Thrift Savings Plan (TSP) | M.Dutton & Associates

The Top 5 Employee Perks Federal Workers Are Raving About Right Now

Posted on April 26, 2025April 27, 2025 by Marvin Dutton

Key Takeaways:

Federal employees enjoy a robust benefits package, with standout perks that enhance their financial security and work-life balance.
Understanding these perks can help you make the most of your federal employment or retirement.

Why Federal Perks Are the Talk of the Town

Working in the federal sector comes with a range of benefits designed to support you both professionally and personally. Whether you’re an employee or planning for retirement, these perks go beyond the paycheck, creating a safety net that’s hard to find elsewhere. Let’s dive into the top five benefits federal workers are raving about in 2025.

1. The Federal Employees Retirement System (FERS): A Cornerstone of Stability

The Federal Employees Retirement System (FERS) is a game-changer for federal employees. FERS provides you with three components that work together to secure your retirement:

Basic Benefit Plan: This pension plan is calculated based on your years of service and your high-3 average salary. If you’ve served 20 years or more, your annuity increases significantly, giving you a stable income in retirement.
Social Security Benefits: As a FERS employee, you’re covered by Social Security, adding another layer of financial security.
Thrift Savings Plan (TSP): The TSP is a federal version of a 401(k), with government matching contributions up to 5% of your salary. In 2025, you can contribute up to $23,500 annually, plus catch-up contributions if you’re 50 or older.

Why It Matters: FERS offers one of the most comprehensive retirement systems, giving you peace of mind for your golden years.

2. Federal Employee Health Benefits (FEHB): Comprehensive Coverage That Grows with You

Your health is a priority, and the FEHB program ensures you’re covered. FEHB offers a variety of health plans tailored to meet your needs, whether you’re working, retiring, or somewhere in between. The program allows you to:

Choose from a wide range of plans with extensive coverage for medical, dental, and vision care.
Keep your coverage into retirement, as long as you’ve been enrolled for the last five years of federal service.

For 2025, premiums have increased slightly, but the government still covers about 70% of the total cost. This means you’re paying significantly less compared to private-sector employees.

Why It Matters: FEHB offers stability and flexibility, ensuring you’re never without coverage.

3. Work-Life Balance: Leave Benefits That Keep You Refreshed

Federal employees rave about their leave policies. You’re entitled to generous leave benefits that help you maintain a healthy work-life balance:

Annual Leave: Earn up to 26 days of annual leave each year after 15 years of service.
Sick Leave: Accrue four hours of sick leave per pay period, with no cap on accumulation.
Paid Federal Holidays: Enjoy 11 paid holidays each year.
Family Leave: Access up to 12 weeks of paid parental leave under the Federal Employee Paid Leave Act (FEPLA).

Why It Matters: These leave policies give you the flexibility to recharge and spend time with your loved ones without sacrificing your paycheck.

4. Federal Employees’ Group Life Insurance (FEGLI): Financial Protection When You Need It Most

FEGLI is the largest group life insurance program in the country, offering:

Basic life insurance coverage equal to your salary, rounded to the next $1,000, plus an additional $2,000.
Optional coverage for increased protection, tailored to your family’s needs.

As you approach retirement, it’s worth reviewing your coverage. FEGLI’s premiums do increase with age, but the program remains a cost-effective option for many federal workers.

Why It Matters: FEGLI ensures your loved ones are financially secure in the event of the unexpected.

5. Access to the Federal Employees Dental and Vision Insurance Program (FEDVIP)

FEDVIP offers comprehensive dental and vision plans for federal employees, retirees, and their families. While it’s separate from FEHB, it provides crucial coverage, including:

Routine dental cleanings, major dental procedures, and orthodontics.
Annual eye exams and allowances for frames, lenses, or contacts.

In 2025, FEDVIP continues to be a popular choice for retirees who coordinate their benefits with Medicare for maximum coverage.

Why It Matters: FEDVIP enhances your overall healthcare package, ensuring you don’t overlook essential dental and vision care.

Bonus Perk: Professional Development Opportunities

Federal employment isn’t just about the benefits; it’s also about growth. You have access to:

Training Programs: Courses to develop your skills and stay competitive.
Tuition Assistance: Programs that help you pursue higher education without the financial burden.
Career Development: Mentorship programs and leadership training to advance your career.

Why It Matters: These opportunities ensure you’re always moving forward, both personally and professionally.

Making the Most of Your Benefits

Now that you know the top perks, it’s time to take action. Here are some tips to maximize your benefits:

Review Your Options Regularly: During Open Season, take the time to evaluate your FEHB and FEDVIP plans. Ensure they meet your current and future needs.
Plan for Retirement Early: Take advantage of the TSP and FERS to build a solid retirement fund. The earlier you start, the more you’ll have when you retire.
Stay Informed: Keep up with policy changes that might impact your benefits. Regularly check OPM updates to stay ahead.
Utilize Leave Wisely: Use your annual and sick leave strategically to balance work and personal time effectively.
Explore Training Opportunities: Take full advantage of the professional development programs offered to federal employees.

Why Federal Benefits Stand Out

When you compare these perks to what’s available in the private sector, it’s clear why federal employees are so enthusiastic about their benefits. The combination of comprehensive health coverage, stable retirement plans, and a strong emphasis on work-life balance creates an unparalleled employment experience.

As a federal worker, you’re not just an employee; you’re part of a system that prioritizes your well-being and future. These perks are designed to help you succeed, both on and off the clock.

Federal Benefits: Your Key to a Secure Future

Whether you’re just starting your career or nearing retirement, federal benefits provide the tools you need for a secure and fulfilling life. By understanding and utilizing these perks, you’re setting yourself up for long-term success. Don’t wait—take control of your benefits today and make the most of what’s available to you.

Six Big Changes to Federal Employee Benefits You Should Know About

Posted on April 13, 2025April 14, 2025 by Marvin Dutton

Key Takeaways:

Federal employee benefits have undergone significant changes that can impact your retirement plans and healthcare options.
Staying informed about these updates ensures you make the best decisions for your financial security and well-being.

Retirement Contributions: What’s New?

As a federal employee, your retirement savings play a crucial role in securing your future. For 2025, the Thrift Savings Plan (TSP) has updated contribution limits, allowing you to save even more for retirement. The elective deferral limit is now $23,500. If you’re 50 or older, catch-up contributions provide an additional $7,500. But there’s a twist: if you’re between 60 and 63, your catch-up contribution limit increases to $11,250. This means you could potentially save up to $34,750 annually.

These higher limits are an opportunity to boost your retirement savings and take full advantage of employer matching contributions. Beyond just meeting these limits, it’s important to assess how much you’re contributing regularly. By adjusting your monthly deductions, you can make smaller changes that add up to significant savings over time. Additionally, remember that your TSP investments can be tailored to your risk tolerance and retirement timeline. Balancing your portfolio now can yield better results as you approach retirement.

To get the most out of these updates, ensure you’re also monitoring your beneficiary designations and account performance. Small administrative tasks like these can have long-term benefits for your overall savings plan.

Healthcare Premium Increases and Adjustments

Healthcare is always a top concern, especially as you near retirement. Federal Employees Health Benefits (FEHB) premiums have risen by an average of 11.2% in 2025, with enrollees seeing a 13.5% increase. While the government covers about 70% of the cost, the increase in premiums means you’ll pay more out-of-pocket.

For retirees, pairing FEHB with Medicare remains a popular strategy to manage healthcare costs. Medicare Part B premiums have increased to $185 per month in 2025, and the annual deductible is now $257. This coordination can significantly reduce your overall expenses, but it’s crucial to evaluate your needs during open season to ensure you’re getting the best value from your plan.

You’ll also want to consider supplemental plans and the new prescription drug out-of-pocket caps, as these can further reduce your financial burden. Understanding how your specific FEHB plan integrates with Medicare can help you make the most of your benefits while avoiding redundant coverage. Whether you’re adjusting your current plan or exploring new options, careful evaluation is essential to ensure your healthcare aligns with your budget and medical needs.

Enhanced Medicare Integration for Postal Workers

If you’re a postal worker transitioning to the Postal Service Health Benefits (PSHB) program, there are big changes to note. Starting in 2025, Medicare-eligible retirees must enroll in Medicare Part B to maintain PSHB coverage. Exceptions apply for those who retired before January 1, 2025.

The integration of PSHB and Medicare includes benefits such as lower deductibles, reduced copayments, and prescription drug savings through a Medicare Part D Employer Group Waiver Plan (EGWP). If you’re eligible, reviewing these options during the PSHB Open Season from November 11 to December 13 is vital.

As part of these changes, you may also have access to expanded pharmacy networks and improved coordination of benefits. It’s important to carefully review any communications from your benefits provider to understand how the transition affects your current coverage. Taking the time to research and ask questions ensures you’re fully prepared for these adjustments.

Out-of-Pocket Caps and Prescription Drug Coverage

One of the most impactful changes in 2025 is the introduction of a $2,000 annual cap on out-of-pocket prescription drug costs under Medicare Part D. This cap eliminates the “donut hole” coverage gap and provides relief to retirees with high medication expenses. Additionally, Medicare Part D premiums average $46.50, while deductibles have increased to $590.

This change makes prescription drugs more affordable and predictable for retirees. If you’re considering switching plans, remember that the Annual Enrollment Period for Medicare runs from October 15 to December 7.

Beyond the cost cap, you should evaluate the coverage offered by different Part D plans to ensure your specific medications are included. Formularies—the lists of covered drugs—can vary widely among plans, so reviewing these details can save you money and avoid surprises at the pharmacy. Additionally, take note of any new initiatives such as the Medicare Prescription Payment Plan, which allows you to spread out-of-pocket costs over several months, easing financial strain.

Flexible Spending Account (FSA) Adjustments

For active federal employees, the 2025 healthcare FSA contribution limit has increased to $3,300, up from $3,200 in 2024. If your plan allows carryover, you can now roll over up to $660 of unused funds into the next year.

FSAs are an excellent way to save on healthcare expenses by using pre-tax dollars for eligible medical costs. However, remember that these accounts follow a “use-it-or-lose-it” policy. Planning your contributions carefully ensures you maximize the benefit without leaving money unused.

To get the most out of your FSA, make a detailed list of your predictable medical expenses, such as regular prescriptions, specialist visits, and medical equipment. This helps ensure you contribute the right amount while minimizing the risk of forfeiting unused funds. Many FSAs also cover over-the-counter items and wellness programs, so review the eligible expenses to take full advantage of this benefit.

Income Thresholds and Tax Implications

Changes to income thresholds can affect retirees in several ways. For 2025, the Income-Related Monthly Adjustment Amount (IRMAA) for Medicare applies to individuals earning over $106,000 and couples earning over $212,000. Higher-income retirees may see increased premiums for Medicare Parts B and D.

In addition, federal income tax brackets have shifted due to inflation. The lowest bracket applies to incomes of $11,925 or less for individuals and $23,850 or less for couples, while the top bracket starts at $626,350 for individuals and $751,600 for couples. Understanding these adjustments helps you plan withdrawals from retirement accounts and manage taxable income.

To reduce the impact of IRMAA and higher tax brackets, consider working with a financial planner to strategize your retirement account distributions. You might benefit from techniques like Roth conversions or delaying Social Security benefits to optimize your taxable income. Being proactive can help you retain more of your hard-earned savings and manage your expenses effectively.

How These Changes Impact Your Benefits Strategy

Navigating these changes requires careful planning. Whether you’re contributing more to your TSP, adjusting healthcare coverage, or managing income thresholds, staying proactive ensures you optimize your benefits.

For retirees, the integration of Medicare with FEHB or PSHB can lead to significant savings. Reviewing Annual Notice of Change (ANOC) letters and participating in open seasons allows you to adapt your plans to meet evolving needs.

Active employees should focus on maximizing contributions to retirement and FSAs while preparing for future healthcare costs. Keeping an eye on premium increases and out-of-pocket caps ensures you’re not caught off guard by unexpected expenses.

Additionally, staying engaged with informational sessions, webinars, or consultations provided by your agency or benefits providers can help you stay informed about upcoming changes. Regularly revisiting your financial goals ensures your strategies remain aligned with evolving circumstances.

Staying Ahead of Federal Benefits Updates

Changes to federal employee benefits are inevitable, but staying informed empowers you to make confident decisions. Whether you’re retiring soon or managing your post-retirement finances, these updates highlight the importance of ongoing planning.

Don’t wait until the last minute—review your benefits, set financial goals, and consult with a benefits advisor if needed. A little preparation now can make a big difference in your future security.

Divorce And Federal Benefits—What Happens To Your Pension TSP And Insurance When Things Get Complicated

Posted on April 7, 2025April 8, 2025 by Marvin Dutton

Key Takeaways:

Divorce can significantly impact your federal benefits, including pensions, TSP, and insurance. Understanding how these are divided is critical to safeguarding your financial future.
Proactively planning for how a divorce may affect your benefits ensures smoother negotiations and protects your long-term interests.

Untangling Federal Pensions in a Divorce

One of the most valuable assets in a federal employee’s retirement portfolio is the pension. Whether you’re covered under the Federal Employees Retirement System (FERS) or the older Civil Service Retirement System (CSRS), your pension is likely subject to division during a divorce. Here’s how this process typically works.

The Role of the Court Order

Federal pensions are governed by the Court Order Acceptable for Processing (COAP). This document directs the Office of Personnel Management (OPM) on how to allocate your pension benefits. A COAP must meet specific requirements to be enforceable, and it’s essential to work with an attorney experienced in federal benefits to draft one correctly.

Division Methods

Pensions are often split using one of these methods:

Shared Payment: A percentage of your monthly annuity is paid to your ex-spouse directly by OPM.
Refund of Employee Contributions: Your ex-spouse may receive a portion of the contributions you’ve made to your retirement system.

You should review your divorce decree carefully to understand the exact terms. If the COAP isn’t precise, it can delay or jeopardize the division of benefits.

Survivor Benefits

If you’ve elected a survivor annuity for your ex-spouse, this could reduce your monthly pension. Survivor benefits ensure that your former spouse continues to receive a portion of your pension after your death. Be aware that these benefits may require separate language in the COAP to be valid.

What Happens to Your Thrift Savings Plan (TSP)?

The Thrift Savings Plan (TSP), a key component of federal retirement, is also subject to division during a divorce. Much like your pension, a court order is required to allocate TSP funds.

Court Orders and TSP

A Retirement Benefits Court Order (RBCO) is necessary for dividing your TSP. The order must specify the amount or percentage of your account that your ex-spouse is entitled to. Without a valid RBCO, the TSP will not disburse funds.

Distribution Options

Your ex-spouse can choose to receive their share in several ways:

Direct Payment: The TSP pays the awarded amount directly to your ex-spouse.
Transfer to an IRA or Retirement Plan: This option avoids immediate tax implications for the recipient.

Keep in mind that withdrawing or transferring funds from the TSP due to a divorce does not incur the usual early withdrawal penalties. However, taxes may still apply.

Managing the Financial Impact

Dividing your TSP can significantly reduce your retirement savings, so it’s vital to plan for how you’ll rebuild your account. Consider increasing your contributions post-divorce to make up for the loss.

Navigating FEHB and FEDVIP After Divorce

Federal Employees Health Benefits (FEHB) and Federal Employees Dental and Vision Insurance Program (FEDVIP) provide essential coverage for federal workers and retirees. Divorce, however, alters your eligibility and coverage options.

FEHB Coverage Changes

After a divorce, your ex-spouse loses eligibility for FEHB coverage under your plan. They may be able to continue coverage temporarily under Temporary Continuation of Coverage (TCC), but they’ll need to pay the full premium plus a 2% administrative fee. TCC coverage lasts for up to 36 months.

If you have children covered under your FEHB plan, their coverage remains unaffected as long as they meet eligibility requirements.

FEDVIP Implications

FEDVIP coverage works similarly. Your ex-spouse will no longer qualify for coverage under your plan post-divorce. Unlike FEHB, FEDVIP does not offer a temporary continuation option, so your ex-spouse will need to find a new dental and vision insurance provider.

Reassessing Your Coverage

Post-divorce, you may want to review your own health, dental, and vision coverage. If you were in a family plan, you could switch to a self-only or self-plus-one plan during the next open season or if a qualifying life event occurs.

The Fate of Federal Life Insurance Policies

Federal Employees’ Group Life Insurance (FEGLI) policies are often overlooked during divorce proceedings but can be a significant asset or point of contention.

Beneficiary Designations

Your FEGLI policy’s beneficiary designation takes precedence over any divorce decree. If you don’t update your beneficiary after the divorce, your ex-spouse may still receive the benefit upon your death.

Court-Ordered Benefits

In some cases, a court order may require you to maintain your ex-spouse as the beneficiary of your FEGLI policy. This is often done to ensure financial security for alimony or child support obligations.

Reevaluating Your Coverage

Divorce is a good time to reassess your life insurance needs. You may want to adjust your coverage levels or change beneficiaries to align with your new circumstances.

Social Security Benefits After Divorce

Your divorce may also affect your Social Security benefits. If you were married for at least 10 years, your ex-spouse could be entitled to benefits based on your record—but this does not reduce the amount you receive.

Eligibility Criteria

To qualify for benefits based on your record, your ex-spouse must:

If your ex-spouse remarries, they generally lose eligibility for benefits based on your record unless the subsequent marriage ends.

Key Steps to Protect Yourself

Divorce can be overwhelming, but taking proactive steps can help safeguard your benefits:

Understand the Rules: Familiarize yourself with how federal benefits are divided to avoid surprises.
Work with Experts: Hire a divorce attorney who specializes in federal employee benefits.
Update Beneficiary Designations: Ensure your life insurance, TSP, and other accounts reflect your current wishes.
Rebuild Your Finances: Adjust your retirement savings plan and budget to account for post-divorce changes.
Review Insurance Coverage: Consider switching to a more suitable plan based on your new situation.

How Timing Affects Your Benefits

The timing of your divorce can influence how your benefits are divided. For example:

If you’re nearing retirement, the division of your pension could have a more significant impact.
Post-retirement divorces may involve more complex negotiations regarding survivor benefits and annuities.

Additionally, certain benefits, like Social Security, depend on specific timelines, such as the length of your marriage and your ex-spouse’s age.

Avoiding Common Pitfalls

Divorce is complicated, but understanding these common mistakes can help you navigate the process more effectively:

Overlooking Beneficiary Updates: Failing to update designations can lead to unintended outcomes.
Ignoring Future Financial Needs: Ensure your divorce settlement considers the long-term implications for your retirement.
Misunderstanding Insurance Options: Know how your FEHB, FEDVIP, and FEGLI plans will change post-divorce.
Neglecting Legal Requirements: Ensure all court orders meet federal standards to avoid delays or issues with processing.

Securing Your Financial Future Post-Divorce

Divorce may feel like a financial setback, but with careful planning, you can rebuild your financial foundation. Take the time to reassess your retirement strategy, insurance coverage, and overall financial goals. Working with financial and legal professionals can make this transition smoother and set you up for a stable future.

How to Come Up with a Financial Plan for a Secure Retirement in 2024

Posted on April 1, 2025April 2, 2025 by Marvin Dutton

Key Takeaways

Developing a comprehensive financial plan for retirement in 2024 involves assessing your current financial situation, setting clear goals, estimating expenses, and creating a diversified investment strategy.
Regularly reviewing and adjusting your plan, maximizing retirement account contributions, and planning for healthcare costs are essential steps for ensuring financial security.

Planning for retirement is a critical aspect of financial management, ensuring that you can maintain your desired lifestyle and cover essential expenses once you stop working. As 2024 approaches, it’s essential to revisit and refine your retirement strategy to account for current economic conditions, changing personal circumstances, and new financial tools. This guide will walk you through the steps necessary to create a comprehensive financial plan for a secure retirement.

Assessing Your Current Financial Situation

Reviewing Assets and Liabilities

The first step in creating a retirement plan is to assess your current financial situation. Begin by listing all your assets, including savings accounts, investments, real estate, and retirement accounts. Next, catalog your liabilities, such as mortgages, loans, credit card debt, and any other outstanding obligations. Understanding your net worth will provide a clear picture of your financial health and help identify areas that need attention.

Analyzing Income and Expenses

Examine your current income sources, including salary, rental income, dividends, and any other earnings. Simultaneously, track your expenses to understand where your money goes each month. Categorize your expenses into essential (housing, utilities, groceries) and discretionary (entertainment, dining out). This analysis will help you identify potential savings opportunities and ensure you have a realistic view of your spending habits.

Setting Clear Retirement Goals

Defining Your Retirement Lifestyle

One of the most critical steps in retirement planning is setting clear goals. Define what your ideal retirement looks like. Do you plan to travel extensively, downsize your home, or start a new hobby or business? Understanding your desired lifestyle will help determine how much money you will need.

Establishing Financial Targets

Set specific financial targets to achieve your retirement goals. These targets might include the amount of savings you need, the expected returns on investments, and the desired income level during retirement. Use retirement calculators and tools to estimate these figures based on your current savings rate, projected expenses, and expected lifespan.

Estimating Retirement Expenses

Calculating Essential Expenses

Estimate your essential expenses in retirement, including housing, healthcare, food, utilities, and transportation. Remember to factor in inflation, which can significantly impact the cost of living over time. Healthcare expenses, in particular, tend to rise faster than the general inflation rate, so plan accordingly.

Accounting for Discretionary Spending

Consider discretionary spending, such as travel, entertainment, and hobbies. While these expenses are not mandatory, they play a crucial role in maintaining your quality of life. Ensure that your retirement plan accommodates these desires without jeopardizing your financial security.

Building a Diversified Investment Portfolio

Understanding Risk Tolerance

Building a diversified investment portfolio is essential for protecting your retirement savings from market volatility. Start by assessing your risk tolerance, which depends on your age, financial goals, and comfort level with investment risks. Younger individuals can typically afford to take more risks, while those closer to retirement should focus on preserving capital.

Diversifying Investments

Diversify your investments across various asset classes, including stocks, bonds, real estate, and cash equivalents. This strategy helps mitigate risk and ensures that poor performance in one area does not significantly impact your overall portfolio. Consider working with a financial advisor to create a balanced portfolio that aligns with your risk tolerance and retirement goals.

Rebalancing Regularly

Regularly review and rebalance your portfolio to ensure it remains aligned with your goals. Market fluctuations can shift your asset allocation, increasing risk or reducing potential returns. Rebalancing involves buying or selling assets to restore your desired allocation and maintain your investment strategy.

Maximizing Retirement Account Contributions

Taking Advantage of Employer-Sponsored Plans

Maximize contributions to employer-sponsored retirement plans, such as 401(k) or 403(b) accounts. These plans often offer tax advantages and employer matching contributions, which can significantly boost your savings. Aim to contribute at least enough to receive the full employer match, as this is essentially free money for your retirement.

Utilizing Individual Retirement Accounts (IRAs)

Consider contributing to Individual Retirement Accounts (IRAs), including Traditional and Roth IRAs. Traditional IRAs offer tax-deductible contributions, while Roth IRAs provide tax-free withdrawals in retirement. Evaluate which type of IRA aligns best with your financial situation and retirement goals, and contribute the maximum allowable amount each year.

Catch-Up Contributions

If you are 50 or older, take advantage of catch-up contributions to boost your retirement savings. The IRS allows additional contributions to retirement accounts for those nearing retirement age, helping you make up for any shortfall in savings.

Creating a Withdrawal Strategy

Understanding Required Minimum Distributions (RMDs)

Develop a withdrawal strategy that balances your need for income with preserving your retirement savings. Begin by understanding Required Minimum Distributions (RMDs), which mandate withdrawals from certain retirement accounts starting at age 72. Failing to take RMDs can result in significant tax penalties, so plan your withdrawals accordingly.

Sequencing Withdrawals

Sequence your withdrawals to minimize taxes and maximize the longevity of your savings. Consider withdrawing from taxable accounts first, followed by tax-deferred accounts, and finally tax-free accounts like Roth IRAs. This strategy can help manage your tax liability and ensure a steady income throughout retirement.

Managing Withdrawal Rates

Adopt a sustainable withdrawal rate to avoid depleting your savings too quickly. A commonly recommended approach is the 4% rule, which suggests withdrawing 4% of your retirement savings annually, adjusted for inflation. However, your withdrawal rate should reflect your specific financial situation, market conditions, and life expectancy.

Planning for Healthcare Costs

Estimating Medical Expenses

Healthcare is a significant expense in retirement, and planning for it is crucial. Estimate your medical expenses, including premiums for Medicare or private insurance, out-of-pocket costs, and potential long-term care expenses. Use tools and resources to project these costs based on your health status and expected lifespan.

Exploring Insurance Options

Evaluate your health insurance options, including Medicare, Medicare Advantage, and supplemental insurance plans. Determine which plans best meet your healthcare needs and budget. Consider long-term care insurance to protect against the high costs of extended care services, which can quickly deplete your retirement savings.

Incorporating Social Security Benefits

Maximizing Social Security

Social Security benefits are a vital income source for many retirees. Understand how to maximize your benefits by considering factors such as your full retirement age, the impact of delaying benefits, and how working during retirement affects your payouts. Delaying benefits can significantly increase your monthly payments, enhancing your financial security.

Coordinating Benefits with Other Income Sources

Coordinate your Social Security benefits with other retirement income sources to optimize your overall financial plan. Consider how Social Security fits into your broader retirement strategy, and use it to complement your savings and investment income.

Considering Long-Term Care Insurance

Evaluating the Need for Long-Term Care

Long-term care insurance can provide financial protection against the high costs of extended care services. Evaluate your need for long-term care based on your health status, family history, and financial situation. Consider the potential impact of long-term care expenses on your retirement savings and whether insurance is a suitable solution.

Comparing Long-Term Care Policies

Compare long-term care insurance policies to find the best coverage for your needs. Consider factors such as benefit amounts, coverage periods, waiting periods, and premium costs. Look for policies that offer inflation protection to ensure your benefits keep pace with rising care costs.

Reviewing and Adjusting Your Financial Plan Regularly

Monitoring Financial Progress

Regularly review your financial plan to ensure it remains aligned with your goals and circumstances. Monitor your progress toward your retirement savings targets, and adjust your plan as needed to stay on track.

Adapting to Changes

Be prepared to adapt your financial plan to changes in your life, such as health issues, changes in income, or significant market shifts. Flexibility is crucial to maintaining a secure financial future, so regularly reassess your plan and make adjustments as necessary.

Seeking Professional Advice

Consult with financial advisors to get expert guidance and ensure your plan is robust and comprehensive. Advisors can help you navigate complex financial decisions, optimize your investment strategy, and provide peace of mind as you approach retirement.

Final Thoughts

Creating a financial plan for a secure retirement in 2024 involves a thorough assessment of your current financial situation, setting clear goals, estimating expenses, and building a diversified investment portfolio. Maximizing retirement account contributions, developing a withdrawal strategy, planning for healthcare costs, and incorporating Social Security benefits are essential steps to ensure financial security. Regularly reviewing and adjusting your plan and seeking professional advice will help you stay on track and achieve a worry-free retirement. By taking these steps, you can enjoy your golden years with confidence and peace of mind.

Three Critical Facts About Divorce and Federal Pensions You Can’t Ignore

Posted on March 25, 2025March 27, 2025 by Marvin Dutton

Key Takeaways

Divorce can significantly impact your federal pension and other retirement benefits, so understanding the rules is crucial to protecting your financial future.
Court orders play a critical role in dividing pensions and determining the fate of other retirement benefits like health insurance and Thrift Savings Plan accounts.

Understanding the Basics of Federal Pensions and Divorce

When a federal employee or retiree goes through a divorce, their federal pension often becomes a central point of negotiation and court rulings. Federal retirement benefits are considered marital assets, meaning they can be divided during divorce proceedings. The division of these assets is not automatic; it requires a court order known as a court order acceptable for processing (COAP) to direct how the pension will be split.

If you are a federal employee covered under the Federal Employees Retirement System (FERS) or the older Civil Service Retirement System (CSRS), it’s vital to understand how your pension benefits could be divided. A divorce agreement must specifically address the federal pension to ensure clarity and compliance with federal regulations.

How a Court Order Affects Your Pension

Court Order Acceptable for Processing (COAP)

A COAP is a legal document that provides the Office of Personnel Management (OPM) with instructions on how to divide your pension. Without a COAP, your former spouse will have no legal claim to your pension benefits, regardless of any informal agreements made during the divorce.

For the COAP to be valid, it must meet specific federal requirements. It’s not enough for a divorce decree to mention a pension split; the COAP must include details like the percentage or dollar amount your ex-spouse will receive. Failing to include clear terms could lead to delays or disputes during retirement.

Impact on Survivor Benefits

If your former spouse is designated as a survivor, they may be entitled to receive a portion of your pension after your death. To preserve these survivor benefits, a court order must explicitly outline the designation. Survivor benefits also come with a cost, which will reduce your monthly pension payments, so it’s important to weigh this decision carefully.

Health Benefits: What Happens to FEHB Coverage?

One of the most overlooked aspects of divorce is the impact on health insurance coverage under the Federal Employees Health Benefits (FEHB) program. Spouses lose eligibility for FEHB coverage once a divorce is finalized, but they may qualify for Temporary Continuation of Coverage (TCC) for up to 36 months. TCC allows them to retain health insurance at their own expense but does not include any government contribution toward premiums.

For you, as the federal employee or retiree, the divorce does not affect your own FEHB coverage, but you need to ensure your plan is updated to reflect the change in dependents. You may also need to reassess your plan options during Open Season to account for the new household structure.

The Role of the Thrift Savings Plan (TSP) in Divorce Settlements

Division of TSP Accounts

The Thrift Savings Plan (TSP) is another significant retirement asset subject to division during divorce. Like your pension, a TSP account can be divided under a court order. However, this requires a Retirement Benefits Court Order (RBCO) rather than a COAP.

The RBCO must specify the percentage or fixed dollar amount your former spouse is entitled to receive. Once approved, the TSP will process the order and distribute the funds accordingly. It’s essential to note that the distribution may be taxable to the recipient unless rolled over into another retirement account.

Loan Balances and Account Adjustments

If you’ve taken a loan from your TSP, the outstanding balance may affect the division of the account. Courts often treat the loan as a liability and adjust the division of the remaining balance accordingly. Make sure your RBCO accounts for any TSP loans to avoid disputes.

Social Security and the Windfall Elimination Provision (WEP)

For FERS employees, Social Security benefits can also factor into a divorce settlement. Your former spouse may qualify for spousal or survivor Social Security benefits based on your earnings record if you were married for at least 10 years. These benefits do not reduce your own Social Security payments.

However, if you’re a CSRS retiree, the Windfall Elimination Provision (WEP) could reduce your Social Security benefits if you earned Social Security credits from other non-CSRS employment. Keep in mind that WEP does not affect spousal or survivor benefits.

Steps to Protect Your Financial Future

1. Understand Your Benefits

Review your retirement benefits, including your pension, TSP, and Social Security, before starting divorce negotiations. Access your OPM statements and consult your agency’s benefits office if needed.

2. Work with Professionals

Dividing federal retirement benefits is complex, so consider hiring an attorney and financial advisor experienced in federal divorce cases. They can help ensure your interests are protected and that all court orders comply with federal regulations.

3. Update Beneficiary Designations

After your divorce is finalized, update the beneficiary designations on your pension, TSP, and life insurance policies. Federal law generally honors the most recent beneficiary designation on file, even if it’s outdated.

4. Monitor Your Pension and TSP Accounts

Keep track of any changes to your pension or TSP after divorce. Ensure that all court-ordered distributions are processed correctly and that your retirement plans align with your new financial situation.

Key Timelines and Deadlines to Remember

Court Order Submission: Submit your COAP or RBCO as soon as the divorce is finalized to avoid processing delays.
TCC Enrollment for Health Coverage: Your ex-spouse has 60 days from the divorce date to apply for Temporary Continuation of Coverage.
Beneficiary Updates: Update beneficiary designations promptly to prevent conflicts in case of unexpected events.
Open Season Changes: Use the next FEHB Open Season to adjust your health plan based on your post-divorce needs.

Your Retirement, Your Control

Divorce is a challenging life event, but it doesn’t have to derail your retirement plans. By understanding how your federal benefits are affected and taking proactive steps, you can maintain control over your financial future. Ensure you have the proper court orders in place, keep your beneficiary designations updated, and work with knowledgeable professionals to navigate this complex process. Your retirement should remain secure, even during times of change.