Federal Employees Who Are Committed to Their Careers Need Retirement Strategies Too

October 30, 2024

There are ways to secure a lucrative, not simply comfortable, retirement. Some planning can help you maximize your remaining work years.

1. Learn the retirement formula first

This table assumes you’re a FERS member (not Law Enforcement or Special Provisions).

AGE	FORMULA
Under age 62 upon retirement or separation, or more than 62 years old with fewer than service of twenty years	1 percent of your high-3 average salary for each year of service
62 or older with more than the service of twenty years	1.1 percent of your high-3 average salary for each year of service

Consider these formula highlights:

Retiring at 62 after 20 years is advantageous. Once you realize how much 20 years will add to your retirement, you won’t stop before 62. This might influence whether you survive or flourish.

Your vacation time and sick leave will be counted against your total service time.
Your retirement service compensation date determines your total service years (RSCD).

2. Before saving for retirement, learn the rules

RSCD is the most important date for retirement. OPM will use this data to calculate your FERS or CSRS pension and eligibility. Many people think they can utilize leave credit towards retirement. If feasible, get credit for military, Peace Corps, or VISTA service. A government employee who was a contractor is another prevalent occurrence. A corporation may let workers bank unused vacation time but not contribute to retirement. This might take weeks, months, or years. Changes in agency or service gaps might influence RSCD. Check your RSCD early.

3. Plan vacations and sick days

Sick days matter. Conventional instant retirement pays yearly leave in a lump sum. Your pension includes sick time. Sick days are unlimited, but annual leave is limited. Sick leave might boost your lifetime pension. Unpaid short-term illness leaves. Work a few more hours to get a month’s sick leave.

4. FEGLI life insurance is now

How much will FEGLI premiums rise? When you’re young and healthy, taking care of your health might save you money on insurance. After middle age, option B coverage equivalent to five times your salary virtually doubles every five years. As a government employee, preventative measures may reduce life insurance costs.

FEGLI vs. pension maximization. Life insurance may save you money on your pension’s survivor benefit. Permanent life insurance has never matched a guaranteed survivor pension’s future payout. The insurance may necessitate a multimillion-dollar payment if the annuitant dies suddenly.

5. Consider Long-Term Care Options

Not everyone needs long-term care insurance. Do the arithmetic to determine whether getting insurance makes sense. Long-term care beyond 60 is expensive. It’s not pleasant, but essential. Long-term care may swiftly erode funds. It’s the most significant financial hazard to retirees.

6. Make Sure You MAX It Out

TSP members make a significant error by being overly cautious in the most vital year. TSP money should last the longest, so allocate accordingly. TSP is a long-term investment. Depending on when you retire, this may be 20 or 30 years. Your TSP is where you’ll likely beat inflation. Know your risk tolerance and investment objectives to optimize your TSP. Feds may max out their TSP in their later years.

7. Invest outside your 401(k)

Middle-of-the-road savings may help you enjoy retirement. This gives you a source of capital gains-taxed cash instead of ordinary income tax. Tax diversification means this.

8. Invest in yourself

Use mental capital. Ben Franklin stated, “Education is the best investment.”

Adding job skills is smart. Here are some helpful sources:

Contact your CLO (HR) to inquire about training funds.
GSA provides federal workers with both agency-based and self-paced training.
OPM offers courses.
Harvard Kennedy School has various programs for feds.

After 15 years in government, it may be easy to assume that retirement will be what it is. By preparing beforehand, you’ll be less surprised when filing your retirement application. Thrive in retirement, not just survive. With careful planning, including the stages in this series, you may enjoy a retirement beyond your wildest expectations.