End-of-Year Retirement Planning for Federal Couples

As the end of the year approaches, federal employees—particularly those where both spouses work for the federal government, face unique challenges in planning for retirement. The Office of Personnel Management (OPM) gears up for a surge in retirement applications every year, processing nearly 25% of the year’s total applications in January and February. This uptick in retirements is often driven by employees looking to maximize their unused annual leave benefits before they retire.

If you’re in a federal couple, planning for your retirement involves more than just understanding how to maximize leave or file your retirement paperwork. You’ll also need to carefully consider your healthcare and survivor benefits, which can vary depending on whether both spouses are retiring at the same time, or if one is still working.

Health Coverage Considerations

A common question federal couples face is whether to choose two self-only health plans under the Federal Employees Health Benefits (FEHB) program or a single self-plus-one plan. The answer depends on a variety of factors:

• If both spouses are retired, two self-only plans might work best. This allows each spouse to choose the health plan that suits their needs. One spouse may be eligible for Medicare, while the other may still need comprehensive coverage or want to utilize the money they’ve saved in a Health Savings Account (HSA).
• If only one spouse is retired, the working spouse may find it more cost-effective to keep a self-plus-one plan, as they can pay premiums with pre-tax dollars, leading to potential tax savings.

It’s also essential that the spouse who is still employed maintains coverage for both spouses in retirement. If the retiring spouse loses their coverage eligibility, the working spouse can transfer health benefits to them, as this situation qualifies as a life event under FEHB rules.

Survivor Annuities

Another decision for federal couples is whether to provide a survivor annuity for each other. This annuity can guarantee that if one spouse passes away, the surviving spouse continues to receive income from their retirement benefits. While it’s not always required to maintain health coverage, a survivor annuity can be vital in providing income stability after the death of a spouse.

For federal employees under the Federal Employees Retirement System (FERS), it’s important to consider whether you could live on your TSP investments and Social Security benefits if your spouse were to pass away. A survivor annuity can act as a form of insurance, helping the surviving spouse maintain their standard of living.

Remember, if you choose not to provide a full or partial survivor annuity, your spouse’s consent is required, and it must be notarized. This confirms that they understand how the decision will affect their future income.

Retirement planning for federal couples can be complex, but with the right guidance, you can navigate the important decisions around healthcare, survivor benefits, and maximizing your retirement income. As the year winds down, take the time to review your plans together, making sure you’re both prepared for retirement. Contact us today to schedule a personalized consultation and discuss your path toward retirement success!