Retirement planning for federal employees involves many moving parts, and over the years I have learned that most individuals share the same core questions. Although every situation is unique, there are consistent themes that appear when someone reaches the point where they begin wondering if they are truly ready to retire. My goal in this article is to walk through several of the most common questions I receive. I want to offer perspective, clarity, and a framework that helps you evaluate your own circumstances with confidence.
This article is based on real questions that federal employees bring to us every week. While I cannot tell anyone the exact moment they should retire, I can help you understand the factors that matter most, the decisions that carry long-term impact, and the options that are available as you consider the next stage of your life.
When Should I Retire?
This question may seem straightforward, yet it often reflects a deeper concern. Many people already understand the age and service requirements for eligibility. What they truly want to know is when they can retire confidently. They want to know when it is reasonable to make the transition without feeling uncertain about their income or their future financial stability.
There is no single answer. I do not believe in universal formulas that apply to every federal employee. Instead, I focus on one guiding principle that has helped many individuals determine their own timing.
A helpful rule of thumb is to evaluate whether your take-home income in retirement will allow you to maintain the lifestyle you currently enjoy. Once your essential expenses are covered and your discretionary goals are still attainable, you can begin to consider whether your resources provide a sufficient buffer for the unexpected. These unexpected circumstances may include inflation, medical needs, home repairs, long-term care, or future travel.
Your income may come from different combinations of the FERS pension, the Social Security supplement (if applicable), Social Security, and withdrawals from the Thrift Savings Plan. There is no single right combination. Some individuals rely on only two income streams at the beginning and preserve their TSP for later. Others draw from the TSP earlier while delaying Social Security. The key is to ensure that the income you rely on first does not completely exhaust your resources.
I have worked with individuals who retired with a lower percentage of their previous take-home income because they adjusted their lifestyle or eliminated debt. Others chose to refinance or take on a new mortgage right before retirement and were still in a strong position because their income sources could easily support it. The point is not to achieve perfection. The point is to understand your numbers and evaluate your options with a clear perspective.
Beyond personal finances, it can also be beneficial to understand the impact of continuing federal service. Closer proximity to age sixty-two often increases the pension computation for those with twenty or more years of service. Continuing to work may increase your pension, increase your TSP, and strengthen your overall retirement position. While this does not mean everyone should work longer, it is a factor worth including in your evaluation.
What Counts Toward the Social Security and Supplement Earnings Limit?
Many federal employees are familiar with the earnings limit that applies to Social Security or the FERS supplement before reaching full retirement age. What is less understood is what actually counts as earnings under this rule.
Only earned wages count. This includes W2 income from employment or 1099 income from self-employment. Your pension does not count. Withdrawals from your TSP do not count. Annual leave payouts do not count. Income received from savings, investments, or retirement accounts does not count. The focus is on whether you are gainfully employed and generating new income through work.
If you exceed the earnings limit for the year, the following year’s Social Security or supplement benefit will be reduced by fifty percent of the amount that exceeded the limit. For example, if you exceed the limit by ten thousand dollars in a given year, your benefit in the following year would be reduced by five thousand dollars.
There are some gray areas. Rental income and farming income can count in certain circumstances depending on how the activity is structured. Situations like these are best reviewed with a tax professional. As a general rule, if the income is not from active employment or self-employment, it usually does not count toward the limit.
Once you reach your full retirement age, the earnings limit no longer applies.
When Should I Take Social Security?
This is another question without a universal answer. The optimal timing of Social Security varies from person to person. Several considerations influence this decision, which is why individualized guidance is often beneficial.
Some individuals choose to start at age sixty-two because they need the income immediately or because their FERS supplement is ending. Others want to begin receiving benefits earlier so they can enjoy more financial flexibility in their sixties. Some are concerned about potential policy changes and prefer to start receiving benefits while the current rules are in place.
Others prefer to wait. Delaying Social Security increases the benefit by roughly eight percent each year between full retirement age and age seventy. Waiting has the potential to provide higher income later in life, especially if you expect to live beyond the average life expectancy. Family health history, personal vitality, and long-term goals can all influence this decision.
Taxes also matter. Social Security can be taxable depending on your combined income. Taking benefits during higher income years may result in more taxation. Waiting until your income declines could reduce the tax impact.
If you are still working and earning above the earnings limit, it usually makes sense to wait. Otherwise, your benefits could be reduced to the point where receiving them provides little value.
Your circumstances, health, income level, tax situation, and long-term goals all contribute to the timing decision. What works well for one person may not be appropriate for another.
Can I Stop the Survivor Benefit if My Spouse Passes First?
If your spouse passes away before you, you can request that your survivor benefit deduction be stopped. Under the FERS system, the full survivor benefit costs ten percent of the pension, and the reduced survivor benefit costs five percent. Once the survivor passes, you can provide documentation to OPM, and the reduction will stop going forward.
What you paid before that point is not refunded, but your pension will return to its full unreduced amount once the survivor benefit deduction ends. There can be delays in processing, but OPM can adjust your payments retroactively to the date of the spouse’s passing after receiving proper documentation.
Final Thoughts
Federal retirement is filled with important decisions that shape the future of your income, lifestyle, and long-term financial security. Every decision is personal and should be considered carefully. My goal is to ensure that federal employees have access to information that helps them evaluate their own situation without unnecessary confusion.
If you have questions, you can always reach out, and my team or I will gladly review your circumstances and help you understand the options available to you.
