Federal Retirement Benefits Overview: What You Actually Get

The Federal Retirement Package Isn't One Benefit — It's Six

Federal employees are often told they have a "three-legged stool" for retirement: pension, TSP, and Social Security. That's a simplification. The actual retirement package includes six distinct components, each managed by a different system with its own rules, timelines, and gotchas. Understanding what you're working with — and where the gaps are — is the foundation for planning your transition out of federal service.

1. Your Pension (FERS or CSRS Annuity)

The pension is the centerpiece. It's a guaranteed monthly payment for life, adjusted annually for inflation.

FERS annuity formula: 1% of your high-3 average salary × years of creditable service. If you retire at or after age 62 with at least 20 years of service, the multiplier increases to 1.1%. For a 30-year employee with a $100,000 high-3, that's $30,000/year at 1% or $33,000/year at 1.1%.

CSRS annuity formula: Tiered — 1.5% for the first 5 years, 1.75% for years 6–10, and 2.0% for every year beyond 10. The same 30-year/$100,000 employee receives $56,250/year under CSRS. The higher pension is why CSRS employees don't receive agency matching contributions in the TSP.

COLAs: FERS annuities receive a cost-of-living adjustment capped at 1% below the CPI increase when inflation exceeds 2%. CSRS annuities receive the full CPI adjustment. In 2026, CSRS retirees got 2.8% while FERS retirees got 2.0%.

Survivor annuity: You can elect to reduce your pension by 5% or 10% so your surviving spouse receives 25% or 50% of your unreduced annuity after your death. This is a permanent election made at retirement.

2. Thrift Savings Plan (TSP)

The TSP is the federal 401(k). It holds the money you contributed during your career, plus any investment gains, in a mix of funds you selected — the G, F, C, S, I, and L (lifecycle) funds.

FERS matching: Your agency contributed 1% of your salary automatically, plus matched your contributions dollar-for-dollar on the first 3% and 50 cents on the next 2%. If you contributed at least 5% of your pay, you received the maximum 5% match. CSRS employees get no matching.

2026 contribution limits: $24,500 elective deferral, plus $8,000 catch-up for ages 50–59 and 64+, or $11,250 catch-up for ages 60–63 under SECURE 2.0.

Withdrawal options after separation: Partial withdrawal, full withdrawal, installment payments (monthly, quarterly, or annual), TSP annuity through MetLife, or rollover to an IRA. No RMDs until age 73 (rising to 75 for those born 1960+). The "Rule of 55" exempts you from the 10% early withdrawal penalty if you separated in or after the year you turned 55.

The TSP balance varies enormously by employee. A 30-year careerist who maxed contributions in the C and S funds could have $1.5 million+. Someone who contributed only enough for the match and stayed in the G Fund might have $200,000. There's no "typical" TSP balance — which is why the pension (predictable) and TSP (variable) serve different roles.

3. Social Security

FERS employees pay Social Security (FICA) taxes and earn Social Security credits throughout their federal career. Your benefit is calculated based on your 35 highest-earning years, using the standard formula.

CSRS employees generally didn't pay into Social Security through their federal service. If they have 40 quarters from non-federal work, they qualify for benefits — and since the Social Security Fairness Act (January 2025) repealed both WEP and GPO, those benefits are now calculated at the full rate without the historical reductions.

When to claim: Your full retirement age is 67 if born in 1960 or later. Claiming at 62 permanently reduces your benefit by about 30%. Delaying past full retirement age increases it by 8% per year up to age 70.

Coordination with FERS Supplement: If you retire before 62, the FERS Special Retirement Supplement bridges part of the gap. Social Security itself doesn't start until you file a claim at 62 or later.

4. FERS Special Retirement Supplement (SRS)

This is the benefit most federal employees don't know about until they're close to retirement.

If you retire at your MRA with 30+ years of service, or at age 60 with 20+ years, you're eligible for the SRS — a monthly payment that approximates what your Social Security benefit would be based only on your federal service. It continues until you turn 62, when you become eligible for actual Social Security.

The earnings test: The supplement is reduced by $1 for every $2 you earn above $24,480 (2026 limit). This applies to all earned income — wages, self-employment — but not investment income, pension payments, or TSP withdrawals. If you plan to work part-time in retirement, the SRS could be reduced to zero.

Not automatic: You don't need to apply separately for the SRS, but OPM calculates and pays it as part of your finalized annuity. It won't appear in interim payments.

5. Health Insurance (FEHB or PSHB)

Your federal health insurance continues into retirement if you were enrolled for the five years immediately before your retirement date. The government continues to pay its share of the premium (roughly 72% on average), and your share is deducted from your annuity.

FEHB covers most federal retirees. Part B enrollment is optional — FEHB is creditable coverage. When you do enroll in Part B (usually at 65), Medicare becomes primary and FEHB secondary, dramatically reducing out-of-pocket costs.

PSHB covers postal employees and retirees as of January 2025. Unlike FEHB, PSHB requires Medicare Part B enrollment for anyone entitled to Part A. Losing Part B coverage means losing PSHB.

FEDVIP (dental and vision) continues separately through BENEFEDS and requires direct billing during the interim pay period.

6. Life Insurance (FEGLI)

Federal Employees' Group Life Insurance continues into retirement if you were enrolled for five years. At retirement, you choose a reduction schedule for your Basic coverage:

• 75% Reduction: Coverage drops by 2% per month after 65 until 25% remains. Free after 65.
• 50% Reduction: Drops until 50% remains. You pay $0.75/month per $1,000 for life.
• No Reduction: Full coverage continues. You pay $2.25/month per $1,000 for life.

Options A, B, and C have their own reduction schedules. Option B (Additional) is the one that gets expensive in retirement — premiums are based on five-year age bands and increase sharply after 65.

The FEGLI election is made on SF 2818 at retirement and is permanent. There's no way to increase coverage after retirement, and the conversion option (to an individual policy) must be exercised within 31 days of losing FEGLI eligibility.

How the Pieces Interact

The six components aren't independent. Your pension estimate determines how much you need from TSP and Social Security. Your Social Security claiming age determines how long you need the FERS Supplement. Your FEHB plan choice affects whether Medicare Part B is worth the $202.90/month premium. Your TSP withdrawal strategy determines your tax bracket, which determines how much of your pension and Social Security you keep.

The systems that manage these components — OPM, TSP.gov, ssa.gov, your FEHB carrier, BENEFEDS, and your agency HR — don't talk to each other. No single entity gives you a unified view of your retirement income.

The Federal Retirement Countdown Checklist structures the coordination across all six systems into a single timeline, from five years out through your first annuity payment — so you can manage the handoffs between systems instead of discovering gaps after separation.