The Federal Benefits That Sound Boring But Could Be Your Biggest Retirement Asset

Key Takeaways

• Some of the least-discussed federal benefits, such as life insurance, long-term care, and flexible spending accounts, can provide significant value in retirement when used strategically.

• You can lose thousands of dollars in potential support if you overlook how these benefits coordinate with Medicare, Social Security, or your FERS/CSRS annuity.

Why the “Boring” Federal Benefits Matter More Than You Think

If you’re nearing retirement from government service, you’ve likely focused on your annuity and Thrift Savings Plan (TSP). But what often gets ignored are the seemingly unremarkable benefits that quietly support your financial and health security. These programs are often undervalued simply because they aren’t flashy. Yet, they can be among your most powerful tools—if you understand how to use them right.

In 2025, with inflation still shaping household budgets and longevity increasing, it’s time to take a closer look at these underappreciated benefits.

1. Federal Employees’ Group Life Insurance (FEGLI) Isn’t Just for Active Workers

Life insurance tends to feel like a safety net for younger employees. But under the Federal Employees’ Group Life Insurance (FEGLI) program, coverage extends into retirement—and the decision you make at separation has lasting effects.

What you need to know:

• You’re allowed to continue your Basic FEGLI into retirement if you had it for the 5 years before retiring.

• You must elect how much coverage you want to maintain (75% reduction, 50% reduction, or no reduction).

• Premiums rise significantly as you age, especially with Option B and Option C.

Why it matters in retirement:

• FEGLI can provide a meaningful tax-free death benefit to your survivors.

• Choosing the wrong reduction option could cost you thousands in premiums or leave your survivors underinsured.

Take time now to compare your FEGLI costs against any private life insurance you might be holding. Many retirees opt to reduce or cancel extra coverage and keep only the Basic option with the free 75% reduction.

2. Flexible Spending Accounts Don’t End with Retirement If You’re Planning Ahead

Flexible Spending Accounts (FSAs) might seem irrelevant after you stop working, but how you use them in your final working year can give you a serious advantage.

In 2025:

• The maximum healthcare FSA contribution is $3,300.

• If your plan allows, you may carry over up to $660 of unused funds into the next year.

How this helps you:

• If you retire mid-year, you can still spend your entire elected FSA amount, even if you haven’t contributed the full amount yet.

• Qualified expenses include copays, dental care, and prescriptions, which often increase during the transition to Medicare.

Think of the FSA as a short-term tax shelter and a buffer for your healthcare costs in your final employment year. Make full use of it before your final pay period.

3. Long-Term Care Insurance: Unpopular but Often Critical

Long-Term Care (LTC) coverage is often brushed aside, especially if you’re healthy and active. But costs for nursing care and assisted living facilities continue to climb, and many retirees face serious financial strain without a plan.

The Federal Long Term Care Insurance Program (FLTCIP) is currently suspended for new enrollees, but if you already have coverage, preserving it could make a big difference down the line.

Key points:

• LTC costs often exceed $90,000 per year for private facilities.

• Medicare does not cover most long-term care expenses beyond short-term skilled nursing.

• If you already hold FLTCIP coverage, you should carefully assess premium increases before canceling.

If the program reopens, you may want to reevaluate whether it fits your situation. In the meantime, consider how annuity income, TSP, or other assets would support you in a long-term care event.

4. Survivor Elections on Your Annuity May Be the Most Important Decision You Make

At retirement, you must elect whether to provide a survivor benefit to your spouse. It’s easy to underestimate the long-term impact of this choice.

Here’s why this matters:

• A full survivor benefit reduces your annuity by 10%, but gives your spouse 50% of your annuity for life.

• Without a survivor election, your spouse loses access to FEHB coverage after your death.

This benefit protects not only your spouse’s income, but also their healthcare security. In 2025, FEHB premiums for retirees continue to rise, and private alternatives can be much more expensive. Preserving FEHB through a survivor benefit can be worth far more than the cost of the annuity reduction.

5. Medicare and FEHB Coordination Can Lower Your Lifetime Costs

When you become eligible for Medicare at age 65, your FEHB coverage doesn’t go away. Instead, it becomes your secondary insurer if you enroll in Medicare Part B. While this coordination isn’t mandatory (except for certain USPS retirees in 2025), it can lead to significant cost savings.

Why this is valuable:

• Most FEHB plans waive deductibles and coinsurance if you enroll in Medicare Part B.

• This can reduce your out-of-pocket costs for hospital and outpatient services.

• FEHB remains your drug coverage unless you enroll in Medicare Part D separately.

The standard Part B premium is $185 in 2025, with higher amounts for those subject to IRMAA. Compare this to the potential out-of-pocket savings from reduced copayments, hospital costs, and specialty services.

You may also benefit from automatic drug coverage under some federal plans if you’re a Postal Service retiree under PSHB.

6. Social Security Timing Still Matters—Even for Government Retirees

As of 2025, the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) have been repealed. That means your Social Security benefit is no longer reduced simply because you worked under FERS or CSRS.

What this change means for you:

• You may receive a significantly higher Social Security benefit than you expected.

• This makes your timing decision (age 62 vs FRA vs age 70) even more important.

Delaying Social Security can increase your benefit by up to 8% per year after full retirement age. Combine this with your FERS annuity and TSP withdrawals to create a tax-efficient retirement income stream.

7. Federal Employee Dental and Vision Insurance May Become Essential After Age 65

Many retirees assume Medicare covers dental and vision—but it doesn’t. If you’ve enrolled in FEDVIP during your career, you can keep it into retirement, and this benefit becomes more useful as you age.

Why FEDVIP still matters:

• Dental procedures like crowns and root canals can cost thousands out-of-pocket.

• Vision plans can cover eye exams, corrective lenses, and cataract-related care.

Although premiums vary by plan, having access to national coverage without waiting periods makes FEDVIP a useful safety net, especially if you expect higher dental or vision needs in retirement.

8. The TSP Isn’t Just About Investment Returns—It’s About Withdrawal Strategy

Your Thrift Savings Plan is likely your largest retirement asset. But it’s not just how much you’ve accumulated—it’s how you access it that affects your long-term financial stability.

In 2025, your TSP withdrawal choices include:

• Installment payments (monthly, quarterly, or annual)

• Partial or full lump sum withdrawals

• Rollover to an IRA

• Combination of these

Poor withdrawal timing or ignoring Required Minimum Distributions (RMDs), which begin at age 73, can trigger penalties and raise your tax liability. Aligning your TSP withdrawals with your other income sources (annuity, Social Security, or rental income) can help manage tax brackets and keep your healthcare premiums lower.

9. Federal Retirement Counseling Isn’t Automatic—But It Should Be

It’s easy to assume someone will walk you through every benefit as you near retirement. But in reality, many federal employees receive only a general retirement estimate and little in-depth counseling unless they seek it out.

In 2025, here’s what you should do:

• Request a retirement estimate from your HR or agency benefits office.

• Review your SF-50 records to confirm service time and pay grades.

• Ask specifically about survivor benefit implications, FEHB eligibility, and unused leave payouts.

A personalized retirement strategy can help you coordinate all your benefits, reduce taxes, and make smart choices about coverage and timing.

Putting All the Pieces Together Before You File the Paperwork

By now, you’ve probably realized that retirement from public service isn’t just about hitting a service milestone or collecting a pension. It’s about using the federal benefits system wisely. The programs that seemed dull or routine during your career—like FEGLI, FSAs, or FEDVIP—can actually save you thousands and help you age with security.

Before you make your final decisions, talk with a licensed professional listed on this website who understands how federal benefits interact. They can help you review your current elections, spot costly mistakes, and design a coordinated retirement strategy that works.