The Five Biggest Myths about Federal Retirement - United Benefits

Senior couple on vacation - Retirement age - Myths about federal retirement

The retirement process may be one of the most confusing aspects of federal employment. Here are some common myths regarding federal retirement.

MYTH 1: “When I retire, my pension will begin right away.”

Even if you retire at the end of the month, you will have to wait a minimum of one month to receive your first payment from Federal Employee Retirement System (FERS). While it’s true that regular monthly payments are paid on the first of the month, that payment covers the annuity for the previous month. Your first few payments may also be less than the full amount while OPM verifies all of your information, so you will need to plan accordingly.

The best way to avoid delays is to plan and apply as early as possible. 

MYTH 2: “Social Security benefits will not begin until age 65.”

Your Full Retirement Age (FRA) for Social Security will be between age 65 and 67 depending on the year you were born. Still, you could start drawing benefits as early as age 62. If you start early, your benefits will be reduced, and there is a limit on how much income you can earn and still receive Social Security. However, this can still be a good option for some people because it allows them to retire earlier than they otherwise could financially. Learn more about federal employees’ Social Security by clicking here.

MYTH 3: “You must start taking payments from your Thrift Savings Plan when you retire.”

When you receive your annual TSP statement, it will illustrate the estimated monthly benefit you could start receiving at retirement. This option is called a Straight Life Annuity, and it is only one of the options available to you with your TSP account. You receive a fixed monthly amount for life with this option, but you will forfeit your account balance. That means you will no longer have access to your account, and there will be nothing to leave to your beneficiaries.

You may decide there are better options for you by transferring your account to an Individual Retirement Account (IRA), where you can access features such as 100% protection from market losses, increasing income for life, and death benefits for your heirs. 

MYTH 4: “There is no need to sign up for Medicare when I retire if I have FEHB coverage.”

You can continue your Federal Employee Health Benefits (FEHB) in retirement as long as you have met the eligibility requirements. And while you do not have to, it is typically recommended to sign up for Medicare Part B. You may even be able to combine FEHB with Medicare and eliminate all of your out-of-pocket healthcare expenses. There are certain Medicare Advantage plans that coordinate extremely well with your FEHB. Specific FEHB plans even offer reimbursements to help offset the cost of Medicare premiums. 

MYTH 5: “You can keep all of your life insurance coverage into retirement.”

While it’s true that you can continue your life insurance coverage, you may not be able to afford it once you’ve stopped working. That’s because the cost of coverage increases dramatically when you retire, with the cost for Basic rising 650%. And Option B can cost even more over your lifetime as the price increases every five years all the way to age 80.

United Benefits offers life insurance plans specifically for federal employees with fixed premiums and death benefits, but you must be a current employee to qualify for some policies. So don’t wait until retirement to apply, as you could lose your eligibility.

Need help navigating the retirement process?

Retirement from Federal Service can seem overwhelming, and there are many misconceptions circulating. Let our Retirement Benefit Specialists help you retire with confidence.

Get in touch with a United Benefits Specialist for a free consultation and we can walk you through the process step-by-step by filling out the form below.

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