Federal Employees
Retirement planning for federal employees
Your agency handles the paperwork. This page explains the decisions behind it, in plain English, so you know what you are choosing and why.
Your FERS pension, in plain English
Most federal employees today are covered by FERS, the Federal Employees Retirement System. It has three parts that work together: a pension from your years of federal service, Social Security, and your Thrift Savings Plan.
Your pension is built mainly from your years of creditable service and your highest average salary over a set period, often called your high-3. Some employees with long careers are under CSRS, the older system, which works differently.
Questions worth answering
- Do you know what your pension will be, in dollars, on the date you want to leave?
- Does all of your service count, including any military or part time service?
- Will your pension start right away when you leave, or later?
- If you leave before you can collect Social Security, what fills the gap?
Your TSP at retirement: the choices people face
Your Thrift Savings Plan may be the largest sum of money you have ever been responsible for. At retirement, the question changes from how much you saved to how it will pay you.
People generally choose among leaving it in the TSP, taking withdrawals, buying an annuity, or moving some or all of it to another account. Each choice has its own tax, cost, and timing effects, and some are hard to undo.
Questions worth answering
- How would a market drop in the year you retire affect your plans?
- Do you know how your traditional and Roth balances are taxed when you take money out?
- How long does your money need to last, and what if you live longer than you expect?
Keeping FEHB into retirement
For many retirees, health coverage matters as much as income. Federal Employees Health Benefits, or FEHB, can continue into retirement, but only if certain requirements are met before you leave. Checking them before you retire is far easier than trying to fix things after.
Postal employees now have their own program, PSHB, with its own rules. The postal page explains it.
Questions worth answering
- Have you been enrolled long enough to keep FEHB when you retire?
- How will FEHB work alongside Medicare when you turn 65?
- Will your spouse keep coverage if you die first?
Survivor benefits and your spouse
When you retire, you decide whether to provide a survivor benefit for your spouse. It lowers your own monthly pension, and it can protect your spouse's income and health coverage after you are gone.
It is one of the biggest decisions in federal retirement, and usually one you cannot change later.
Questions worth answering
- How much income would your spouse have if you died first?
- What would a survivor benefit cost you each month, and what would it provide?
- Could life insurance do part of the job, and how would the numbers compare?
Early retirement offers: questions to answer before you sign
Agencies sometimes offer early retirement, often called VERA, or a separation payment, often called VSIP. An offer can be a good fit or a costly mistake, and the deadline rarely leaves much time to think.
Nothing here is a promise about any offer. Every offer is different, and the details that matter are in yours.
Questions worth answering
- How much smaller is your pension if you leave now instead of later?
- Will you keep FEHB, and will you have income until Social Security begins?
- What happens to your TSP, and what will a separation payment leave after taxes?
- If you sign, can you change your mind?
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