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 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:
-
Pay Stubs
-
Insurance Policies
-
Loans
-
Utility costs
-
Other expense items
-
Last years taxes
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.
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 social security offset will help you make ends meet.
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.
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.
SAMPLE RETIREMENT COST
ANALYSIS
SPREADSHEET
(Table R-1)
|
EXPENSE |
Pre/year |
Pre/mo |
Post/year |
Post/mo |
Survivor |
Comments |
|
Mortgage |
13800 |
1150 |
0 |
0 |
0 |
Paid off mortgage at retirement |
|
Mtg Taxes |
3800 |
317 |
3800 |
316 |
3800 |
|
|
Gas |
1050 |
87.5 |
1050 |
87.5 |
1050 |
|
|
Light |
1100 |
92 |
1100 |
92 |
900 |
|
|
Phone |
500 |
42 |
360 |
30 |
360 |
|
|
Water/Sewage |
720 |
60 |
720 |
60 |
432 |
|
|
Security |
0 |
0 |
0 |
0 |
0 |
|
|
Garbage |
116 |
10 |
116 |
10 |
116 |
|
|
Lawn Service |
0 |
0 |
0 |
0 |
0 |
|
|
Cable |
540 |
45 |
540 |
45 |
540 |
|
|
Internet Access |
363.4 |
21.95 |
363.4 |
21.95 |
363.4 |
|
|
Other |
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
SUBTOTALS |
21989.4 |
1825.45 |
8049.4 |
662.45 |
7561.4 |
|
|
|
|
|
|
|
|
|
|
INSURANCE |
|
|
|
|
|
|
|
Employee |
|
|
|
|
|
|
|
FEGLI 59K |
237.74 |
19.81 |
237.74 |
19.81 |
0 |
With 75% reduction to $0 at 65 |
|
Policy 1 25K |
265 |
22 |
265 |
22 |
0 |
|
|
Policy 2 |
|
|
|
|
|
|
|
Home Care |
457 |
39 |
457 |
38 |
0 |
|
|
Other |
|
|
|
|
|
|
|
Spouse |
|
|
|
|
|
|
|
Policy 1 25K |
216 |
18 |
216 |
18 |
216 |
|
|
Policy 2 3K |
0 |
0 |
0 |
0 |
0 |
|
|
Home Care |
444 |
37 |
444 |
37 |
444 |
|
|
Other |
|
|
|
|
|
|
|
Home |
490 |
40.83 |
490 |
40.83 |
490 |
|
|
Umbrella |
0 |
0 |
0 |
0 |
0 |
|
|
Car #1 |
585 |
48.75 |
585 |
48.75 |
0 |
|
|
Car #2 |
600 |
50 |
600 |
50 |
600 |
|
|
Mobile Home |
|
|
|
|
|
|
|
Motor Cycle |
|
|
|
|
|
|
|
Health Ins |
3692 |
307.66 |
3692 |
307.66 |
1113.6 |
Survivor must change to self only |
|
SUBTOTALS |
6986.74 |
583.05 |
6986.74 |
582.05 |
2863.6 |
|
|
|
|
|
|
|
|
|
|
PAY |
|
|
|
|
|
|
|
Gross Pay |
56,900 |
4,741 |
36,985 |
3,082 |
20,341 |
|
|
Deductions |
|
|
|
|
|
|
|
Social Security |
|
|
|
|
|
|
|
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, etc. |
|
Medicare |
804 |
67 |
0 |
0 |
|
|
|
TSP |
3,983 |
367 |
0 |
0 |
|
No contributions after retirement |
|
CFC |
26 |
2 |
0 |
0 |
|
" |
|
Savings Bond |
1,300 |
108 |
0 |
0 |
|
" |
|
SUBTOTALS |
19369.53 |
1647.87 |
3500 |
291 |
1500 |
|
|
|
|
|
|
|
|
|
|
AUTOs |
|
|
|
|
|
|
|
Car 1 |
1200 |
100 |
600 |
50 |
0 |
Check Ins Co for rate reductions |
|
Car 2 |
600 |
50 |
500 |
41 |
400 |
|
|
Maint 1 |
200 |
17 |
200 |
17 |
0 |
|
|
Maint 2 |
200 |
17 |
200 |
17 |
300 |
|
|
Loan |
2592 |
216 |
0 |
0 |
0 |
|
|
SUBTOTALS |
4792 |
400 |
1500 |
125 |
700 |
|
|
|
|
|
|
|
|
|
|
FOOD/MISC |
|
|
|
|
|
|
|
Groceries |
8500 |
704 |
7000 |
583 |
4000 |
|
|
Clothing |
1500 |
125 |
1000 |
83 |
1000 |
Depends on habits/etc. |
|
SUBTOTALS |
10000 |
829 |
8000 |
666 |
5000 |
|
|
|
|
|
|
|
|
|
|
ENTERTAIN |
|
|
|
|
|
|
|
Eat Out |
1800 |
150 |
2400 |
200 |
1000 |
|
|
Misc |
1200 |
100 |
2400 |
200 |
1000 |
|
|
Other |
|
|
|
|
|
|
|
SUBTOTALS |
3000 |
250 |
4800 |
400 |
2000 |
|
|
|
|
|
|
|
|
|
|
EXPENSES |
21989 |
1825 |
8049 |
662 |
7561 |
|
|
INSURANCE |
8557 |
721.23 |
7986.2 |
664.9 |
2919 |
|
|
PAY WITHHOLD |
19,367 |
1697 |
3500 |
291 |
1500 |
|
|
AUTOS |
4192 |
400 |
1500 |
125 |
700 |
|
|
FOOD/MISC |
10000 |
829 |
8000 |
666 |
5000 |
|
|
ENTERTAIN |
3000 |
250 |
4800 |
400 |
2000 |
|
|
|
|
|
|
|
|
|
|
TOTAL ALL |
67105 |
5722.23 |
33835.2 |
2808.9 |
19680 |
|

(Click on the banner to review this valuable
resource)
One key point to consider for married retirees is
the election of a survivor annuity for
your spouse. If you elect a full survivor's annuity your spouse will receive
55% of your annuity when you die. The cost for this is just under 10% of
your annuity. Some retirees consider alternatives such as a large insurance
policy. There are risks to that approach. Read on for complete
information.
Many approaching retirement debate whether
or not to take a full survivor’s annuity – which reduces their annuity by
close to 10% – or to simply purchase a large insurance policy, at less
cost, instead. There are a number of options for you to consider and each
option has its own potential risks that need to be evaluated.
Retirees can take a full or partial annuity or
depending on your personal situation – and how much you saved through prudent
investing – you may be able to forgo a full survivor’s annuity with some
exceptions.
Regardless of what you decide you need to know
several key facts. Your spouse MUST agree to a reduced annuity and sign
the waiver form included with your retirement application. Also
– and this
is a critical issue – if you and your spouse elect NO survivor’s
annuity your spouse will not be covered under your federal health insurance
coverage when you retire. You MUST elect a minimum annuity as described on your
retirement application for your wife to be covered under your Federal
Group Health Insurance program. View the
CSRS and FERS minimums
before electing your survivors benefits if you want your spouse to be covered by
the FEHB program.
I consider the insurance option too great a risk
for most spouses. The survivor's annuity is backed by the federal government.
There isn't any third party involved. If you and your spouse choose an insurance
policy rather than have your annuity reduced research the insurance company
thoroughly before making this decision. Insurance companies can go bankrupt and
your spouse could be left with nothing. I'm not saying that insurance should not
be considered at all, what I'm saying is that you must be very careful. If you
decide to buy insurance instead of electing a survivor's annuity you can check
the insurer's financial stability with several rating services. Make sure that
the company you intend to work with is rated high on their lists. A.M. Best
ratings are free as long as you register on-line and they are very easy to use. They rate the
financial strength of Insurance companies from A++, Superior to S (Rating
Suspended) and everything in between. Several services such as Weiss Ratings
charges $14.95 for a comprehensive rating. I
found the A.M. Best site very easy to use and all that I had to do was register to
obtain unlimited ratings.
NOTE: Many of these rating reports are also
available at large public libraries.
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