Category: Thrift Savings Plan (TSP)

Key Takeaways

• Electing a survivor benefit is the only way to ensure your spouse continues to receive a portion of your federal annuity after your death.

• Failing to elect this benefit at retirement—or removing it later—can result in permanent financial loss for your spouse, with limited options for correction.

Understanding the Survivor Benefit Election

When you retire under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS

), you must make a crucial choice: whether or not to elect a survivor annuity. This decision directly affects whether your spouse receives any retirement income after your passing.

The survivor benefit provides your spouse with a portion of your monthly annuity—up to 50% under FERS and up to 55% under CSRS. But it only works if you elect it in writing at retirement.

Why the Decision Matters More Than You Think

If you do not choose a survivor benefit when you retire—or cancel it after retirement—your spouse is left without ongoing income from your annuity. That means no guaranteed monthly payments, no cost-of-living adjustments, and no continued access to certain health benefits.

For many retirees, this oversight isn’t discovered until it’s too late. And by then, even a legal will cannot override your original retirement election.

Timeline: When and How You Must Elect It

You must make the survivor benefit election at the time of retirement. The Office of Personnel Management (OPM) requires this decision on your retirement application (SF 3107 for FERS, SF 2801 for CSRS). You may:

• Elect a full survivor annuity, which reduces your own monthly annuity by about 10% but gives your spouse up to 50% of your annuity after you die.

• Elect a partial survivor annuity, which reduces your annuity by approximately 5% and provides up to 25% to your spouse.

• Choose no survivor annuity, but only with your spouse’s notarized written consent.

What Happens If You Skip the Election?

If you retire and fail to elect a survivor benefit—and your spouse does not provide written consent—OPM will automatically reduce your annuity to cover a full survivor benefit. This is designed to protect your spouse by default.

But if you are not married at retirement, no reduction is made, and no survivor benefits will exist unless you later marry and take steps within two years to elect a new survivor annuity.

The Two-Year Window After Marriage or Remarriage

If you marry after retirement, you can still elect a survivor benefit for your new spouse—but you must do so within two years of the marriage. This election requires:

• A written request to OPM

• An actuarial reduction in your annuity

• Possibly repaying the difference in benefits that would have been withheld had the election been made earlier

Missing this two-year window means your spouse will not be eligible for a survivor benefit—ever.

Divorce Complicates the Equation

If you divorce after retirement, your survivor election can be affected in several ways:

• If you had elected a survivor benefit for your now ex-spouse, it is automatically cancelled unless a court order mandates its continuation.

• If you remarry, the new spouse is not entitled to the survivor benefit unless you submit a new election within the required time.

• A divorce court order can grant your former spouse a survivor annuity even if you do not want them to have one, and this can reduce your annuity.

Reviewing your divorce decree and coordinating with OPM early is essential to ensure there are no surprises.

Survivor Benefits and Health Insurance Access

Under FERS and CSRS, continued health insurance coverage through the Federal Employees Health Benefits (FEHB) Program depends on electing a survivor annuity. If your spouse does not receive a survivor benefit, they cannot continue FEHB coverage under your record after your death.

This detail is often overlooked, but it can leave your spouse without health insurance when they may need it most.

Cost vs. Security: Is It Worth Electing?

While it’s true that electing a survivor annuity reduces your monthly retirement income, that reduction provides significant peace of mind:

• Your spouse receives guaranteed monthly payments for life.

• The payments are adjusted for inflation through cost-of-living increases.

• Health benefits can be preserved.

If you forgo the survivor benefit to increase your own annuity, the short-term gain could result in long-term loss for your spouse.

Making Changes After Retirement: What Are the Limits?

After retirement, your ability to make changes to the survivor benefit election is extremely limited. You may:

• Cancel a survivor election only with your spouse’s written and notarized consent

• Add a new survivor after marriage or remarriage within two years

• Comply with a court order in divorce to maintain or assign a survivor benefit

You cannot:

• Add a survivor benefit for a spouse after two years have passed since your marriage

• Reinstate a survivor benefit after canceling it (unless tied to divorce or death of the original spouse)

What If Your Spouse Passes First?

If your spouse dies before you, your survivor annuity deduction stops—but you do not automatically regain all the funds previously withheld. You will receive your full annuity going forward, but past reductions are not refunded.

You should notify OPM immediately upon your spouse’s death so they can adjust your annuity accordingly.

Planning Ahead to Protect Your Family

You should start discussing survivor annuity options well before your retirement date. Consider the following steps:

• Estimate your spouse’s future needs, especially if they do not have their own pension or substantial savings

• Weigh the cost of reducing your annuity against the financial protection it offers

• Confirm your election choice with your spouse, and discuss it with a licensed professional if necessary

The right decision often depends on the specifics of your household finances, health, age difference, and whether your spouse has access to other income streams.

Don’t Leave It to Chance—Your Family’s Security Depends on It

Failing to elect a survivor benefit—or waiting too long to correct a misstep—can jeopardize your spouse’s financial future and healthcare access. The rules around elections, deadlines, and eligibility are strict, and exceptions are rare.

If you’re nearing retirement or reviewing your benefits, now is the time to make informed decisions. Speak with a licensed professional listed on this website to help you evaluate your options and avoid costly mistakes.

Key Takeaways

• If you resign from federal service under FERS, your pension isn’t automatically gone—but whether you can claim it, and when, depends on your age and years of service.

• A deferred retirement is often available, but you must understand the timelines, penalties, and how benefits like FEHB and TSP access may be impacted.

Resigning Under FERS: What You Need to Know

If you’re covered by the Federal Employees Retirement System (FERS) and thinking about resigning before reaching retirement eligibility, you might wonder whether you’re walking away from your pension. The truth is, your benefits don’t disappear—but they do change dramatically based on how and when you leave federal service.

Eligibility Matters More Than You Think

Under FERS, your eligibility for retirement benefits is determined by your age and years of creditable service. If you resign before reaching the required combination of age and service for immediate retirement, you may still qualify for deferred retirement—but you must meet key thresholds:

• Minimum of 5 years of creditable service to be eligible for any pension.

• Deferred retirement is available starting at age 62 with at least 5 years of service.

• With 10 years of service, you’re eligible at the Minimum Retirement Age (MRA), which in 2025 is between 56 and 57 depending on your birth year.

However, these options don’t come with full benefits.

Your Pension Isn’t Gone—But It’s Not Immediate Either

When you resign, you’re not entitled to an immediate annuity unless you meet retirement eligibility. That means:

• No monthly FERS pension begins until you reach the required age.

• The annuity is based on your high-3 average salary and years of service at the time you resigned—not when you claim it.

• If you take a deferred retirement at MRA with 10+ years of service, there’s a 5% reduction per year if you claim before age 62.

You can delay your pension to age 62 to avoid this reduction, but that delay means no income from your FERS annuity during that gap.

You Must Apply for Deferred Retirement

Many resigning employees don’t realize this critical step: your pension is not automatic. If you’re not eligible for an immediate retirement, you must file Form RI 92-19 when you reach retirement age to begin receiving your deferred annuity.

Failure to file means you won’t receive anything—even if you’re entitled to it. There’s no automatic notice or check arriving on your birthday.

What Happens to FEHB and FEGLI

If you resign before reaching immediate retirement eligibility, you lose access to FEHB and FEGLI.

• FEHB does not continue into retirement unless you retire with an immediate annuity.

• Resigning employees cannot keep FEHB into retirement unless they later qualify under MRA+10 and meet the five-year rule.

• FEGLI coverage ends unless you convert it to a private policy within 31 days.

Once you leave service, even with a future pension, you’ll need to obtain healthcare and life insurance through other means unless you’re eligible for and elect continuation.

What About the TSP?

The Thrift Savings Plan remains yours after resignation:

• You can leave your money in the TSP and continue to benefit from its tax-advantaged growth.

• You can roll it over into another qualified retirement plan.

• Withdrawals are allowed after separation, but early withdrawals before age 59½ may be subject to a 10% IRS penalty.

However, you lose eligibility for federal matching contributions once you leave employment.

Creditable Service Still Counts

Even after resignation, your years of federal service remain creditable. If you later return to federal employment, those years count toward your new total. You may even be able to buy back military service or prior service not yet counted.

However, time spent after resignation and before deferred retirement does not count toward your pension. Your annuity will be calculated as if time stood still after you left.

Should You Withdraw Your FERS Contributions?

You do have the option to withdraw your FERS contributions (your own retirement deductions from your paychecks). But there’s a catch:

• Doing so forfeits your right to a future FERS pension.

• If you later re-enter federal service, you’ll have to redeposit those funds with interest to regain credit.

Only consider withdrawing if you’re absolutely certain you won’t return to government work and don’t want a future pension.

How Resignation Differs from Retirement

Here’s the key distinction:

• Retirement means you’re eligible for and electing an annuity that begins shortly after you leave.

• Resignation means you’re ending federal service before becoming eligible for an immediate annuity.

Retirees keep their health and life insurance and start receiving annuity payments. Resignees don’t—unless they later apply and qualify for deferred benefits.

Timeline to Expect Your Pension

If you resign in 2025 and are under age 62, you will wait years before you can apply for your pension:

• Resign with 5+ years of service: eligible at 62.

• Resign with 10+ years: eligible at your MRA (but reduced), or wait until 62 for full pension.

• No benefits are paid until you file your application at that time.

This can lead to a long income gap that you’ll need to plan for using savings, your TSP, or other income sources.

Can You Get Social Security?

Yes, your Social Security benefits aren’t tied to your FERS employment directly, but they factor into your retirement:

• Social Security can start as early as age 62, but claiming early reduces your benefit.

• Your FERS pension and Social Security are independent—you don’t lose one for claiming the other.

Remember, you pay into Social Security while working under FERS, so it’s part of your retirement income picture, just not tied to your resignation decision.

Mistakes to Avoid When Resigning

• Assuming you’re retiring when you’re actually resigning.

• Forgetting to file for deferred retirement benefits.

• Withdrawing FERS contributions without understanding the consequences.

• Not planning for the income gap before your deferred annuity begins.

These are common missteps that cost employees thousands in missed pension and healthcare value.

Before You Walk Away

Before resigning from a FERS-covered position, ask yourself:

• Do I have at least 5 years of service?

• How far am I from age 62 or my MRA?

• Can I bridge the income gap with other assets?

• Will I need health insurance, and how will I get it?

• Am I making a temporary decision that affects my permanent retirement?

If you’re unsure, speak with a licensed professional listed on this website before making any irreversible choices.

Make the Right Exit—And Protect Your Future

Resigning under FERS doesn’t mean forfeiting your retirement—but it can delay or reduce it significantly. Knowing how to claim a deferred retirement, what benefits you lose, and how to manage the gap in coverage and income is essential for making a smart decision.

Before you resign, review your service history, understand your eligibility, and plan your next steps. For personalized help evaluating your situation, speak with a licensed professional listed on this website.

Key Takeaways

• Several policy changes in 2025 are reshaping public sector retirement, and missing these updates could disrupt your retirement timeline.

• New federal workforce headlines affect benefits, annuities, Social Security adjustments, and healthcare coverage, requiring closer planning now.

Federal Retirement: New Shifts You Need to Know

Public sector retirement has always required careful attention, but 2025 brings changes that could catch you off guard if you are not paying attention. This year, a blend of legislative reforms, cost-of-living adjustments, and healthcare updates are reshaping the expectations many government employees held for years.

If you are planning retirement soon, or even if it is still a few years away, staying ahead of these developments can make the difference between a smooth transition and a series of costly surprises.

Federal Pay Raises and Their Impact on Retirement Calculations

Although 2025 included a modest federal pay raise, it is important to note that not all salary increases will directly impact your retirement annuity. Specifically:

• The proposed exclusion of locality pay from the ‘high-3’ salary calculation could reduce final annuity payouts for many.

• If passed into law later this year, employees in high-cost areas may need to revise their retirement savings strategies.

High-3 calculations are critical because they determine your monthly retirement annuity under the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS).

FERS Annuity Supplement Adjustments

In 2025, the FERS Annuity Supplement remains available to those who retire before age 62 with full eligibility. However, remember:

• The supplement still ends at age 62, regardless of when you claim Social Security.

• Continued employment after retirement or earnings above the Social Security earnings limit ($23,480 for 2025) will reduce or eliminate your supplement.

If you were counting on this additional income, you need to be cautious about part-time work or side gigs that could unintentionally disqualify you.

Thrift Savings Plan (TSP) Contributions Get a Lift

New TSP contribution limits in 2025 allow you to save more toward retirement:

• The standard elective deferral limit is $23,500.

• Catch-up contributions for those aged 50-59 and 64+ are $7,500.

• Participants aged 60-63 have a special catch-up limit of $11,250.

This means you can potentially contribute up to $34,750 if you are between 60-63, giving you a significant last-minute savings opportunity.

Social Security Changes Affecting Federal Employees

Following the 2025 repeal of the Windfall Elimination Provision (WEP), public sector retirees now receive full Social Security benefits without reduction due to their government pension. This is a major positive shift, but it comes with a few things you should monitor:

• The full retirement age (FRA) for those born in 1963 is now 67.

• The maximum taxable earnings limit has increased to $176,100.

• The COLA for 2025 is 3.2%, providing an average monthly benefit increase of $59.

These updates make Social Security a stronger part of your retirement income, but smart planning is still crucial.

Healthcare remains a vital piece of your retirement puzzle. In 2025, Medicare costs have risen:

• The standard Part B premium is now $185 per month.

• The Part B deductible increased to $257.

• The Part A hospital deductible is $1,676 per benefit period.

• Part D prescription drug coverage has a new $2,000 out-of-pocket cap, replacing the previous coverage gap (donut hole).

These increases may strain fixed incomes, especially when combined with other healthcare costs such as coinsurance and copayments.

The PSHB Program and Postal Employees

If you are a Postal Service employee or retiree, 2025 marks the full transition from the Federal Employees Health Benefits (FEHB) Program to the Postal Service Health Benefits (PSHB) Program. Key points include:

• Open Season continues to run each year from November to December.

• Medicare Part B enrollment is mandatory for many Medicare-eligible annuitants.

• Integrated Medicare Part D prescription drug coverage is now standard.

If you have not reviewed your PSHB plan yet, it is crucial to do so to ensure it still fits your needs.

Legislative Proposals That Could Reshape Retirement Further

Several proposals introduced in early 2025 could reshape federal retirement planning in the coming months:

• Locality Pay Removal: Removing locality pay from retirement calculations is still pending and could become law.

• FEHB Contribution Shift: Discussions continue around shifting government contributions for FEHB from percentage-based to a flat-rate voucher model, which could mean higher out-of-pocket healthcare costs.

• TSP G Fund Changes: A proposal to remove the government subsidy from the G Fund could impact returns for conservative investors.

None of these proposals have passed yet, but staying aware is critical. Any could significantly affect your future retirement security.

Leave and Telework Policies Are Also Evolving

While retirement benefits get most of the attention, changes to work policies can influence when and how you retire:

• Expanded telework flexibilities in 2025 mean some employees can continue working longer from remote locations.

• New leave policies, including expanded paid parental leave, provide greater flexibility but may affect final leave payouts that count toward retirement benefits.

Understanding how your current working conditions tie into your retirement timeline is an often overlooked but important strategy.

Special Considerations for Early Retirement

If you are considering early retirement under the MRA+10 provision (Minimum Retirement Age plus 10 years of service), you should be aware:

• Retiring before full eligibility still results in a 5% per year penalty reduction.

• You may defer your annuity to avoid penalties, but healthcare continuation rules may complicate this decision.

Choosing early retirement in 2025 requires a nuanced evaluation of financial readiness and healthcare coverage.

Survivor Benefits Still Require Special Planning

Choosing survivor benefits continues to be a major decision point in 2025. Important considerations include:

• To continue FEHB coverage for a spouse after your death, you must elect a survivor annuity.

• Survivor annuity elections will reduce your own annuity, so balance your financial needs carefully.

Spending time to think through these elections today will spare your loved ones financial headaches later.

Retirement Application Processing Times

As of 2025, OPM processing times for retirement applications still average around 90-120 days. Plan ahead accordingly:

• Submit your application at least 90 days before your intended retirement date.

• Double-check all required documentation, including marriage certificates and military service records if applicable.

Delays are common, so build in a buffer to avoid cash flow gaps after you retire.

Action Steps You Should Take Now

With all these changes underway, here are a few practical steps to strengthen your retirement outlook:

• Review your Social Security statement for accurate earnings history.

• Increase TSP contributions if possible to take advantage of higher limits.

• Meet with a licensed professional to evaluate your Medicare strategy, especially if you are turning 65 soon.

• Plan for potential healthcare cost increases by building a larger cash reserve.

• Stay updated on legislative developments to quickly adjust your plans if needed.

Planning ahead gives you more options when retirement day arrives.

Preparing for a New Retirement Landscape

The federal workforce landscape in 2025 is changing faster than many realize. Delayed reactions or assumptions based on old rules could cost you years of financial security. Whether it is adjusting to new Social Security benefits, higher healthcare costs, or legislative shifts, the time to review your retirement plan is now.

For personalized advice on optimizing your retirement under the new 2025 federal workforce realities, we encourage you to contact a licensed professional listed on this website. Getting expert help today can lead to greater financial peace tomorrow.

Key Takeaways

• Your FERS annuity is directly tied to your “high-3” average salary. Getting this number right is essential for securing long-term retirement income.

• Strategic timing—such as delaying retirement by a few months—can significantly increase your annuity over the span of your retirement.

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What the “High-3” Is—and Why It Matters

Under the Federal Employees Retirement System (FERS), your basic retirement annuity is calculated using your “high-3” average salary. This is the average of your highest-paid consecutive 36 months of basic pay.

Your high-3 isn’t just a formality—it forms the cornerstone of your future income. For many government employees, this average defines how comfortably they’ll live in retirement. Given that the typical FERS retiree receives about $1,810 monthly from the annuity, even small changes in your high-3 can make a noticeable difference.

What Counts Toward Your High-3

Your high-3 calculation includes only your basic pay. This means:

• Overtime, bonuses, and awards are not included.

• Locality pay and shift differentials do count, as they are considered part of your basic pay.

• Special pay adjustments, such as those for law enforcement officers or air traffic controllers, also count.

It’s important to review your earnings statements and SF-50s to verify what pay is included and to ensure there are no errors. Incorrect classification of pay can result in a lower high-3 and thus a smaller annuity.

When Your High-3 Occurs

Your high-3 can happen at any point in your career—it doesn’t have to be your final three years. It just needs to be any three consecutive years where your basic pay was highest. For most, this tends to be the final stretch before retirement, especially if promotions or step increases occur late in your career.

However, if you’ve accepted a lower-paying position before retirement—such as shifting into a lower-grade job for less stress—your high-3 may come from an earlier period.

Why Timing Matters

Your high-3 average is not locked in until you retire. This means:

• Delaying retirement by a few months to include a higher-paying period can permanently raise your pension.

• Postponing step increases or foregoing promotions right before retirement can reduce your high-3.

• Taking extended leave without pay during your final three years may lower your average.

You should aim to retire shortly after your final step increase or general pay adjustment to ensure these boosts are fully reflected in your average.

Understanding the Formula

Your FERS basic annuity is calculated as follows:

• 1% of your high-3 average salary multiplied by your years of creditable service.

• 1.1% if you retire at age 62 or later with at least 20 years of service.

For example, if your high-3 average is $90,000 and you have 30 years of service:

• Retiring before age 62: 1% x $90,000 x 30 = $27,000/year

• Retiring at 62 or older with 20+ years: 1.1% x $90,000 x 30 = $29,700/year

That 0.1% difference adds up. Over 20 years of retirement, it could mean an additional $54,000.

Mistakes That Can Hurt Your High-3

Several common missteps can reduce your high-3, leading to a smaller retirement check:

• Accepting a lower-grade job late in your career.

• Switching to part-time during your final years without checking the impact.

• Extended unpaid leave or sabbaticals without understanding their effect on your average.

• Incorrect earnings records that understate your actual basic pay.

Always request and review a Certified Summary of Federal Service and compare it to your personal records to spot any discrepancies early.

Tools to Help You Estimate

While the Office of Personnel Management (OPM) provides the final determination, you can run your own estimates using several tools:

• SF-50s: Use these to identify periods of highest pay.

• Earnings and Leave Statements: Confirm basic pay and ensure no overtime or bonuses are misclassified.

• High-3 calculators: Use official or agency-provided calculators to estimate your average and see how small timing changes can impact it.

Using these tools allows you to make more informed decisions about your retirement date and employment choices.

Strategies to Improve Your High-3

If you still have time before retirement, several tactics can help boost your average:

• Pursue step increases strategically.

• Time retirement around general pay raises.

• Avoid taking lower-paying details or reassignments in your final years.

• Maximize locality pay by working in higher-cost areas if feasible.

• Review and fix errors in your personnel records annually.

Each of these steps can result in a higher final annuity—potentially thousands more annually.

Impact of Unused Sick Leave

While unused sick leave doesn’t affect your high-3 calculation, it does increase your total years of creditable service. This can boost your pension when multiplied by your high-3 salary. Every 174 hours of unused sick leave equals one month of additional creditable service.

So if you’re a few months short of a higher annuity milestone, accrued sick leave could push you over the edge.

High-3 and Divorce Settlements

If you’re divorced, your high-3 calculation can affect how much of your annuity is subject to division under a court order. If your ex-spouse is entitled to a portion of your annuity based on your high-3, ensure your calculation is accurate and reflects your correct earning history.

You should consult your divorce decree and clarify how the benefit is apportioned, especially if it was based on earnings during a specific period.

Military Buyback and High-3

If you served in the military and are considering a military service credit deposit (buyback), it’s worth noting that your military time counts toward your years of creditable service but not toward your high-3 salary. However, since it can add years to your service calculation, your overall annuity amount increases significantly.

Just make sure to complete the buyback before you retire to receive full credit.

It’s worth remembering that the FERS Special Retirement Supplement—which bridges the gap until Social Security begins at 62—is not based on your high-3. Instead, it’s calculated using your estimated Social Security benefit and your years of FERS service.

So while the high-3 is crucial for your annuity, it does not affect every aspect of your retirement income.

Final Thoughts on Getting Your High-3 Right

Securing your highest possible high-3 average takes awareness, planning, and timing. Because your annuity is for life and often includes cost-of-living adjustments, even small differences compound significantly over time.

Take time now to:

• Review your personnel and pay records.

• Consider the timing of your retirement.

• Work with your agency’s HR or benefits officer.

For tailored guidance, connect with a licensed professional listed on this website who can help you evaluate your personal situation and ensure your high-3 truly works in your favor.

Key Takeaways:

1. The Government Pension Offset (GPO) significantly reduces the Social Security benefits of federal retirees who are eligible for pensions from non-Social Security-covered jobs.
2. As pension rules and cost-of-living adjustments evolve, the impact of the GPO is hitting federal retirees harder in 2024, contributing to financial insecurity for many.

The Government Pension Offset (GPO) is an often overlooked yet critical issue for federal retirees, especially those who rely on Social Security as a part of their post-retirement income. In 2024, as inflation and cost-of-living adjustments (COLA) rise, the GPO is becoming an even more significant financial burden. While this provision was designed to offset pension benefits received from non-Social Security-covered employment, its impact has become disproportionately large for many public sector workers. Let’s dive into how the GPO works, why it’s affecting retirees more harshly now, and what federal employees should consider as they navigate their financial future.

Understanding the Government Pension Offset (GPO)

The Government Pension Offset is a provision that reduces Social Security spousal or survivor benefits for those who receive a pension from work not covered by Social Security. Most federal retirees, especially those under the Civil Service Retirement System (CSRS), are affected because they worked in positions where they did not pay into Social Security.

The GPO reduces Social Security benefits by an amount equal to two-thirds of the individual’s federal pension. For example, if a retiree receives a monthly pension of $3,000 from non-Social Security-covered work, the GPO would reduce their spousal or survivor benefits by $2,000—potentially wiping out their Social Security benefits altogether.

Why 2024 Is Making the GPO Worse

In 2024, several economic and policy changes are exacerbating the negative impact of the GPO on federal retirees. These include inflation, COLA adjustments, and changes in federal pension structures. Let’s explore these issues in more detail:

1. Cost-of-Living Adjustments Are Rising

One of the key factors amplifying the effects of the GPO is the rising cost of living. Social Security provides annual COLAs to ensure that benefits keep up with inflation, but pensions under the CSRS system often don’t fully keep pace with inflation. In 2024, inflation remains relatively high, meaning the COLA increases for Social Security benefits are larger than in previous years. However, federal retirees impacted by the GPO might not see any benefit from these adjustments, as their Social Security payments are already reduced—or eliminated entirely—by the offset.

2. Inflation Is Increasing Financial Pressure

Inflation continues to erode the purchasing power of retirees. While Social Security adjusts benefits to account for inflation, many federal pensions do not offer the same level of protection. Those retirees who rely on a combination of Social Security and their federal pension face growing financial insecurity as rising prices outpace their fixed incomes.

Since the GPO reduces Social Security benefits by up to two-thirds of an individual’s pension, retirees feel the impact even more as their pensions lose value in an inflationary environment. This puts them at risk of falling behind in essential expenses like healthcare, housing, and everyday living costs, hitting them harder than in years with lower inflation rates.

3. Changes in Retirement and Pension Rules

Recent adjustments to federal retirement and pension rules are also making the GPO’s impact more severe. As the federal workforce transitions to the Federal Employees Retirement System (FERS) from CSRS, many retirees may not fully understand how the GPO will affect their Social Security benefits, especially those who worked in both Social Security-covered and non-covered jobs.

For CSRS retirees, the GPO’s impact is absolute, often reducing or eliminating their Social Security benefits. However, FERS employees are more likely to be covered by Social Security, which means that the GPO affects them differently. But even for FERS employees, those with mixed work histories or who worked part-time in jobs not covered by Social Security may still see a significant reduction in their benefits.

4. Delayed Awareness of GPO’s Effects

One of the biggest issues with the GPO is that many federal employees don’t realize how much it will impact their retirement benefits until it’s too late. Because the GPO primarily affects Social Security spousal or survivor benefits, employees may not realize the full effect of the offset until after their spouse retires or passes away. For many federal retirees, this can come as a rude awakening, severely altering their expected retirement income and financial security.

In 2024, with an aging federal workforce, a greater number of retirees are feeling the pinch of the GPO, often too late to adjust their financial plans accordingly.

How Federal Retirees Can Prepare for the GPO

For those still in the workforce or newly retired, understanding the GPO and preparing for its impact is critical. Here are some steps federal employees and retirees can take to mitigate the GPO’s effect:

1. Maximize Other Retirement Savings

One way to minimize the impact of the GPO is to increase contributions to other retirement savings vehicles, such as the Thrift Savings Plan (TSP), IRAs, or 401(k)s. Building up a robust retirement nest egg can help offset the reduction in Social Security benefits due to the GPO.

2. Consider Spousal Retirement Plans

For married federal retirees, it’s crucial to take spousal benefits into account. If your spouse is entitled to their own Social Security benefits, it may make sense to delay claiming spousal benefits as long as possible to maximize their value. Delaying benefits can result in a higher payout down the line, which may help compensate for the reduction caused by the GPO.

3. Plan for a Potential Reduction in Benefits

Federal retirees who are subject to the GPO should plan their retirement budget with the assumption that their Social Security benefits may be significantly reduced. This includes being realistic about how much income you’ll need to cover essential expenses and creating a strategy to make up the difference with other income sources.

4. Stay Informed on Legislative Changes

There has been ongoing debate in Congress about repealing or modifying the GPO. While no major changes have been enacted yet, federal retirees should stay informed about potential legislative efforts that could alter the way the GPO is applied. Keeping up with changes in retirement laws and pension policies can help you plan for a more secure financial future.

5. Seek Professional Financial Advice

Because the GPO is a complex issue that can drastically affect retirement planning, consulting with a financial advisor who understands federal benefits is a smart move. A professional can help you navigate the rules around the GPO, ensure that you maximize your retirement benefits, and create a financial plan that takes into account all aspects of your income sources.

The Future of the Government Pension Offset

As the federal workforce continues to age and more retirees come to rely on a mix of federal pensions and Social Security, the future of the GPO remains uncertain. While there is pressure on lawmakers to modify or repeal the provision, progress has been slow. For now, federal retirees will need to continue planning for the financial hit caused by the GPO.

What’s clear is that the GPO will continue to have a significant impact on federal retirees in 2024 and beyond, particularly as inflation and cost-of-living increases erode the value of their fixed incomes. The key for current and future retirees is to stay informed, plan ahead, and be prepared to adapt as necessary.

Navigating the Challenges of the GPO in 2024

The GPO has long been a controversial issue, but its financial impact is being felt more acutely in 2024 than ever before. Rising costs, inflation, and changing retirement rules are all contributing to the greater strain on federal retirees. While the GPO serves a regulatory purpose, it often leaves those who dedicated their careers to public service struggling to make ends meet in retirement.

For those affected by the GPO, the best course of action is preparation. By understanding how the offset works, maximizing other sources of retirement income, and staying informed on legislative efforts to reform the system, retirees can better protect their financial well-being.