Once your retirement application reaches OPM, several of the choices buried inside that paperwork become difficult — and in some cases impossible — to undo. Most federal employees spend months on the retirement date and only minutes on the elections themselves. Yet those elections shape your income, your spouse’s security, and your cash flow for the next thirty years
Am I eligible to retire? is the right place to start, and it deserves a firm answer rather than an assumption. Once eligibility is settled, a second question carries equal weight: Have I finalized the decisions my paperwork is about to lock in? Let’s dive deeper into four that deserve a strategic review before you sign.
Survivor Benefits: The Election That Protects More Than Income
Under FERS, you have three survivor options, and each carries a tradeoff.
- Full survivor annuity: Your spouse receives 50% of your unreduced annuity after your death, in exchange for a 10% reduction to your annuity while you are living.
- Partial survivor annuity: Your spouse receives 25% of your unreduced annuity, in exchange for a 5% reduction.
- No survivor annuity: Your annuity is not reduced — and no continuing annuity is paid to your spouse.
Here is what many federal employees overlook: your spouse’s FEHB coverage is tied to the survivor annuity. If you elect no survivor benefit, your spouse’s access to federal health insurance ends when your FERS pension stops. That single connection may outweigh the monthly math.
Work through these before you decide:
- Your spouse’s own pension, Social Security, and retirement savings
- Whether life insurance could replace some of the survivor benefit at a lower cost — and whether that policy can be maintained for life (pension maximization)
- Notarized spousal consent is required for anything less than the full election
- Whether the reduction fits comfortably inside your retirement budget
This is one of the least reversible decisions in the entire retirement process.
FEGLI: Decide What Coverage Still Earns Its Cost
To carry FEGLI into retirement, you generally need continuous enrollment for the five years immediately before you separate. Assuming you qualify, the next decision is how much coverage to keep.
For Basic coverage, you choose a reduction election:
- 75% Reduction → coverage declines 2% per month after age 65 until 25% remains; premiums stop at 65
- 50% Reduction → coverage declines to half; an extra premium continues past age 65
- No Reduction → coverage stays level, at the highest ongoing cost, continuing indefinitely
Option B is where expenses can escalate. Premiums are age-banded, and electing No Reduction can mean sharply rising costs through your 60s and 70s. For some retirees, that protection remains worth it. For others, private coverage may deliver similar protection at a lower long-term cost.
Add to your checklist: confirm your FEGLI beneficiary designations still reflect your current wishes.
The FERS Supplement: Know the Amount, and Know the Test
If you retire at your MRA with 30 years of service, or at age 60 with 20, you may be eligible for the FERS Annuity Supplement. It approximates the Social Security you earned during federal service and continues until age 62.
Two items to finalize:
- The amount — get it in writing on your official HR retirement estimate
- The earnings test — for 2026, earned income above $24,480 reduces your supplement by $1 for every $2 over the limit
What counts toward that test matters. Wages and net self-employment income are included. Your FERS annuity, TSP withdrawals, rental income, and investment income are not. If part-time work or consulting is part of your plan, model that offset before you set your date.
TSP: How Much to Spin Off — and How
Your TSP is likely your largest and most flexible asset — and the piece most often left undecided until the paperwork is already filed.
How much? Many planning conversations reference a withdrawal rate near 4% annually as a starting point — a reference, not a rule. A more useful approach is to build the number from your actual income gap: total your projected expenses, subtract your pension and supplement, and what remains is what your TSP is being asked to cover. Your tax bracket, Social Security timing, and time horizon all move that number.
How? The TSP offers several distribution strategies:
- Installment payments → monthly, quarterly, or annual; fixed dollar amount or based on life expectancy
- Partial withdrawals → for one-time needs such as home repairs, a vehicle, paying off debt, or travel
- Annuity purchase → converts a portion of your balance into a fixed lifetime income
- Rollover to an IRA → broader investment and distribution flexibility
A few tax and timing details deserve attention:
- Traditional TSP dollars are taxable as ordinary income in the year you take them
- Separating in or after the year you turn 55 (age 50 for special provisions) may allow penalty-free TSP access before 59½
- Required minimum distributions begin at age 73 or 75, depending on your year of birth
- Default TSP withholding (20% federal tax) may not match your actual tax liability
A withdrawal strategy decided in advance beats one decided under pressure.
Bringing It All Together
At Benchmark Financial Group, we specialize in helping federal employees navigate the retirement process with clarity and confidence. If you are within five years of retirement, a strategic review of your survivor election, insurance coverage, supplement, and TSP withdrawal plan may help you maximize benefits, support long-term financial stability, and make informed decisions for a smooth transition.
Call David Raetz at 913-534-8256 or visit bfgkc.com to schedule your retirement planning consultation.
Your federal career was built with discipline and service. Your retirement deserves the same level of strategy.
Want to learn more? Attend our free online webinar led by David Raetz on Thursday, October 15.
Decide Before You Sign
*Securities and Advisory Services Offered Through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.
“*Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values. Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.”
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