Key Takeaways
-
Maximizing your federal retirement benefits requires strategic planning, from reviewing your annuity calculations to understanding healthcare options.
-
Before you leave, ensure you’ve accounted for your pension, Social Security, and Thrift Savings Plan (TSP) to secure long-term financial stability.
Know Your High-3 Average Salary and How It Affects Your Pension
Your federal pension is based on your high-3 average salary, which is the highest average basic pay over any three consecutive years of service. Since this determines the foundation of your retirement annuity, you’ll want to make sure you optimize it before you leave.
-
If possible, delay retirement until you’ve reached your highest salary years.
-
- Also Read: Blending Private and Public Sector Retirement Plans Is Complicated—Here’s Where Couples Get It Wrong
- Also Read: The Silent Shift in Postal Service Retirement Benefits That Could Change Everything by 2026
- Also Read: The Side of Civilian Military Employment Benefits Nobody Mentions Until After You Retire
-
Be aware of any legislative changes affecting pension calculations, such as proposed exclusions of locality pay.
Taking time to review your Retirement Estimate Report from your agency can give you an accurate projection of what to expect.
Don’t Forget About Social Security and the Windfall Elimination Provision (WEP)
If you’ve earned Social Security benefits in addition to your federal pension, you need to be aware of how they interact. The Windfall Elimination Provision (WEP) can reduce your Social Security benefits if you’re covered under the Civil Service Retirement System (CSRS) and did not pay Social Security taxes during your career.
-
Check your Social Security Statement to estimate your benefit amount.
-
If you’re a FERS retiree, WEP does not apply, and you’re eligible for full Social Security benefits starting at age 62.
-
For CSRS retirees, understanding the WEP reduction helps avoid surprises in your income planning.
To avoid miscalculations, consult with a licensed agent listed on this website who can clarify your situation.
Make the Most of Your Thrift Savings Plan (TSP)
Your TSP is one of the most valuable assets you have in retirement. How you manage withdrawals and investments before leaving federal service can determine how much money you’ll have in the long run.
-
Max out contributions before retirement to increase your nest egg. The 2025 contribution limit is $23,500, with a $7,500 catch-up contribution if you’re 50 or older.
-
Understand Required Minimum Distributions (RMDs)—you must start withdrawing funds at age 73 to avoid penalties.
-
Decide between partial withdrawals, monthly payments, or full withdrawals based on your long-term financial plan.
Since TSP offers low-cost investment options, keeping funds in the plan after retirement may be a smarter move than rolling them over.
Plan for Federal Employees Health Benefits (FEHB) and Medicare
Healthcare costs are a significant concern in retirement, and maintaining your FEHB coverage can help offset expenses. You should understand how it interacts with Medicare to avoid unnecessary out-of-pocket costs.
-
If you retire before 65, you can continue FEHB without changes.
-
Once you turn 65, enrolling in Medicare Part B is a critical decision. FEHB and Medicare work together, often reducing your overall healthcare costs.
-
If you’re a Postal Service retiree, you will transition to the Postal Service Health Benefits (PSHB) program, which has specific Medicare requirements.
Pro Tip: Some FEHB plans offer incentives like premium reimbursements for those enrolled in Medicare Part B. Reviewing these options can save you thousands annually.
Be Aware of Special Retirement Provisions for Law Enforcement and Other Special Groups
Certain federal employees, including law enforcement officers (LEOs), firefighters, and air traffic controllers, have mandatory retirement ages and enhanced retirement benefits. These provisions allow them to retire earlier with a higher annuity formula.
-
Special retirement benefits allow LEOs and other eligible employees to retire as early as age 50 with 20 years of service or at any age with 25 years of service.
-
The annuity calculation for these employees is typically 1.7% of the high-3 salary for the first 20 years, plus 1% for each additional year.
-
The FERS Special Retirement Supplement provides income until Social Security eligibility at age 62.
If you fall under these categories, make sure you understand your specific benefits and how they differ from regular FERS employees.
Avoid Costly Mistakes With Survivor Benefits and Beneficiary Designations
Your federal benefits don’t just impact you—they also affect your spouse and dependents. If you pass away, your survivor’s access to benefits depends on whether you set up survivor annuities and correct beneficiary forms.
-
Opting for a survivor annuity allows your spouse to continue receiving a portion of your pension after your death.
-
Review Thrift Savings Plan (TSP) beneficiary designations to ensure funds go to the right person.
-
Confirm your Federal Employees’ Group Life Insurance (FEGLI) beneficiaries to avoid complications.
Missing a step could mean your loved ones don’t receive the financial support you intended.
Consider the Financial Impact of Leaving Before Full Retirement Eligibility
Retiring too early can have significant financial consequences. If you leave federal service before meeting full retirement eligibility, you may face reductions in your pension or delayed access to benefits.
-
FERS employees can retire with full benefits at age 62 with five years of service, age 60 with 20 years, or the Minimum Retirement Age (MRA) with 30 years.
-
If you leave before MRA but have at least 10 years of service, you can take a reduced pension under the MRA+10 rule.
-
Leaving before reaching retirement eligibility may also mean forfeiting government contributions to your FEHB and delaying your TSP withdrawals.
Understanding these timelines ensures you make a well-informed decision before leaving federal service.
Secure Your Financial Future Before You Retire
Preparing for federal retirement requires careful planning. From optimizing your pension and TSP withdrawals to ensuring your healthcare and survivor benefits are in order, taking the right steps now will save you from financial surprises later.
A licensed agent listed on this website can help you navigate your options and ensure you get the most from your retirement benefits. Don’t leave money on the table—get expert guidance today.
