As you approach retirement, it’s crucial to make thoughtful decisions, some of which cannot be undone once your retirement begins. These decisions may feel overwhelming, but by understanding your options and planning ahead, you can help ensure that you’re making the best choices for your long-term needs. Here are key choices to consider carefully when retiring as a government employee:
1. Retirement Date
Your retirement date is a decision made during the application process, and it’s permanent once your retirement has been authorized by the Office of Personnel Management (OPM). The specific date you choose is crucial because it marks the official end of your employment with the federal agency and triggers your benefits. This decision is made on forms such as SF 3107 (FERS Application for Immediate Retirement) and SF 2801 (CSRS Application for Immediate Retirement), typically in Section B, #2. For those eligible for deferred or postponed retirement, this decision is made in RI 92-19, with specific instructions in Schedule B and Schedule C based on MRA+10 eligibility. If you change your mind after separation, your application cannot be withdrawn, and reinstatement may be required.
2. Lump-Sum Leave Payment
When retiring, unused annual leave will be paid out in a lump sum, but you need to use or lose any leave above the ceiling (generally 240 hours) before your retirement date. After that, any unused leave beyond the limit will be forfeited unless certain circumstances apply. Be mindful of the deadline for using your annual leave. While the current federal leave year ends on January 11 for most federal employees, the last day for scheduling “use or lose” leave is November 30. For many employees, the lump sum payment includes unused leave from 2023 and accrued leave from 2024. For example, if you retire at year-end, you may receive up to 440 hours of leave, with 64 hours paid at the 2024 salary rate and the remaining 376 hours at the 2025 rate. If the new pay rate is finalized late, the additional payment may be delayed. Be sure to review your leave balance to help maximize your payout.
3. Annuity Election (Survivor Benefits)
Choosing a survivor annuity is an important decision that cannot be altered easily. If you’re married, your spouse must consent if you wish to choose less than the maximum survivor benefit. You may only make changes under specific conditions (e.g., a change in marital status) after retirement. This decision is made during the application process, specifically on SF 3107 (FERS Application for Immediate Retirement), Section D, #1 – #5; SF 2801 (CSRS Application for Immediate Retirement), Section F, #1 – #5; or RI 92-19 (FERS Application for Deferred or Postponed Retirement), Section F for all applicants. All applicants must select one option from the choices listed. If you’re single with no dependents, you’d typically choose #3: “An Annuity Payable During My Lifetime.” If your marriage ends, the survivor annuity is void, and your annuity may be restored. To continue a survivor annuity for a former spouse, it must be in the divorce decree. The “insurable interest” election (#4) lets you designate someone to benefit from your life, with proof of good health required. It can convert to a spousal annuity if your spouse loses entitlement due to death or remarriage before 55 (unless married for 30+ years).
4. Military Service Credit
If you have military service, make sure your deposit for creditable military service is paid in full before retirement. Failing to do so may affect your retirement eligibility and benefits. According to OPM’s Benefits Administration Letter #23-105 (dated 9/8/2023), paying a military service deposit is not mandatory, but it is your responsibility to decide whether to pay for any period of creditable military service. Seek counseling from your agency about military service deposit requirements and obtain necessary records (e.g., RI 20-97, Estimated Earnings During Military Service). Request two retirement estimates, one with military service credit and one without. If you pay the deposit after your third year of federal employment, interest will accrue, so make sure it is paid before your separation from federal service.
5. Health Insurance & Life Insurance Coverage
You can continue your health and life insurance coverage into retirement if certain conditions are met. For health insurance, you must have been enrolled in the Federal Employees Health Benefits (FEHB) program for at least five years before retirement. If you cancel your FEHB enrollment, you cannot re-enroll later. If you choose not to enroll or cancel coverage, you’ll need to certify your understanding of the impact on your eligibility by signing the Health Benefits Election form (SF 2809). If you retire under MRA+10, you can temporarily continue your health coverage for up to 18 months by paying the full premium. Once your annuity starts, and if you had FEHB coverage for the last five years, you can re-enroll. Similarly, your life insurance coverage under the Federal Employees Group Life Insurance (FEGLI) program may continue based on your election at retirement.
6. Thrift Savings Plan (TSP)
Your TSP account remains open after retirement as long as your balance is over $200. Once you close your account, it cannot be reopened unless you return to federal service. You can also transfer eligible funds into your TSP account after retirement. There are various withdrawal options available once you retire, but you don’t need to request a withdrawal immediately. However, once you reach a certain age, 73 if born between January 1, 1951 and December 31, 1959, or 75 if born after December 31, 1959, you will be subject to required minimum distributions (RMDs). Additionally, you can purchase a life annuity through TSP, but once purchased, changes are irreversible, so be sure to evaluate this option carefully.
7. Social Security
Once you start receiving Social Security benefits, your options to reverse or suspend your claim are limited. You can cancel your application within a year of approval, but this option is available only once, and you’ll need to reapply if you wish to begin receiving benefits again. Alternatively, if you’re over full retirement age but under 70, you can suspend your payments. This will earn you delayed retirement credits, resulting in a higher monthly payment when you resume benefits. However, both options come with restrictions.
Each of these decisions plays a significant role in your retirement security. It’s important to fully understand the implications of each choice to help you prepare for a comfortable retirement. We encourage you to seek advice and carefully review your options before making any final decisions. Contact us today to discuss your retirement plans in more detail—we can help you navigate these choices and find the best fit for your unique situation.
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