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FERS Retirement Sounds Simple—Until You Realize What You Forgot to Plan For

Site Admin
June 2, 2025

Key Takeaways

FERS retirement is more complex than it appears, with potential pitfalls if you overlook planning for healthcare, inflation, or life expectancy.
Strategic preparation for things like survivor benefits, long-term care, and withdrawal strategies can make a major difference in your retirement security.

Retirement Planning Starts Long Before You File the Paperwork

On the surface, the Federal Employees Retirement System (FERS) offers a clear formula: your Basic Benefit Plan, Social Security, and Thrift Savings Plan (TSP). But the closer you get to retirement, the more you realize that understanding the components is only half the job. The rest involves actively preparing for the unexpected—and the easily overlooked.

Don’t Underestimate Health Care Costs

While many government employees assume their Federal Employees Health Benefits (FEHB) coverage will carry them through retirement with little change, the reality is more nuanced.

FEHB and Medicare Coordination

Once you reach age 65, Medicare becomes a factor in your planning. Most retirees stay in FEHB and add Medicare Part B, which in 2025 has a standard premium of $185 and a deductible of $257. When combined correctly, FEHB and Medicare can reduce out-of-pocket costs—but not every plan integrates equally well.

You also need to decide whether paying the Part B premium is worth it. Some retirees skip Part B and rely solely on FEHB, but this choice may result in higher costs later, particularly if you need extensive care.

Long-Term Care Is Rarely Covered

Neither Medicare nor FEHB covers long-term care (custodial care in a nursing home or assisted living facility). Planning for this expense—either through savings or other options—is crucial, as costs can easily exceed $100,000 per year.

Survivors and Spouses: Are You Protecting Them?

FERS includes the option to provide a survivor annuity for your spouse. If you elect this benefit, your annuity is reduced, but your surviving spouse can continue to receive a portion of your pension.

In 2025, you must elect this option when you retire or your spouse could lose:

Ongoing annuity payments
FEHB coverage under your plan

If you waive the survivor annuity, your spouse may not be eligible to continue FEHB, which can be a costly and irreversible oversight.

Inflation Isn’t an Afterthought—It’s a Threat

While FERS does offer Cost-of-Living Adjustments (COLAs), they’re not full inflation protection. Only retirees who are age 62 or older receive COLAs on their Basic Benefit, and even then, the increase may lag behind actual inflation.

For example, if inflation rises by 4%, your FERS COLA might be only 3%. Over time, this shortfall compounds and erodes your purchasing power.

What You Can Do:

Rely more on TSP and other investments for long-term growth.
Choose TSP allocations that can outpace inflation, particularly in the early retirement years.
Delay withdrawals from higher-return accounts until necessary.

Social Security Timing Matters More Than You Think

You can claim Social Security benefits as early as age 62, but doing so locks you into a permanently reduced benefit. Waiting until your Full Retirement Age (67 for those born in 1963) or even delaying until age 70 can significantly increase your monthly income.

The FERS Supplement Stops at 62

Many FERS retirees forget that the Special Retirement Supplement, which mimics Social Security income until age 62, ends regardless of whether you actually start Social Security. You’ll need another source of income to fill the gap if you delay claiming.

Retirement Isn’t a One-Time Decision—It’s a Series of Milestones

There’s a common misconception that retirement is a single event. In reality, it involves:

Reaching your Minimum Retirement Age (MRA) with 30 years of service
Choosing when to start withdrawals from TSP
Deciding whether to enroll in Medicare at 65
Claiming Social Security at the optimal age

Each of these decisions has financial consequences. Mistiming even one can reduce your lifetime income significantly.

Taxes Can Take You by Surprise

Your FERS annuity, withdrawals from your TSP (unless Roth), and Social Security benefits may all be taxable. If you don’t plan for the tax implications, your retirement income may be lower than expected.

Things to Review:

Whether to convert traditional TSP to Roth before RMDs begin at age 73
How your withdrawals affect your tax bracket
The impact of IRMAA surcharges on your Medicare Part B premium if your income exceeds certain thresholds

Divorce and Court Orders Can Alter Your Retirement

FERS benefits can be divided in a divorce settlement. Your TSP, annuity, and even FEHB eligibility may be affected by a court order. If you’ve been divorced, confirm that your retirement documents reflect the correct beneficiary designations and legal obligations.

This is especially important if you remarried or if your divorce occurred many years ago—errors can go unnoticed until retirement, with costly consequences.

Don’t Wait Too Long to Review Your TSP Strategy

Many government employees focus on contributing to the TSP during their working years but ignore the distribution phase. Once you retire, your TSP becomes one of your primary sources of income—and managing it requires just as much care as contributing to it.

Important TSP Considerations:

How and when will you take withdrawals? Lump sum, monthly payments, or annuity?
What asset allocation makes sense once you’re no longer contributing?
How do TSP withdrawals coordinate with other income sources?

Retiree Life Insurance: FEGLI Isn’t Always the Best Fit

FEGLI coverage becomes more expensive with age. By retirement, you may be paying far more than you expected—or holding on to a benefit that no longer fits your needs.

Evaluate whether reducing or canceling optional FEGLI coverage makes sense in retirement. But be cautious: once you drop it, you can’t get it back. Also consider whether you need life insurance at all after your children are grown or your mortgage is paid off.

Required Minimum Distributions (RMDs) Start at 73

In 2025, retirees must begin taking RMDs from traditional TSP and other tax-deferred accounts by April 1 of the year after they turn 73. If you don’t, you could face steep penalties.

Planning your withdrawals before this point allows for better control over taxes and may help you manage Medicare premiums and other income-related thresholds.

Psychological and Lifestyle Factors Deserve a Place in Your Plan

You’ve prepared for the financial side of retirement—but have you thought about your routine, your sense of purpose, or how you’ll spend your time?

A fulfilling retirement includes structure, connection, and health maintenance. These aspects are easy to overlook but make all the difference in long-term happiness.

Your Retirement Is a System—Not Just a Date

To retire well under FERS in 2025, you need more than just eligibility. You need:

A plan for medical expenses beyond FEHB
A withdrawal strategy for your TSP
An understanding of your Social Security options
A survivor benefit election aligned with your family’s needs
Tax-aware income planning
Life insurance reviews

These elements work together. If one falls short, the others can be affected.

Rethink What Retirement Means—Then Plan Accordingly

Retirement under FERS is achievable, but it requires attention to more than just your annuity and TSP balance. It’s about preparing for real life: health shocks, taxes, inflation, and family obligations.

Before you file your retirement application, take the time to look at your entire financial picture. If there are gaps in your plan—or if you’re not sure—you don’t have to figure it out alone.

Speak with a licensed professional listed on this website to make sure your retirement plan reflects your full needs—not just your years of service.