The average firefighter hangs up the helmet around age 52 – nearly a decade earlier than many other workers.[1] Yet, the typical firefighter’s pension often replaces only 50–70% of their working income. That means without extra planning, you could face a big income gap. The good news is that if you’re about 5–10 years from retirement, you still have time to make some savvy moves. Consider this your late-career financial checklist to help you shore up your finances as you enter the home stretch.
1. Maximize Catch-Up Contributions in the Final Stretch
Pump up your retirement savings while you still can. Once you hit age 50, Uncle Sam lets you toss extra cash into your retirement accounts. For example, in 2025, the standard 457(b) or 401(k) contribution limit is approximately $23,500, but individuals 50 or older can add an extra $7,500 on top of this amount.[2] That brings the annual max to roughly $31,000. And if you’re in a governmental 457(b) plan, you might have an even more potentially lucrative option: a special “Last 3 Years” catch-up provision. This allows you to contribute up to double the normal annual limit (potentially around $47,000 per year) if you’re within three years of retirement and have underutilized limits from prior years. In other words, you can supercharge your savings as you approach the finish line.
For a quick reference, check out the breakdown below of catch-up contribution limits (using 2025 figures):
Catch-Up Contribution Limits (2025)
| Contribution Type | Annual Limit | Eligibility |
|---|---|---|
| Standard 457(b)/401(k) | $23,500 | All participants |
| Age 50+ Catch-Up | +$7,500 (total $31,000) | Age 50 and older |
| 457(b) Special 3-Year Catch-Up | Up to ~$47,000 | Within 3 years of normal retirement |
If you’ve been skating by with minimal contributions, now’s probably the time to crank it up. Bump up that percentage on your deferred comp (457) or other plans. Those extra contributions in the final 5 years can significantly pad your nest egg. Remember, 457(b) plans have separate limits from any 401(k)/403(b) you might have, meaning you could max out both if you have access to multiple plans. Take advantage of all the buckets available. Every dollar you sock away now is one you won’t have to scramble for later.
2. Leverage Your 457(b)’s Early Withdrawal Perk
One of the best perks of being a firefighter with a 457(b) deferred compensation plan is the ability to tap it early without penalty. Unlike a private 401(k) or IRA, which generally slaps you with a 10% penalty if you withdraw before age 59½, a governmental 457(b) lets you withdraw funds penalty-free as soon as you separate from service, even if you’re only 50 or 55.[3] That’s huge. Essentially, your 457(b) can act as an income bridge in your 50s.
Here’s how to use this to your advantage: plan on leaving your 457(b) untapped until retirement, then draw from it in those early retirement years when other accounts might be off-limits. You’ll still owe regular income tax on withdrawals, but avoiding that 10% penalty is a big win.
457(b) vs. 401(k): The Early Withdrawal Reality
457(b) Plan
Scenario: Retire at 53
• Must separate from service
• Still owe regular income tax
• Available immediately upon retirement
401(k) Plan
Scenario: Retire at 53
• Rule of 55 (limited cases)
• 72(t) distributions
• Hardship withdrawals
The 457(b) Advantage: $5,000 More in Your Pocket
Strategic Withdrawal Timeline:
| Age | Primary Income Source | Penalty Status |
|---|---|---|
| 50-59 | 457(b) + Pension | No penalty |
| 59½+ | 401(k)/IRA + Pension | No penalty |
| 62+ | Social Security (if applicable) | No penalty |
This special provision acknowledges that public safety professionals often retire at a relatively young age. If you hang up your turnout gear at 53, you don’t want to wait six years to use your own savings. By contributing aggressively to your 457(b) (see point #1) and knowing you can withdraw without penalty, you give yourself flexibility. For example, you could plan to use 457(b) money from age 53 to 59 to supplement your pension until things like IRA funds become available.
Just a heads up. This only works if you separate from your fire department job. You generally can’t be 50 and still on the job, and try to withdraw from a 457(b) plan. It’s meant for when you retire or leave. Also, note that 401(k)s and IRAs have different rules. Most plans will penalize early withdrawals (though there are exceptions, such as the Rule of 55 or 72(t), which we’ll touch on later). The 457(b) is a unique firefighter-friendly tool, so it’s likely worth making it a piece of your retirement income strategy.
3. Get a Reality Check on Your Pension (Know Your Numbers)
It’s crunch time. Now is the time to determine what your pension will pay. Request an updated pension estimate from your plan or HR, or use your pension formula to project it yourself. Most firefighter pensions utilize a formula similar to Years of Service × Multiplier × Final Average Salary. For example, 25 years at a 2.5% multiplier would result in approximately 62.5% of your final salary being paid as a pension each year. Keep in mind that many plans have a cap, typically around 70–80% of your final salary, regardless of how long you serve. If you’re closing in on that cap or 30+ years of service, you might already be near the max pension you can get.
Compare that pension estimate to your expected expenses in retirement. Does it measure up? If you’re looking at, say, a $4,000 monthly pension but figure you’ll need $5,000 to cover the bills and enjoy life, you’ve identified a gap. Don’t ignore it – attack it. This is your wake-up call to adjust plans while you still have a few working years left.
Importantly, find out if you’ll be entitled to Social Security or not. Many firefighters are in positions that don’t pay into Social Security, which means you might not get any Social Security benefits in retirement. If that’s the case, your pension and personal savings carry even more weight. Even if you do qualify for Social Security, remember you can’t start that until at least age 62 (and full benefits come later), so it won’t help in your early 50s.
Take a hard look at your retirement budget: list your expected costs (everything from mortgage or rent to groceries, insurance, and bass boat fuel). Now see how your guaranteed income (pension, etc.) stacks up. It’s better to find any shortfall now than when you’re retired and the paycheck stops.
If you discover your projected pension is less than you hoped for, don’t panic – but take action. As one Protection Red advisor put it, those pension formulas could be less than you’d hoped, and supplementing a pension check may be necessary to live comfortably. Your pension might fall short, so be ready to shore it up. That leads us to the next checklist item.
4. Close the Gap: Ramp Up Savings or Adjust Your Retirement Plan
So your pension estimate isn’t quite enough to cover the lifestyle you want in retirement – now what? This is the time to hustle. You essentially have two levers: save more or work longer (or both). Neither sounds fun, but a small course-correction now can make a huge difference later.
Close the Gap: Your Options Calculator
Disclaimer: This calculator is for illustrative purposes only and does not constitute financial advice. Please consult a professional advisor before making retirement decisions.
Option A: Ramp up your savings.
We already talked about maxing your contributions (#1 above). If you haven’t been doing that, do it now. Funnel any overtime pay, side gig money, or other windfalls straight into your retirement savings. Also, consider building a “bridge fund” in a regular brokerage or savings account, money you can draw on in the early years if needed, without touching retirement accounts. The idea is to have a pot of accessible cash (taxable account) to supplement your pension in your 50s.
Option B: Consider a deferred retirement (work a bit longer).
This might mean staying on the job for an extra year or two beyond when you first could retire. Each additional year (or even half-year) can noticeably boost your pension in many plans, and of course, it’s one more year to save and one less year to fund with your savings. Some firefighters choose to transition into less strenuous roles or drop to part-time if that’s an option, rather than fully retiring. Others might retire from the department but pick up a lighter second career or a “fun job” to earn income (and possibly snag some health insurance – more on that later). There’s no shame in working longer if it solidifies your financial foundation.
Option C: Tighten the belt (reduce expenses).
If neither saving a lot more nor working longer appeals, consider cutting costs. Maybe downsizing your home, relocating to a cheaper area, or paying off debt before retirement could lower the income you’ll need. Often, a combination of these strategies works best – save more and adjust expectations a bit.
The key is not to wait. If the numbers aren’t lining up, face it head-on. You still have time in your final 5-10 working years to make changes. Increase that deferred comp contribution, slash unnecessary expenses, or maybe postpone the retirement party slightly. A small sacrifice now can mean far less stress later.
5. Weigh Your Pension Payout Options (Survivor Benefit vs. Life Insurance)
As retirement day nears, you’ll have to choose how your pension benefit is paid out. This decision can affect your family’s financial security, so pour yourself a coffee and think it through. The typical options look like this:
Single-Life Annuity (aka “Max” or “Straight Life” pension): This pays you the highest monthly benefit, but payments stop when you die – nothing goes to a spouse. Great for maximizing your income while alive, but if you have a spouse or other dependents, they get zero pension after you’re gone.[4]
Joint-and-Survivor Annuity: This pays a bit less each month, but continues paying to your spouse (or designated beneficiary) after you die. Common variants are 100% J&S (your spouse gets the same amount you were getting) or 50% J&S (spouse gets half) for their lifetime. The higher the survivor percentage, the more your own check is reduced.[4]
Period-Certain + Life: Some plans offer a “10 years certain” or similar, which guarantees payments for a minimum period (to you or your beneficiary) if you die early, then stops after that period if you’re gone. If you live past the period, it’s just like a normal single life thereafter.[4]
If you’re single, the choice is usually straightforward – take the max single-life benefit and enjoy the larger check. However, if you’re married or have someone relying on your income, it becomes more complicated. You essentially have to decide: Do I take the larger pension and purchase life insurance to protect my spouse, or opt for a smaller pension with a built-in survivor benefit?
Pension Payout Decision: Single Life vs. Joint & Survivor
This is sometimes referred to as the pension max strategy: elect the higher single-life pension and use some of that extra money to purchase a life insurance policy that would support your spouse in the event of your passing. It can work out well in theory – often, the life insurance payout can exceed the total survivor pension that would have been paid.
However, it comes with risks and must be executed correctly. For one, you need to be insurable and likely buy a substantial policy. Premiums can be significant, especially if you wait until your late 50s and have any health issues. You also must keep the policy in force. If you go this route and then let the life insurance lapse (say you forget to pay premiums or you outlive the term), your spouse could be left with nothing.
On the other hand, choosing the pension’s joint & survivor option is simple: no medical exams, no extra bills to pay. The pension system just pays your spouse monthly after you die. The downside is that your monthly check is smaller from day one. Over the decades, the “cost” of that survivor benefit can be quite substantial (the reduction might be 5-15% or more of your pension, depending on the plan and your age).
6. Prepare for the “Retirement Gap” (Age 50–55 to 62–65)
Firefighters often face a unique stretch of retirement – let’s call it the Retirement Gap. If you hang up your helmet in your early 50s, you may have a solid 5-15 years before other safety nets kick in. You can’t tap your 401(k)/IRA without penalties until 59½ in most cases. Social Security doesn’t start (at the earliest) until 62. You may not get Social Security, but perhaps your spouse will, so it’s relevant. Medicare health coverage begins at 65. That gap can feel like standing on a roof with no safety line.
Your pension might be the only steady income during those gap years, and it may only cover a portion of what you were earning. Meanwhile, you’ll likely need to find health insurance until Medicare kicks in – and that can be expensive. Many firefighters don’t get retiree health benefits from their department, so you could be looking at COBRA coverage, a private health plan, or hopping onto a spouse’s plan if possible.[6]
The Retirement Gap: Your 5-15 Year Bridge Strategy
Your Bridge Strategy - What You Need:
Income Sources
- Fire pension (50-80% of salary)
- 457(b) withdrawals (no penalty)
- Bridge fund (taxable savings)
- Part-time work (optional)
Major Expenses
- Health insurance ($800-1,500/month)
- Regular living expenses
- Inflation impact (3-4% annually)
- Unexpected costs
Gap Years Survival Rules:
Bridging the gap takes some strategy:
- Use your 457(b) wisely: As discussed, this is your go-to early retirement account. You can draw from it in your 50s penalty-free.[3] Ideally, have a healthy balance in it by retirement, and treat it as your income supplement until other sources become available.
- Build a bridge fund: If possible, set aside a separate savings or taxable investment account specifically for those gap years. Some folks divert overtime pay or side gig earnings into this fund. It’s there for you to draw on at 52, 55, 58, etc., without worrying about penalties. Even a few years’ worth of expenses saved up can make a world of difference.
- Plan for healthcare: Research your health insurance options well before you retire. Will your city or state offer a retiree health plan or subsidy? If not, look at COBRA durations,[5] Affordable Care Act marketplace plans, or whether taking a bridge job (maybe a civilian role) that provides insurance is worthwhile. Don’t assume you’ll “figure it out later” – premiums for a 55-year-old can be eye-popping. Work those costs into your retirement budget. Also, consider an HSA (Health Savings Account) if you have access to one pre-retirement – it’s a great way to save for medical expenses with tax advantages.
- Mind inflation: If you retire at 52 and live to 82, that’s 30 years of rising prices. Many fire pensions lack robust COLAs (cost-of-living adjustments).[3] That means the buying power of your pension drops each year. Your bridge fund and 457/IRA withdrawals might need to increase over time to compensate. Plan conservatively – better to have a surplus than run short at 60.
The retirement gap is one of the big reasons we harp on saving and planning. It’s not to be a downer. It’s to ensure your early retirement can be enjoyable, not a period of financial stress. With a well-thought-out strategy (and some guidance from a firefighter-savvy retirement planner), you can confidently bridge the years until your primary income sources become available.
In Conclusion
Retiring from the fire service is a huge life transition. Financially, it can feel like going from a structured, predictable fireground to a make-your-own-rules landscape. But a little late-game planning will go a long way to keep things running smoothly. We’ve covered a lot, so here’s a quick recap checklist of those last-minute financial moves before you pull the chalks:
In these final working years, treat your financial prep like you would a pre-plan for a fire: identify the hazards, secure your resources, and have a backup plan. Talk with your family about your retirement goals and any adjustments you might need. This is also a great time to consult with a retirement advisor who understands firefighter pensions and benefits. A professional can help double-check your calculations, identify any blind spots, and suggest optimizations (for instance, strategies related to taxes, insurance, or estate planning tailored to your specific situation).
Above all, don’t procrastinate. It’s easy to think, “I’ll deal with that when I retire,” but by then some options might be off the table. The five-year mark is a great time to tighten up your game plan.
Now’s the time to give your financial situation a thorough review, and if you need a hand, we’re here to help make sure your retirement is every bit as rewarding as you deserve. Stay safe out there, and congrats (in advance) on your upcoming retirement!
Sources:
- https://protectionred.com/why-firefighters-need-to-plan-for-the-retirement-gap/
- https://hr.msu.edu/benefits/retirement/457-def-limits.html
- https://protectionred.com/mid-career-financial-moves-firefighters-cant-afford-to-miss/
- https://www.firerescue1.com/pensions/articles/firefighter-pension-payouts-how-to-choose-the-best-option-rsqO4TZuWae4wRJP/
- https://www.firerescue1.com/benefits/articles/5-financial-concerns-to-address-when-leaving-the-fire-department-NaK8kNt0YEiUSZAn/
- https://www.iaff.org/wp-content/uploads/Governmental_Affairs/42114_Medicare-min.pdf
