Your Last 90 Days as a Federal Employee: The Retirement Execution Sprint

Days 90 to 61: set up

Gather every document and lay out your whole retirement picture.

• SF-50 and anything showing your service computation date
• FEGLI election forms and current coverage
• TSP statement, split into traditional and Roth balances
• Social Security statement from ssa.gov
• A real list of monthly expenses

Why so early? This is the time to catch mistakes. We have seen service computation dates that were wrong and pensions that came out lower than they should have, followed by months of back-and-forth with HR and OPM. You want that fixed before you leave, not after.

Days 60 to 31: sequence

Your application should be signed and submitted during this window. Then the planning gets specific.

• Run your 10-, 20- and 30-year numbers. Know what your income looks like at each stage.
• Split the TSP into protection and growth. Decide what stays in the TSP, what moves, and when Roth conversions start.
• FEGLI or private life insurance? Apply for the outside policy now. If you are approved, you can drop FEGLI. If you aren't, you keep it. Either way you are not deciding in a panic.
• Survivor benefit or life insurance? A key reason to elect the survivor benefit is so your spouse keeps FEHB. If your spouse is not on your FEHB plan and you have a strong TSP balance, a life insurance policy may cover the same risk at lower cost.

Days 30 to 0: lock down

Most of the work now sits with your agency's HR office. Your job is to follow up and save cash. December is the worst month for paperwork: HR offices are overloaded and people are out.

When your paycheck stops you get your annual leave payout, then a gap. Interim annuity payments may arrive weeks later and the full payment can take months. Build at least several months of expenses in the bank. One client stopped his TSP contributions in his final months and sent that money to savings, which gave him about four months of runway.

“Don't just retire to retire. Build travel, gifts and giving into the plan, so when you spend the money you don't feel guilty about it.” — William Smith Jr.

Common myths we hear

• “I have to take everything out of the TSP when I retire.” You don't. You don't have to leave it all either.
• “My TSP stops growing when I retire.” It keeps growing in the same funds. You just stop contributing.
• “I should stop contributing before I retire.” Most people never need to. The exception is building an emergency fund, as above.

Questions from the live audience

How far in advance should I submit my federal retirement application?

Aim for 60 to 45 days before your retirement date. For a December 31 retirement, early November is best and mid-November is the latest we recommend, because December is a logjam.

When can I take money out of my TSP after I retire?

Once your agency reports your separation to the TSP. You add and verify a bank account (about a week), then request a withdrawal; payments usually start within another week or two.

If I get the FERS supplement, do I have to start Social Security at 62?

No. The supplement stops at 62, but you can delay Social Security. Many retirees draw from the TSP to bridge the gap and claim Social Security later for a larger benefit.

Does my FEGLI Basic coverage drop when I turn 65?

If you elected the 75% reduction, premiums stop at 65 or at retirement, whichever is later, and coverage then reduces by 2% a month until it reaches 25% of its value at retirement.

Is a TSP lump sum in my retirement year taxed like a paycheck?

Yes, if it goes to your bank account it is ordinary income for that year. Rolled into an IRA, it is not taxed. Large lump sums can push you into a higher bracket and raise Medicare premiums later.

What happens to an unpaid TSP loan when I retire?

You can repay it. If you don't, the TSP declares the balance a taxable distribution. If you are under 59½ and don't qualify for an exception, the 10% penalty can also apply.

Your numbers, not an example

See what this looks like for your TSP and pension.

The first call is free. We gather your service date, salary, TSP balance and goals, then show you where the gaps are.

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Fed Legacy is an independent financial services firm helping federal employees create retirement strategies using a variety of insurance products. Any reference to protection benefits, safety, security, steady and reliable income, or lifetime income streams refers only to fixed insurance products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities may be subject to fees, surrender charges and holding periods, and are not FDIC insured. This content is educational and is not tax or legal advice. Fed Legacy is not affiliated with OPM, the FRTIB or any federal agency.