Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Short-Term Benefits

The idea of a federal retiree used to conjure up the image of a Betty Bureau or Freddy Fed who had 30 or more years of government service by the time they applied for retirement. That image is changing, thanks to flexible hiring practices and the benefits available for employees who enter federal service later in life.

Many people now are coming to the government to share their experience and knowledge after careers in private industry or the military. They get retirement rewards, too. This week's column focuses on the benefits available to employees who retire with less than 10 years of civilian service but more than five, since that's the minimum to receive a retirement benefit under either the Civil Service Retirement System or the Federal Employees Retirement System. FERS Basic Annuity

Employees who have joined the government since the beginning of 1984 are covered under FERS. Employees who resign with more than five years of service are eligible for a deferred FERS basic annuity benefit, payable at age 62. If the employee is at least 62 when he or she leaves, the benefit is available immediately. And if the employee has more than 10 years of service, the benefit may be available even sooner than that. (Click here for more details.)

The FERS basic retirement benefit is computed by using the following formula:

1% x high-three average salary x years and months of creditable service
So, suppose Henry joins the civil service at age 59, and has previously served in the Army for four years. He completes five years of civilian service, and the average salary of his three highest-paid years is $80,000. He also gets credit for his military service by paying a military deposit. His FERS retirement will be payable when he retires at age 64, and will be computed as follows:
9 x 1% x $80,000 = $7,200/year or $600/month
This benefit will be paid to Henry for the rest of his life and will be boosted by annual cost of living adjustments.

Henry also has the option to take a 10 percent reduction to his benefit to provide a survivor annuity for his wife that would be paid at 50 percent of $600 per month (adjusted each year for inflation) for the rest of his wife's life should she outlive him.

TSP Returns

Employees covered under FERS are eligible to participate in the Thrift Savings Plan and receive agency automatic and matching contributions. The TSP is similar to 401(k) plans available to many private sector employees. Its purpose is to give employees the opportunity to participate in a long-term savings and investment plan.

How much could an employee save in the TSP in five years? Let's say Theresa was hired at a salary of $70,000 and contributed 10 percent of her salary to her TSP account. Suppose also that the investment earned an 8 percent rate of return. The balance in the account after five years would be $64,413. This could be used to supplement other retirement income by either taking a series of monthly payments or purchasing a life annuity. She could also transfer the balance to an IRA and use it as needed for future expenses.

Life Insurance

There are two types of insurance available under the Federal Employees Group Life Insurance program:

  • Basic Insurance: Employees are automatically enrolled in basic insurance, unless they waive this coverage. It is based on annual basic pay, rounded up to the nearest $1,000, plus $2,000. The government pays one-third of the cost and employees pay two-thirds. FEGLI insurance does not build any cash value.
  • Optional Insurance: There are three types: Option A (standard), Option B (additional) and Option C (family). Option A provides $10,000 of additional coverage. Option B comes in multiples of 1, 2, 3, 4 or 5 times your annual basic rate of pay. Option C insures your spouse for up to five multiples of $5,000 and eligible children for up to five multiples of $2,500.
If you have had FEGLI in effect for at least five years prior to your retirement and you retire with an immediate (not a deferred) retirement, you will be able to continue this coverage. For more information on continuing FEGLI into retirement, see my columns of Sept. 15 and Sept. 22, 2006.

Health Benefits

Maintaining adequate health care coverage is a very important element in retirement planning. The Federal Employees Health Benefits Program is designed to cover not just federal employees and their families, but retirees and their family members as well. Employees and survivor annuitants may continue FEHBP coverage through their CSRS or FERS retirement or survivor benefit. Of course, as with all other federal benefits, there are a series of rules related to FEHBP. To continue coverage into retirement, you must:

  • Have retired on an immediate annuity (that is, an annuity that begins to accrue no later than one month after the date of your final separation). This would apply to those "short timers" who retire at age 62 with more than five years of service or those employees who are at least the FERS minimum retirement age with at least 10 years of service.
  • Have been continuously enrolled (or covered as a family member) in any FEHBP plan (not necessarily the same plan) for the five years of service immediately preceding retirement--or if less than five years, for all service since your first opportunity to enroll.
For more on the subject of continuation of FEHBP in retirement, see my June 16, 2006, column.

President Bush's fiscal 2008 budget includes a proposal to scale back the government's contribution to health care premiums for new federal retirees with less than a decade of government service. If this becomes law, this means that retirees who have less than 10 years of service will pay some of the government share of the health premium in addition to the employee share.

Dental and Vision Coverage

The new Federal Employees Dental and Vision Insurance Program is available to eligible federal employees, retirees and their eligible family members on an enrollee-pay-all basis. This program allows dental and vision insurance to be purchased on a group basis, which means competitive premiums and no limitations based on pre-existing conditions. To learn more about this coverage, see

Long-Term Care Insurance

Long-term care insurance can be a smart way to help protect your assets and remain financially independent should you need long-term care.

Most health insurance programs, including FEHBP and the military's TRICARE, provide little or no coverage for long-term care. This is why the Office of Personnel Management sponsors such a program for federal employees and retirees. To learn more, see

A relatively short federal career can result in some lifelong benefits. For those interested in joining the civil service, it pays to understand how these programs work to be sure you complete enough service to earn these valuable rewards.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement and the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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