Retirement requires planning, especially for federal workers. When should you retire? How do you prepare financially? What options does your benefit plan offer? And what about all that paperwork?
Your planning will be affected by whether you are in the Civil Service Retirement System (CSRS), CSRS-Offset, or the Federal Employees Retirement System (FERS) and FERS-Transfer.
From financial planning to achieving the lifestyle you want, it’s essential to avoid these mistakes to ensure a happy, comfortable, and secure retirement.
Mistake 1: Not Attending Your Pre-Retirement Seminar Five Years In Advance
It may be hard to imagine what your life may be like five years in advance of when you plan your retirement, but thinking at least that far in advance can make a big difference. Take advantage of your pre-retirement seminar at least five years before you plan to retire. You can take maximum advantage of your retirement benefits, get the most of your retirement annuity, and determine your health and life insurance options for the future.
Mistake 2: Taking Your Thrift Savings Plan (TSP) for Granted
Be sure to take advantage of your tax-deferred TSP contributions and its added government contributions. If you are in the Federal Employees Retirement System (FERS), it is especially important to start contributing as early as possible, because the TSP is designed to be one-third of your retirement income.[i]
Mistake 3: Not Buying Long Term Care Insurance Coverage
According to LongTermCare.gov, long term care can cost as much as $7,698 per month for a private room in a nursing home. That’s just one example of the potential costs, whether it is a nursing home, home care, or an adult health care center. Whatever medical support services you may need for long term care, it is expensive. LongTermCare.gov offers planning options and considerations based on your age — before 50, between 51–64, and 65 and older.
Mistake 4: Losing Track of Your Accrued Sick Leave and Annual Leave
Federal employees get credit for unused sick leave. You need to know how much you have. Be sure to take into account the impact on your sick leave if you need to take federal disability retirement. Federal employees are limited to 240 hours of annual leave, which you should also check a year before you retire.
Federal employees have an Official Personnel Folder (OPF), which includes Form SF 50 (Notice of Personnel Action). The employee should make sure that the form has the correct retirement designation. A mistake can complicate and cause problems with your retirement.[ii]
Mistake 5: Missing Out on FEHBP Coverage
Some employees opt out of the Federal Employees Health Benefits Program (FEHBP) if their spouse has private insurance. But, if you want to have FEHBP upon retirement, you need to be enrolled for five years before you retire.[iii]
Mistake 6: Thinking It Can’t Happen to You
Federal employees can accrue sick leave, which they use when they are ill or injured. But it’s usually not enough protection if you have a long-term disability. According to the insurance research firm LIMRA, 64 percent of consumers believe that most people need disability insurance, but only 20 percent carry it themselves.[iv] Whether you are in a high-risk career such as law enforcement or you “ride a desk,” accidents and illness happen.
Another reason to consider disability insurance as a federal employee is due to factors influencing Social Security Disability Insurance (SSDI) and FERS. While both offer assistance to your family during your time away from work, they are also subject to taxation. As well, SSDI and FERS may only provide short-term disability benefits, leaving gaps in your payments.
Starr Wright USA offers disability insurance for federal employees that provides qualifying employees and their families with up to 65 percent of their basic monthly salary — up to a maximum annual salary of $166,000. While some insurance plans for disability only provide short-term coverage, Starr Wright USA delivers short- and long-term disability insurance for federal employees.
Mistake 7: Being Unaware of Federal Regulations and Opportunities (If You Plan to Start a Business)
Retired feds often move onto a second career — whether they want added financial security or they want to apply the skills they have gained to become a consultant, a contractor, or start a small business. You need to be aware that retiring federal employees may be subject to some special considerations if they work for the government as a contractor.
Working after retirement has tax implications, which you need to determine as part of your plan. Another option for retired government employees is to work for the government under the rehired annuitant program, which can result in lower income taxes, lower withholdings, and supplement your Social Security. If you retire and work in the private sector, you still will receive your annuity and benefits.
Starr Wright USA offers Professional and General Liability insurance, and Business Owner Policies (BOP) designed for retired federal employees who start their businesses.
Mistake 8. Not Obtaining Insurance Protection from Claims Filed Against You After Retirement
Starr Wright USA provides Federal Employee Professional Liability Insurance (FEPLI) for thousands of federal employees. FEPLI covers legal fees and liability costs in the event of an allegation of misconduct while on the job — even baseless accusations of discrimination, retaliation, or harassment, for covered claims. FEPLI offers insurance protection even after retirement.
“Federal employees may not be aware that people can still make claims against them after they have retired. As an added benefit to the federal employees we insure, our policyholders receive 36 months of continuous coverage after retirement for no additional cost. It is important not to cancel or let your policy lapse. Just contact us and let us know your retirement date,” says Starr Wright USA Director of Marketing, Honey Fender.
Warren Buffet said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
If you want to “sit in the shade” of your retirement, avoid these mistakes and plant the seeds you need to grow a bright future.
Article authored by and containing the opinions of Starr Wright USA; this article is offered solely for informational purposes.
Starr Wright USA is a marketing name for Starr Wright Insurance Agency, Inc. and its affiliate(s). Starr Wright USA is an insurance agency specializing in insurance solutions for federal employees and federal contractors. For more information, visit WrightUSA.com. Starr Wright USA is a division of Starr Insurance Companies, which is a marketing name for the operating insurance and travel assistance companies and subsidiaries of Starr International Company, Inc. and for the investment business of C.V. Starr & Co., Inc.