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SMART INSIGHTS FROM PROFESSIONAL ADVISERS

Should You Put Your Countdown to Retirement on Hold?

Federal employees have a lot to gain (how's $10,000 more per year in retirement sound?) by sticking it out until age 66.

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Few milestones in life are as eagerly anticipated as retirement. You may already even be preparing for the magical age of 62 — the earliest age you can draw Social Security. The thought of working an extra four years to the full retirement age of 66 might not be a sacrifice you’re willing to make.

SEE ALSO: Federal Employees: Don't Panic About Changes

But would you consider working longer if it meant as much as an extra $10,000 in annual income in retirement? If you are one of the more than 2 million federal employees (including military), working to age 66 can make that kind of difference.

Let’s consider a federal employee who earns an average $50,000 a year working for the Food and Drug Administration. Your retirement income at age 62 would be $26,400. Even when you add $21,000 from Social Security, your annual income ($47,400) would be less than your current annual salary.

But if you worked four more years, to full retirement age at 66, your retirement income would now be $30,247 and your Social Security would grow to $27,000. That means your total annual income would jump to $57,247, or $7,000 more than your annual working income. Income from a Thrift Savings Plan would add even more to this figure.

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See Also: Making $70,000 But Still ‘Poor’? You’re Not Alone

Federal employees have a complicated set of benefits. For some, they could fall into different retirement plans. Those who began work before January 1984, for example, were hired under the Civil Service Retirement System, CSRS. Those hired after January 1984 became part of a new plan called the Federal Employees Retirement System, FERS. These employees were also required to pay into Social Security.

Women’s Risk Factors

Female federal employees face a unique set of issues when planning retirement. Historically, women earn less, don’t have enough saved, don’t work as many years (because of such reasons as caring for children or other loved ones) and in general have low retirement confidence. Some married women may expect that their spouse will take care of them, but that doesn’t always happen. Therefore, women often take fewer proactive steps in planning for retirement.

Today, women are outliving men in every country in the world. According to the Social Security Administration, a woman turning 65 today can expect to live, on average, to 86.6, compared to 84.3 for a man. In addition, it’s important for women to have a strategy in place for long-term care, since women make up the majority of those living in nursing homes.

A Simple Solution

The golden rule for retirement planning is earn more, save more and spend less. Remember the extra-four-year calculations above? They’re looking more attractive.

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Hold off on that retirement celebration. Instead, begin a four-year countdown and look forward to a retirement that will allow you to comfortably enjoy your senior years.

See Also: How Do You Know When You’re Ready to Retire?

Rozel Swain contributed to this article.

Ann Vanderslice, president and CEO of Retirement Planning Strategies, specializes in helping federal employees understand and maximize the value of their benefits and plan for retirement. Vanderslice holds the Registered Financial Consultant designation from the International Association of Registered Financial Consultants. She is the author of "FedTelligence 2.0: The Ultimate Guide to Mastering Your Federal Benefits."

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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