The Old Rules Don’t Work Anymore—Here’s What It Really Takes to Retire From Government Work Today

Key Takeaways

• The retirement landscape for government employees in 2025 looks very different than it did in the 1990s. Your strategy must reflect today’s rules, timelines, and economic conditions.

• You can no longer rely on outdated assumptions about pensions, Social Security, or lifetime healthcare. To retire securely, you need a current, proactive plan tailored to how the system actually works today.

What Retirement Meant in the Past

In the 1990s, retiring from a government job meant a secure pension, affordable health coverage, and a clear timeline. You worked 30 years, earned a stable annuity, and likely stayed in the same job throughout your career. Few decisions were required. Once you met your minimum retirement age (MRA), you filed the paperwork, chose your survivor benefits, and stepped into retirement with confidence.

But that old model has eroded.

The current system requires more decisions, more financial literacy, and better timing. And the consequences of a mistake today are far more severe than they were 30 years ago.

Today’s Retirement System Demands More from You

The structure of your retirement has evolved dramatically, especially if you’re under the Federal Employees Retirement System (FERS) or similar state or local plans.

Here’s what you’re facing in 2025:

• FERS Annuity is Smaller: It replaces a smaller portion of your salary than CSRS did.

• TSP is Essential: Your Thrift Savings Plan (TSP) now plays a primary role, but managing it is your responsibility.

• Social Security Is Delayed: Full benefits now begin at age 67 for those born in 1960 or later.

• Healthcare Costs Are Higher: FEHB premiums have increased substantially, especially for retirees.

• Longer Life Expectancy: You must now plan for 25 to 30 years of retirement income.

How the Key Elements Work Together Now

To retire securely from government service today, you must coordinate three main sources:

1. The Basic FERS Annuity

Your FERS annuity is based on your high-3 average salary and years of creditable service. The standard formula is:

• 1% × high-3 × years of service (or 1.1% if you retire at 62 with 20+ years)

In 2025, the average monthly FERS annuity is about $1,810, which does not keep up with inflation alone.

Keep in mind:

• You must have at least 5 years of creditable civilian service.

• MRA+10 retirements come with permanent reductions unless postponed.

• There are penalties for early retirement without reaching MRA or age/service milestones.

2. Thrift Savings Plan (TSP)

Your TSP is the largest variable in your retirement. You control how much you contribute, how it’s invested, and how you withdraw it.

For 2025, the limits are:

• $23,500 elective deferral

• $7,500 catch-up if age 50+

• $11,250 super catch-up if age 60-63

You can withdraw from the TSP starting at age 55 if you separate in that calendar year. But having access does not mean you should take money out without a plan.

Watch out for:

• Required Minimum Distributions (RMDs) starting at age 73

• Tax penalties if you withdraw before qualifying age

• Market volatility that affects your retirement timing

3. Social Security

While you are eligible at age 62, your full retirement age (FRA) is 67. If you claim early, your benefits are permanently reduced.

In 2025, the Social Security COLA increase is 2.5%, but that may not be enough to cover rising expenses. Also:

• The earnings limit for working retirees under FRA is $23,480

• Once you reach FRA, there’s no earnings cap

If you’re eligible for the FERS Annuity Supplement, it ends at 62 regardless of when you claim Social Security.

What Retirement Planning Must Include Now

You must go beyond basic calculations. A successful government retirement plan in 2025 includes:

Retirement Timeline Mapping

You need to identify the optimal dates for:

• Reaching MRA or age milestones

• Triggering TSP withdrawals

• Initiating Social Security benefits

• Filing Medicare (age 65 or earlier if disabled)

These dates affect each other and must be aligned.

Pension Estimate Verification

Do not rely solely on automated calculators. Review your SF-50 forms and verify:

• Your creditable service

• Military service buyback status

• Leave without pay periods

• High-3 salary assumptions

This affects your FERS annuity projection significantly.

TSP Strategy With Risk Management

Managing your TSP now means:

• Choosing allocation strategies that reduce risk as retirement nears

• Creating an income plan to withdraw funds without outliving them

• Considering Roth vs. Traditional tax impact

Many retirees are surprised by their post-retirement tax bracket. Be proactive.

Survivor and Insurance Elections

You will need to decide:

• Whether to provide a survivor annuity (and reduce your monthly benefit)

• Whether to continue FEGLI or reduce it as costs increase with age

• Whether to elect Spouse Equity for FEHB eligibility

These choices have long-term consequences and are difficult or impossible to reverse.

Medicare Coordination

If you retire at or after age 65, you must coordinate Medicare enrollment with your FEHB or PSHB coverage.

In 2025:

• Medicare Part A is usually premium-free

• Medicare Part B premium is $185/month, with income-related adjustments

• You must enroll in Part B to remain eligible for certain PSHB plans

Failure to enroll in time may lead to late penalties and gaps in coverage.

Out-of-Pocket Budgeting

Government retirees often underestimate their expenses, especially in:

• Healthcare

• Long-term care

• Travel and family support

• Taxes on TSP withdrawals and Social Security

You need a realistic monthly budget adjusted for inflation and emergency reserves.

The Mistakes That Can Still Derail Your Plans

Even in 2025, many government employees fall into avoidable traps:

• Using outdated rules: MRA ages, COLAs, and TSP limits have changed.

• Missing paperwork deadlines: Survivor elections, Medicare enrollment, and military service deposits must be timely.

• Assuming FEHB lasts forever without paying attention to eligibility rules.

• Claiming Social Security too early without a coordinated income plan.

• Ignoring tax efficiency: Poor withdrawal timing can trigger unnecessary tax burdens.

What Hasn’t Changed—And What Has

Some fundamentals of government retirement are still in place:

• You can still keep FEHB into retirement if you meet eligibility.

• You still receive COLAs on your annuity (though not fully inflation-matched).

• You still have access to a defined benefit pension.

But the key differences in 2025 include:

• Heavier reliance on TSP for income

• Mandatory Medicare Part B in some cases

• Higher healthcare costs and insurance complexity

• More personal responsibility for coordinating benefits

Today’s Retirement Reality Requires Personalization

No two retirements are the same. Factors such as your health, marital status, federal service dates, TSP balance, and geographic location all play a role in your strategy.

In 2025, one-size-fits-all advice is not enough. You need a personalized plan that aligns your:

• Pension income

• TSP withdrawal timing

• Social Security strategy

• Healthcare elections

• Tax planning

You Can Still Retire Securely—But Not Without Planning

Retiring from public service today still offers valuable benefits. But relying on outdated assumptions, old calculators, or advice that ignores 2025 changes can result in serious financial gaps.

You owe it to yourself to approach your retirement with the same diligence you gave your career.

For help understanding your options and creating a retirement plan based on today’s rules, contact a licensed professional listed on this website for a retirement readiness consultation.