Category: Thrift Savings Plan (TSP)

Key Takeaways:

1. Federal employee benefits are undergoing significant changes before 2025, including rising healthcare premiums, retirement contribution updates, and evolving insurance options.

2. Understanding these changes can help you make informed decisions to protect your financial well-being and plan for the future.

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What’s Changing in Federal Employee Benefits?

Federal employee benefits are evolving in ways that will impact both active workers and retirees. With updates to healthcare costs, retirement planning, and insurance premiums, understanding these trends is essential. Whether you’re nearing retirement or still climbing the career ladder, these changes affect how you manage your benefits now and into the future.

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Rising Healthcare Costs: Brace Yourself

Premiums Are Climbing Steadily

The Federal Employee Health Benefits (FEHB) program will see an average 13.5% premium increase in 2025. This is one of the largest hikes in recent years, and it reflects broader trends in healthcare inflation. For federal employees, this translates to higher paycheck deductions, while retirees will see a larger portion of their annuities going toward premiums.

Why Are Costs Increasing?

Healthcare costs are rising due to factors like:

• Inflation affecting medical services and prescriptions.
• An aging population requiring more extensive care.
• The ongoing demand for advanced treatment options and newer technology.

Understanding these factors won’t stop the increases, but it can help you plan for higher costs.

What You Can Do Right Now

• Compare plans during Open Season: The 2024 Open Season runs from November 11 to December 9. Take time to evaluate whether your current FEHB plan still meets your needs.
• Consider healthcare savings options: Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs) can help you manage out-of-pocket expenses more effectively.

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Medicare and Its Expanding Role

Medicare Enrollment Becomes Critical for Some

By January 1, 2025, Medicare-eligible Postal Service retirees must enroll in Medicare Part B to retain their Postal Service Health Benefits (PSHB) coverage. This requirement highlights the growing importance of Medicare for federal retirees.

Why Combine Medicare with FEHB?

Coordinating Medicare and FEHB often reduces out-of-pocket costs by ensuring you’re covered for a broader range of medical services. For example:

• Medicare Part B often covers outpatient care and preventive services.
• FEHB can fill in gaps, covering services Medicare doesn’t, like certain prescriptions or additional hospitalization costs.

Your Action Plan

• Enroll in Medicare during your Initial Enrollment Period (IEP), which spans 7 months around your 65th birthday (3 months before, the month of, and 3 months after).
• Reassess your combined Medicare and FEHB coverage annually to optimize your benefits.

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Retirement Contributions: Plan Smarter

New Thrift Savings Plan (TSP) Limits

For 2024, the TSP contribution limit has increased to $23,000, with an additional $7,500 in catch-up contributions available for those aged 50 and older. Beginning in 2025, changes from the SECURE 2.0 Act will allow workers aged 60 to 63 to contribute even more.

Social Security Earnings Caps

If you’re receiving Social Security benefits while still working, the earnings limit for 2024 is $22,320 per year. Exceeding this threshold can result in reduced benefits. However, once you reach your full retirement age, this cap no longer applies, and you can earn freely without reductions.

How to Optimize Contributions

• Max out your TSP contributions each year to take full advantage of matching contributions from your agency.
• Use catch-up contributions if you’re eligible, as these extra savings can significantly bolster your retirement fund.

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Shifting Retirement Dynamics: FERS vs. CSRS

The Rise of FERS

The Federal Employees Retirement System (FERS) now covers the vast majority of federal workers. It combines a civil service pension, Social Security benefits, and TSP contributions, offering flexibility but requiring proactive management.

The Decline of CSRS

Only a small percentage of federal employees remain under the Civil Service Retirement System (CSRS). While CSRS pensions are more generous than FERS, they don’t include Social Security, making additional retirement savings critical for those still covered by this system.

The Role of the Special Retirement Supplement

FERS employees who retire before age 62 may qualify for a Special Retirement Supplement (SRS), which bridges the gap until Social Security benefits begin. However, this supplement phases out once your earnings exceed a certain threshold.

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Rising Insurance Premiums: Time to Reassess

FEGLI Costs Are on the Rise

The Federal Employees’ Group Life Insurance (FEGLI) program will see higher premiums in 2025, particularly for older enrollees. This increase reflects both longer life expectancies and rising administrative costs.

FEDVIP Plans Aren’t Exempt

Dental and vision insurance under FEDVIP is also experiencing premium increases. While these changes are less dramatic than FEHB hikes, they still add to the overall cost burden for federal employees and retirees.

Tips for Managing Insurance Costs

• Reassess your FEGLI coverage levels. If your life insurance needs have changed, consider adjusting your coverage to lower your premiums.
• Shop around during Open Season to find the most cost-effective dental and vision plans that meet your needs.

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Enhancements to Work-Life Benefits

Paid Leave Policies

Paid leave for federal employees has expanded in recent years, with options like paid parental leave becoming standard. These changes reflect a broader commitment to work-life balance and employee satisfaction.

Training and Career Development

Agencies are investing in professional development programs to keep employees competitive. Access to new skills and certifications not only benefits you but also strengthens your agency’s mission.

Flexible Work Arrangements

Telework and hybrid work models are becoming more widely adopted, offering greater flexibility for federal employees. These arrangements help improve productivity and reduce commuting costs.

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Retirees, Stay Vigilant

Cost-of-Living Adjustments (COLA)

For 2024, the COLA for federal pensions and Social Security benefits is 3.2%, offering a modest increase in monthly income. While helpful, COLAs often fail to keep pace with rising costs for healthcare and other essentials, so planning ahead is crucial.

Estate Planning Considerations

Federal retirees should also focus on updating their estate plans to account for any changes in tax laws or benefit structures. Ensuring that your plans align with your financial goals and the needs of your beneficiaries is essential.

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Preparing for the Future: Your Checklist

To stay ahead of these changes and make the most of your benefits:

1. Evaluate Healthcare Plans: Compare options during Open Season to find a plan that offers the best value for your needs.
2. Maximize Retirement Savings: Contribute the maximum allowed to your TSP and take advantage of catch-up contributions.
3. Plan for Medicare: If you’re nearing age 65, understand how Medicare enrollment affects your overall healthcare strategy.
4. Adjust Insurance Coverage: Reassess life, dental, and vision insurance to ensure you’re not overpaying for coverage you no longer need.
5. Account for COLAs: Incorporate cost-of-living adjustments into your financial planning.

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Federal Benefits in 2025: Stay Informed, Stay Prepared

Federal employee benefits are changing rapidly, and staying informed is your best tool for navigating these shifts. By taking proactive steps, you can ensure your healthcare, retirement, and insurance options continue to support your goals both now and in the years ahead.

Key Takeaways

• If you’re still under the Civil Service Retirement System (CSRS), your retirement income is structured quite differently than today’s FERS retirees. That distinction has never mattered more than it does in 2025.

• CSRS retirees now face specific challenges and opportunities, including recent Social Security changes and shifting inflation protections. Understanding these differences is essential to preserving your retirement advantage.

The Relevance of CSRS in 2025

The Civil Service Retirement System (CSRS) was closed to new federal employees back in 1984. Yet, in 2025, roughly 44,000 employees still remain under this legacy system. If you’re among them, you belong to a shrinking group with access to a pension model few workers in the U.S. still enjoy.

But here’s the reality: even though CSRS provides a generous annuity and no mandatory participation in Social Security, the landscape around your benefits has changed significantly. The repeal of the Windfall Elimination Provision (WEP), inflation-adjusted COLAs, and broader market trends all play a new role in your planning. It is no longer just about what CSRS offers you; it’s about how that offer fits into today’s retirement world.

Understanding the Foundation of CSRS

CSRS is a defined benefit retirement system that provides a predictable pension based on your years of service and highest salary (usually your “high-3” average). In contrast to FERS, it does not include automatic Social Security coverage or government TSP matching.

Your CSRS annuity is calculated using this formula:

• 1.5% of your high-3 average for the first 5 years of service

• 1.75% for years 6 through 10

• 2.0% for every year over 10

With a maximum benefit of 80% of your high-3 average, CSRS can provide a powerful foundation for retirement. Many CSRS employees retire with 30 to 40 years of service, giving them monthly annuities far above FERS counterparts.

What Has Changed in 2025

Even with a secure pension, 2025 brings new realities:

1. Social Security Now Applies Differently

The Windfall Elimination Provision (WEP) was repealed in January 2025. This is especially important if you worked in both CSRS and private-sector or Social Security-covered jobs.

• Before 2025, WEP reduced your Social Security benefit if you also received a CSRS pension.

• Now, your Social Security benefits reflect your full earnings history, even if you draw a CSRS annuity.

If you’ve already filed for Social Security, your monthly check may increase. If you haven’t yet applied, your future benefit could be higher than you once thought.

2. COLA Adjustments Are Still Generous but Lag Behind Inflation

CSRS retirees receive full Cost-of-Living Adjustments (COLAs), unlike FERS retirees, whose COLAs may be capped when inflation exceeds 2%.

• For 2025, the COLA is 2.5%, applied to your full annuity.

• However, inflation pressures in housing, health care, and long-term care continue to outpace COLA increases.

This means your CSRS pension retains more buying power than FERS annuities, but you still need to plan for out-of-pocket increases, especially for healthcare.

What to Watch: Healthcare Costs and Coordination

Although CSRS retirees typically have fewer moving parts in their retirement, 2025 healthcare coordination is more complex than it once was. Your options depend on whether you:

• Retain Federal Employees Health Benefits (FEHB) into retirement

• Enroll in Medicare Parts A and B

• Consider adding Part D for prescription coverage

FEHB and Medicare: Better Together?

Most CSRS retirees keep FEHB into retirement. But at age 65, you become eligible for Medicare. Here are the key points:

• FEHB + Medicare Part A: No premium if you worked 40 quarters under Social Security. Most retirees enroll automatically.

• FEHB + Medicare Part B: Part B premium in 2025 is $185/month. Many retirees weigh this cost against benefits like lower FEHB copayments and waived deductibles.

• Prescription Costs: Adding a Medicare Part D plan may help, especially with the new $2,000 out-of-pocket cap in 2025.

Be sure to confirm how your specific FEHB plan coordinates with Medicare. Some plans waive deductibles or offer reimbursements for Part B.

Thrift Savings Plan (TSP) May Still Be in Play

Although CSRS employees did not receive matching contributions, many still contributed to the Thrift Savings Plan during their careers. In retirement, your TSP provides:

• Tax-deferred withdrawals (or tax-free if you contributed to Roth TSP)

• Required Minimum Distributions (RMDs) beginning at age 73

• Flexibility to make partial or monthly withdrawals, or purchase an annuity

In 2025, the TSP offers more flexible withdrawal options than in the past, but tax strategy matters. A poorly timed withdrawal can push you into a higher tax bracket. Work with a licensed professional to time your distributions effectively.

Long-Term Care Planning Is No Longer Optional

With fewer CSRS retirees left in the system, you may feel confident with your strong annuity. However, one major risk remains: long-term care.

CSRS doesn’t provide long-term care insurance, and in 2025, premiums for such coverage have increased significantly. Consider these factors:

• The average cost of a private room in a nursing home now exceeds $120,000 per year

• Long-term care needs can last 3 to 5 years or more

• Medicare only covers short-term rehab, not custodial care

Evaluate whether to self-fund using your CSRS annuity and TSP, or explore alternative funding options.

Survivor Benefits Should Be Reviewed in 2025

CSRS provides survivor benefits if you elect them at retirement, but those elections may no longer match your family’s current needs. Reassess your plan if:

• You’ve remarried

• Your spouse is significantly younger or older

• Your TSP or life insurance beneficiaries have changed

Survivor benefits reduce your monthly pension but offer continued income to your spouse. A one-time review in 2025 could prevent unintended gaps in future support.

Tax Efficiency Matters More Than Ever

In 2025, changes in tax law and income thresholds impact retirees differently. Your CSRS annuity is partially taxable, depending on your contributions. Social Security (if applicable) and TSP withdrawals add to your income layer.

Strategies to consider:

• Income smoothing to avoid IRMAA brackets for Medicare

• Qualified charitable distributions (QCDs) to reduce taxable RMDs

• Withholding adjustments to avoid large tax bills in April

Work with a tax advisor who understands CSRS-specific rules. Tax treatment for annuities differs from other retirement sources.

Estate and Legacy Planning for CSRS Retirees

Most CSRS retirees have a solid financial base, which means legacy planning becomes a priority later in life. In 2025, key steps include:

• Updating your will and power of attorney

• Reviewing TSP and life insurance beneficiaries

• Establishing a living trust, if applicable

If you’re concerned about how your CSRS annuity ends upon your death, make sure your survivor elections, insurance policies, and TSP balances all support your goals.

Why CSRS Retirees Are Still in a Strong Position

Despite changes in healthcare costs, inflation, and taxation, CSRS remains one of the most secure retirement systems ever offered to public employees. In 2025, your main responsibility is not to earn more but to protect what you already have:

• Preserve your annuity by avoiding unnecessary elections or withdrawals

• Coordinate benefits like Medicare and FEHB carefully

• Plan for your spouse or dependents

• Ensure your estate reflects your financial strength

Your pension gives you predictability, but only thoughtful planning will ensure it supports your full retirement journey.

Make Your CSRS Legacy Work for You

CSRS was designed to reward a lifetime of public service with a secure retirement. In 2025, the environment around that promise has evolved, but the foundation remains strong. Now is the time to fine-tune how you manage and preserve it.

Whether you’re already retired or preparing to file soon, speak with a licensed professional listed on this website. A tailored review of your annuity, health coverage, TSP, and tax positioning can help you make the most of the advantages CSRS still offers.

Key Takeaways

• The Postal Service Health Benefits (PSHB) Program fully replaced FEHB for USPS annuitants as of January 1, 2025, and now requires different rules, enrollment procedures, and Medicare coordination.

• You may need to take action during the upcoming Open Season in November 2025 to ensure your health coverage still fits your needs, especially if you missed opportunities in 2024.

The Shift from FEHB to PSHB: What It Means for You

If you’re a Postal Service retiree, the shift from the Federal Employees Health Benefits (FEHB) Program to the new Postal Service Health Benefits (PSHB) Program in 2025 has already changed how your healthcare coverage works. While you may have been automatically enrolled in a corresponding PSHB plan, it doesn’t mean you’re done reviewing your options. The next Open Season, scheduled for November to December 2025, is your opportunity to assess whether your plan is still right for your needs.

Why This Change Happened

The PSHB program was created under the Postal Service Reform Act of 2022 to stabilize USPS finances and integrate retiree healthcare more efficiently with Medicare. It is now a completely separate program administered by OPM, specifically for USPS employees, annuitants, and their eligible family members. Starting January 1, 2025, FEHB plans are no longer available to Postal retirees unless you’re covered as a family member under another federal employee’s FEHB.

What Stayed the Same—and What Didn’t

While many familiar elements remain, several critical aspects have shifted. Understanding what continues under the new system versus what changed helps you avoid surprises during Open Season.

Key Features That Stayed the Same:

• Carrier options and plan names: Many plans look similar to their FEHB counterparts.

• Government contribution: USPS still pays approximately 70% of your premium.

• Coverage structure: Most plans still include medical, hospital, mental health, and prescription benefits.

• Annual Open Season: The enrollment period still runs from mid-November to mid-December.

What Changed:

• New enrollment system: You no longer use the old FEHB portal. Annuitants must use the KeepPosted.org website for changes.

• Separate program rules: PSHB plans have different rules and structures from FEHB.

• Mandatory Medicare Part B for many retirees: If you became eligible for Medicare before 2025 but weren’t enrolled in Part B, you may have lost certain PSHB benefits unless you qualified for an exemption.

• Prescription drug coverage now through Part D EGWP: Medicare-eligible retirees are automatically enrolled in an Employer Group Waiver Plan (EGWP).

Medicare Coordination Has Become Central

For many postal retirees, Medicare is now a required part of maintaining full PSHB coverage. The integration with Medicare Part B in 2025 was one of the most significant shifts.

Who Had to Enroll in Medicare Part B?

• If you were 64 or older on January 1, 2025, or already retired by that date, you’re exempt from the Part B requirement.

• If you turned 65 in 2024 and were not enrolled in Part B, you may have faced loss of certain PSHB benefits unless you enrolled during the Special Enrollment Period that ended September 30, 2024.

• If you retired after January 1, 2025, and are Medicare-eligible, enrollment in Part B is now mandatory to maintain your full PSHB plan coverage.

How Medicare Now Works With PSHB

If you’re enrolled in Medicare Parts A and B, your PSHB plan becomes secondary. This can reduce your out-of-pocket costs, waive deductibles, and minimize copays. Prescription drug coverage is now through Medicare Part D under the EGWP model, which includes:

• A $2,000 annual out-of-pocket cap

• A $35 monthly cap on insulin

• Access to a wider pharmacy network

Why Open Season Still Matters in 2025

Even if you were automatically moved into a PSHB plan in 2024, that plan might not be the best one for you moving forward. Open Season 2025 is your chance to correct course.

What You Should Review Before November

• Premium amounts: While the government covers a portion, your share can vary widely.

• Deductibles and copays: These can differ even among plans that look similar on the surface.

• Medicare coordination benefits: Some plans offer better integration with Medicare than others.

• Provider networks: Double-check that your preferred doctors and specialists are still in-network.

• Prescription drug coverage: While Part D EGWP is standardized, formularies and pharmacy availability still differ by plan.

Coverage Pitfalls You Should Avoid

With a new system comes new risks. Failing to reevaluate your plan before Open Season could leave you exposed to avoidable costs or gaps in care.

Common Mistakes Postal Retirees Are Making Now:

• Assuming the default plan is still a good fit: Your automatic assignment might not reflect your current needs.

• Ignoring Medicare enrollment obligations: Missing deadlines for Part B can result in losing full PSHB plan coverage.

• Not using updated enrollment platforms: Attempting to use FEHB systems will not work.

• Overlooking the drug coverage changes: You may lose access to certain medications if you don’t review formularies.

The Role of the Special Enrollment Period (SEP) in 2024

Many retirees missed or were confused by the Special Enrollment Period for Medicare Part B that ran from April 1 to September 30, 2024. If you didn’t enroll during that time and you were required to, you might now be facing penalties or coverage restrictions.

If you’re unsure about your current status, Open Season 2025 may be your opportunity to make corrections, provided you’re now enrolled in Part B or qualify for an exemption.

Planning Ahead for 2026 and Beyond

The PSHB system is now the permanent framework for USPS health coverage. That means your future planning must be based on PSHB rules, not FEHB assumptions. You’ll need to keep up with evolving plan offerings, annual updates, and cost structures.

What You Can Expect Each Year Going Forward:

• Annual adjustments to premiums, deductibles, and out-of-pocket maximums

• Continued integration of Medicare Part D EGWP updates

• Stricter enforcement of Part B requirements for new retirees

• Refinements to PSHB plan offerings and networks

What You Should Do Now to Prepare

If you’re retired from the Postal Service or planning to retire soon, this is the time to get proactive. Waiting until Open Season opens may not give you enough time to do your homework.

Steps to Take Today:

• Check your Medicare status: Make sure you’re enrolled in Part B if required.

• Review your PSHB plan: Read your plan brochure and understand cost-sharing details.

• Mark your calendar: Open Season is coming in November 2025.

• Update your contact information: Ensure OPM and KeepPosted.org have your current details.

• Contact a licensed professional: If you’re confused about your options, don’t guess. Mistakes could be costly.

Staying Informed Means Staying Protected

The transition to PSHB is not just a paperwork change. It’s a structural shift that affects your long-term retirement security. This is the first year many retirees are experiencing the full impact of PSHB and Medicare Part B integration. With more change possible each year, staying informed and taking action during Open Season isn’t just smart—it’s essential.

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Prepare Now So You’re Not Rushed Later

Postal retirees are now part of a new health benefits era. The automatic transition to PSHB was only the beginning. To make sure you’re protected, covered, and optimizing your retirement benefits, now is the time to start preparing for the 2025 Open Season. Don’t wait until November. Begin evaluating your plan and Medicare status today, and get in touch with a licensed professional listed on this website if you need guidance.

Key Takeaways

• Many government workers assume they are retirement-ready, but gaps in timing, paperwork, and financial alignment can delay or disrupt the process.

• A successful retirement in 2025 requires updated planning, including understanding Medicare integration, TSP withdrawal rules, and annuity expectations.

The Retirement Picture Isn’t as Clear as It Used to Be

If you’re approaching retirement from public service in 2025, you might feel confident. After all, you’ve worked decades under the assumption that your pension, health benefits, and TSP would cover everything. But here’s the hard truth: many of the assumptions that made sense ten years ago no longer apply.

Retirement today involves more than just filing a few forms and waiting for your annuity. It requires strategic timing, coordinated decisions, and a clear understanding of how benefits like FEHB, Social Security, and the Thrift Savings Plan work together. The rules have changed, timelines have shifted, and new requirements make the transition far more complex than it once was.

Your High-3 May Not Be What You Think

The Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) calculate your pension using your “high-3” average salary. But many government workers assume this figure includes all forms of pay. In reality, it excludes overtime, bonuses, and some locality pay, unless specifically included.

As of 2025, legislation is still under review that may redefine what counts toward retirement calculations. If locality pay is excluded, workers in high-cost areas could see lower annuity projections than expected.

You need to:

Your Retirement Date Affects More Than Your Pension

Retiring at the end of a pay period, month, or year isn’t just about clean bookkeeping. The exact date you retire can influence your first pension payment, annual leave payout, and COLA eligibility.

For example:

• FERS retirees who separate on December 31 may have their annuity start in January, but not receive their first full payment until February or March due to OPM processing delays.

• Retiring on the last day of a month ensures the annuity begins the very next day. Missing that cutoff pushes your benefit start to the next month.

The timing isn’t just about preference. It affects income flow.

Social Security Isn’t Always a Sure Thing

In 2025, the Social Security Full Retirement Age (FRA) for those born in 1963 is 67. But many government workers under FERS assume they should take benefits as early as 62.

Here’s the issue:

• Taking Social Security at 62 results in a permanent reduction of up to 30%

• The FERS Annuity Supplement ends at 62, even if you delay Social Security

• Income limits apply if you work while collecting early Social Security

If you claim too early without a backup income plan, you may limit your long-term benefit potential.

Medicare and FEHB: Coordination Is Now Mandatory for Some

Starting in 2025, Postal retirees and some other eligible groups must enroll in Medicare Part B to maintain PSHB (Postal Service Health Benefits) coverage. While this mandate doesn’t apply to all federal retirees, the trend is moving in that direction.

You should:

• Enroll in Medicare Part B when first eligible at 65, unless you are actively working

• Consider whether your FEHB plan offers coordination benefits like waived deductibles or Part B premium reimbursements

• Know that delaying Part B enrollment may trigger lifelong penalties unless you qualify for a Special Enrollment Period

This coordination is not automatic. If you ignore the requirement, you risk reduced coverage or higher out-of-pocket costs.

The TSP Isn’t a Passive Retirement Income Tool

Many government workers mistakenly treat the Thrift Savings Plan like a traditional pension. But unlike your annuity, the TSP requires active management after retirement.

In 2025, the TSP offers flexible withdrawal options, including:

However, mistakes are easy to make. For instance:

• Withdrawing too early (before age 59½) can trigger a 10% IRS penalty unless you qualify under the age 55 rule

• Failing to meet Required Minimum Distributions (RMDs) starting at age 73 leads to tax penalties

You need to create a withdrawal strategy that aligns with your income needs, tax situation, and market risks.

Survivor Benefits: One Decision, Permanent Impact

Your choice of survivor benefits affects both your monthly annuity and your spouse’s financial security after your death. You only get one chance to make this election at retirement.

Key facts:

• Electing a full survivor annuity (50%) reduces your pension by about 10%

• Choosing no survivor annuity disqualifies your spouse from continuing FEHB after your death

• You can’t change your decision after retirement unless your spouse dies or you divorce and remarry

This is not a checkbox on a form. It’s a permanent commitment with long-term consequences.

Don’t Overestimate Your Annual Leave Payout

Many government employees count on a substantial payout from unused annual leave. But several factors can reduce this expected windfall:

• The payout is based on your hourly rate, not your high-3

• Leave caps apply (typically 240 hours for most employees)

• The payout is taxed as income and may affect your tax bracket

You may also face a delay of several pay periods before receiving your leave check. Planning around this money without a buffer could create a cash-flow gap.

COLAs Aren’t Guaranteed to Keep Pace With Reality

Cost-of-living adjustments (COLAs) apply differently depending on your retirement system:

• FERS retirees receive partial COLAs: only the full amount if inflation is 2% or less, and less than full if it exceeds 2%

• CSRS retirees receive full COLAs, but CSRS covers fewer employees today

In 2025, the COLA increase is 2.5%, offering moderate relief, but not fully covering the recent inflation surges.

You should not assume your purchasing power will remain steady. Budgeting for a gap between inflation and your COLA is a wise move.

Forms and Processing Delays Can Derail the Best-Laid Plans

Even if everything is in place, your retirement can be delayed or disrupted by errors in paperwork or OPM processing times.

In 2025:

• Retirement application processing still averages 60 to 90 days

• Common delays occur from missing signatures, outdated beneficiary forms, or incomplete service credit documentation

To reduce these risks:

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

• Review your OPF (Official Personnel Folder) annually during your last five years of service

• Update your designations of beneficiary for life insurance, TSP, and unpaid compensation

What You Should Be Doing Right Now

If you’re within five years of retiring, take these steps immediately:

• Request a full retirement estimate from your HR or agency benefits officer

• Create a timeline that includes projected retirement date, Medicare eligibility, TSP withdrawal start, and Social Security claim window

• Check if your FEHB plan requires or benefits from Medicare enrollment

• Schedule a financial planning session with someone familiar with public sector retirement

These steps aren’t optional. Retirement is no longer a passive milestone—it’s an active transition that demands precision.

The Rules Keep Changing

Public sector retirement is not static. Each year brings potential changes to policies, benefits, and timelines. For example:

• Proposed changes to the FERS contribution rate could increase how much you must pay toward your pension

• Discussions around reducing the government’s FEHB contribution may increase your healthcare premiums in retirement

• RMD rules and TSP withdrawal limits are evolving as life expectancy tables adjust

You must stay engaged even after retirement to avoid costly surprises.

Retirement Success in 2025 Requires More Than Tenure

If you feel ready to retire based solely on your years of service, that confidence may be premature. Modern retirement readiness involves:

The stakes are too high to leave any of this to chance.

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Get Serious About Your Retirement Readiness

Retiring from public service in 2025 means entering a more complex benefits environment than ever before. Your pension, health insurance, and TSP will only work for you if they are aligned and planned carefully.

Don’t rely on outdated assumptions or one-size-fits-all calculators. Instead, speak with a licensed professional listed on this website who understands your specific agency rules, benefit interactions, and financial goals. They can help you verify that your readiness isn’t just hopeful — it’s real.

Key Takeaways

• While law enforcement officers (LEOs) can retire earlier than most public employees, this benefit comes with lesser-known financial and healthcare tradeoffs that can catch retirees off guard.

• The FERS Special Retirement Supplement ends at age 62, potentially creating a retirement income gap for LEOs who don’t plan for the switch to Social Security.

The Appeal of Early Retirement in Law Enforcement

One of the most attractive features of a law enforcement career is the opportunity to retire early. Under the Federal Employees Retirement System (FERS), law enforcement officers, along with firefighters and air traffic controllers, are considered special category employees. You can retire with a full pension as early as age 50 with 20 years of qualifying service, or at any age with 25 years of qualifying service. This accelerated timeline reflects the physically demanding and high-risk nature of your work.

However, early retirement comes with a set of assumptions that, if misunderstood or unplanned for, can jeopardize your long-term financial stability. Simply retiring early doesn’t mean retiring worry-free.

As a special category employee, your pension under FERS is calculated differently during your first 20 years of service:

This makes it more generous than the standard FERS formula, which offers 1.0% (or 1.1% if retiring at 62 with 20 years) across the board. If you leave after exactly 20 years at age 50, you’re entitled to 34% of your high-3 average salary. But if you serve an extra five years, the jump is modest—just 5% more. That’s a tradeoff: higher early benefits, but slower increases if you extend your career.

Special Retirement Supplement Ends at 62

You are eligible for the FERS Special Retirement Supplement (SRS) if you retire before age 62 and meet the criteria for an immediate annuity. The SRS is designed to replicate the Social Security benefit you would receive at 62—based on your federal service alone.

But here’s the catch: The supplement stops at age 62, regardless of when you claim Social Security. If you delay claiming your Social Security benefit for a higher payout (which you can do until age 70), you’ll need to fill the income gap from your savings, your Thrift Savings Plan (TSP), or other sources.

Mandatory Retirement Age: A Double-Edged Sword

As a law enforcement officer, you’re subject to mandatory retirement at age 57 if you’ve completed 20 years of service. This rule ensures that agencies maintain a physically fit workforce—but it can cut your earnings potential short.

If you entered federal service late in life, this could mean you’re forced out before reaching your maximum earning or saving potential. While you might be eligible for retirement, you may not feel ready financially. Planning ahead is essential.

What Happens to FEHB?

One of your biggest concerns post-retirement might be health coverage. If you’re enrolled in the Federal Employees Health Benefits (FEHB) Program and have been for the five years before retirement, you can carry it into retirement. The government continues to pay a large share of your premiums, typically around 70%.

But if you retire in your early 50s, you’ll be paying FEHB premiums out-of-pocket until you’re eligible for Medicare at age 65. That’s over a decade of potentially rising healthcare costs. Some retirees find this financially burdensome, especially when combined with reduced income post-retirement.

Medicare and Coordination—Not Automatic

Once you reach age 65, Medicare becomes your primary insurer, and FEHB serves as secondary coverage if you keep it. But be aware:

• You must actively enroll in Medicare Part B to coordinate coverage.

• You’ll pay Part B premiums on top of your FEHB premiums.

This dual-premium setup offers strong coverage but adds to your monthly costs. Many LEO retirees don’t fully understand this dynamic until it arrives. If you don’t enroll in Medicare Part B when first eligible, you may face late enrollment penalties and gaps in coverage.

The TSP Factor in Early Retirement

Because your pension and SRS may not fully cover your needs—especially between ages 57 and 62—your Thrift Savings Plan (TSP) often becomes a vital income source.

LEOs are eligible for penalty-free withdrawals from the TSP as early as age 50 if they retire in the year they turn 50 or later. This rule provides flexibility, but:

It’s essential to structure your TSP use wisely to bridge the gap between the end of the Special Retirement Supplement and the start of Social Security.

Survivor Benefits—Know Your Options

When you retire under FERS, you can elect survivor benefits for your spouse. To keep your FEHB coverage going for a surviving spouse, you must:

Survivor benefits reduce your monthly pension, but skipping them could leave your spouse without coverage or income. This is a decision worth discussing with a licensed professional.

Retiring Early Doesn’t Mean Escaping Inflation

Your FERS annuity receives Cost-of-Living Adjustments (COLAs), but early retirees face a limitation. If you retire under age 62, you don’t receive COLAs until you turn 62. That means the value of your annuity could erode over time, especially in high-inflation periods.

You’ll need to factor in this delay and ensure your savings, TSP investments, and supplemental income sources can support rising living costs during this gap.

Disability and Early Retirement—A Misunderstood Area

Some LEOs consider disability retirement as an alternative to standard retirement if they’re injured or face chronic conditions. But disability retirement has its own rules:

• You must apply before you separate from federal service

• Approval requires medical documentation and agency certification of your inability to perform your duties

If you qualify, you may receive 60% of your high-3 average for the first year, then 40% thereafter (offset by Social Security disability benefits). But this is not a guaranteed fallback—you must meet strict eligibility.

Planning Is the Most Critical Asset

Early retirement is possible, but not without planning. You must address questions such as:

• How will I replace the Special Retirement Supplement after 62?

• Can my TSP and savings cover over a decade of FEHB premiums before Medicare?

• What if inflation erodes my annuity before I get COLAs?

These are complex questions that deserve informed answers.

Before You Hand in the Badge

The ability to retire early under FERS is a meaningful benefit—but it comes with obligations that aren’t always visible on the surface. Understanding how your pension, FEHB, TSP, Medicare, and Social Security benefits intersect is critical to making your retirement sustainable.

Don’t wait until the gaps appear. Speak with a licensed professional listed on this website to create a tailored plan that secures your benefits and protects your family.