A crash course in retirement planning

Throughout this year of VERA, VSIP, RIF, DSR, and the new one, DRP 1.0 and DRP 2.0, many employees are trying to hurry up and learn what it takes to retire. 

This is an update to an article I wrote last year that provides tips and resources to transition from employee to annuitant and to catch up on some of the retirement planning that should have, but maybe didn’t, begin when you started your career. 

Here are some crucial tips for every stage of your federal career:  

Understand the parts of the Federal Employees Retirement System (FERS)  

• FERS An Overview of Your Benefits  

• FERS Information  

• Learn about your Minimum Retirement Age (MRA)  

Service Credit 

You know how long you’ve been a federal employee, but is there sufficient evidence of your career so that service may be credited towards your retirement eligibility and calculation?  Be sure that there is documentation of your prior federal civilian and military service in your electronic Official Personnel Folder (eOPF) or paper OPF. If documentation is missing, let your retirement specialist know so that it can be retrieved and included in your service history for leave accrual and future retirement eligibility and computation.  

In today’s climate where every federal employee is on alert for early retirement offers and, in some cases, the “pink slip” of an involuntary separation, it is important to take responsibility for  gathering copies of the records that prove your beginning and ending dates of federal and military service, your retirement coverage, and work schedule.  

If your agency isn’t as responsive as you would like, try to learn more about service credit by reading and attending available training.  Here are some places to begin: 

•  Office of Personnel Management YouTube: Retirement Counseling Tips 

•  Office of Personnel Management YouTube: Quick Guide to Retirement Processing 

• Office of Personnel Management YouTube: Navigating Federal Retirement: How to Register for a Login.gov Account through Services Online 

Consider paying a deposit into FERS for military service, non-covered civilian federal employment performed before 1989 (civilian service not covered by FERS deductions after 1988 is not currently creditable), and any refunded FERS contributions that you may have if there was a break in your federal career allowing you a return of your retirement contributions.    

Understand the value of your sick leave and annual leave  

Sick leave is your “short-term disability” protection. Treat it like “gold!” You earn four hours per pay period which translates to six months of paid time off after 10 years and a full year of paid time off after 20 years of federal employment.    

Know the rules for using your leave:  

Fact Sheet: Annual Leave (General Information): An employee may use annual leave to establish initial eligibility for retirement in reduction-in-force (RIF) and other restructuring situations. An employee who has received a specific notice of termination in a RIF situation may use annual leave past the date the employee would otherwise have been separated to establish initial eligibility for immediate retirement, including discontinued service or voluntary early retirement. 

Fact Sheet: Sick Leave (General Information): Unused sick leave will be used in the calculation of an employee's or survivor's CSRS or FERS annuity based on retirement with an immediate annuity or on a death in service.  

Update your designation of beneficiary    

Unpaid Compensation SF 1152: (Last paycheck, allowances and reimbursement for things such as unused annual leave, and anything else that is owed to an employee from the agency upon the death of a federal employee)  

Federal Employees Group Life Insurance SF 2823 

• Reporting a death/FEGLI Death Claims   

Federal Employees Retirement System or Civil Service Retirement System SF 3102 This does not determine any recurring benefits such as a survivor annuity for a spouse or a child.  This benefit consists of the deceased's retirement contributions, plus any applicable interest, in the Civil Service Retirement and Disability Fund.     

• Chapter 75, CSRS and FERS Handbook, Lump Sum Benefits 

• Office of Personnel Management Survivor Benefits 

Thrift Savings Plan: To designate a beneficiary or beneficiaries, log in to My Account on tsp.gov or use one of the Thrift Line Service Center options listed in the Death Benefits booklet. Remember that once you select a beneficiary(ies), you cannot cancel and return to the order of precedence. You will only be able to designate a new beneficiary. If your spouse inherits your TSP account, they will have a TSP Beneficiary Account set up for their inherited funds.   

Understand how the TSP works   

• Online Learning Opportunities: The TSP offers free recorded webinars, live webinars, and other scheduled training which cover many topics for TSP participants and their beneficiaries. These learning opportunities are hosted by the Federal Retirement Thrift Investment Board (FRTIB). 

• How Does Compound Interest Work? By Mark Catanzaro, St. Louis Federal Reserve Bank: Learn about the Rule of 72 and learn about how inflation affects purchasing power of money. This should always be considered when reviewing long-term projections. For instance, the purchasing power of $787,180 today would be approximately $434,580 in 30 years, assuming a 2% average inflation rate. 

• Core Funds vs. L Funds vs. Mutual Fund Window  

Set up your “My Social Security” account with LOGIN.GOV: This account will let you access your earnings record, age-appropriate information about Social Security benefits and estimates of the benefits you are earning.   

Leaving federal service early:  

• Leaving early might mean giving up lifetime FEHB coverage, life insurance, and credit for unused sick leave toward your retirement computation.    

• A deferred retirement is paid later when a federal employee is not entitled to an immediate retirement benefit, however, you must have a minimum of five years of creditable civilian federal service to qualify for any retirement benefit.  A deferred annuitant is not entitled to the FERS Special Retirement Supplement to hold you over until you qualify for Social Security at age 62. When contemplating a move to the private sector, consider and compare workplace flexibility; leave policies and accrual; retirement benefits, insurance options; and of course, salary.  

If you make the decision to leave:   

• Consider keeping your FERS retirement contributions on deposit to allow a deferred retirement benefit that is payable later if you have at least five years of creditable civilian federal employment.    

• Consider keeping your retirement savings in your TSP account if you leave federal service when you are at least 55 in the year of your separation from federal employment to avoid early withdrawal penalties that may apply from an IRA when you make withdrawals before age 59 ½. If you separate before the year that you reach age 55, be aware of the potential tax penalties for early withdrawal unless you meet one of the other exceptions as described in the TSP Tax Rules About TSP Payments publication.    

• You may continue your FEHB coverage for up to 18 months following your separation (this is called Temporary Continuation of Coverage comparable to COBRA in the private sector). Under TCC, you will pay the employer and the employee share of the premium.    

• Be sure to use up your flexible spending account dollars before you leave. The balances in your Health Care FSA (HCFSA), Limited Expense Health Care FSA (LEX HCFSA) and Dependent Care FSA (DCFSA) are treated differently if you separate before the end of the calendar year.  
  • Your HCFSA or LEX HCFSA will terminate as of the date of your separation or retirement. There are no extensions. Any eligible health care expenses incurred prior to the date of separation will still be reimbursed but those incurred after the separation date are not reimbursable, even if you accelerated your allotments. If you used your entire elected amount before FSAFEDS has deducted it from your pay, you will not be responsible for the remaining allotments.  
  • Your DCFSA remaining balance can continue to be used to pay for eligible dependent care expenses until your account balance is depleted or the end of the calendar year, whichever comes first.  

Retirement Sooner than Later: 

• Make sure you are on track with your savings (review the TSP tips for new hires)  

• Learn the pros and cons of a TSP Loan before you apply for one.  

• Try saving for big items such as a car, vacations, and other major outlays rather than using credit or loans.    

• Update your designation of beneficiary forms    

• The TSP allocation you have could be too conservative   

• The TSP allocation you have could be too aggressive (or not agressive enough) 

• Begin to project your retirement benefits payable at your MRA, age 60, and at age 62.    

• At your MRA, you may find that you are eligible for either a reduced MRA + 10 benefit or an unreduced immediate retirement benefit with a supplemental payment to help you retire earlier than age 62.  Although you may be eligible to retire, can you afford to retire?  

• At age 60, you will only need 20 years of creditable service to retire with an unreduced, immediate retirement benefit, and be entitled to a FERS Special Retirement Supplement to age 62.  

• Age 62 is worth considering for a variety of reasons:  

• To be eligible for an immediate retirement at age 62, you only need five years of creditable civilian service covered by FERS.  
• If you have 20 years of creditable service (including credit for unused sick leave), you will qualify for a higher computation factor for your benefit resulting in a ten percent increase just for have 20 or more years of service (and being age 62 or older), 
• Cost of living adjustments for most FERS retirees begin at age 62.  Remember that if you retire before 62, your retirement under FERS (and the FERS Supplement) will not increase until after you turn 62 years old. Exceptions for special groups such as law enforcement officers and firefighters retiring under FERS along with disability annuitants and survivor annuitants.  
• At age 62, you are now eligible for Social Security retirement benefits which will be more than the FERS Supplement because they will be based on your lifetime of Social Security covered employment rather than only your civilian service covered by FERS. Social Security benefits are adjusted annually for inflation.   

To Do List:  

• Run the numbers  
  • Compute your FERS Basic Retirement Benefit (or have your HR office do it for you). Consider reductions for survivor elections, former spouse apportionments and survivor benefits, age reduction for MRA + 10 option, and proration of the benefit if you ever worked part-time.    
  • Your retirement benefit will also be subject to monthly withholdings for federal and state income tax (not all states tax federal retirement benefits, however), and insurance (FEHB, FEGLI, FLTCIP, and FEDVIP).   
  • If you are going to file for Social Security retirement, get an updated estimate at www.ssa.gov. Your benefit will be partially taxable on the federal level and there are about six states that also tax SSA benefits.   
• Complete retirement forms ahead of time and review. If available, set up pre-retirement counseling to ask questions, review your estimated benefits and learn how your agency processes your retirement.    
  • SF 3107 Application for Immediate Retirement (FERS)  
  • Applying for Immediate Retirement Under FERS  
  • RI 92-19  Application for Deferred or Postponed Retirement (FERS)  
  • Applying for Deferred or Postponed Retirement (FERS)   
  • SF 2818 Continuation of Life Insurance (FEGLI)  
  • Fact Sheet:  Lump Sum Payment for Annual Leave  
  • Retirement Facts 8:  Credit for Unused Sick Leave Under the Civil Service Retirement System (also applies to FERS)  
• The health plan you are in may not be the best health plan for retirement. This is especially true if you enroll in Medicare Part B once you have retired.  FEHB plans wrap around Medicare nicely so you can avoid most out-of-pocket expenses (deductible, copays, and coinsurance). It pays to compare your current coverage with plans that offer incentives to enroll in Medicare. Members of the National Active and Retired Federal Employees Association have access to a series of webinars that can help you understand and choose the best plan for you. In addition, the Checkbook Guide to Federal Health Plans can provide comprehensive information for employees and retirees during open season.    
  • Retirement is not a Qualifying Life Event, however if you move outside of your FEHB plan’s service area or if you are 65 or older, you can use a QLE to change plans outside of open season.  See a list of all QLEs on form SF 2809 or OPM Form 2809.  
• Your HR retirement specialist will assemble your retirement package in this order: Yes, it is paper, and it is two-hole punched, put in an envelope, and mailed to OPM!) Any changes in your health benefits are on top of the stack of papers if you retire during open season!   
• Here is the order that your personnel office will assemble your retirement to prepare to send to OPM after you have separated for an immediate (rather than a deferred or postponed retirement that you will apply for after you have left federal employment about 60 days before the age you want the deferred or postponed benefit to begin) General Assembly Guidance for Non-Disability Retirement Application Packages
• Make copies of everything that you fill out before you turn in your applications.  
• Brush up on tax information  
  • W-4P  Withholding Certificate for Periodic Pension or Annuity Payments  
  • IRS Publication 721 Tax Guide to U.S. Civil Service Retirement Benefits  
  • Tax Rules About TSP Payments, TSP Publication 26  
  • Request to withhold taxes from your Social Security benefit   

• Be sure to have six months of living expenses in the bank before you retire to allow for delays in processing your benefits.  
• Update your designation of beneficiary forms (see above) Information for FERS Annuitants  
• When you receive your CSA (Civil Service Active) number from the Office of Personnel Management, it is time to set up your Services Online account.  This will allow you to make changes such as updating your address, electing federal and state tax withholding, view your annuity statement and more.  
• Learn how to manage your TSP account in retirement  
• The TSP allocation you have could be too conservative   
• The TSP allocation you have could be too aggressive  
• Consider the options for distribution of your TSP account  
• TSP Distribution Booklet  
• Withdrawing Your TSP Account after Retirement  
  • One option for a TSP distribution is to purchase a TSP life annuity through the TSP vendor. To compute an estimate of this, use the TSP annuity calculator.  The current rate for May 2025 is 4.7% and you can see the historical rates here. Learn about this option in the TSP Annuity Fact Sheet.   
  • Other, more flexible options include requesting monthly, quarterly, or annual installment payments directly from your account; partial payments, as needed; and you may also transfer some or all your TSP to an IRA.  
  • Make sure that your address is current with the TSP and be sure to enter your bank information by accessing your account at www.tsp.gov.   This will make your withdrawals go smoother and take less time to process. 
  • For your protection, the destination you wish to send your TSP payment to must be on file for at least seven days before it can receive funds. This includes any postal address or any direct deposit information you’ve entered. Make sure this information is on file for at least seven days before you start your request. Lost, stolen, damaged, or misdirected checks can take six weeks or longer to replace.  

I am sure that I’ve left out some things on this list, but if you can do some of the items listed, it will help you be better prepared for your life after retirement. All the best to those of you who are getting ready to complete your career of dedicated federal service and move into the next chapter of your career or your retirement life!