9 Retirement Planning Mistakes Federal Employees Make

Jan 16, 2017

Retirement planning for a man on a beach

mistakesWhen it comes to retirement, or the time leading up to it, planning is key! This cannot be stressed enough. Being unprepared for this time in your life may leave you with less income. Whether you want to travel the world in retirement or learn a new hobby, make sure you understand how your actions now affect your later years. This post will look at some of the worst mistakes you can make as a federal employee heading into retirement.

1. Not Attending a Retirement Planning Seminar

A pre-retirement seminar is available to help you learn about retirement benefits and ensure that your retirement annuity is as high as possible. At least 5 years before your EARLIEST planned retirement date, you attend one. This will also help you understand if your health and life insurance will continue in retirement.

2. Missing the Chance to Contribute to Your Thrift Savings Plan

CSRS (Civil Service Retirement System) employees who don’t contribute to a tax-deferred TSP are missing out on adding to their retirement income. FERS (Federal Employees Retirement System) employees who don’t contribute are missing out on added government contributions to their TSP. Both CSRS and FERS employees can make contributions up to $16,500. It is more critical for FERS employees to make contributions as early as possible because the TSP is designed to be one-third of their retirement income. Employees over 50 who contribute the maximum to their TSP can make $5,500 in “catch-up” contributions.

3. Forfeiting the Opportunity to Pay Your Military Service Credit Deposit

If applicable, employees must pay military service credit deposits BEFORE they retire. OPM does not accept these after retirement. CSRS employees hired before October 1, 1982, must pay their deposit to ensure the retirement credit continues. CSRS employees hired after that date must pay the deposit to have military service included in their annuity computation. FERS employees must pay a deposit to get credit for military service for both retirement eligibility and computation purposes.

4. Not Purchasing Long Term Care Insurance Coverage at the Right Age

Rates are based on your age when you apply. The key factor here is that younger enrollees have higher acceptance rates than older employees and retirees. You must keep paying premiums in retirement, so you need to make sure you can afford them and have a good idea of your income and deductions.

5. Mismanaging Sick Leave

CSRS employees receive FULL credit for sick leave. As of January 1, 2014, FERS retirees receive FULL credit for unused sick leave. Before that, they only received HALF. It is ESPECIALLY important to know how to manage sick time if you leave work because of federal disability retirement. Using just a couple of hours of sick time can hurt your case with OPM.

6. Leaving Annual Leave Calculations to the Last Minute

Most federal employees have a ceiling of 240 hours of annual leave that they can carry over from one year to another. Any leave above that falls into the “use it or lose it” category. Ex. If you carry over 240 hours of annual leave and you plan to retire the following November 30th, a lump sum for the 240 hours PLUS leave accrued through November 30th is paid out. This would total 432 hours. This is one thing you will want to check on closely if you plan to retire at the end of a calendar year.

7. Failing to Have 5 Years of FEHBP Coverage Before Retiring

A federal employee covered by a spouses’ private sector health plan, who opts not to enroll in Federal Employees Health Benefits Program (FEHBP) while employed, or is enrolled in a FEHBP plan for less than 5 years immediately prior to retirement cannot continue enrollment as a retiree. To keep enrollment in retirement, employees need to enroll at least 5 years before retiring to continue coverage and have the option to make any changes during Open Enrollment. This is one of the main reasons it’s extremely important to attend a retirement planning seminar more than 5 years before you plan to retire. If you miss that 5-year “deadline”, you must get health insurance elsewhere, and that could be very costly.

8. Not Electing a Survivor Benefit When You Retire

Electing a survivor benefit for a spouse at retirement or upon marriage (or remarriage) after retirement will allow a surviving spouse to continue federal health benefits. Recent retirees (within 18 months) can elect a survivor benefit post-retirement however, the elections are very costly. Any survivor benefits for a post-retirement marriage must be received at OPM within 2 years of marriage. The survivor can pay FEHBP premiums directly if the survivor annuity doesn’t cover the premiums.

9. Expecting to Receive a Fill Social Security Retirement

The Windfall Elimination Provision (WEP) can reduce up to 60 percent of the earned Social Security benefits of CSRS employees. This doesn’t apply to FERS employees. Under the Government Pension Offset (GPO), CSRS annuitants could lose all their survivor benefits.

As you can see, retirement takes a lot of preparing. Don’t wait until the last minute to start your retirement planning. That could be a costly mistake that could’ve been avoided. Whether you retire on a voluntary basis or you have an injury or illness that qualifies you for a federal disability retirement, these are all decisions that must be made at some point. If you think you may qualify for a federal disability retirement, please don’t’ hesitate and give us a call at 877-226-2723, or fill out this INQUIRY form. The consultation is always free. We can help walk you through the process and filling out your application to ensure these elections are right for your specific situation.

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