You’ve put in your time as a federal employee and you know you want to retire soon.
But are you really ready?
If you want to retire this year then here are the 3 things you need to do.
Are You Eligible?
If you want to get the most of your retirement benefits you need to meet the retirement requirements.
If you are a traditional FERS then you have to hit one of the following:
30 years of service at your MRA (minimum retirement age)
20 years of service at age 60
5 years of service at 65
Note: There are ways to retire at your MRA (minimum retirement age) with fewer years of service but there are some downsides which you can read all about here.
If you are a special provisions employee (fire fighter, air traffic controller, etc.) then you have to hit one of the following:
20 years at age 50
25 years at any age
What Does Being Eligible Get Me?
Being eligible for retirement comes with lots of benefits but the two biggest ones are that you can get a pension (monthly payment for the rest of your life) right away and can keep your FEHB (health insurance) into retirement.
Note: There are a couple other requirements to keep your FEHB into retirement which you can find here.
Do You Have Enough $$$?
Being eligible for retirement is important but doesn’t mean much if you can’t afford to retire.
But how do you know if you have enough to retire?
FERS enjoy three main sources of income in retirement:
FERS Pension
Social Security
TSP (Thrift Savings Plan)
Note: If you retire with a full retirement before 62 then you’ll qualify for the FERS Supplement as well.
You can get estimates for your pension and FERS supplement from your HR and you can get Social Security estimates by making an account on the Social Security website.
But how can you know how much income your TSP can provide?
There are a lot of philosophies out there about this but here is one of the simplest ones.
It is called the 4% rule. You can get more details of the 4% rule in this video but here is a simple example of how it works.
To estimate how much your investments can produce for you per year without worrying about running out then you multiply your total balance by 4%.
For example, if you have $500,000 in your TSP then it would look like this:
$500,000 x 4% = $20,000
So in this example, a 500k TSP could produce 20k/year of income for your entire retirement.
So once you know how much income you’ll get from all 3 sources of retirement income then you’ll need to decide if that is enough income for you to have the retirement that you really want.
If you want to know more about these 3 sources of income then check out this article.
The Retirement Process
If you are eligible and can afford to retire then it is time to hang it up!!
But what does the retirement process look like?
Here are things that have to happen:
You pick a date to retire. Some dates are better than others.
You request the retirement paperwork from your HR and they’ll let you know how soon before your retirement date they’ll need your application.
You fill out the application and return it to your HR.
Your HR gets your packet organized and will send your packet to OPM once you hit your retirement date.
Congrats, you are retired!!!
If you want more information on retirement timelines and how long it takes to get your pension then check out this article.
It is also best practice to make sure all of these things are in order before starting the retirement process:
Does your eOPF have all your official documents about your career?
Are all your SF-50’s correct?
Do you have proof of any bought back time (ie Military Time)?
Final Thoughts
Retirement can be incredible especially when you go in with your eyes wide open.
Most of us like surprise birthday parties but no one likes retirement surprises.
And the only way to reduce the unknown in retirement is by doing your homework now.
