Will You Have Enough Income in Retirement — Part 2

4.24.26: Audio automatically transcribed by Sonix

4.24.26: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker 1:
You check your account balance and realize you have no idea where your last paycheck actually went? Bills are piling up. That nagging anxiety kicks in and you wonder, how did I even get here? If that hits too close to home, you're far from alone. And April just happens to be the one month of the year the entire country stops to do something about it. I'm Jim Perabo here for the Retirement Radio Network powered by Amaryllis.

Speaker 2:
Financial literacy is so important because it's what you're going to base the rest of your life on resource wise.

Speaker 1:
John Ford of CNBC bringing up an obvious but important pointer about money and finances. April is National Financial Literacy Month. It started back in the early 2000, when Congress realized too many Americans were leaving school without the first clue about how to manage a paycheck, a credit card, or a financial future. Fast forward to 2026, and the problem hasn't gone away. In fact, nearly half of U.S. adults still give themselves a C-minus or worse, on money knowledge. And as CNBC's Bertha Coombs tells us, one of the best investments you can give yourself learning how to manage your money.

Speaker 3:
You know, we all work very hard for our money and we should learn how to make our money work for us. And I think if you invest in knowing how to manage your money, that it will pay off as you get older, it'll pay off in your life.

Speaker 1:
It's about knowing enough to stop making the same expensive mistakes, and finally starting to make decisions that move your financial life forward. So here are five quick financial wins you can achieve this month. Review one monthly bill and see if you can cut, renegotiate, or cancel it. Follow that with pulling up your free credit report and spot any surprises. Next, set one small savings goal. Even 20 bucks a paycheck counts. Don't forget to learn just one new money concept, like how compound interest actually works for you instead of against you. And maybe the most powerful one. Sit down with your partner and or your kids and have one honest conversation about money. No judgment, just a real talk. While Financial Literacy Month won't fix every financial bump in the road you may have, it can be the month you finally stop feeling helpless about money and start feeling in control. So pick one thing. Do it this week, because the best time to get smarter with your money was 20 years ago. The second best time right now in April for the Retirement Radio network powered by Amora Life. I'm Jim Tabaka.

Speaker 2:
Welcome back to the Federal Retirement Show. I'm your host, Val Majewski with American Benefits Exchange. I really appreciate you taking the time out of your busy schedule to join us to view our content. That's what we're here for. For you, the federal employee who's looking for accurate information when it comes to your benefits and retirement situation. Last episode, we started a new topic called Will You Have Enough Income in Retirement? And I'm going to revisit that. And this is part two of will you have enough income in retirement? We're going to hone in on a specific portion of your income in retirement. So let's dive into today's content and go into part two of will you have enough income in retirement? So as you may recall, if you have not seen part one, I'd highly go back. I highly recommend go back and watch the previous episodes so you can catch yourself up and jump back in here in part two. But we discuss how much will you need in retirement. And that's the big question. A lot of folks, when I'm talking to federal employees and we're going over benefit reviews and we're doing retirement projections, it revolves around income. And the big question is how much will you need in order to retire when you want, how you want with the lifestyle you want. It revolves around income. You need to have that money coming in because you're no longer working, and you need to have enough money coming in to support your lifestyle for whatever you want to do.

Speaker 2:
And everybody's a little different. So maybe, maybe you need 100%. Maybe you don't need 100% of your pre-retirement income. Maybe it's 90, maybe it's 80. But typically I see federal employees, just based on the thousands of benefit reviews that I've done over the past 14 years. Want to get as close to 100% as possible. That's that's the big thing is trying to get enough income, wanting to live the same lifestyle that you currently have. And that usually revolves taking home the same money that you're making before retirement. So let's say 100%. Now, what makes up your retirement income in retirement? There's your first pension. Most of you have your CSRs. Yes, there's CSRs, but most of you are going to be fers. The second part is Social Security, and then the third is TSP. And each one of them carries a different weight. And if you're not familiar with how is your first calculated? We have an episode on that. Go back and view that. What is Social Security and how does that play into your retirement income? We've talked in length about Social Security. We're actually going to talk about that a little bit more today. And then TSP. How does your TSP factor in. Well there's a lot of uses for your TSP in retirement.

Speaker 2:
Which one is right for you. Depends on your situation. So in order to know where you stand and and also where all these incomes are going to come from, what it all looks like, you need to get a review done of your situation. You need to take a look behind the curtain, you know, pop up the hood and look inside and see what everything's going to be looking like and projecting like as you get closer to retirement. And that way, you know exactly where the money is going to be coming from, what all the income streams look like. And if you're going to have enough. That's the that's the purpose of these last two episodes. Will you have enough income? And I'm talking about guaranteed lifetime income in retirement. Your pension is a form of guaranteed income, social security, a form of guaranteed lifetime income. Tsp you can utilize it and create another guaranteed lifetime income stream. But there's a lot of choices, a lot of options, and you need to look at all of them to make the right decision. We've talked about in the top ten mistakes series. If you haven't seen that, I highly recommend you go back and view our recent series called The Top ten Mistakes Made by Federal Employees. We talk about understanding the different distribution options when it comes to TSP, one of them being a lifetime income stream.

Speaker 2:
You have to see how that works and understand all the options you have with that. Now today we're honing in on the second one on our list, Social Security. And why is that? Because there are a lot of different Social Security strategies. We're not going to go into those in detail today, but I want to talk about the future of Social Security. You may have seen some articles, you may have seen some news. You may have seen our previous episodes where we talk about the future of Social Security. But a big thing when it comes to it is Social Security strategy. And when you should take Social Security, I said it's one of your lifetime income streams, but it depends on when you take it. It's that's going to be your starting point for Social Security. Then maybe the cost of living adjustments that you get down the road and also affects your loved ones, it affects your spouse. If you were to predecease your spouse and you're the breadwinner, your Social Security income affects what your spouse is going to get. But why is it so important to strategize and understand how Social Security works? Because according to the recent Social Security Trustees report, by 2033, they're projecting that the Social Security Trust Fund will be exhausted, meaning the the the money that's in there Will be exhausted. Now, what they'll be collecting still are Social Security, payroll taxes, right? The FICA taxes that fund Social Security, and they'll be using those solely to pay out future beneficiaries.

Speaker 2:
So that's what I mean. Not that Social Security will go away. It just means now the money that comes in is what's going to be distributed. So this is something that they're telling you in plain English. They're saying that this is what's going to happen if we don't make any changes. And this is according to their trustee's report, which is out there. We've talked about this before. So there's a big fear that Social Security payments will be adjusted, but they're going to be reduced in the future. And that's just common sense right. They're not collecting enough money to pay out. Then those benefits are going to be reduced. And they're saying they're probably only going to be paying out once this occurs. Once the trust fund is exhausted, they'll probably have enough to pay out $0.77 in the dollar. So 77% of what's expected will get paid out, and that could change. That's an estimate. But they're saying we're not going to be able to pay out as much if we don't make any changes. So this means less future income. So will you have enough retirement income if you're counting on Social Security to be a major contributor to your retirement income solution, right, your retirement income plan, then what you need to do is understand that that number can be less than you're expecting, especially if you're a ways away from retirement.

Speaker 2:
So have you saved probably same questions we asked in episode one. Have you saved properly to fill this gap? If there is a gap in Social Security, have you saved properly? Will you have enough guaranteed retirement income guaranteed for your lifetime retirement income? That money that's not going to be running out because there are folks that save well enough, but they don't have a plan to turn that into a guaranteed stream of income, and that money can run out. And a lot of times that income, that money, whether it's an outside retirement savings or TSB, if it's not turned into a lifetime income stream and you're just relying on, well, I'm gonna take out, you know, 4% or 5% or 3% or whatever that number is not factoring in what if the market goes down? What if my account is not worth as much after a decline and I'm still taking money out? Now I've got a double whammy. I'm pulling money out and the market went down and my payments may not last as long as I wanted them to. And we talked about, well, what if you don't pass away when you think, what if you live really, really long? Now we've got a longevity risk. We've talked about that before in previous episodes. So understand how Social Security is going to factor in and you can plan ahead.

Speaker 2:
You can do all the Social Security estimates you want. But if they reduce benefits and we don't know how much they're just making an estimate, it says approximately $0.77 in the dollar that that's not a guarantee of what it's going to be. If you don't make any changes, there's going to be less income, which means you have to properly plan. And I like to say this, especially if you're younger, if you're a younger employee and you're listening to this plan as if Social Security is not going to be there. Now, that's a drastic piece of advice, but I think it's a pretty good piece of advice. What if you plan that Social Security is not going to be there, and you save and save and save and say, you know what, I need to make up my own Social Security payment because I'm not certain that I'm going to get anything from Social Security. Again, that's a drastic that's that's doom and gloom from me. Coming from me sounds terrible. It's also imagine you're thinking in your head, he's saying Social Security is not going to be there. I said, no, no, no, no, no plan. As if it's not going to be there. Guess what? If it is in some way, shape or form, this is bonus money. But if you're planning and you're able to save enough money and utilize all the time that you have, then then you will be extremely happy.

Speaker 2:
Uh, your future self will be extremely happy for the decision that you made, because you will have the problem that we talked about before of having way too much money in retirement. That's never been a problem for anybody. So, um, we like to plan as if Social Security is not going to be there or not going to be there in the capacity that we think it's going to be. And that's a big deal. Now, what are they telling us are the solutions to the Social Security problem? Now this is an article on govexec.com. Government executive is the full name of the website govexec.com. It's written by Tommy Flanagan. It's called the Social Security. Clock is ticking faster than expected. And here are some of the bullet points right. Tammy indicates there are numerous contributing factors to this lack of funding in Social Security. Why is it going to run out? Well, first of all, this is a recent thing. This this isn't a long term contributing factor, but it's a more recent one where they repealed the windfall elimination provision and government pension offset. So this now increased benefits for some people who were affected by these two things by WEP and GPO. Now that they're no longer affected by it, they're going to collect some more benefits. So now more benefits are getting paid out.

Speaker 2:
Less people are being born, lower birth rates are occurring. So people aren't being born at the same frequency, which means we're not replenishing the workforce as much as we used to. I mean, there's less people paying in to the FICA taxes that go to Social Security and fund the trust funds. Um, and then we're having more beneficiaries, right? So the baby boomers and those right behind them, when we were repopulating as much as we were, um, they're getting more and more into social security age. So they're collecting benefits, but we have less people being born that are going to help replenish. So that's just a math problem, right? Right. Less is going in. More is coming out. That's not a good thing when you're you've got a, you know, payments to make, uh, then the share of wages versus other forms of compensation. So the, the Social Security trust fund is funded by FICA taxes, right? This is 6.2% is being paid by the individual, 6.2% by the employer. Self-employed people pay both, but not not all forms of compensation contribute to FICA taxes. So if other forms of compensation are are being made and they're not paying as much into FICA, then you know, there's not as much taxes. People might be earning as much, but they're not paying as much into FICA tax part of this. So that's contributing factor. There could be some other things as well, but these were the three main points that that it's a great article, which is why I'm citing it.

Speaker 2:
So Tammy, if you're listening to this great article, loved it. But there are solutions that are outlined, um, within here and there, there were basically five solutions. I'm I'm highlighting four of them in the article. But just think of these how these affect you as well. So what are some solutions to the Social Security Trust fund running out? You're going to increase what goes in. Simple. How do you do that? Well, if you're not increasing the amount of people going into the workforce, you increase the amount of contribution made by the people currently in the workforce. What does that mean for you? Less income, less money that you're taking home because more is going to FICA. What does that mean for you? Also less it can be saved into your retirement. So now you've got less disposable income that you can fund your retirement for. That's, that's a double whammy for you right now. Granted, if you put in more, it's not a guarantee that we're going to solve the problem by increased revenue or increasing the percentage. It's not a guarantee because more people, more people, more people. There's a point at which you're probably gonna say, well, we need to increase it again. We need to increase it again. And I don't know how drastic they're going to go on the increase of contribution to Social Security.

Speaker 2:
We'll see. But this is one thing that's talked about is increasing the revenue by increasing the percentage or increasing the max income amount that people have that you can contribute to Social Security. If you're not familiar, there is a cap once you go above a certain dollar amount as far as your earnings, then you stop paying into Social Security. So not only increasing the percentage, but maybe increasing the cap of where you stop paying into Social Security. So there's also a combo where it's a combo of increased contributions, but also a reduction of benefits. That could be something that they're contemplating. That makes sense too. Like we talked about, increase the contributions at the same time, decrease the benefits being paid out. That should improve the solvency of the program. But that's a double whammy of we're asking the folks to that are working to put in more, and we're going to pay out less on the back end to try to, you know, get us back into the black here. We'll see, um, reduced reductions and then, you know, there's an increase in or reduced, uh, benefit reductions is what I'm saying. Reduced payouts and an increase in the Fra, which is the full retirement age for Social Security. All right. Um, they're saying you're going to we're going to pay less in benefits because we're stretching out the Fra.

Speaker 2:
So for you to collect 100% of what we've calculated for you, we're going to increase the age at which you get full retirement for Social Security. Currently it's 67. That's that is something because then for every year prior to your full retirement age, they're going to pay you out. A lesser percentage could happen. And then there's a blend of, of other things that they can throw in there. But we don't know exactly which legislation is the right one, which one they're going to go with. Um, it's this is not something you should rely on 100%. But there are a lot of federal employees that I talked to that heavily rely on Social Security income heavily. So we're seeing and you could read numerous articles. You can hear see a lot of different things about it. You can read the trustee's report that Social Security could be in trouble. And they do need to make some changes. They do need to. And if they don't, it's telling us in plain English that they're going to pay out less in benefits. So just understand, you should take control of your retirement with the time that you have, and plan again, as if Social Security is not going to be there. And that way you're filling that gap and then some yourself. You're taking control of this. Do not rely on put it on the if if they fix it, I hope hope is not a strategy.

Speaker 2:
As we mentioned before, you need 100% to take control of that yourself and bridge that gap as best you can. There's a lot of different strategies to do it, but there's no magic solution. You need to take action, Set money aside incrementally. Save additional funds. It could be a few extra dollars every pay period, but that'll all add up in the end. Talk to a federal employee earlier today and in his early 20s, has a lot of time ahead and is taking that time to learn now what to do, to plan properly and to make sure that there's going to be enough in retirement. And if it's over done, okay, that's not a that's not a problem for any retiree, like I said, to have too much in retirement. But if Social Security is telling you they're not going to pay as much, we should awaken to this and take action. You know the same thing if if you saw o fers, the calculation is going to go to a high five, they're going to pay you less. That could be a problem, right? So just understand things can change with or without your say. You need to take action. You need to take control of this yourself. So ensure you're going to have enough and not run out. That's big. This is where we go back to how how get up benefits and retirement review.

Speaker 2:
Done. Go to our website federal retirement show.com. Fill out the form. One of our experts across the country. If it's not me personally, we'll be reaching out to perform a benefits and retirement evaluation. You can see exactly where you stand, if there are any gaps and how to fill them. Ask questions. Get all of your questions answered. The consultation. There's never a cost for that. The reporting. We can run 20 different reports for you. There's never a cost for that. We just want to make sure you have this information so you can make the best decisions. I said earlier, hope is not a strategy. Okay. The false sense of security is not a strategy. Thinking the government's going to take care of you is not a strategy. You need to take action. Talk to an expert, and then take the necessary action or actions so that when you retire, you're going to retire how you want, when you want. With the lifestyle, there's not going to be, oh, I can't live on that. Oh, I need to work five more years. Oh, I need to drastically reduce my lifestyle. We're trying to eliminate all of those things. Well, I hope you enjoyed today's session. Today's episode, we're honing in on Social Security and some of the issues that are going on with Social Security, some of the possible solutions and how that affects you in the end.

Speaker 2:
This two part series, we want to 100% make sure that you're going to have enough income in retirement so that you can retire with your head held high, confident in the plan that you put in place and utilized over the course of your working career. So reach out to us today. Get that check up, make sure 100% that you're heading in the right direction. So go to federal retirement show.com, fill out the form, we'll be in touch. And if you really liked this two part series or any of our previous content, share it with a colleague. We want to help as many federal employees as possible. Pass it along, pay it forward, tell somebody about the federal retirement show. Say, look, episodes are are 5 to 30 minutes. You can listen to it on your commute to work. You can listen to it when you're working out. You can listen to it if you want it to help you go to sleep. I don't know, I'm joking there, but just understand that the content is here for you all to learn as much as you possibly can about your benefits, retirement situations, so you can make the best decisions. So thank you for that in advance. You've been listening to the Federal Retirement Show once again. My name is Val Majewski, and we look forward to seeing you on a future episode.

Speaker 4:
Nearly 1 in 4 Americans have no emergency savings at all and would struggle to cover an unexpected expense. That's according to Bankrate. And having an emergency fund is really, really an important thing because we never know what's going to happen in life after all. Joining me now to talk more about that is Rod Griffin. He's senior director of consumer education and advocacy at Experian. Rod, thanks so much for taking some time for me. I really appreciate it, sir. Well, thanks for having me. Well, no problem at all. It really is crucial to have some sort of backup, some sort of safety net, right? I mean, but a lot of people, as we just said that that, uh, statistic there from Bankrate, 1 in 4 Americans almost have absolutely no emergency savings. Why is it so difficult for so many of us to save money right now? Yeah, it's life is expensive. Uh, and when you look at where inflation was over the last several years, coupled with the holidays just being, you know, just passed and people have what I kind of call the holiday hangover with their debts, you know, trying to pay down those credit card bills and debts they may have taken on during the holidays. Mhm. That puts a pinch on on the bank account and can make it hard to set aside savings when it feels like all of your money is consumed in just paying the the day to day expenses and reducing you the debts you may have. So, um, that makes it hard. Uh, and it's, it's difficult to get started, uh, because of that. Yeah, it really is, uh, very difficult these days, as you say there. And I mean, you know, how much should people save in an emergency fund? I know that I've, I've heard different things from different folks, a sort of, you know, general guideline is like 3 to 6 months of expenses. Some people say up to a year, some people say not quite so much. What would you say is a good kind of goal for people to set for their emergency fund?

Speaker 5:
Yeah. And you're right, the the rule of thumb has been for many years, 3 to 6 months of sort of your daily of your monthly living expenses, really. So things like your utility bills, your rent, your mortgage, food costs, those sorts of things. And that can be a really daunting number if you're trying to, you know, set a number to it and reach that goal. The problem with a goal that's large like that can be that it becomes discouraging. And so you, you emotionally kind of check out and give up. And that defeats the purpose. So my recommendation is start small and you maybe don't put a large number on it. Maybe it's, I'm going to save $10 a month or $20 a month, whatever you have sort of cushion to do and start setting that aside. And over time, it will build toward that larger amount. The key is to be able to stay motivated to build that habit of savings so that you are just kind of naturally putting savings aside over time. Um, the other thing that is important to focus on is finding ways to reduce your expenses, because that gets in the way of saving. And you know, And that means tracking your expenses, knowing where your money is going, where it's coming from. You know, I kind of think about, you know, you should be in control of your money. It shouldn't be in control of you. But that's the way it often feels. Uh, and so if you track your expenses and know where they are and then look at ways you can reduce those expenses and not just the don't buy coffee once a week, which is kind of the common one.

Speaker 5:
Um, but think about just the regular bills you have every month. When people think of Experian as a credit bureau, which we are, but we're much more than that today. And one of the things that we kind of think about and aspire to be is to be a person's big financial friend. Meaning we want to help them take control of their finances and to reduce the costs of everyday life. So we have, for example, a service that can help you reduce your auto insurance payments each month. Uh, We have a service that can help you identify streaming services that perhaps you've forgotten about, or other subscription services and signed up for for a sporting event or a movie that you wanted to watch and then just didn't use it again. But it's still, uh, you know, being deducted every month and it's an expense. We can help you find those and cancel them. We have a service that can help you negotiate regular monthly bills, things like utilities for many people to reduce those monthly costs. We have a credit card marketplace that can help you find credit cards that would be at a lower interest rate or lower fees that perhaps you could transfer balances to and pay them off faster. So, you know, think of Experian as more than just a credit bureau. It's really about your overall financial health. And saving means having money to set aside to save. And that requires reducing your your monthly expenses.

Speaker 4:
Yeah, absolutely. Right. And I sort of always think of it as, you know, pay yourself first, right. It's like your future. You will thank you if if you do that and and an emergency fund is a big part of that. And of course, one of the ways too, that I often hear about, you know, sort of makes makes things easier. You were just talking about, um, the subscription services and things like that that we all sign up for. And then maybe we forget about, uh, you know, after a certain amount of time, the same thing could be true in a positive way, though, if you kind of automate some savings, right? Just have a certain amount go into a savings account or whatever it might be. Um, and just really, you know, set that up to just automatically happen. Maybe you forget about that. And then before you know it, you've got enough saved up for your emergency fund. Right?

Speaker 5:
Right. It's that the old out of sight, out of mind thing, uh, and out of sight, out of mind can be good if you're automating those deposits and they're automatically going into a savings account, you don't think about it and it just becomes habit and you work with, then living within the means that you have the funds that are left over. And but it could also be bad if it's out of sight, out of mind. And I'm just not going to think about the bill I have to pay. Forgot about it. And then I didn't pay it. Um, that's exactly the opposite. Now you you're damaging your credit history potentially. Uh, you're reducing your access or making access to financial services more expensive. So, um, automating payments, uh, and automating savings can be a great tool for building that, that habit that just sort of becomes natural over time.

Speaker 4:
Yeah, absolutely. Right. Well, just about time for us to wrap things up, but anything else that you wanted to mention, rod, that we haven't touched on that comes to mind?

Speaker 5:
Yeah. Well, I mean, being, uh, you know, the retirement radio network, think about saving for retirement. If you work for a company that offers a 401 K, for example, and they have a match, never forego that match. Make sure you take advantage of that. If it's pre-tax, you can save potentially tens of thousands of dollars over your career. If you're taking that match and putting money in the 401 K, and if it's pre-tax, it likely won't affect your take home pay or will have very minimal effect. So if you are not doing that, it could cost you a lot of money over over the 20 or 30 years. So, you know, make sure you're taking advantage of every savings opportunity you have, not just what we think of as an emergency savings, but also retirement savings as well, because they play a part in that too.

Speaker 4:
Yeah, 100%. I always tell people, if you're not taking the the match with your employer, if it's offered, you're telling me you don't like free money. And I don't believe that for a minute. So there we go.

Speaker 5:
I'm with you on that one.

Speaker 4:
Rod Griffin, senior director of consumer education and advocacy at Experian. Thank you so much, rod, for spending some time with me. Really do appreciate it.

Speaker 5:
Great. Thank you. Glad to be here.

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