Terry Gerton Well, we’ve been having a lot of conversations about how federal civilians should be thinking about whether or not to retire, but we’re going to take a little bit of a different twist this morning. We’re going to talk about what happens after you retire, right? You’re a pro at that.

Abe Grungold Yes, Terry, I retired three years ago from federal service after 36 years and I planned my retirement. It took me three years to think about how much money am I going to need in retirement? What am I going to do in retirement, and if my plan of staying busy is not going to work out, what is my backup plan? So, in 2025, there’s going to be two tsunamis of retirements from federal retiree applications. The first one is due to the deferred retirement that will take effect September 30th, all those that are taking the buyout. And then there’s just going to be a wave of retirees at the end of December 31st. So, do these people have a plan? What is going to be their plan? And many of them are still going to be young. So will they be working full-time or part-time in retirement? Or are they going to just play pickleball and play golf in retirement? You have to have a plan.

Terry Gerton Well, I’m a two-time retiree failure. Obviously I’m back at work. So my plans have not proven out very well, but my husband is succeeding quite well at retirement. What are the myths that most people need to get out of their head early so that they can have a successful and enjoyable retirement?

Abe Grungold You have to have this plan, and it has to be a flexible plan and there has to be contingencies. Say you want to work full-time and you start working full- time and you realize the grind isn’t for you. So you say, well maybe I’ll find a part-time position. I have a lot of friends in government who are retiring. They are going to be doing some interesting things. One of them has a farm with farm animals and farming equipment. Another one is remodeling his mother’s home. So they’re taking on these very big new careers that are different from them, but it’s something that they want to do. And it’s something they’re going to enjoy doing. So that is a big factor. You have to find something you want to do. Now there are other people who volunteer. I have a friend who volunteers in a food bank and then he helps disabled people with exercise programs, so they continue to exercise even though they have disabilities. So he keeps busy doing a lot of volunteer work. That is something he wants to give back to the community. So there has to be some sort of a value if you’re going to work or you’re going to do something else in return.

Terry Gerton Well, one of the pieces of advice I hear most often is find something that keeps both your mind and your body engaged. It may be work, it may be volunteering, it maybe something else entirely, but don’t think that you’re going to just sit on the couch for your retirement.

Abe Grungold Exactly. Look, I started my business three years before I punched out from federal service and I play golf. I go to the gym. I don’t want to work full time, but I do want to keep my mind active and staying physically healthy is important by playing golf and other things. I don’t want to be getting injured on the pickleball court. I have many friends who are getting injured, but there are many things that you can do, but sometimes you get bored doing them and you have to have an alternative plan. What else could I be doing? And going back to work is not a bad thing if you’re out for a year playing golf and traveling. Some people get bored. But another big thing to consider is, how are you going to fund all the things that you’re going to do in retirement? I have many friends and neighbors who are remodeling their homes. They’re traveling, they’re buying expensive cars, they’re doing all sorts of things that require large amounts of money. Is their retirement income stream going to be able to handle all of that? They need to think about that.

Terry Gerton I’m speaking with Abe Grungold. He’s a retired federal manager and owner of AG Financial Services. All right, let’s think about that cash flow stream. What are the likely sources of cash for a federal employee who’s now retired? Where should they be thinking about that? How should they think about budgeting?

Abe Grungold This is very good. If you are still young, let’s say you’re 57, you reach your minimum retirement age, and you are going to get your annuity from the government and you’re thinking about working, you may not want to take Social Security at this time. You may want to defer Social Security at a later date. Now, if you’re going to work part-time, you can collect social security and not have a reduced benefit, so you have to think about those limit amounts. Now, in retirement, you can also draw from your TSP. A lot of people just want to draw 2% or 3% from their TSP and use that money to travel with. That’s fine, but you need to budget. You need to budget if you’re going to remodel your home or you’re going to take a couple expensive cruises or trips. You need budget and think about where you’re going to draw that retirement income. And from a personal level, I cashed in savings bonds that I purchased over 30 years ago from the federal savings bond programs that they had for employees. So that is something that I was planning on doing and I am using those funds to do various things in my life. So that’s something you need to think about. You need to plan, you need have a budget.

Terry Gerton What’s really the big differences in a retirement budget from a working budget? Obviously the source of income, but what kind of expenses might people need to think about that they are going to have in retirement that they might not have had while they’re working, or that might be different?

Abe Grungold Well, a big thing, and even from my personal experience, is health care costs. You have to have good health care insurance, whether you’re going to continue with your FEHB insurance in retirement, or you’re going to be on Medicare and have a Medicare supplement. You have to have good health care because there are many unexpected things that happen. You could fall on the pickleball court. You can have a sudden illness. You need to look at what does your healthcare plan provide? How much is the out-of-pocket maximum? What are the deductibles? And especially with medicines, because medicines can be very, very expensive and you need to monitor that carefully.

Terry Gerton Well, the inflation rate in health care costs is double the general economic inflation rate, so you have to be thinking about cost increases there as well.

Abe Grungold Oh, of course, everything is going up, everything. You go to the store, you’re buying a car, everything is going to have an increased value from what you experienced while you were working several years earlier. So yeah, you need to plan for all that and expect that to happen. And a lot of what is going on is people in retirement, they get together with friends. They’re eating lunch, breakfast, dinner, and they don’t realize how much the entertainment expenses are so excessive now that you have all this free time on your hands. Where you were working before, you’re out, you’re enjoying yourself, which is great, but at the end of the week, it starts to add up.

Terry Gerton This is a great reminder that even as you’re looking forward to retirement, you need to be sober-minded about the cash flow, the expenses, and make some smart choices so that you can enjoy that retirement over a longer period of time.

Abe Grungold Absolutely. You know, and there are ways that you can cut out certain expenses. Maybe you don’t need that expensive life insurance policy. Maybe you don’t need three or four streaming services on your television. Maybe you don’t need some other luxury items that you really don’t seem to make use of now that you have all this free time and you’re out playing. So you can cut back on some of those monthly expenses, and something to think about every year. Maybe you don’t need two cars. I have a lot of neighbors, they’re just using one vehicle between a married couple. So that’s something to consider.