Preparing For Retirement - 5 Years Out

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Preparing For Retirement - 5 Years Out

Preparing For Retirement 5 Years Out

When you’re five years from retirement, it becomes even more important to take the appropriate steps to ensure your retirement strategy is successful.

Determine your retirement income streams

At this time, you should start piecing together your income streams. For most Federal employees, the three components of retirement income will be your FERS or CSRS pension, Social Security payments and Thrift Savings Plan.

Reach out to OPM to receive your estimated FERS pension amounts or work with us to calculate what it will be — we can also point you in the right direction for an estimated amount.

You can find estimated Social Security amounts by visiting Social Security’s website. Your statement will show your estimated benefits at age 62, Full Retirement Age, and age 70.

Your Thrift Savings Plan will also serve as an additional source of income.

Your options at retirement include cashing out your full amount, leaving the funds in TSP, transferring to an IRA, or selling your account value for an income stream.

Determine your retirement income withdrawal strategy

There are three main types of retirement withdrawal strategies.

There is no right or wrong answer, and each method has pros/cons.

We want to be clear – we are not making and recommendations here, simply discussing potential strategies.

  • Systematic withdrawal method

This first we’ll discuss uses systematic withdrawals for retirement income.

With this method, you use a safe withdrawal rate you determine.

Typically it’s anywhere from 2-6%.

Many experts agree on 4% being ideal.

Your specific withdrawal percentage depends on your risk tolerance, time horizon and investment returns.

You sell off a diverse mix of your investments to generate necessary income from your portfolio.

Then, annually, you can rebalance your portfolio and adjust your withdrawals for inflation, taxes, market movements and other factors.

It’s important to take into consideration other income sources (Social Security amounts and your FERS pension) to determine the correct withdrawal percentage.

  • Bucketing method

Bucketing for income uses buckets, or groups of investments that are set aside at different time horizon for spending needs.

The first bucket includes investment that are safe, conservative, and easy to liquidate.

The second bucket includes investments that are slightly longer term, and they don’t typically have full market exposure.

The third bucket is any long-term investment that you, ideally, won’t touch for at least ten years.

Below is an overview of the types of investments you might see in each bucket.

1st bucket = 0-5 Years

Cash, Money Market, Short-term annuities, Bonds, CDs, Social Security, FERS pension amounts

2nd bucket = 5-10 Years

Bonds, Fixed Indexed Annuities, Balanced Mutual Funds

3rd bucket = 10+ Years

Mutual Funds, Growth Stocks, Real Estate, Commodities, Long Term Investments

  • Flooring method

The flooring method breaks down your retirement spending into “needs” and “wants.”

For all “needs” you should have a guaranteed income source, or floor, to cover this amount.

Guaranteed income streams would include your FERS pension, Social Security and external annuities or pensions.

For all “wants” or discretionary expenses, most people choose to invest into riskier securities and investments.

The flooring method is simple.

And it ensures all necessary items are covered by a guaranteed income source.

Conduct a Life Insurance Needs Analysis

If you already have life insurance, such as FEGLI or group life insurance with the Federal system, make sure you understand how the costs may vary as you age.

Consider doing a needs-analysis to determine the amount of life insurance cover you’d like to have.

We have a calculator that’s extremely simple to use — and it’ll help you determine how much coverage you should have.

FEHB Health Insurance

Arguably one of the best benefits you have as a federal employee is health insurance.

If you’d like to continue the coverage in retirement, you need to be in the federal system for at least five continuous years.

You might want to consider electing coverage if you’re not already covered, which could be beneficial in your retirement strategy.

Put Together A Will, Trust Or Estate Plan

At this time, it makes sense to get together with an estate planning attorney.

You want to ensure you have everything in place should the unexpected happen.

Questions To Ask Yourself

Are my beneficiaries updated?

Who do I want to manage my affairs?

Do the right individuals have access to my important papers and do they have the passwords for my individual accounts? (we’ve linked our simple document you can use).

Has my living situation changed and does it make sense to make changes to my retirement strategy?

All of this can feel overwhelming to you.

And the earlier you get started, the better.

Schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.

For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to


-Sam Wiss, RICP ®


By responding to this offer, you may be contacted by a licensed insurance and financial professional regarding life insurance and/or annuity products.




We are here to help. Our goal is to provide you with the knowledge and tools to make educated decisions when it comes to your benefits and retirement. Contact us today!

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