For many federal employees, the greatest risk to a comfortable retirement is not market volatility, but confusion about OPM regulations. Avoiding these frequent errors is key to ensuring a secure future.
Misunderstanding the “High-3” average pay
Many believe the “High-3” is calculated from their last three years of service. In truth, it refers to the highest three consecutive years of basic pay, which includes locality pay but usually excludes overtime, bonuses, or travel pay. Misjudging this can result in an unexpected decrease in your monthly annuity.
Overlooking the cost of survivor benefits
Some employees think survivor benefits are “automatic” or free. Opting for a full survivor annuity reduces your monthly payment by 10%. However, opting out can leave a spouse without health insurance (FEHB) eligibility after your passing, a significant misstep that is often irreversible once retirement papers are submitted.
3. The TSP “Catch-Up” Oversight
Many employees believe that simply “participating” in the TSP is enough. A frequent error is failing to maximize the Agency Match or neglecting “catch-up” contributions after age 50. Additionally, moving funds entirely into the G-Fund too early can result in your portfolio failing to outpace inflation during your retirement years.
The TSP “catch-up” oversight
Many assume mere participation in the TSP is sufficient. A common mistake is not maximizing the Agency Match or ignoring “catch-up” contributions after age 50. Additionally, transferring all funds into the G-Fund prematurely can prevent your portfolio from keeping pace with inflation during retirement.
Secure your legacy
The transition from federal employee to retiree requires precision, and a paperwork error or a timing mishap can jeopardize decades of hard work. Before starting this transition, consult your case with a lawyer so you can make informed decisions.