For years, many retirement conversations assumed a much shorter timeline. A Fed might retire, draw a pension, claim Social Security, take withdrawals from the Thrift Savings Plan (TSP), and plan around a retirement lasting 10 to 15 years.
That assumption no longer fits many families. The U.S. population continues to age. The U.S. Census Bureau projects that by 2030, one in five Americans will reach age 65 or older. Other aging data estimates about 80.8 million older adults by 2040 and 94.7 million by 2060.
For healthy federal retirees, that broader trend can translate into a much longer retirement. Many Feds may spend 25, 30, or even 35 years in retirement. That is good news. Longer lives can mean more time with family, travel, service, and the retirement you've worked hard to enjoy. But longer retirements also require more thoughtful retirement planning for federal retirees.
The Four Risks of a Long Retirement
A longer retirement creates several planning challenges. The most common include the following:
- Outliving assets: TSP balances and other savings may need to last longer than expected.
- Inflation: Rising prices can reduce purchasing power over time.
- Healthcare expenses: Premiums, prescriptions, dental care, vision care, and long-term care needs may increase with age.
- Loss of a spouse: Household income, survivor benefits, taxes, and healthcare access can change after one spouse dies.
These challenges do not mean retirement should feel overwhelming. They simply mean the plan needs to account for a longer timeline. They simply mean the plan needs more range.
Why Inflation Becomes More Powerful Over Time
Inflation may feel manageable in a single year. Over 25 or 30 years, it can quietly change what retirement income can actually buy.
That matters because everyday expenses rarely move in the same direction at the same pace. A long retirement may bring higher costs for the following:
- Healthcare premiums, prescriptions, and out-of-pocket care
- Home repairs, maintenance, insurance, and property taxes
- Groceries, utilities, transportation, and other routine expenses
- Family support, travel, or lifestyle costs during the active retirement years
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For Feds, inflation planning deserves extra attention because retirement income sources do not all adjust the same way. Traditional FERS pensions generally include cost-of-living adjustments (COLAs) after age 62. Special provision retirees (law enforcement, firefighters, and air traffic controllers) receive COLAs immediately upon retirement. Social Security includes cost-of-living adjustments. TSP withdrawals, however, do not automatically increase each year. Other savings may depend on investment performance, withdrawal timing, and market conditions.
That is why inflation matters more with time. The longer retirement lasts, the more important it becomes to understand which income sources may rise, which may stay fixed, and which may depend on how markets perform.
Healthcare Costs Rarely Stay Flat
Federal Employees Health Benefits (FEHB) can give many Feds a strong starting point in retirement, especially when they coordinate FEHB with Medicare. But strong coverage does not mean every future healthcare cost disappears.
That matters more over a long retirement. A retiree may start out focused on the monthly FEHB premium, then later face Medicare Part B premiums, prescription costs, copays, dental and vision expenses, or Income-Related Monthly Adjustment Amount (IRMAA) surcharges if income runs higher in a given year. Long-term care can add another layer of planning, because traditional health insurance and Medicare may not cover the type or length of care a spouse eventually needs.
For many Feds, the better question is not just, “What does healthcare cost right now?” It is also, “How much flexibility will we have if those costs change later?”
Making Retirement Income Last
Most Feds enter retirement with several income sources, including a federal pension, Social Security, TSP withdrawals, individual retirement accounts, brokerage accounts, cash reserves, or other savings.
The goal should not always involve taking the most income as early as possible. That can feel good at first but create pressure later. Longevity planning means evaluating whether your income sources can support a retirement that may last 25, 30, or even 35 years.
Several decisions can affect that outcome:
- Withdrawal timing: TSP and other account withdrawals can affect taxes and long-term balances.
- Social Security timing: Delaying Social Security past full retirement age may increase benefits until age 70. Benefits increase 8% per year delayed past full retirement age.
- Survivor benefits: A survivor annuity reduces the retiree’s pension but can protect a spouse’s income.
- Account order: The order of withdrawals can shape taxes and flexibility over time.
A strong income plan considers when to use each source and how today’s choices may affect later years.
Planning for Different Stages of Retirement
Retirement does not operate as one long, unchanging phase.
Many retirees spend more during their active years, when travel, hobbies, home projects, and family events fill their calendars. Spending may shift during the transition years as routines change. Later in life, healthcare, housing, caregiving, and survivor planning may become more important.
A good plan should leave room for those stages. It should also account for the reality that no one knows exactly how long retirement will last.
Build a Plan for the Retirement You May Actually Live
For our Feds, the practical question is simple. Does your plan only get you to retirement, or can it support you for decades afterward?
Retirement planning for federal retirees should look beyond the first few years. A stronger plan considers inflation, healthcare, survivor needs, income timing, and flexibility over 25, 30, or even 35 years.
Reach out to the team at Serving Those Who Serve at [email protected] to review how your federal benefits, TSP, Social Security, and other savings may work together over a longer retirement.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
