Key Takeaways:
- Retirement planning rules for federal employees have changed, with major updates in 2024, including Medicare and TSP revisions.
- Not staying updated on these changes could cost you thousands in retirement income or benefits.
Federal employees, 2024 has been a whirlwind of changes for retirement planning! It’s no longer business as usual with key updates affecting everything from your TSP to Medicare coordination. Whether you’re just starting to think about retirement or you’re already planning your exit from the federal workforce, these changes could impact your future plans in a big way. Let’s break it down.
Major Updates to Your TSP in 2024
- Also Read: 4 Reasons Why Medicare Could Be a Smarter Choice Than FEHB for Some Federal Retirees
- Also Read: Leaving Your TSP Alone Can Be Risky—Especially If You’re Already Retired
- Also Read: FERS Pension Gone? Here’s What Really Happens If You Resign Tomorrow
Changes to TSP Withdrawal Rules
There’s also been a shift in withdrawal rules. As of 2024, you now have more flexibility in how and when you can take money out of your TSP, but it’s crucial to understand the tax implications of early withdrawals. Taking distributions before age 59½ can still subject you to penalties, but the good news is there are more withdrawal options without restrictions tied to age or work status. This is great if you want to fine-tune how you access your money, but get it wrong, and you could owe Uncle Sam more than you bargained for.
Medicare Coordination for Retiring Postal Workers
If you’re a postal worker, I bet you’ve been hearing all about the changes headed your way. With the Postal Service Health Benefits (PSHB) program rolling out, it’s crunch time for getting your ducks in a row. As of 2024, the transition from FEHB to PSHB has already begun, and if you’re eligible for Medicare, you need to know that signing up for Medicare Part B when you turn 65 is no longer just a suggestion—it’s a requirement to maintain your PSHB coverage. If you’re a current retiree or soon-to-be retiree, this mandate could hit your plans hard if you’ve been holding off on enrolling in Part B. And if you or your eligible family members don’t make the switch, you risk losing critical coverage. That’s no small bombshell!
The Premium Landscape: What’s Changing?
Premiums are another hot topic. Across the board, 2024 has already seen a spike in costs, with premiums expected to rise by 13.5% for some federal health plans. Don’t be surprised when you get hit with higher costs for your coverage. If you’re approaching retirement or already retired, it’s worth re-evaluating how much these increases will affect your bottom line, especially when you’re budgeting out your future retirement expenses.
Social Security and the Windfall Elimination Provision
We need to talk about Social Security, especially if you’ve been covered under both federal and non-federal employment. The Windfall Elimination Provision (WEP) continues to stir up frustration among federal retirees, especially those under CSRS. In 2024, WEP is still capping Social Security benefits for retirees who haven’t paid into Social Security for at least 30 years. In fact, this year, the maximum reduction for WEP is $498 per month—ouch! If you’ve worked outside the federal system and paid into Social Security, you’ll want to run the numbers to see how much this penalty might cost you in retirement.
FEHB to PSHB Transition: The Clock Is Ticking
The clock is ticking for those covered under the Federal Employees Health Benefits (FEHB) program. Postal workers and their families will transition to the PSHB program by the end of 2024. If you’re already covered under FEHB, don’t panic—your coverage will automatically transfer unless you make any changes during Open Season (November 11 – December 9, 2024). However, retirees currently enrolled in FEHB who are eligible for Medicare will need to enroll in Part B to maintain their benefits under the new system. Make sure you review your health plan options and deadlines carefully. Missing out on Medicare Part B could mean losing your health coverage altogether—this isn’t something you want to mess around with.
FEGLI Costs Are Going Up Too
Federal Employees’ Group Life Insurance (FEGLI) isn’t immune from 2024’s rising cost trend either. Premiums for Option B are rising, especially for older employees and retirees. If you’re still covered under FEGLI, it might be time to explore other life insurance options before these increases take a bigger bite out of your paycheck or pension. Be aware that once you reach a certain age, these costs could skyrocket, and it’s better to plan now than scramble later.
Early Retirement? Here’s What to Know
If early retirement is on your mind, 2024 has some points to consider. Under the Minimum Retirement Age (MRA) +10 option, you can retire as early as 57 if you’ve got at least 10 years of service under your belt. However, don’t forget the penalties. If you take this route and retire before age 62, your annuity will take a hit—specifically a 5% reduction for each year you’re under 62. Is it worth leaving early? Only if you’ve carefully calculated how much you’ll lose and have other income sources lined up.
Survivor Benefits: Don’t Overlook This!
Lastly, let’s not forget survivor benefits, which often get overlooked until it’s too late. In 2024, federal retirees still have the option to elect a survivor benefit for their spouse, which allows a portion of their pension to continue after they pass away. This might seem like an easy choice, but it comes with its own set of costs. By reducing your own pension to provide for a spouse, you’re lowering your monthly income in retirement. It’s important to weigh whether the survivor benefit makes sense for your situation, especially if you’re already considering life insurance options outside of the federal system.
Take These Changes Seriously—They’re Already in Effect!
With all the updates federal employees face in 2024, now is the time to get your retirement strategy straight. These changes are happening, and the clock is ticking on your window to adjust and make the most of them. Whether it’s maxing out your TSP contributions, preparing for Medicare enrollment, or reassessing your health and life insurance options, don’t wait until it’s too late.
