Thread: Dirt Cheap retirement FERS at 55

Sounds like you won't be taking FEHB into retirement so you won't have that typical expenditure. The other thing to figure in is taxes as all FERS and TSP will be taxed as regular income. Your odd jobs will also be taxed and SS taken out unless you plan to be doing that under the table.

Once you turn 65 you'll have to sign up for Medicare. Part A is free but you have to pay for parts B & D if you want them. I think part B is typically $105/month per person this year.

yes of course taxes, at whatever is the going rate for them on a dirt cheap income, lowest tax bracket, per year. That's one advantage of going from a large income per year, to a small income per year. tax bracket decreases.

Originally Posted by Cactus

Sounds like you won't be taking FEHB into retirement so you won't have that typical expenditure. The other thing to figure in is taxes as all FERS and TSP will be taxed as regular income. Your odd jobs will also be taxed and SS taken out unless you plan to be doing that under the table.

Once you turn 65 you'll have to sign up for Medicare. Part A is free but you have to pay for parts B & D if you want them. I think part B is typically $105/month per person this year.

Do you qualify for the FERS Social Security supplement?

Originally Posted by tsptalk

Do you qualify for the FERS Social Security supplement?

unfortunately no I would not get SS supplement. Because you need to be 60 to get that as a retirement benefit when you retire. I also do not get medical at all.

Originally Posted by offroad

I am going to live in an RV and boondock...

What big problems would I have that I am not estimating?

there are a couple of things you are definately going to need to watch out for when living in an rv: trailer park girls and tornados. in my experience they both are trouble and no matter where you park they will find you, like moths to flame. other that i think you got it pretty well accounted for.

Originally Posted by offroad

unfortunately no I would not get SS supplement. Because you need to be 60 to get that as a retirement benefit when you retire. I also do not get medical at all.

I believe it is 60 y/o with 20 years, or any age @ 30 years.

400,000k with a 5% withdrawal rate may not last and when your SS comes in that doesn't seem too exceed your withdrawal amount. Consider increasing your TSP balance (stay in the game for a couple more yrs). Good luck, your plans sound fun.

A 5% withdraw rate from your 401(k) (TSP) is rather high. The normal assumption is 4%, but that is high right now.

The way to think of it is to figure out how to make your withdraw rate safely in an investment allocation. I don't think you can do even 4% with the skinny margin you are building. The only safe way to do this is to take five to seven years of $20K + inflation out of any F\C\S\I investments and dump that into the G.

Thus, assuming 2% inflation you will move about $105K into G where it is earning 2.125% and use that for five years of a $20,000 income stream. Then, the rest gets into F/C/S/I based on a bucket strategy. Add another $43,000 to carry you into Social Security - that is, about $150K

So, that leaves about $250K for F/C/S/I. The F is bubble popping and earns nothing. And, the C/S/I will likely correct. A 10% correction will lop $25K out of C/S/I assets. If the F were in a normal 5% - 7% earnings range than this might be possible, but it ain't. I would wait till it is.

By the way, can you even 'retire' and use your 401(k) assets without getting fined by the IRS. You might be able to pull your pension, but not be able to draw from TSP. If not, you can lop another 10% out of your assets for each dollar withdrawn - that on top of your taxes. And, the IRS will hound you till the hounds come home. If you attempt the 72(t) withdraw option your total account is worth about $18K per year, not $20K. You might want to check that out because I am some distance from working hard at those numbers so those come from DinkyTown.net.

If you are single, $48K is not a low tax rate. If you are married, adding $48K to his/her income might not be a low rate. You will have no deductions.

Inflation will eat you alive over time. You have lots of years left and not much of a buffer. ObamaCare will fail and leave you with bad options - like some form of Medicaid.

Personally, I would look at working longer. You can quit this job if you hate it and find another making $42K. I think that is going to be the future anyway. You would have a survivable buffer with a slightly higher pension and about $500K in TSP.

5% or 4% ? real dollars on $1M savings yearly is -- $10,000 difference. Really? that's not much of a yearly difference when you can get that return by timing a BUY LOW - SELL HIGH. in a single day. Not sure that's a real thing to discuss, but see that often brought up as a thing. that all should plan for 4% or less.


yes I can use my TSP (which has different rules than 401K) at 55 and older. As long as I am retired from the federal government. How would this not be a key strategy for anyone with a TSP? this should be clear knowledge that when you retire after 55 that all the TSP funds are available with no tax penalty.

boghie - am confused as you seem to imply a buy-hold strategy of investment when I retire. Thought this whole TSP web site was avoiding that strategy at every way possible. and to actively follow tools and indicators and advice that gets you above 5% every year over the last thirty years.

as far as inflation. that all depends on what is inflated, and the overall percentage that takes against your income. sure in round numbers inflation could be 5% yearly. But 5% against rent? am not paying that. 5% against groceries? maybe, but there are food banks if I get too poor. there are just ways to reduce your costs to more practical levels.

Not saying anyones advice-planning-thoughts are wrong, but sometimes it all seems a culture of fear mongering in financial discussions. That as you get older you will reach this point of being some trapped wheelchair person, who is going to be destitute if you have no resources. Am thinking more that a minimal resources will be enough to be comfortable. Who really can predict that anyway. Maybe everyone is right and you need a $1M for every person to survive old age. wait wait no one survives old age? lol.

If I seem argumentative please consider am just trying to discus this reasonably.

Offroad, can tell you've put a lot of thought into this already. You speak of boondocking the next 7 years, paying no rent. That is theoretically possible, if you already own the land and county ordinances allow for "camping" on your own land (I just read where a CO county is trying to change ordinances to stop people from indefinite "camping" on their own land-even though many county residents have been doing it for years). The boondocking could also work if you are willing to serve as a USFS volunteer campground host for different forests around the country through the year and do the snowbird thing.

One question I'd have for you: Apt. rentals are hard to come by now and rents keep screaming up because nobody can afford to buy given their low incomes so the pressure continues to build in the rental markets. What do you envision doing for affordable housing when you're done with the boondocker phase? If you become a property owner beyond land and RV, you have prop taxes and maintenance costs, even if the property is paid off. Do you have cost of future rental or prop ownership fully figured into your calculations?

I get where you are coming from, I'm close to being in your boat retirement timewise if I wanted to go low-end retirement, although I'd be able to keep my FEHB into retirement, myself. But I'm also looking at a longlived family history on both sides so running the math well beyond the average life expectancy-another difference for me, which also means I choose to carry LTC insurance as well, family is small and I may well outlive the others in my generation due to their life stresses and current health relative to mine. I'm including LTC insurance costs to avoid the nursing home, Medicaid both as long as possible.

So 2d question I have for you. What kind of family history do you have in terms of longevity? No need to answer that in detail, just something for you to add to your calculations if you haven't fully considered the possibilities and the odds...

SS has been warning that around about 2040, SS will start running deficit, and payees can expect 25% cut in payout. If you expect to live that long or beyond, you'll want to take a hard look at how you would or wouldn't be able to make up that difference in income and whether you could still cover basic living expenses if that cut came to pass.

I have visions of doing retirement lifestyle a little differently than you, but still fairly simply. to do that, I need to stay a FED for a few years past eligibility to fulfill that vision. Fulfilling that vision will take every ounce of savings and account(s) buildup through conservative management I can manage in the meantime-and relocate post-retirement to an area with lower state and local taxes and housing costs relative to current location.

Hi Offroad. We're just trying to help you. Once you've retired, it's a pretty final thing with respect to you FERS and TSP. I can tell you that there are unforeseen expenses because we humans have this tendency to make decisions that change our lives and they cost money...sometimes lots of it. For example, when I retired (my wife and I) moved to Spokane, WA thinking that was going to be our final retirement home. We lived there in our younger days and loved the outdoors, our friends, skiing, boating, etc. We learned it was too cold for us in our senior years...even though we loved it as young people. Our friends that we thought we'd reconnect with had moved on and taken different paths. Things just weren't what we thought they would be and so we made new decisions that we hadn't planned on. That cost us because we decided to relocate. That is just an example.

I think all anyone wants you to assess is what brings you the best financial situation once you're out. I left with 37.5 years of service and I can tell you that I love retirement. I stayed in beyond 35 years because the extra benefit to my retirement was worth two more years of toil. Bottom line: Because I decided to stay a few extra years, I was able to have the option to relocate without incurring debt and absorb the cost of to relocation decision. It gave me some extra flexibility. Ultimately, it's your decision and whatever you decide will be the right decision. Good luck.

FS