The Retirement Benefits Puzzle - United Benefits

The Retirement Benefits Puzzle

We all look forward to our retirement, but as we approach our last day of work anxiety kicks in. Can I afford to retire? How much money will I receive while retired? What paperwork do I need to fill out? Who can help me? Is there anyone who can do it all?

United Benefits is your one-stop shop for navigating your retirement package and fitting all of the puzzle pieces together to maximize your benefits. The most common question we get is “Where do I start?”

Your retirement benefit package consists of a variety of separate pieces, including your Federal Employee Retirement System (FERS), Civil Service Retirement System (CSRS), FERS Annuity Supplement/Gap Coverage, Social Security, Thrift Saving Plan (TSP), Survivor Benefit choices, Federal Employee Health Benefits (FEHB), Federal Employee Group Term Life Insurance (FEGLI) and Special Provisions.   

Every one of these puzzle pieces has an irrevocable decision to be made. Ensuring that you have all of the information and expert guidance you need is key to maximizing your retirement package. We’ll be covering each of these in more depth, but let’s start with an overview of what each element of your retirement package is:

FERS & CSRS Monthly Annuities (Pension), including Special Provisions and the FERS Annuity Supplement

The Federal Employee Retirement System (FERS) and the Civil Service Retirement System (CSRS) are the retirement annuity programs for federal employees. Additionally, you may fall under Special Provisions depending on your job category that may provide enhancements to your retirement package.

Your pension is the fundamental basis for your overall retirement income. Your FERS or CSRS annuity is based on a formula that a United Benefits Retirement Specialist can review with you. The specific amount is dependent on a variety of factors, including your yearly income, years of service, your age, and what category your job title falls under. 

Additionally, if you retire before the age of 62 and are a FERS employee, you may be eligible to receive the FERS Annuity Supplement/Gap Coverage. It bridges the gap until you reach Social Security age of 62, and is based on years of service and your projected Social Security income. If you retire after 62, then you may be eligible for a 10% increase in your FERS annuity since you never received the supplement.

Social Security

Social Security is another fundamental guaranteed lifetime payment and a big part of your retirement income. You need a minimum of 40 credits or 10 years of service in order to be eligible for Social Security. The amount of Social Security you receive will be dependent on how much income you made during your career and the age when you decide to start your social security income. The Social Security Administration averages 35 years of your income to determine the monthly amount paid.

The biggest decision you have to make about your Social Security income is when to start your income. Once you start drawing social security, your monthly payment amount locks in, with the exception of any cost of living adjustments. You are eligible to start Social Security at age 62, but the later you decide to start the higher your monthly payment will be.

If you are married or were married for more than 10 years, you will also need to decide whose Social Security you will use – both you and your spouse will receive a check, but you have the option to either take your own Social Security or half of your spouse’s.

Thrift Savings Plan (TSP)

Your Thrift Savings Plan will be your third source of income after Social Security and your pension. The TSP has the most variables and can be set up in a wide variety of ways. Unlike your pension, you own the funds in your TSP and they can be passed on to your family or beneficiaries.

Similar to a 401k plan for Federal/Postal Employees, FERS, CSRS and Social Security are defined benefit plans where your benefit is pre-determined by a formula. The TSP is different – it’s a defined contribution plan, where the only requirement is in regards to how money is put into it. Income from your TSP could either be traditional income (taxable) or Roth income (nontaxable) depending on how you’ve set it up. How you take money out of your TSP is open-ended.

How much money you decide to draw from your TSP will depend heavily on your individual preferences and financial goals. We will cover some options in a later in-depth article about the TSP, but you are always welcome to set up an appointment with a United Benefits Retirement Specialist who can walk you through all of your options.

FEHB Health Insurance & Medicare

Federal Employee Health Benefits (FEHB) and Medicare are designed to help cover your healthcare costs and needs. You will want to use both systems to create an efficient health care plan for your specific health care needs.

Medicare Part A automatically starts at age 65 and becomes primary after you are retired. It only covers your hospital stays and nothing else. Medicare Part A is prepaid before 65 through your taxes and there is no additional cost. Additional Medicare components B, C, and D cover other portions of your health care, including doctor’s visits, prescription drugs, etc. and can be purchased in addition to Medicare Part A. 

FEHB is your health insurance through your federal employer, and you can stay enrolled throughout retirement if you qualify. FEHB can be used in multiple combinations with Medicare. We’ll dive into various configurations in a later article. In the meantime, if you have questions about how FEHB and Medicare interact, schedule an appointment with a United Benefits Retirement Specialist and we’ll be happy to help you.

Survivor Benefits & FEGLI Life Insurance

Survivor Benefits allow you to pass on a portion of your retirement benefits to your spouse, including your pension and FEHB elections, after you pass away. Electing to provide Survivor Benefits to your spouse will reduce your pension 5-10% depending on your choice. In order to allow your spouse to continue to be enrolled in FEHB, you must elect to have some amount of Survivor Benefits.

Life insurance policies may be a good alternative or complement to Survivor Benefits. Life insurance policies can be transferred to a new beneficiary in the event of your spouse’s death while Survivor Benefits cannot be transferred. In addition, life insurance may provide a greater benefit to your spouse or beneficiaries depending on a variety of factors.

Federal Employee Group Life Insurance is the life insurance available to you while you are employed. You can keep it into retirement, but the cost will go up substantially. Talk to a United Benefits Specialist to explore your life insurance options.

Putting It All Together

United Benefits offers free retirement assistance and consultations to help you maximize your retirement benefits. We have become federal retirement experts on every piece of your retirement planning. Unlike most financial advisors who only want to help you with the few retirement pieces that are profitable to them, United Benefits takes all the pieces and places them into your finished retirement puzzle. Contact us to schedule your retirement assistance appointment. A trained Retirement Specialist will walk you through everything, including how to use the GRB Platform or completing the retirement process. United Benefits will continue to provide assistance after you have successfully retired.

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