FERS, TSP, Retirement, what am I missing?

[GTP2022]

After serving 31 years in law enforcement and 4 years in the USN I'm pondering retirement in 15 months. I will be eligible for full retirement benefits with the federal government. I will be 53. I have to mandatory retire at 57. If I were to stay it would add 1% benefit per year.

Looking for thoughts, feedback, and wisdom from those who have travelled this road. I have a ten year old child whom I actively parent every other week due to divorce. I value this more than anything. I am of the mind that time spent with him while he's young and still desires to hang out with dad would be priceless.

I have accumulated 1.2 million in TSP split 50C and 50S.

My pension breaks down as $50,120 yearly AFTER paying federal retiree health care, vision, dental, and estimated federal taxes.

my SS value is:

62 yoa $23,784
67 yoa $36,168

I have a 2 year old home with a 30 year 2.25% mortgage of 384K on a Zillow estimated $663K value.

I tallied my spending including incidentals, travel, and extra health care. My annual spending accounts at 70K.

Firecalc shows good to go at 100%. I understand it's important to understand expenses. Running my numbers through all the usual calculators is promising.

I've been working since I was 13 years old (not a typo). Not a political statement, but more of a medical / stress observation... law enforcement and the stresses of today's environment weigh heavier every day. I'm a firm believer in living life as it comes and enjoying what you have without envy of those who have more.

My heart tells me to prepare and make the move to retirement in 2022, my my pragmatic planning brain always runs towards preparation is the mother of success. In the end it's my decision but after years reading this board I'd appreciate any shared wisdom from others.

All the best out there, stay healthy and enjoy life.

 

[HawkOwl]

One thing not included is that your social security bridge ends at age 62. If you wait until age 70 to collect ssc, you will need to find another way to fill that gap.

Otherwise... thank you for your service. Sincerely. It sounds like a great time to move along, and you will have the option to retire outright or start another job, as seems right for you.

 

[HawkOwl]

Oh, and 50:50 s- and c-fund mix is very aggressive. Not saying it is wrong, I don’t have enough information to say that, but consider what a 50% drop in the stock market would mean for you and your son. This isn’t theoretical, drops like this happen occasionally. Although your pension will give you a degree of safety, I would still examine your asset allocation to see if that is what you really want.

 

[kaudrey]

I'd retire; as HawkOwl noted - I'd re-think your AA. Put a 1/3 of it in G or F fund...

 

[SnowballCamper]

I assume the pension starts immediately upon retirement, and that you can't draw TSP until 59.5. Then it looks like a 70k-50k=20k deficit you'll have until you draw the TSP. Perhaps there is a loophole for law enforcement types to draw earlier? There is also the "rule of 55" if you retire when you're 55 you can draw from the IRA penalty free at 55. There is also the 72t rule that allows fixed payments from the TSP/IRA.

You've got the funds, its just how to get them out without the 10% penalty until 59.5.

I have my TSP equally spread among G,C,S, and I and rebalance regularly (probably too often). But it just sits there for now as our inflation hedge while we live on the military pension for another decade +. Good luck!

 

[HawkOwl]

If you are a sce (special category employee)- which I believe covers law enforcement officers- you are exempt from the tsp early withdrawal penalty if you separate in the year that you turn 50 or later.

https://www.fedweek.com/tsp/tsp-early-withdrawal-penalty-myth/

 

[HawkOwl]

OP, did you take into account that you will not be paying a ssc tax of 6.2% ? And that there will be no more tsp contributions withheld from your paycheck? Those two factors went a long way for me towards closing the gap between my pre- and post-retirement income. It is also surprising how much less you spend when you are not driving to work five days a week.

You may find yourself in a lower state and federal bracket as well.

 

[HawkOwl]

You don’t say what part of the country you live in. With your son, you obviously aren’t geographically mobile. But depending on your location, perhaps you could downsize to a smaller but still adequate for one person home, and cut the mortgage costs from your living expenses.

 

[Free2030]

It sounds to me you're good to go! Most of your expenses are covered by your pension so you only need to withdrawn less than 2% a year from your portfolio. This will allow you to tolerate more fluctuation in the market and therefore you'll be able to have a more aggressive portfolio. And your health insurance is taken care of. Enjoy the time with your son!

 

[SecondCor521]

Thanks for your service (x2).

Two tax notes:

1. If you contributed to your pension, make sure that whomever does your taxes calculates the taxable amount properly by taking your contributions into account.

2. There is a public safety officer (PSO) deduction you can take where your health insurance payments which are deducted from your pension are not taxed, up to $3,000 per year. As a LEO I think you should qualify for this treatment.

Other than that, your numbers look good to me, and I agree that spending time with our kids is one of the best things we can do in FIRE. I did, and it was probably one of the best things in my life ever.

 

[GTP2022]

Oh, and 50:50 s- and c-fund mix is very aggressive. Not saying it is wrong, I don’t have enough information to say that, but consider what a 50% drop in the stock market would mean for you and your son. This isn’t theoretical, drops like this happen occasionally. Although your pension will give you a degree of safety, I would still examine your asset allocation to see if that is what you really want.

Very true. I guess I've always equated my pension as the bond side of my financial pie. but I am thinking of moving to a less aggressive ratio.

 

[GTP2022]

I'd retire; as HawkOwl noted - I'd re-think your AA. Put a 1/3 of it in G or F fund...

Thanks Hawk. I'm evaluating just that.

 

[GTP2022]

It sounds to me you're good to go! Most of your expenses are covered by your pension so you only need to withdrawn less than 2% a year from your portfolio. This will allow you to tolerate more fluctuation in the market and therefore you'll be able to have a more aggressive portfolio. And your health insurance is taken care of. Enjoy the time with your son!

Thanks Free. That's my thoughts also. Anything could change but life is a gamble right?

 

[GTP2022]

Thanks for your service (x2).

Two tax notes:

1. If you contributed to your pension, make sure that whomever does your taxes calculates the taxable amount properly by taking your contributions into account.

2. There is a public safety officer (PSO) deduction you can take where your health insurance payments which are deducted from your pension are not taxed, up to $3,000 per year. As a LEO I think you should qualify for this treatment.

Other than that, your numbers look good to me, and I agree that spending time with our kids is one of the best things we can do in FIRE. I did, and it was probably one of the best things in my life ever.

Thanks for that tip, I will look into it. Luckily the federal pension allows me to carry the same medical insurance into retirement.

I'm glad to hear you had quality time with your family. I think in the end that's what matters most. Stuff... not so much.

 

[GTP2022]

I assume the pension starts immediately upon retirement, and that you can't draw TSP until 59.5. Then it looks like a 70k-50k=20k deficit you'll have until you draw the TSP. Perhaps there is a loophole for law enforcement types to draw earlier? There is also the "rule of 55" if you retire when you're 55 you can draw from the IRA penalty free at 55. There is also the 72t rule that allows fixed payments from the TSP/IRA.

You've got the funds, its just how to get them out without the 10% penalty until 59.5.

I have my TSP equally spread among G,C,S, and I and rebalance regularly (probably too often). But it just sits there for now as our inflation hedge while we live on the military pension for another decade +. Good luck!

Thanks. One good thing is with the law enforcement pension I get access to my TSP when I retire without penalty. Since we are forced to retire at 57.