Your FERS retirement plan isn’t as straight-forward as planning for a private sector retirement. Your benefits provide you with a number of options to enhance your financial security when you separate from service.
1. Choosing When To Retire Under FERS
Retiring at your MRA with at least 30 years of creditable service is the youngest you can retire with a full immediate annuity. You also receive the FERS Supplement which fills the income gap between your MRA and age 62, which is when you first become eligible for Social Security.
If you wait until age 62 with a minimum of 20 years of creditable service, you get the FERS 10% bonus. This can be as much as a 10% raise in your monthly annuity for the rest of your life. You need to decide which option provides more income for you.
2. Deciding What To Do With Your Thrift Savings Plan (TSP)
Before you retire, it’s important to think about what you’re going to do with the balance in your TSP. To plan ahead, you need to know your options:
- Leave your money in the TSP
- Rollover your TSP into a Qualified IRA or 401(k)
- Transfer your TSP into a Qualified Annuity
Making a decision depends on your personal financial situation and understanding the pros and cons of each option.
“If you make a mistake when applying for retirement, you may lose healthcare coverage and you’ll never be able to re-enroll.”
3. Ensuring You’re Eligible To Continue FEHB In Retirement
FEHB is a valuable benefit because the federal government continues you to pay as much as 75% of your FEHB premiums in retirement. But you have to meet all of the eligibility requirements for continuing benefits, including the FEHB 5-Year Rule. If you make a mistake when applying for retirement, you may lose healthcare coverage and you’ll never be able to re-enroll.
4. Choosing When To File For Social Security To Maximize Your Benefit
Social Security is your third source of retirement income in addition to your FERS annuity and TSP distributions. This gives you the ability to time your Social Security benefits to maximize the amount you receive. If you delay until age 70, you earn credits that continue to increase your benefit by 8% for each year beyond your Full Retirement Age (FRA). If you file before your FRA, your benefit is reduced forever.
Without fully understanding the four main components of a FERS retirement, you may end up leaving money on the table. Consider working with an FRC® trained advisor who understands your federal benefits and can help you crunch the numbers.
