FERS Employees Are Unlocking More Retirement Freedom Than Ever—Here’s What’s Working

Jeff Boettcher
June 8, 2025

Key Takeaways

FERS employees are capitalizing on updated retirement strategies to enjoy earlier and more flexible retirement options.
Combining FERS benefits with TSP and Social Security provides a multi-faceted approach to financial security.

Understanding the FERS Advantage

As a Federal Employees Retirement System (FERS) participant, you already have access to a robust retirement framework. Designed to balance three key components—a basic annuity, Social Security benefits, and the Thrift Savings Plan (TSP)—FERS offers a flexible approach to retirement planning. This combination ensures that your retirement income isn’t reliant on a single source, making it adaptable to your lifestyle needs.

The flexibility inherent in FERS is one of its strongest advantages. Unlike legacy systems, such as the Civil Service Retirement System (CSRS), FERS integrates well with modern financial planning tools, allowing you to maximize your retirement income streams. Whether you plan to retire early or extend your career, understanding how to optimize each component of FERS can significantly impact your financial future.

The High-3 Calculation: What You Need to Know

One of the cornerstones of your FERS benefits is the basic annuity. This is calculated using your “High-3” average salary, which represents the highest average pay you earned over three consecutive years. Typically, these are your last three years of service. To calculate your annuity:

Multiply your High-3 salary by 1% (or 1.1% if you retire at age 62 or older with at least 20 years of service).
Multiply this result by your total years and months of creditable service.

For instance, if your High-3 salary is $90,000 and you’ve worked for 25 years, your annuity calculation at 1% would be:

$90,000 x 0.01 x 25 = $22,500 annually.

This amount forms the base of your retirement income under FERS. If you qualify for the enhanced 1.1% multiplier, the annual amount would increase to $24,750. Understanding this formula helps you project your financial future and explore additional retirement income sources.

The Thrift Savings Plan: A Critical Component

The TSP is an essential part of your FERS benefits, offering tax-advantaged savings with contributions from both you and your employer. The government matches your contributions up to 5%, effectively boosting your savings at no additional cost to you. In 2025, the contribution limit for TSP stands at $23,500, with an additional $7,500 available as a catch-up contribution for those aged 50 and older.

To make the most of your TSP:

Maximize Contributions Early: Start contributing as much as you can as soon as possible to take advantage of compound growth.
Diversify Your Investments: TSP offers several funds, from conservative government securities (G Fund) to more aggressive international stocks (I Fund). Diversifying can help balance risk and reward.
Consider Lifecycle Funds: These are designed for hands-off investors and automatically adjust your asset allocation as you approach retirement.

Social Security: Timing Is Everything

Social Security is the third pillar of your FERS retirement. While you become eligible for benefits at age 62, the age at which you claim significantly affects your monthly payments. Waiting until your full retirement age (FRA), typically between 66 and 67, results in a higher monthly benefit. Delaying until age 70 maximizes your payout.

For FERS retirees, timing is crucial. If you retire early, you may rely more heavily on your annuity and TSP withdrawals until Social Security kicks in. Consider factors such as life expectancy, current savings, and desired lifestyle when deciding when to claim.

Retiring Early Under FERS: Is It Possible?

Yes, early retirement is an option under FERS, but it comes with caveats. The Minimum Retirement Age (MRA) depends on your birth year and ranges from 55 to 57. You can retire at your MRA with at least 10 years of service under the MRA+10 provision, but your annuity will be reduced by 5% for each year you’re under age 62.

Another option is the Special Retirement Supplement (SRS) for those retiring before age 62 with at least 30 years of service (or 20 years at age 60). The SRS bridges the gap until you’re eligible for Social Security and approximates what your Social Security benefits would be at age 62.

Coordinating FEHB and Medicare for Health Coverage

Your Federal Employees Health Benefits (FEHB) program is a significant asset in retirement. When you turn 65, you become eligible for Medicare, and many FERS retirees choose to coordinate these two benefits for comprehensive coverage.

Key considerations include:

Enrolling in Medicare Part A: Since it’s premium-free for most, this is a straightforward decision.
Deciding on Medicare Part B: While this comes with a monthly premium, many retirees find it worthwhile to reduce out-of-pocket costs.
Maintaining FEHB: You can keep your FEHB coverage, which often acts as secondary insurance to Medicare, covering expenses Medicare doesn’t.

This dual approach can reduce your overall healthcare costs and provide greater flexibility.

Maximizing Financial Flexibility with Military Buyback

If you’ve served in the military, a military buyback program can significantly boost your FERS benefits. This allows you to convert your years of military service into creditable civilian service, potentially increasing your annuity and shortening the time until you’re eligible to retire.

Steps to consider:

Request Your Estimated Earnings: Obtain this from the military to calculate your buyback cost.
Pay Your Deposit: Submit your payment to your federal agency’s HR or payroll office.
Verify Your Records: Ensure your service is credited in your retirement account.

Managing Your Post-Retirement Income

Transitioning into retirement means carefully managing your income streams. Combining your FERS annuity, TSP withdrawals, and Social Security benefits creates a balanced portfolio that can adapt to changing needs.

Tips for income management include:

Create a Withdrawal Strategy: Decide how much to withdraw from your TSP annually. Experts recommend the 4% rule as a guideline.
Monitor Tax Implications: Understand how your income sources affect your tax bracket. For example, Social Security benefits may be taxable if your combined income exceeds certain thresholds.
Plan for Inflation: Use cost-of-living adjustments (COLAs) to anticipate changes in your annuity and Social Security payments.

Stay Informed About Annual Changes

Retirement policies and benefits often change. Staying informed about updates to FERS, TSP, and Social Security ensures you can adapt your strategy. For instance, the TSP contribution limits increase periodically, and Social Security benefits are adjusted annually for inflation.

You should also pay attention to the annual Federal Benefits Open Season to review and adjust your FEHB and FEDVIP plans. This is your opportunity to ensure your healthcare coverage aligns with your retirement goals.

Making the Most of FEDVIP Benefits

Dental and vision care can be significant expenses in retirement. Enrolling in the Federal Employees Dental and Vision Insurance Program (FEDVIP) provides access to comprehensive plans tailored to federal retirees.

To maximize FEDVIP:

Review available plans during Open Season.
Consider combining FEDVIP with FEHB and Medicare for full-spectrum coverage.
Budget for premiums and out-of-pocket costs to avoid surprises.

What’s Next for Your Retirement Journey?

Your retirement under FERS is an opportunity to enjoy the freedom you’ve worked so hard to achieve. By taking the time to understand and optimize each component of your benefits, you can create a retirement plan tailored to your unique needs. Whether you’re nearing your MRA or just starting to think about retirement, the tools available through FERS make financial freedom more attainable than ever.

Jeff Boettcher

For over 20 years, Jeff Boettcher has helped his clients grow and protect their retirement savings. "each time I work with my clients, I'm building their future, and there are few things that are more important to a family than a stable financial foundation."

Jeff is known for his ability to make the complex simple while helping navigate his clients through the challenges of making the right investment decisions. When asked what he is most passionate about professionally, his answer was true to character, "Helping my clients – I love being able to solve their problems. People are rightfully concerned about their retirement income, when they can retire, how to maximize their financial safety and future income." Jeff started Bedrock Investment Advisors for clients who value a close working relationship with their advisors.

A Michigan native, Jeff grew up playing sports throughout high school and into college. While Jeff is still an 'aging' athlete, Jeff will take more swings on the golf course than miles running these days. He creates family time, often with weekly excursions to play golf, a hobby he shares with his three young children.

Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.