After decades of protecting your community, you deserve a retirement built around protecting what you’ve worked so hard to earn. Your retirement should be about making the most of the income, benefits, and savings you have built and creating a plan that supports the life you want.
Retirement planning for firefighters is different than it is for most people. Your career comes with unique challenges that may require a more thoughtful approach. Earlier retirement ages, pension benefits, deferred compensation plans, healthcare costs, and the potential gap between leaving the firehouse and becoming eligible for other sources of income can all shape your retirement strategy. Having a plan in place before you retire can help you understand where your income will come from and how to prepare for the years ahead.
Know What Your Pension Provides
Start by asking:
- When can you retire with your full benefit?
- How is your pension calculated?
- Does it include a COLA?
- How much of your current income will it replace?
- What survivor benefits are available?
- Is your pension taxable?
These are important questions to consider before you retire. Public-sector pensions tend to play a much larger role for firefighters than they do for many private-sector workers, so it’s important to understand how your pension works and what it can realistically cover.
Calculate Your Retirement Income Gap
Working as a firefighter is a physically demanding job involving lifting heavy objects and operating in dangerous conditions. That’s not counting the mental and emotional strain many firefighters face. These conditions often make it difficult to continue working into your 60s. In fact, the average firefighter retires around 52 years of age, much earlier than workers in many other professions.
However, an earlier retirement can create an income gap that is crucial to plan for as you may have several years before other sources of retirement income become available. For example, 401(k) and IRA withdrawals before age 59½ are generally subject to an additional tax unless an exception applies, Medicare generally does not begin until age 65, and while Social Security can begin as early as age 62, claiming before your full retirement age means receiving a reduced benefit.
Create Your Retirement Income Plan
Consider how your pension will work alongside your 457(b), savings, investments and other income sources to help cover your expenses, particularly during the years before Social Security or Medicare become available.
A retirement income plan can help you determine how much you may need to supplement your pension, and which resources may be available to help fill the gap. If you have a 457(b), taxable savings, investment income or plans to work part time, consider how each could fit into your overall income strategy.
Navigate Healthcare and Social Security
Retiring from the fire service doesn’t necessarily mean all your retirement benefits begin at the same time. Healthcare coverage, Social Security, and Medicare each have different eligibility rules and timelines. That’s why it is important to understand when these benefits become available, what they may provide, and what you will need to cover in the meantime can help you avoid surprises in the early years of retirement.
Update Estate Documents
It’s also important to make sure your retirement plan includes what happens to your income and assets in the event you pass. Review your pension’s survivor benefits and understand what income may be available to your spouse or other dependents.
Before retiring, review your estate documents and beneficiary designations to make sure they reflect your wishes and the people you want to protect.
Build The Life You Want After The Firehouse
Before you retire, take time to avoid some of the common mistakes that can create unnecessary financial challenges later:
- Waiting too long to start planning
- Overlooking beneficiary designations
- Failing to coordinate your pension, retirement accounts, and other income sources
- Putting off estate planning
Planning for retirement isn’t just about determining when and whether you can stop working. It’s about making sure your financial plan supports the life you want after the firehouse and the people you want to protect.
Ready to get started? Contact Richard Ngin of Foundation Asset Management today to start building a retirement strategy designed around your pension, income needs and goals for life beyond the firehouse.
This content is for informational purposes only and should not be considered tax, legal, or investment advice. All investing involves risk, including the possible loss of principal. Tax laws, contribution limits, and plan rules may change. Individuals should consult with qualified financial, tax, or legal professionals regarding their specific situation.
Sources:
https://www.investopedia.com/why-more-retirees-rely-on-pensions-than-most-people-realize-12009683
https://protectionred.com/why-firefighters-need-to-plan-for-the-retirement-gap/
