10 things to know before you retire from federal service
Your federal benefits are generous and unforgiving. Get these ten decisions right before your retirement date, because several of them cannot be changed once you sign.
Your retirement date is a math decision, not just a calendar one
Retiring at the end of a pay period, at year end, or just after you hit a new year of service can change your annual leave payout, your first pension check, and your high-3. A few weeks can be worth thousands.
Know your high-3, and whether it is really your last three years
Your FERS pension is based on your highest average basic pay over 36 consecutive months. For most people that is the final three years, but not always. Confirm the figure before you count on it.
The 1.1% multiplier at 62 is worth waiting for, sometimes
Retire at 62 or later with at least 20 years and your pension multiplier rises from 1.0% to 1.1% per year of service, a 10% larger pension for life. Whether waiting is worth it depends on your full picture.
The FERS supplement can be reduced if you keep working
If you retire before 62 with an immediate, unreduced annuity, the FERS supplement bridges you to Social Security, but it is subject to an earnings test. Earned income above the limit can shrink or erase it.
The survivor election is permanent the day you sign
Choosing a survivor annuity reduces your pension but keeps FEHB coverage available to your spouse after you pass. Declining it is generally irrevocable. Understand the trade-off before you decide.
You must be enrolled in FEHB for 5 years to keep it in retirement
To carry Federal Employees Health Benefits into retirement, you generally need to be covered for the five years immediately before you retire. This is one of the most valuable benefits you have, and one of the easiest to lose.
FEGLI gets expensive fast, plan for the cost cliff
Federal Employees Group Life Insurance premiums climb sharply with age. What was cheap at 45 can be costly at 65. Decide which options to keep and which to replace before the increases hit.
Your TSP has more exit options than most people use
You are not limited to leaving it or cashing it out. Installments, partial withdrawals, annuities, and rollovers each have different tax and flexibility trade-offs. Roth and traditional balances are treated differently too.
Taxes are where the biggest retirement mistakes hide
Your pension, TSP withdrawals, and Social Security are taxed differently, and how you coordinate them can change your lifetime tax bill significantly. This is the gap federal employees are rarely warned about.
Coordinate FEHB with Medicare, do not just default
At 65 you can keep FEHB, add Medicare, or both. The right combination depends on your plan and situation, and the wrong default can mean paying twice or leaving coverage gaps.
See how these fit your situation
A complimentary session or one-on-one puts these decisions in the context of your own benefits, with no products sold and no pressure.