Why Civilian Military Employees Have Some Of The Best Retirement Perks You’re Probably Not Using Yet

Key Takeaways

1. Civilian military employees can leverage unique benefits that enhance retirement savings and security, offering opportunities many others don’t have access to.

2. Understanding these perks and taking advantage of available programs, like military buybacks and federal retirement plans, can significantly boost your financial future.

What Makes Civilian Military Employees’ Retirement Plans Special?

If you’re a civilian employee supporting the military, you’re in a unique position. Your retirement benefits are a blend of federal perks and military-related advantages. These opportunities often surpass what’s available in the private sector. But here’s the catch: many people don’t know how to make the most of them.

Understanding these benefits isn’t just about maximizing your retirement savings—it’s about ensuring you have the financial security you deserve for your years of service. So, let’s dive into the key aspects of your retirement options and how you can use them to your advantage.

Federal Retirement Systems: FERS and CSRS

As a civilian military employee, you’re likely covered under one of two federal retirement systems: the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Both systems are designed to provide you with a robust retirement package, but they differ significantly.

The FERS Advantage

FERS, which covers most federal employees hired after 1987, includes three main components:

1. Basic Annuity: This is calculated based on your years of service and your “high-3” average salary.

2. Social Security Benefits: Unlike CSRS employees, FERS participants contribute to Social Security and are eligible for benefits starting at age 62.

3. Thrift Savings Plan (TSP): TSP is similar to a 401(k), offering matching contributions from your employer and a range of investment options.

The CSRS Difference

If you’re among the fewer employees still under CSRS, you enjoy a more generous annuity formula but do not contribute to Social Security. Your pension is calculated as a percentage of your salary for every year of service, which can lead to a substantial monthly payout. However, CSRS participants often miss out on Social Security benefits due to the Windfall Elimination Provision (WEP).

Military Buyback: The Hidden Gem

One of the most overlooked benefits for civilian military employees is the ability to “buy back” your military service time. This program allows you to convert your active-duty military years into creditable civilian service years for retirement purposes, in case you had served in the military before joining a civilian role.

Why It Matters

By buying back your military time, you can:

• Increase your years of service, boosting your pension.

• Potentially retire earlier, as your combined service time reaches eligibility faster.

How It Works

The process involves making a deposit into your retirement system based on your military earnings. The earlier you do this, the lower the interest charges. If you’re nearing retirement and haven’t explored this option, now’s the time to act.

Health Benefits: FEHB and Medicare Integration

Your health benefits are another area where you can enjoy significant advantages. As a federal employee, you’re eligible for the Federal Employees Health Benefits (FEHB) program, one of the most comprehensive health insurance options in the country.

Coordinating FEHB and Medicare

When you become eligible for Medicare at age 65, you can integrate it with your FEHB plan. This combination often provides:

• Lower out-of-pocket costs.

• Broader coverage for medical services.

Staying Covered in Retirement

Unlike many private-sector plans, your FEHB coverage continues into retirement as long as you meet the eligibility requirements. This means you won’t have to worry about losing your health benefits when you leave the workforce.

The Thrift Savings Plan: A Powerful Tool

Your Thrift Savings Plan (TSP) is a cornerstone of your retirement savings. With low fees and diverse investment options, it’s one of the best savings vehicles available.

Make the Most of Matching Contributions

Under FERS, your agency matches up to 5% of your salary. Not contributing enough to get the full match is essentially leaving free money on the table. Make sure to:

• Contribute at least 5% to maximize the match.

• Consider increasing your contributions as you near retirement to take advantage of catch-up limits.

Diversify Your Investments

TSP offers several funds, ranging from government securities to international stocks. Diversifying your portfolio can help balance risk and reward, especially as you approach retirement.

Social Security and the Special Retirement Supplement

FERS employees enjoy an additional perk: the Special Retirement Supplement (SRS). This benefit bridges the gap between your retirement and eligibility for Social Security at age 62.

How It Works

SRS is available if you retire before 62 and meet certain requirements. It’s designed to replace the Social Security income you would have earned during this period, giving you financial stability in your early retirement years.

Social Security Coordination

Once you reach age 62, your SRS stops, and Social Security benefits kick in. Planning the timing of your Social Security claims can maximize your overall income.

Plan Your Retirement Timeline

Timing is everything when it comes to retirement. Here are a few milestones to keep in mind:

• Minimum Retirement Age (MRA): For FERS employees, MRA ranges from 55 to 57, depending on your birth year.

• 20 Years of Service: With 20 years of service, you may qualify for early retirement benefits if you meet the age requirements.

• 30 Years of Service: Full retirement benefits kick in once you’ve completed 30 years of service and reached your MRA.

Don’t Forget Survivor Benefits

Providing for your loved ones is an important part of retirement planning. Both FERS and CSRS offer survivor benefit options that allow your spouse or dependents to receive a portion of your pension after your passing.

What Are Your Options?

You can choose to:

• Provide a full survivor benefit (50% of your pension).

• Opt for a reduced benefit (25% of your pension).

• Decline survivor benefits altogether, though this decision should be carefully considered.

Why It Matters

While electing survivor benefits reduces your monthly pension, it ensures financial support for your family. Discuss your options with your spouse and consider their long-term needs.

Navigating Federal Retirement Changes

Retirement policies and benefits are constantly evolving. Staying informed about changes can help you adapt your plans and make the most of your options.

What to Watch For

• Legislation Updates: Periodic changes to federal retirement laws can affect your benefits.

• Open Season: This is the time to review and adjust your FEHB or other benefits.

• Economic Trends: Market fluctuations can impact your TSP investments, so keep an eye on performance.

Maximize Your Benefits Today

Civilian military employees have access to some of the most robust retirement benefits available. By understanding your options and planning ahead, you can create a secure and comfortable retirement. Don’t wait until it’s too late to take advantage of these opportunities—start planning today and ensure a financially stable future.