FERS Retirees Are Making These Mistakes—and You Can Avoid Them

Missy E
November 14, 2025

Key Takeaways

Retirement planning under FERS can be complex, and mistakes made during the process can significantly impact your financial security. Understanding common pitfalls will help you avoid unnecessary losses. Mistakes like failing to properly estimate your retirement income needs or misunderstanding how the High-3 average salary calculation works can cost you thousands of dollars over the years.
Reviewing your FERS benefits and coordinating them with other retirement assets is crucial for a smooth and well-funded retirement. By addressing these common mistakes early, you can enhance your financial stability and enjoy your retirement with greater peace of mind.

Failing to Properly Estimate Your Retirement Income Needs

Retirement planning under the Federal Employees Retirement System (FERS) requires careful consideration of your financial needs. Many retirees make the mistake of underestimating how much income they’ll need to sustain their lifestyle throughout retirement. This issue often arises due to the following reasons:

Inadequate budgeting for healthcare expenses, especially as medical costs continue to rise year after year.
Ignoring the impact of inflation on long-term financial needs, which can erode the value of your savings and pension over time.
Overlooking potential changes in spending habits after retirement, including increased travel, hobbies, or assisting family members financially.

Creating a realistic estimate of your retirement income needs involves analyzing your current expenses, projecting future costs, and including potential unforeseen expenses. Don’t forget to account for healthcare expenses that may increase with age. Consider long-term care insurance, out-of-pocket costs, and unexpected medical needs as part of your planning.

Misunderstanding How the High-3 Average Salary Works

Your FERS pension is calculated based on your highest average basic pay over a consecutive three-year period, known as the High-3 average salary. Misunderstandings about how this calculation works can result in lower-than-expected retirement benefits.

Some retirees assume that their last three years of service will always be their highest-paying years. However, if you switch to a lower-paying position, take on part-time work, or reduce your work hours before retiring, your High-3 calculation may be affected. Additionally, certain pay types, such as overtime and bonuses, are excluded from this calculation.

Always verify your High-3 calculation before making retirement decisions to ensure you’re working with accurate numbers. Reviewing your service history and pay records annually can help you avoid costly miscalculations when it’s time to retire.

Ignoring the Impact of Early Retirement Penalties

If you retire under FERS before reaching your Minimum Retirement Age (MRA) with fewer than 30 years of service, or before age 60 with fewer than 20 years of service, your annuity will be reduced by 5% for each year you are under age 62. This can significantly reduce your overall benefits if not properly considered.

Plan your retirement date carefully, especially if you are considering an early retirement. Weigh the pros and cons of retiring early and consider whether waiting a few more years might result in more favorable benefits. A delay of even two or three years can drastically improve your financial outlook by reducing or eliminating early retirement penalties.

Not Considering Social Security Integration

FERS retirees are eligible for Social Security benefits, but timing is essential. While you can claim Social Security as early as age 62, doing so will result in a permanently reduced benefit. Waiting until your Full Retirement Age (FRA) of 67 provides you with a higher monthly payment.

Additionally, the FERS Annuity Supplement, which is available to those who retire before age 62 and meet specific eligibility requirements, ends once you reach age 62, regardless of whether you claim Social Security at that point. Failing to account for this transition can result in an unexpected gap in your income.

Make sure you understand how the FERS Annuity Supplement interacts with Social Security. Planning your claiming strategy carefully can help you avoid unnecessary income gaps.

Overlooking Thrift Savings Plan (TSP) Strategies

Your TSP is a crucial component of your retirement income, but many retirees fail to optimize their withdrawal strategies. Poor planning in this area can result in:

Excessive tax burdens due to high withdrawals, especially when combined with Social Security and other income sources.
Insufficient income during later years of retirement if withdrawals are too aggressive or poorly timed.
Missed opportunities for growth if investments are too conservative, especially when longevity is a factor.

Ensure you understand the current TSP rules for Required Minimum Distributions (RMDs) and consider working with a financial advisor to create a sustainable withdrawal strategy that suits your long-term goals. Review your TSP allocations periodically to ensure they align with your risk tolerance and income needs.

Failing to Consider Survivor Benefits

Survivor benefits are an essential aspect of FERS retirement planning, yet they are often neglected or misunderstood. If you do not elect survivor benefits, your spouse may be left without a significant portion of your retirement income.

When you elect a survivor benefit, your monthly annuity will be reduced to provide continued payments to your spouse after your death. Assessing your options and making an informed decision ensures your loved ones are protected. Reevaluate your choices if your marital status changes or if your spouse’s financial needs shift over time.

Forgetting About COLA Adjustments

Cost-of-living adjustments (COLAs) can help your FERS annuity keep pace with inflation. However, unlike CSRS retirees, FERS retirees only receive COLAs once they reach age 62, unless they are a special category employee such as a law enforcement officer or firefighter.

Failing to plan for years without COLAs can lead to a gap in your expected retirement income. Make sure you understand how COLAs will affect your benefits over time. Regularly reviewing your finances and adjusting your budget accordingly is essential for maintaining financial stability.

Skipping Regular Benefit Reviews

FERS retirees should regularly review their retirement benefits to ensure their plans remain effective. Failing to do so can lead to missed opportunities or unintended financial gaps. Regularly check your:

High-3 calculation
TSP investments and withdrawal strategies
Social Security claiming plan
Survivor benefits selection
Health insurance coverage

Strengthening Your Retirement Plan for Financial Security

Retirement planning under FERS involves more than simply reaching your Minimum Retirement Age or calculating your annuity. It requires ongoing monitoring and adjustments to ensure your retirement years are financially secure.

To make the most of your FERS benefits, regularly review your retirement strategy, stay informed about any policy changes, and consider consulting with a licensed agent listed on this website for professional advice.