FERS, TSP & Federal Benefits Guide for Federal Employees

FERS is a three-part retirement system: your pension (Basic Benefit), Social Security, and the Thrift Savings Plan. Most federal employees focus only on their pension and overlook how the three parts work together to create a complete retirement income picture.

Your pension is calculated using your High-3 average salary, your years of creditable service, and a multiplier (1% or 1.1% if you retire at 62 with 20+ years). Small differences in your retirement date or final salary can mean hundreds of dollars per month — for life.

The TSP offers five core funds (G, F, C, S, I) and Lifecycle funds, with expense ratios far below what you'd find in a private 401(k). The government matches up to 5% of your salary — but only if you're contributing enough to capture the full match.

The bigger challenge is what happens at retirement. Many employees accumulate a significant TSP balance with no plan for how to draw it down efficiently, coordinate it with their pension and Social Security, or protect it from market volatility in their early retirement years.

Federal employees can choose from hundreds of health plans under FEHB, with the government covering roughly 72% of the premium. One of the most valuable features: if you retire with 5 years of FEHB coverage, you can carry it into retirement at the same cost.

The Medicare coordination question is where most retirees get confused. At 65, you'll need to decide whether to enroll in Medicare Part B alongside FEHB — a decision that can save or cost you thousands per year depending on your plan and health needs.

FEGLI offers Basic coverage (equal to your salary, rounded up to the nearest $1,000, plus $2,000) plus three Optional coverages. The government pays one-third of the Basic premium — making it one of the most cost-effective term life options available.

The problem is that most employees never revisit their FEGLI elections after they're first hired. Life circumstances change — marriage, children, mortgage payoff, retirement — and the coverage that made sense at 30 may be costing you far too much at 55, or leaving your family exposed.

Unlike CSRS employees, FERS employees are fully covered by Social Security. You're eligible to collect starting at 62, but your benefit increases by roughly 8% for every year you delay up to age 70. The right claiming age depends on your health, other income sources, and whether you have a spouse.

The FERS Supplement is a bridge payment paid to eligible retirees who retire before age 62. It approximates the Social Security benefit you've earned from federal service and stops when you turn 62 — at which point you can begin collecting actual Social Security.

Medicare Part A (hospital) is free for most people and almost always worth enrolling in. Part B (outpatient) costs around $175/month in 2024 and is where the real decision lies. For some FEHB plans, adding Part B dramatically reduces out-of-pocket costs. For others, it's an unnecessary expense.

The decision is permanent — missing your initial enrollment window can result in lifetime premium penalties. Getting this right requires comparing your specific FEHB plan's benefits against Medicare's coverage and your anticipated healthcare needs.

When you retire under FERS, you'll be asked whether to elect a survivor annuity for your spouse. A full survivor annuity pays your spouse 50% of your unreduced pension after you die — but it reduces your monthly pension by 10% while you're alive. Waiving it saves money now but leaves your spouse with nothing from your pension.

Survivor benefits also affect FEHB — your spouse can only keep FEHB coverage in retirement if you elected a survivor annuity. Life insurance, annuity products, and other strategies can sometimes provide equivalent protection at a lower cost, but the analysis requires careful planning.