The journey to a successful retirement as a federal employee under the Federal Employees Retirement System (FERS) is a marathon, not a sprint. The most common concern for those approaching the finish line is, “Am I forgetting anything?” The key to a confident retirement is a structured, phase-by-phase approach.
This comprehensive checklist breaks down the critical actions you should be taking at the five-year, three-year, and one-year marks leading up to your retirement date. By tackling these “big rocks” now, you ensure a smoother transition to the life you’ve worked so hard for.
5 Years Out: Laying the Foundation
Five years before retirement is the crucial time for foundational work—getting your legal, administrative, and benefit eligibility squared away. This window gives you enough time to fix complex paperwork issues that could otherwise delay your retirement date.
1. Verify Eligibility and Fix Paperwork Issues
- Confirm Eligibility: Make sure you will meet the age and service requirements for the specific type of retirement you desire (e.g., Minimum Retirement Age + 30, Age 60 + 20, Age 62 + 5).
- Resolve Military Buyback: If you have creditable military service, start the “buyback” process now. This can take a long time to process, and it must be completed before you file your retirement paperwork to count toward your years of service and annuity computation.
- Review Service Computation Date (SCD): Check your Official Personnel Folder (OPF) or records to ensure your SCD is accurate, especially if you have had breaks in service or transferred between agencies. Any errors in this date directly impact your retirement eligibility and annuity.
- Check FEHB and FEGLI Eligibility (The 5-Year Rule): This is non-negotiable. To carry your Federal Employees Health Benefits (FEHB) and Federal Employees’ Group Life Insurance (FEGLI) into retirement, you must have been continuously covered for the five years immediately preceding retirement, or since your first opportunity to enroll, and retire on an immediate annuity. If you are not enrolled, enroll now.
2. Debt Reduction Strategy
- Create a Plan: Aggressively pay down high-interest debt (credit cards, car loans).
- Mortgage Review: Decide on a plan for your mortgage. While a low-interest mortgage may not require aggressive payoff, entering retirement debt-free is a massive advantage that reduces your required retirement income.
3. Dial in TSP Investing and Savings
- Maximize Contributions: You are likely in your peak earning years. Aim to maximize your annual Thrift Savings Plan (TSP) contributions, including the catch-up contributions if you are over age 50.
- Review Allocation: Ensure your investment mix (C, S, I, F, G Funds) aligns with your timeline. Five years is still a significant growth period, but you may want to gradually de-risk as you get closer to retirement.
- Build Cash Reserves: Start building a cash cushion or emergency fund. These funds will be essential for the initial months of retirement while your FERS annuity application is being processed by the Office of Personnel Management (OPM), as there can be significant delays before your first full payment.
4. Define Your Retirement Dream
- Lifestyle Planning: Retirement is about more than money. Start having concrete conversations with your spouse or significant other about what you plan to do. Where will you live? How will you spend your time? What hobbies or travel plans do you have? This planning will inform your financial budget.
3 Years Out: Testing and Refining
With three years left, your focus shifts to the practical realities of retirement income and healthcare. You have a solid estimate of your income and can begin stress-testing your plan.
1. Test Drive Your Retirement Budget
- Income Check: Calculate a detailed, realistic estimate of your projected retirement income (FERS annuity, FERS Special Retirement Supplement, Social Security estimate, and planned TSP withdrawals).
- Live Off the Budget: Begin living off the estimated retirement income amount now. Any money left over should be aggressively saved into your cash reserves or TSP. This tests the viability of your spending habits and helps you adjust if the number feels too tight.
2. Test Drive Your Retirement Lifestyle
- Trial Runs: If your dream involves a major change—such as moving, buying an RV, or starting a new full-time hobby—take a trial run. Rent an RV for a month, or spend extended time in your planned relocation city. This helps prevent expensive mistakes later.
3. Review FEHB and Medicare
- FEHB Plan Assessment: With increasing health expenses, evaluate your current FEHB plan. Does the coverage, premium, and deductible still make sense for a retiree? Open Season is a good time to research other plans.
- Medicare Coordination (Age 65): If you or your spouse are approaching age 65, you must understand how Medicare (Parts A, B, C, D) coordinates with your FEHB. You will need to make decisions about enrolling in Medicare Part B, as it is often recommended for federal retirees to combine it with FEHB.
1 Year Out: The Final Countdown
The final year is about making firm, specific decisions, submitting paperwork, and getting all your “ducks in a row.”
1. Set a Specific Retirement Date
- Pick the Date: Nail down a specific month, day, and year. For FERS employees, your annuity begins the first day of the month after you retire. Retiring on the last day of a month (e.g., December 31st, January 31st) is often a popular retirement date to maximize service credit and annuity accrual, and to receive a lump-sum payout for your final annual leave.
- Submit Application: Coordinate with your HR/Benefits office to get the retirement application process started. It is generally recommended to submit your application a few months in advance.
2. Finalize Financial Strategies
- Social Security Strategy: Determine your and your spouse’s optimal Social Security claiming strategy. Will you claim at age 62, Full Retirement Age (FRA), or delay until age 70 for the maximum benefit?
- TSP Withdrawal Plan: Formalize your strategy for accessing your TSP.
- Tax Implications: Understand the tax consequences of Traditional (taxable) versus Roth (tax-free) withdrawals.
- RMDs: Familiarize yourself with Required Minimum Distributions (RMDs), which start in your mid-70s. Taking planned withdrawals earlier can help manage future RMD tax burdens.
- Withdrawal Options: Decide if you will use partial withdrawals, monthly installments, or a combination.
- Final Beneficiary Review: Ensure all beneficiaries are current and correct for:
- TSP
- FEGLI
- Unpaid Compensation
- FERS Annuity (Survivor Benefit Election)
3. Estate Planning and Legal Documents
- Review/Create Legal Documents: Meet with an attorney to finalize your estate plan, including a Will (to manage assets) and potentially a Trust (for more complex estates or probate avoidance).
- Power of Attorney: Ensure you have an up-to-date Financial Power of Attorney and Healthcare Power of Attorney to handle affairs should you become incapacitated.
By dedicating time to these checklists at the five-year, three-year, and one-year milestones, you move beyond just hoping for a great retirement to actively building the secure, worry-free future you deserve.
