Four Federal Retirement Decisions to Understand Before You Retire

Federal retirement comes with a lot of paperwork, and when everything arrives at once, every decision can feel equally important.

They aren't. Some choices can be revisited later. Others can affect your income, your spouse, or your health coverage for years. One of the most important, your FERS survivor benefit election, generally needs to be decided when you retire and can be difficult to change afterward.

You don't need to become an expert in every federal retirement rule. But before you submit the paperwork, there are four decisions I'd want to understand.

The decision	What it decides	When it's made
FERS survivor benefit	What happens to your pension if you die before your spouse, and whether your spouse can keep FEHB	When you retire. Difficult to change afterward.
Social Security	When this income begins, and what funds the years before it	As early as 62, at full retirement age, or as late as 70
TSP	Leave it, move some or all of it to an IRA, or a combination	No rush simply because you've retired
FEHB and Medicare	How the two coverages fit together, and whether to take Part B	When you become eligible for Medicare

The four decisions in the text, in the order they come up below.

01Your FERS survivor benefit election

When you retire under FERS, you'll make a decision about what happens to your pension if you die before your spouse.

Choosing a survivor benefit reduces the pension you receive while you're alive in exchange for continuing some pension income to your spouse after your death. The decision can also affect your spouse's ability to continue FEHB coverage after you die.

You're really asking what your spouse's financial life looks like if you're no longer there.

That's why this deserves more attention than simply comparing the size of two pension checks. You're really asking what your spouse's financial life looks like if you're no longer there. What income disappears? What income continues? What assets would they have available? How important is continued FEHB coverage?

This is also a decision you don't want to make casually assuming you can simply change it later. The rules for changing a survivor election after retirement are limited. Understand this one before you sign the retirement paperwork.

02When to claim Social Security

Social Security is another long-term income decision, but the question is different. You can generally start retirement benefits as early as 62, wait until your full retirement age, or delay beyond that and receive a larger monthly benefit, up to age 70.

The highest monthly check isn't automatically the right answer, and neither is claiming as soon as you're eligible. Your pension matters. Your spouse's Social Security matters. Your health and expected longevity matter. So does what you'd need to withdraw from investments while waiting.

For some federal employees, the pension provides enough income to make delaying Social Security comfortable. Someone else may have a completely different reason to claim earlier. The useful exercise is to put the options next to the rest of your retirement income and see what actually changes.

03What to do with your TSP

Retirement doesn't mean you have to immediately move your TSP. You can leave money in the plan, move some or all of it to an IRA, or use a combination depending on what you're trying to accomplish.

The TSP offers a relatively simple investment lineup and low-cost funds. An IRA can offer more investment choices and potentially more flexibility around how the money is invested and distributed. Costs and services can also be different.

What am I giving up, and what am I gaining?

Before moving the money, I'd want to be able to answer two questions clearly: What am I giving up, and what am I gaining?

If you can't answer those yet, there's probably no reason to rush the decision simply because you've retired.

04How FEHB and Medicare will work together

If you're eligible to carry FEHB into retirement and later become eligible for Medicare, you'll eventually need to decide how the two coverages fit together.

For many retirees, the biggest question is Medicare Part B. Part B comes with an additional monthly premium, so you'll want to understand what you're getting for that cost when it's paired with your specific FEHB plan.

That answer can vary by plan. Premiums, deductibles, copays and how the FEHB plan coordinates with Medicare all matter. This is a good place to compare the actual numbers rather than simply assuming that every federal retiree should make the same choice.

05Put the decisions together

These decisions don't live in separate boxes. Your survivor election affects the pension coming into the household. Your Social Security decision affects how much income needs to come from somewhere else. Your TSP may be the source of that additional income. Health insurance and Medicare premiums become another expense the plan needs to cover.

That's why I wouldn't work through the retirement paperwork one form at a time and assume the forms themselves are the plan.

Before you retire, I'd put the four decisions on one page:

FERS survivor benefit: What happens to my spouse if I die first?

Social Security: When do we want this income to begin, and what funds the years before it starts?

TSP: What job does this money need to do after I retire, and where can it do that job best?

FEHB and Medicare: What coverage do I want, what will it cost, and how do the two programs work together?

You may still need to dig into the rules behind each answer. But at least now you're solving the right questions.

Run your FERS numbers →