Avoid Making These Federal Retirement Mistakes

Several things could ruin your retirement in the short or long term. Most of these, if not addressed in advance, can make you slap your hand to your brow and lament, “If only I had…”

First, confirm your FEHB eligibility. You can only continue your Federal Employees’ Health Benefits (FEHB) program coverage beyond retirement if you have been enrolled for the five years before retiring or from the time you first had the chance to enroll. (Note: The major exemption, which is also uncommon, is that you only need to be registered to FEHB at the time the offer is made – if your agency offered you the chance to retire early.)

Verify your eligibility to continue receiving FEHB twice, then three times. After some time has passed, check it once more. It is not a joke. You’re on your own if you retire without that eligibility. You’ll get a little extension with no government contribution toward premiums.

If this applies to you, you might wish to delay leaving if you would lose your health benefits so that you can keep them in retirement.

Make sure your retirement income will provide the financial security you’ll need once you’re certain you’ll have the health insurance protection you need. Overestimating the total number of service years that will be taken into account in your annuity calculation is among the most frequent errors retirees make, particularly in the case of the following.

Refunded Services

If you ever left the government, requested a refund of your retirement contributions, and then rejoined the workforce, that refund may have a big influence on both your ability to retire and how your annuity is calculated.

You must consult one of your agency’s retirement advisers to establish which regulations apply because the criteria for whether you must or can redeposit the funds to receive credit for that time differs for CSRS and FERS employees. Then, you can select the one that is most suitable for you.

Military Service

CSRS employees who served in the military before October 1, 1982, will not be required to pay the deposit to acquire credit for their time spent on active duty, which will then be utilized to compute their annuity. You will if you serve after that day.

Your annuity will be recalculated lower by 2% for each year (5/12th of 1% per month) that’s covered by that period of service if you don’t make that deposit, retire at age 62, and become eligible for a Social Security payment.

There are various rules for FERS employees. You only have one choice if you are one of them. Make the deposit, and you will receive credit for that time, or don’t, and you won’t receive credit for that time.

Also, Consider This…

Will the nest egg in your Thrift Savings Plan account and your final annuity be enough to allow you to enjoy the life you want in the future? That TSP account may have a good number, but how and for how long will it translate into income? You can perform such an analysis with the aid of calculator tools at www.tsp.gov; and could be shocked by the results.

Ensure your understanding of your annuity is accurate and consider any potential decreases. Additionally, keep in mind that choosing a survivor benefit would reduce your benefits and that, if you are a FERS beneficiary, you won’t start receiving a cost-of-living adjustment (COLA) on your annuity until you turn 62.

The value of that annuity – plus Social Security, if you’re qualified – will be significantly less – often by a large margin – than the amount you earned at work. However, you’ll still need to pay for necessities like rent or mortgage, health and life insurance, federal and state taxes, etc.

Experience is a terrific teacher, showing that retiring would cost more money than we initially anticipated. If you do the necessary math, you might have to put off retiring until the numbers make sense, but if you don’t, you might have to start working again to make ends meet.

At the end of the day, the vital thing is to assess your current financial situation and determine how much you need to save up in addition to your social security and other retirement income to live a comfortable life after your working days.

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