A Reduction in Force (RIF) can leave federal employees with a lot of questions about their future. While finding your next opportunity may be the immediate priority, it’s just as important to understand how a separation from federal service could affect your retirement benefits.
Before making any major financial decisions, take time to review these three key areas.
Know Your Retirement Eligibility
Your options depend largely on your age and years of federal service.
Employees who qualify for an immediate retirement generally have more flexibility than those who do not. Others may be eligible for an early retirement offer if their agency has Voluntary Early Retirement Authority (VERA).
If you are not eligible for an immediate retirement, be sure you understand the difference between postponed and deferred retirement. Although the terms sound similar, they can have very different consequences, particularly when it comes to keeping your Federal Employees Health Benefits (FEHB) coverage in retirement.
Making the wrong retirement election could permanently affect your eligibility for one of the federal government’s most valuable retirement benefits.
Don’t Rush to Move Your TSP
Many employees assume they need to move their Thrift Savings Plan account immediately after leaving federal service. In most cases, that isn’t necessary.
You can generally leave your money in the TSP after separation, allowing it to continue growing tax-deferred while benefiting from the plan’s relatively low administrative expenses.
Depending on your retirement goals, rolling your balance into an IRA or another qualified retirement plan may make sense, but it shouldn’t be an automatic decision. Consider your investment strategy, withdrawal needs, fees, and tax situation before making any changes.
Review Your FEHB Coverage
Health insurance is another benefit that deserves careful attention following a Reduction In Force.
Employees who retire on an immediate annuity and meet the five-year enrollment requirement can generally continue FEHB into retirement, with the government continuing to pay a significant portion of the premium.
Employees who separate before becoming eligible for an immediate retirement face different rules, making it important to understand your options before leaving federal service.
A Reduction in Force can create understandable uncertainty, but rushing into retirement or financial decisions can have long-term consequences. Taking the time to understand how your TSP, retirement eligibility, and FEHB coverage fit together can help you protect benefits you’ve spent years earning.
A Federal Retirement Consultant (FRC®) can help you review your retirement eligibility, TSP options, and FEHB coverage so you can make informed decisions about your next steps. No cost. No obligation. Or join one of our free webinars to learn more about your federal benefits.
