FERS Retirement Perks You Didn’t Know You Could Leverage for Long-Term Gains

Missy E
November 14, 2025

Key Takeaways:

Unlock hidden advantages within the FERS system to maximize your retirement benefits beyond the basics.
Strategic planning and leveraging lesser-known features can significantly boost your financial security.

Understanding the Full Scope of FERS Benefits

When you think about the Federal Employees Retirement System (FERS), you might immediately focus on the core components: the basic annuity, Thrift Savings Plan (TSP), and Social Security benefits. While these elements form the foundation of your retirement plan, FERS offers additional perks that often go unnoticed but can yield long-term financial gains.

Here, we’ll delve into these often-overlooked opportunities and help you craft a more robust retirement strategy.

Maximize the FERS Basic Annuity

The basic annuity is a guaranteed pension, calculated using your High-3 average salary and years of service. While the formula may seem straightforward, understanding its nuances can lead to higher payouts.

Optimize Your High-3 Average

Your annuity is based on your highest three consecutive years of basic pay. To maximize this, consider the following:

Timing Your Retirement: If you’re close to a promotion or annual pay raise, delaying your retirement slightly can significantly boost your High-3 average.
Incorporate Premium Pay: Certain types of pay, such as locality adjustments, count toward your basic pay. Verify what qualifies and aim to maximize these earnings.

Credit for Unused Sick Leave

FERS allows you to convert unused sick leave into service credit, increasing your annuity. For every 2,087 hours of sick leave, you gain an additional year of service credit. To leverage this:

Avoid using excessive sick leave as you approach retirement.
Plan to leave a substantial balance, as it directly enhances your annuity without requiring additional work.

Enhance Savings with the Thrift Savings Plan (TSP)

The TSP is a cornerstone of your FERS retirement, offering tax advantages and government matching contributions. Beyond contributing the minimum to receive the match, consider advanced strategies to maximize your TSP.

Take Advantage of Catch-Up Contributions

For 2025, you can contribute up to $23,500, with an additional $7,500 in catch-up contributions if you’re aged 50 or older. For those aged 60 to 63, the SECURE 2.0 Act allows an additional $11,250, bringing the total to $34,750.

Diversify Your Investments

The TSP offers various funds, from conservative options like the G Fund to more aggressive choices such as the C and S Funds. A diversified portfolio can help you balance risk and growth.

Lifecycle Funds (L Funds): Automatically adjust your allocation based on your retirement timeline.
Self-Directed Brokerage Account: Allows you to invest in individual stocks and bonds for greater control.

Leverage Social Security Benefits

Under FERS, you qualify for Social Security, which can provide a critical income stream. However, strategic timing is crucial to maximizing your benefits.

Claiming Strategies

Wait Until Full Retirement Age (FRA): Claiming benefits at 62 reduces your monthly payout, while waiting until FRA (67 for those born in 1960 or later) ensures you receive 100% of your benefit.
Delayed Retirement Credits: Postponing benefits until age 70 increases your monthly payments by 8% per year.

FERS Special Retirement Supplement (SRS)

If you retire before age 62 and meet eligibility requirements, you’re entitled to the FERS SRS, which bridges the gap until Social Security kicks in. This supplement mimics your Social Security benefit for the years you’ve worked under FERS.

Eligibility: 30 years of service at your minimum retirement age (MRA) or 20 years of service at age 60.
Pro tip: Consider part-time work or reducing hours instead of retiring early if you’re close to the MRA but not quite there yet.

Military Service Credit: A Hidden Gem

Did you serve in the military before joining the federal workforce? If so, you can buy back your military time to count toward your FERS retirement. This often-overlooked benefit can add significant service credit.

How to Buy Back Military Service

Request Your Earnings: Obtain your military service record and verify your earnings.
Pay the Deposit: Typically, the deposit is 3% of your basic military pay, plus interest if not paid within two years of federal employment.
Increased Annuity: Adding military time to your civilian service increases your total service years, boosting your annuity calculation.

Healthcare Perks: FEHB and Medicare Integration

Federal Employees Health Benefits (FEHB) remain available in retirement, offering comprehensive coverage. Coordinating FEHB with Medicare can save money and expand your healthcare options.

Enroll in Medicare Part B

For most retirees, enrolling in Medicare Part B at age 65 ensures seamless integration with FEHB. Medicare often becomes the primary payer, reducing your out-of-pocket costs.

Consider High-Deductible Health Plans (HDHPs)

HDHPs paired with a Health Savings Account (HSA) can be a strategic choice for those not yet eligible for Medicare. HSAs offer triple tax advantages: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

Explore FEDVIP for Vision and Dental Care

In retirement, you can continue your Federal Employees Dental and Vision Insurance Program (FEDVIP) coverage. These plans provide comprehensive vision and dental care nationwide, often at competitive rates compared to private insurance.

Leverage COLA Adjustments

Cost-of-Living Adjustments (COLAs) protect your annuity’s purchasing power. For FERS retirees, COLAs kick in at age 62 and adjust annually based on inflation.

Partial COLAs: FERS retirees receive COLAs capped at 2% when inflation is between 2-3%.
Planning for Gaps: If you retire before 62, budget for inflation until COLAs begin.

Tax Efficiency: Minimize Your Tax Burden

Retirement income can be subject to state and federal taxes. Strategically managing your withdrawals and distributions can minimize tax impacts.

TSP Withdrawals

Roth vs. Traditional: Withdrawals from Roth TSP are tax-free, while traditional TSP withdrawals are taxed as ordinary income.
Required Minimum Distributions (RMDs): Starting at age 73, RMDs are mandatory for traditional TSP accounts. Plan withdrawals to avoid large taxable events.

State Taxes

Many states offer tax breaks for retirees, such as exempting a portion of pensions or Social Security. Research your state’s policies to optimize your tax planning.

Plan for Long-Term Care

Long-term care can be a significant expense in retirement. FERS retirees can access the Federal Long Term Care Insurance Program (FLTCIP), which offers coverage for nursing home care, assisted living, and in-home care.

Evaluate FLTCIP

Eligibility: Open to federal employees, retirees, and their qualified relatives.
Customizable Coverage: Choose the level of benefits and inflation protection that fits your needs.

Avoid Common Pitfalls

Maximizing your FERS benefits requires careful planning and avoiding missteps. Watch out for these common mistakes:

Underutilizing TSP Contributions: Missing out on government matches leaves money on the table.
Failing to Plan for Healthcare Costs: Ensure you have a strategy for Medicare and long-term care expenses.
Ignoring Tax Implications: Mismanaging withdrawals can lead to unexpected tax bills.

Regularly Review Your Retirement Plan

Retirement planning isn’t a one-and-done activity. As laws and regulations change, so do the opportunities and strategies available to you. Schedule annual reviews of your retirement plan to ensure you’re on track and taking full advantage of the FERS system.

Secure Your Financial Future

The FERS system offers much more than a basic retirement package. By uncovering and leveraging these hidden perks, you can maximize your benefits and build a secure financial future. Don’t let these opportunities pass you by—start planning today to make the most of your FERS retirement.