Misunderstood aspects of federal retirement benefits' structures
As more federal employees opt for early retirement programs, the Office of Personnel Management (OPM) anticipates a doubling of the retirement application backlog. This trend underscores the importance of understanding the retirement process and the options available.
In a forthcoming event, federal retirees and prospective retirees will have the opportunity to learn about various aspects of retirement qualification guidelines, FERS/CSRS Pension, Special Retirement Supplement, Survivor Benefits, FEHB (Health Benefits), FEGLI (Life Insurance), Social Security Maximization, and the latest government downsizing updates. Registration for the event is available.
One of the key areas to consider is the pension, which serves as the main source of income for retirees. Alongside this, retirees need to think about their potential beneficiaries and the associated survivor benefits. It's crucial to understand that each option for survivor's benefits comes with a cost, in the form of a monthly percentage deducted from the overall pension.
Retirees can expect their first, estimated annuity payment within two to three months, referred to as "interim" pay, which is approximately 60-80% of the actual annuity.
Another important aspect is health benefits. Retirees can enroll in Medicare parts A and B, with Medicare acting as the primary payer and FEHB as secondary. Qualified spouses, dependent children, and children with disabilities can be covered without meeting the five-year rule for FEHB eligibility in retirement. Under certain eligibility requirements, federal employees can continue their FEHB coverage into retirement, with the government continuing to cover about 72% of the FEHB premium.
Federal employees will also have three main sources of income in retirement: their pension, Social Security, and their Thrift Savings Plan account. Prospective retirees and their spouses are encouraged to speak with a federal retirement consultant and consider the holistic picture of their assets, the spouse's income, their needs and budget, life insurance, and any additional financial obligations.
The Thrift Savings Plan (TSP) offers different ways to withdraw, including partial, full, installment, or annuity. It's recommended that federal employees within the retirement horizon transfer some or all of their TSP balance into an IRA or Roth IRA in the private sector.
Federal employees need to understand their FEGLI plan to maximize benefits in retirement. Basic FEGLI insurance costs between $10-$30 per pay period, but the price increases dramatically in retirement. Some retirees opt for a basic FEHB plan to reduce costs.
It's also important to note that retirees need to make decisions about survivor's benefits on their retirement application. If survivors were on the federal retiree's health insurance plan, that health insurance will cease if there is no survivor's benefit.
The event will conclude with an interactive 30-minute Q&A session on Tuesday, Sept 2 at 6:30 pm ET or Thurs., Sept. 4 at 1 pm ET. This provides an excellent opportunity to clarify any doubts and gain a deeper understanding of the retirement process.
In conclusion, preparing for retirement requires careful consideration of various factors such as pension, survivor benefits, health benefits, Social Security, TSP, FEGLI, and budgeting. By attending the forthcoming event and seeking professional advice, federal employees can ensure they are well-equipped to navigate the retirement process.
