How to Stop Guessing and Start Making Confident Decisions About Your Federal Retirement

Key Takeaways

• Most federal employees nearing retirement feel uncertainty not because of lack of benefits, but because they lack a clear decision-making framework.

• You can replace guesswork with confidence by aligning your benefits, timelines, and goals using updated tools, rules, and expert insight.

Your Retirement Package Is Complex for a Reason

Federal retirement benefits are generous compared to many private-sector plans. But they are also layered: the Federal Employees Retirement System (FERS), Social Security, Thrift Savings Plan (TSP), FEHB, and more. Each component functions on its own rules, timelines, and eligibility thresholds.

Many public sector employees underestimate just how critical it is to coordinate these parts. It’s not just about having enough money. It’s about:

• Knowing when your pension kicks in (and at what rate).

• Timing your Social Security to avoid benefit reductions.

• Taking Required Minimum Distributions (RMDs) from your TSP to avoid penalties.

• Balancing your FEHB or PSHB coverage alongside Medicare at the right time.

Understanding how these pieces fit together is what shifts you from hoping things will work out to knowing that they will.

1. Start With Your FERS Basics

Your FERS annuity is the backbone of your retirement income. Yet, too many retirees guess at when to claim it. Here’s what you need to clarify:

Eligibility Rules

In 2025, full FERS retirement eligibility requires one of the following:

• Minimum Retirement Age (MRA) with at least 30 years of service

• Age 60 with 20 years of service

• Age 62 with 5 years of service

You can also retire under MRA+10, but doing so comes with a permanent reduction in your annuity.

Your High-3 Calculation

Your annuity is based on your highest three consecutive years of basic pay. In 2025, there’s a legislative push to exclude locality pay from this average, which could reduce benefits. While not law yet, it’s something to watch.

Use your personal earnings record and OPM tools to estimate your High-3 now. That one figure drives your annuity calculation.

2. Understand the FERS Annuity Supplement

If you retire before age 62 and meet certain criteria, you may be eligible for the FERS Annuity Supplement. This mimics Social Security until you reach 62 but stops at that point regardless of whether you claim Social Security then.

This benefit is:

• Only for employees retiring with full eligibility (not MRA+10)

• Based on your estimated Social Security at age 62

Knowing this ahead of time allows you to fill income gaps more deliberately.

3. Know When and How to Approach Social Security

Social Security eligibility begins at age 62, but claiming it then locks you into a permanent reduction. Waiting until full retirement age (67 for those born in 1963) increases your benefit.

Here’s what matters now:

• In 2025, you can earn up to $23,480 if you’re under FRA and still working, without benefits being reduced.

• Each year you delay past 67 adds 8% to your benefit, up to age 70.

Coordinate this with your annuity supplement to avoid unnecessary reductions.

4. Evaluate Your TSP Distribution Plan

The Thrift Savings Plan provides flexibility, but without a strategy, you might withdraw too much or too little.

Key facts for 2025:

• RMDs must begin at age 73 if you were born between 1951 and 1959.

• You can take monthly payments, partial withdrawals, or annuitize your TSP.

• Roth TSP withdrawals are tax-free if held for five years and after age 59½.

Don’t leave your TSP untouched for too long. A planned withdrawal approach can fill income gaps between your pension and Social Security.

5. Don’t Let Healthcare Decisions Derail Your Plan

In 2025, health insurance continues under the Postal Service Health Benefits (PSHB) Program for postal retirees and under FEHB for others. Both have critical intersections with Medicare.

Here’s what you need to decide:

• Will you enroll in Medicare Part B at age 65? For PSHB annuitants, this is now mandatory unless you’re exempt.

• Should you coordinate your FEHB or PSHB with Medicare to reduce out-of-pocket costs?

• What are your copayments, coinsurance, and deductibles if you keep FEHB/PSHB without Medicare?

In most cases, keeping FEHB or PSHB with Medicare gives you strong coverage, but understanding when to enroll avoids late penalties and premium waste.

6. Don’t Forget About Long-Term Planning: Survivor Benefits and COLAs

Planning shouldn’t end at your retirement date. You must also consider the long-term impact of your decisions.

Survivor Elections

If you want your spouse to keep FEHB or PSHB after your death, you must:

• Elect a survivor annuity

• Choose Self Plus One or Self and Family coverage

Without this, they may lose all access to your federal health benefits.

Cost-of-Living Adjustments (COLAs)

COLAs in 2025 are set at 2.5%. CSRS annuitants receive the full COLA. FERS retirees only receive full COLAs if inflation is under 2%, and reduced COLAs otherwise.

Don’t assume your purchasing power will always keep up. Build in margin to cover years when inflation outpaces COLA increases.

7. Watch for Policy Changes That May Affect New or Existing Retirees

This year, multiple policy changes have made headlines. Some have already passed; others are pending but influential.

What’s already in effect:

• The Social Security Fairness Act of 2025 repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which increases Social Security for many public sector retirees.

• TSP catch-up contributions for ages 60–63 are now set at $11,250.

• Online-only retirement applications are now the norm via OPM, with average processing time between 60–90 days.

Pending proposals include:

• Removing locality pay from the High-3 annuity calculation

• Eliminating the FERS annuity supplement for new hires starting in 2028

• Changing FEHB contribution models from a percentage to a flat-rate voucher system

Even if you’re retiring soon, these changes can affect spouses, survivor benefits, or future elections.

8. Your Retirement Timeline: A 5-Year Approach

Making confident decisions means spacing out your choices. Start with this general schedule:

5 Years Before Retirement

• Estimate your High-3 average

• Review TSP balance and adjust contributions

• Attend a pre-retirement seminar if available

• Consider military buyback if applicable

3 Years Before Retirement

• Request an official annuity estimate from your agency

• Consider shifting TSP investments to reduce volatility

• Review Social Security earnings history

• Confirm creditable service totals

1 Year Before Retirement

• Lock in a retirement date

• Review FEHB/PSHB options and Medicare requirements

• Finalize survivor benefit elections

• Contact a licensed agent listed on this website for plan guidance

6 Months Before Retirement

• Submit retirement application via OPM’s online portal

• Sign up for Medicare if turning 65

• Review tax strategies with an advisor

• Gather all insurance and financial documents

Post-Retirement

• Monitor annuity deposits and TSP distributions

• Watch for COLA updates each January

• Stay alert to policy changes affecting your benefits

Take the Guesswork Out of Federal Retirement

You don’t have to make your retirement decisions in a vacuum. With thousands of rules, acronyms, and moving parts, even seasoned government employees feel overwhelmed. The key is to replace confusion with a structured approach that integrates your benefits with your personal goals, timelines, and healthcare needs.

Don’t wait until you’re filling out retirement paperwork to get clarity. Start today. Review your benefits, understand your options, and talk with a licensed professional listed on this website to map a confident and realistic plan forward.