Getting Ready to Retire as a Federal Employee? Here’s What You Need to Do Right Now

Missy E
December 7, 2024

Key Takeaways:

Understand Your Retirement Options: You need to understand the federal retirement systems and the different paths to retirement, whether under FERS, CSRS, or special categories like law enforcement.
Start Planning Early: Financial planning, healthcare considerations, and benefits decisions should be tackled well before your retirement date to ensure a smooth transition.

So, You’re Getting Ready to Retire?

Congrats! You’ve made it to the point where retirement is finally on the horizon. After years of service, it’s time to start thinking about what’s next. Whether you’re a few months away or still a few years out, it’s never too early to start preparing. Retirement from federal service can be a bit more complex than in the private sector, so let’s go through the key steps you need to take to make sure everything goes smoothly when the big day arrives.

Know Your Retirement System

First things first—what retirement system are you under? Federal employees are typically under one of two main retirement systems: the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). If you’re under FERS, your retirement benefits come from three sources: your FERS pension, Social Security, and your Thrift Savings Plan (TSP). For CSRS, you won’t get Social Security, but your pension is much more substantial.

If you’re in law enforcement, air traffic control, or another special group, you have different rules for when you can retire and how your benefits are calculated. Most of these employees are eligible for early retirement after 20-25 years of service.

Check Your Eligibility Timeline

You’ll need to make sure you’re eligible for retirement based on your age and years of service. Under FERS, you can retire at:

Minimum Retirement Age (MRA), which is between 55-57 depending on when you were born, with at least 30 years of service.
Age 60 with 20 years of service.
Age 62 with at least 5 years of service.

If you’re under CSRS, you can typically retire at age 55 with 30 years of service or age 60 with 20 years. But if you’re in law enforcement or another category with special rules, these timelines will be different, so make sure you understand what applies to you.

Estimate Your Pension

One of the most important things you can do right now is estimate your pension. Your federal pension is calculated based on your highest three consecutive years of salary (known as your high-3 average salary) and your years of service.

For FERS, your pension formula looks like this:

1% of your high-3 salary for each year of service (or 1.1% if you retire at age 62 or later with at least 20 years of service).

For CSRS, the formula is more generous:

It starts at 1.5% for your first 5 years, 1.75% for the next 5 years, and 2% for every year after that.

Use your retirement calculator to get a ballpark figure. Keep in mind, though, that FERS retirees can also count on Social Security and income from their TSP. If you’re under CSRS, you’ll need to rely more heavily on your pension and personal savings.

Maximize Your TSP Contributions

Speaking of the Thrift Savings Plan, now’s the time to max out your contributions if you haven’t been doing so already. The TSP is one of the best retirement savings options you have as a federal employee because it offers tax advantages and low administrative fees.

As of 2024, the TSP contribution limit is $23,000, with an additional $7,500 catch-up contribution allowed for those aged 50 or older. Every bit helps when it comes to securing your financial future, so take advantage of these higher limits as you approach retirement.

Plan for Health Coverage

Your health insurance will likely continue to be a significant expense, so plan ahead. Many federal retirees stay in the Federal Employees Health Benefits (FEHB) program after retirement, which offers a variety of health insurance options.

If you’re approaching age 65, you’ll also need to think about Medicare. For most federal employees, enrolling in Medicare Part A (hospital insurance) at 65 is a no-brainer because it’s premium-free if you have enough quarters of covered employment. However, you’ll need to decide whether you want to enroll in Medicare Part B (medical insurance), which does have a monthly premium. While FEHB and Medicare can work well together, it’s important to understand how the two programs coordinate to avoid unnecessary expenses.

Get Your Paperwork in Order

The last thing you want when you’re ready to retire is a pile of paperwork keeping you from enjoying your well-earned break. Here are some things you need to make sure are squared away:

Retirement Application: Your retirement application (SF 3107 for FERS or SF 2801 for CSRS) needs to be submitted to your HR department.
Military Buyback: If you’ve served in the military and haven’t already done so, consider buying back your military time so it counts toward your federal pension. This can be a game-changer for many employees.
Beneficiary Forms: Ensure that your beneficiaries are up to date on any insurance policies, TSP accounts, and your pension.

Timing Your Retirement: When Is the Best Time?

The timing of your retirement can affect how much money you walk away with. For example, retiring at the end of the year can give you a bigger lump sum payment for unused annual leave. Additionally, consider how your Social Security benefits will be impacted by your retirement age. FERS retirees can start drawing Social Security benefits as early as age 62, but you may want to delay claiming them to maximize your monthly benefit.

If you’re under CSRS, Social Security benefits won’t apply to you, but Windfall Elimination Provision (WEP) might reduce any Social Security benefits you’re entitled to based on other employment. Keep this in mind when determining your retirement date.

Don’t Forget About the Special Retirement Supplement

If you’re under FERS and retiring before age 62, you may be eligible for the FERS Special Retirement Supplement. This is designed to bridge the gap between your federal pension and the time you can start claiming Social Security. The supplement is based on your years of service and your estimated Social Security benefit at age 62.

Enjoy the Transition

Retirement is a major life change, so give yourself some time to adjust. One way to ease into retirement is by taking phased retirement if it’s available in your agency. This allows you to work part-time while still receiving partial retirement benefits, giving you a smoother transition into full retirement.

You’ve worked hard to get here, so don’t rush it—plan carefully, take advantage of all the resources at your disposal, and make sure you’re setting yourself up for a financially secure and enjoyable retirement.

Make the Most of Your Retirement Benefits

In the end, your federal retirement benefits are there to help you enjoy this next phase of life. Whether it’s understanding how to maximize your TSP, coordinating your FEHB and Medicare, or estimating your pension, each piece of the puzzle will help create a retirement that’s financially stable and fulfilling.

Ready for Your Next Chapter?

Retirement isn’t just about leaving your job behind—it’s about opening the door to a new chapter in your life. The key to a successful retirement is preparation, so start planning now to ensure your retirement is everything you’ve dreamed it would be. From estimating your pension to navigating your health coverage, each step you take today will pay off tomorrow.