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Best Retirement Advice for Federal Employees—Here’s How to Plan for 2024

mark heinrich
March 2, 2025

Key Takeaways:

Planning for retirement in 2024 involves maximizing your federal benefits while keeping an eye on rising costs and changing contribution limits.
The Thrift Savings Plan (TSP), FERS annuity, and healthcare options are essential components of a successful retirement strategy for federal employees.

Why 2024 Is a Pivotal Year for Federal Employees

If you’re like many federal employees approaching retirement, you’re probably wondering how to make the most of your benefits in 2024. A lot has changed over the past few years, and that means some of the old advice simply doesn’t apply anymore. Healthcare costs are rising, Social Security rules have adjusted, and even the Thrift Savings Plan (TSP) has new contribution limits.

Now’s the time to revisit your retirement plan and make sure everything is in place. Whether you’re a few years from retirement or just a few months away, having a solid plan can make all the difference.

TSP Contributions: Take Full Advantage in 2024

Let’s start with the TSP because it’s one of the most valuable tools in your retirement planning arsenal. For 2024, the TSP contribution limit has increased to $23,000. If you’re 50 or older, you can contribute an additional $7,500 in catch-up contributions, bringing the total to $30,500. If you haven’t been maxing out your TSP contributions yet, now is the time to consider it, especially as you inch closer to retirement.

The TSP offers several investment options, and as you get closer to retirement, you’ll want to think about your risk tolerance. For many federal employees, a strategy that balances the G Fund (which is super safe but offers low returns) with something like the C Fund (which carries more risk but has higher growth potential) is ideal.

As market volatility continues to be a concern, many experts suggest diversifying your investments within the TSP. The key here is to stay informed and review your TSP allocations regularly.

FERS Annuity: What to Expect in 2024

Your FERS annuity will likely be one of the major pillars of your retirement income. The formula for calculating your annuity hasn’t changed: it’s still based on your years of service and your high-3 average salary (the highest average basic pay you earned during any three consecutive years).

In 2024, the Cost-of-Living Adjustment (COLA) for federal employees under FERS is 2%. While this might seem modest, it’s important to remember that it reflects inflation trends. In comparison, the 2023 COLA was 7.7%, and the 2022 COLA was 4.9%. For those of you retiring under FERS before age 62, keep in mind that you won’t receive a COLA adjustment until you hit that age unless you’re in a special category like law enforcement.

It’s essential to factor in these COLA adjustments when planning for retirement because even a small percentage change can have a big impact over time. Make sure your retirement savings strategy includes some form of inflation protection.

Healthcare Costs Are Climbing—Be Prepared

Healthcare is another significant expense you need to plan for, and for federal retirees, the Federal Employees Health Benefits (FEHB) program continues to be a cornerstone. But, let’s be honest: FEHB premiums have been going up. In 2024, the average premium increase is 13.5%.

This sharp rise in costs is why so many federal retirees are looking at ways to coordinate their FEHB coverage with Medicare. Once you turn 65, you’ll need to enroll in Medicare Part B if you want to maintain full FEHB coverage under certain programs like the Postal Service Health Benefits (PSHB).

The added cost of Medicare Part B might seem like a burden, but many retirees find that combining Part B with their FEHB plan actually reduces their overall out-of-pocket costs in the long run. It’s worth sitting down and running the numbers to see what works best for you.

Social Security: When and How to Claim in 2024

Social Security is another key piece of your retirement income, but it’s important to know how to maximize it. In 2024, the Social Security taxable earnings limit is $168,600, and if you’re still working, this is the amount of income subject to Social Security taxes.

For those who are drawing Social Security before reaching full retirement age, the earnings limit is $22,320 in 2024. If you earn more than that while claiming benefits, your payments will be reduced. However, once you reach full retirement age, this limit no longer applies, and you can earn as much as you want without losing benefits.

Another strategy to keep in mind is delaying your Social Security benefits beyond your full retirement age. For each year you wait, your benefits increase by about 8% until you reach age 70. If you don’t need the income right away, this is one of the easiest ways to boost your Social Security payments.

Retirement Age and Eligibility: Should You Stay Longer?

One of the biggest decisions you’ll face is when to retire. For federal employees, your Minimum Retirement Age (MRA) falls between 55 and 57, depending on your birth year. You can retire under FERS as soon as you reach your MRA, as long as you have at least 10 years of service.

However, retiring before age 62 comes with a price—your annuity will be reduced by 5% for every year you’re under 62. For example, if you retire at 57, that’s a 25% reduction in your annuity. Waiting until you’re 62 or older avoids that penalty, and your annuity is also calculated at a higher rate—1.1% of your high-3 average salary per year of service instead of the usual 1%.

It’s definitely worth thinking about the financial trade-offs of retiring early versus working a few more years to maximize your benefits. The decision will depend on your personal situation, but for many, waiting just a few more years can make a significant difference in their overall retirement income.

Get Organized: The Importance of Revisiting Your Plan

I know that retirement planning can feel like a lot to juggle, but trust me, it’s worth the effort. 2024 brings new rules, new limits, and new challenges, and if you’re not regularly revisiting your retirement plan, you could be leaving money on the table.

Take a moment to review your TSP contributions, evaluate your healthcare options, and rethink your Social Security strategy. Don’t hesitate to sit down with a financial advisor if you need help figuring it all out. The more you stay informed, the better prepared you’ll be to navigate the changes and make smart decisions about your future.

Ready for 2024? Here’s How to Secure a Smooth Retirement

With all the changes happening this year, it’s more important than ever to stay on top of your retirement planning. From increasing TSP contributions to healthcare cost management, there are several strategies federal employees can use to secure a comfortable and financially sound retirement in 2024. Take the time to revisit your plan, adjust where necessary, and make sure you’re ready for what’s ahead.

Mark Heinrich

Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark's passion for his work, which includes over 25 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families.

Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation.

Additionally, we've counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.