Six Myths About Federal Retirement Benefits

Retiring from federal service is a major life milestone—but let's be honest, the process isn't exactly crystal clear. With more federal employees choosing early retirement through programs like VERA (Voluntary Early Retirement Authority) and DRP (Deferred Resignation Program), it's no surprise that confusion is in the air. Misconceptions are flying around like sakura petals in an April breeze. And if you’re relying on word-of-mouth or half-read handbooks, you might be walking into retirement with the wrong expectations.

Let’s cut through the noise. We’re here to clarify the most common myths about federal retirement so you can step confidently into your next chapter—with all your benefits (and peace of mind) intact.

Myth #1: “My Retirement Pay Starts Immediately”

Reality: Unfortunately, federal retirement isn’t instant.

Here’s the deal: Your agency doesn’t send your retirement paperwork to the Office of Personnel Management (OPM) until your official retirement date. Only then does the clock start ticking. And with OPM currently experiencing a surge in retirement filings, it could take up to 90 days to get things rolling.

During that time, you’ll receive something called interim pay—about 60-70% of your final annuity. Think of it like a down payment on your pension. Once the final calculations are complete, you’ll receive the full amount owed retroactively.

Takeaway: Budget for a short-term gap, just in case.

Myth #2: “My TSP Will Cover Everything I Need”

Reality: Relying solely on your Thrift Savings Plan (TSP) is like thinking your favorite café loyalty card will pay for an international vacation.

Federal retirees typically draw income from three main sources:

• Your federal pension
• Social Security
• Your TSP account

The TSP fills in the gap between your pension and social security but how big that gap is varies from person to person. Your lifestyle, expenses, and healthcare needs all play a role.

And don’t forget—TSP withdrawals come with choices: partial, full, installment, or turning it into an annuity. Many advisors recommend transferring your balance into a Roth IRA or traditional IRA for more flexible management and growth potential—and no taxes or penalties if done right.

Tip: Think of the TSP as your bridge, not your destination.

Myth #3: “My FEHB Ends When I Retire”

Reality: Not true! Your Federal Employees Health Benefits (FEHB) can absolutely continue—if you meet a couple of key rules.

You must:

• Be enrolled in FEHB for five consecutive years before retirement.
• Be enrolled on your actual retirement date.

If you check those boxes, you’re golden. The government continues to cover about 72% of your premium. Bonus: Your qualified spouse and dependents can stay on your plan—even if they didn’t meet the five-year rule.

Want to cut costs? Many retirees combine FEHB with Medicare Parts A and B, allowing for nearly full medical coverage with Medicare paying first.

Tip: Smart planning means fewer surprise medical bills later.

Myth #4: “FEGLI Life Insurance Costs Stay the Same”

Reality: This one’s a wallet-opener.

While FEGLI (Federal Employees’ Group Life Insurance) is a great low-cost benefit during your working years, the price tag jumps significantly after you retire. Basic FEGLI insurance costs between $10-$30 per pay period while employed. In retirement, the increase depends on which options (Basic, A, B, or C) you’ve selected.

Many federal employees don’t even know which plan they’re paying for—or how much they’re paying.

Tip: Review your plan now. Know what you’ve got, and whether it’s still right for your needs in retirement.

Myth #5: “Survivor Benefits Happen Automatically”

Reality: Nope—this one takes action and they’re not free.

When applying for federal retirement, you must elect survivor benefits if you want your spouse (or another eligible dependent) to receive part of your pension after you’re gone. 

And yes, survivor benefits come with a monthly cost—deducted as a monthly percentage from your overall pension . The percentage varies depending on whether you're under the FERS or CSRS retirement system.

Bottom line: If your loved ones depend on your pension, it is crucial to learn your options and calculate costs.

Myth #6: “My Spouse Will Always Keep FEHB”

Reality: Not unless you’ve set it up correctly.

Here’s the hidden catch: Your spouse can only continue FEHB if you elected a survivor benefit. No survivor annuity? No health coverage. 

That’s why it’s essential to think of your retirement package holistically. Your spouse’s income, your health needs, outstanding debts, and even kids in college all play a role in what’s best for your future.

Tip: A retirement consultant can help you see the whole chessboard—not just the next move.

Final Thoughts: Your Retirement, Your Rules (But Know Them First)

Retirement isn’t just about clocking out for the last time—it’s about designing a future that works for you. But getting there requires understanding the rules, benefits, and potential pitfalls of the federal retirement system.

The good news? Now you know better. The bad news? You still have to fill out those forms. But with the right prep and a realistic outlook, you’ll be sipping matcha in your slippers with zero stress.

‍♀️ Frequently Asked Questions

1. How long does it usually take to start receiving full federal retirement pay? It can take up to 90 days to finalize, during which you’ll receive interim payments.

2. Do I have to move my TSP to an IRA when I retire? Not required, but it’s often recommended for flexibility, control, and continued growth.

3. Can I keep FEHB and enroll in Medicare too? Yes! Many retirees use both. Medicare becomes primary, and FEHB becomes secondary.

4. Are survivor benefits mandatory? No—but if you want your spouse to retain health coverage or receive part of your pension, you must opt in.

5. Is FEGLI worth keeping after retirement? It depends. Premiums rise sharply. Some retirees opt for private life insurance alternatives.