both a husband and wife, add both up, and figure out what the total is. Now, are you saving $1,500 extra into a savings account monthly? Maybe you won’t save as much in retirement, but are you making sure to add back the cost of health insurance, vision dental, maybe that group life insurance basic until age 65? Maybe there were financial allotments on your pay stub that you were spending. Maybe you have to add that back in, like a car payment. Maybe you paid your mortgage from those allotments, and they will need to be included in the total amount monthly needed.

Establish what are your monthly income needs. Then secondly, what are your sources of income? Now, most of you listening have a FERS, Federal Employee Retirement System pension. Some of you may be married, have other pensions that may be coming to you or from former employers. If you do, how much is the gross, but then how much is your net, the take home pay that’s going to get deposited into your bank account? You want to absolutely know what that take home amount is.

So we’ve got to a pension, maybe, but what about social security? You want to establish that monthly amount too. And if you are, say, married, or you’re a widow or a widower, or you are divorced, married for 10 years or longer, what is your plan? Or if you’re just a single person, should you elect Social Security as soon as you retire? Should you delay it? How does social security funding look? If they reduce the amount they projected you’d get in 2033, as many are saying, has that been calculated into your plan? These are all things that you should have arranged. We do that as part of what’s called a Social Security Maximization Plan, as part of our CRC, our Chartered Retirement Course. We always include it because it’s a government pension, and most of us are going to receive that.

Now, besides the pension and social security, what about the third piece, retirement savings? Yes. Your Thrift Savings Plan, possibly 401ks from other employers, IRAs 403bs, 457s. Perhaps there’s also mutual funds you bought years ago, or stocks you’ve inherited. How are you going to take that retirement savings and generate the necessary income? Remember, the income is your foundation. It should be solid as a rock. So you shouldn’t be worrying about the stock market falling and you pulling income from it, because you might be in a tough spot to get back to the original balance. You should not be dependent on the stock market’s returns for your monthly check. First establish the foundation, your stable monthly income, the concrete and steel rebar set on top of rock. Then, you may possibly want to take risk with the money you don’t need in the next 3–5 years, for long-term growth in the stock market, to adjust for inflation. You may have rental income that you can add into this equation too. These are the big factors to consider when planning for retirement income, and it is complicated it’s true.

By the way, I get asked all the time, “Charles, should I retire now? Or should I delay for another year, 18 months, two years? What does that look like?” Week in and week out, we project those pension growth estimates for you, and even the potential growth of your TSP, 401ks. We do that week in and week out. This is Charles Dzama, empowering you with financial ideas.