If you are a DoD civilian employee, your retirement is not built around a single account or a single decision. It is built around a coordinated system of benefits that interact with one another in ways that are rarely explained clearly – not by HR, not by OPM.gov, and not by a generic financial advisor who has never heard of the Thrift Savings Plan matching schedule or the FEHB 5-year rule.
Most federal employees spend 20 or 30 years building a career that entitles them to a substantial retirement package. Then, in the final months before they submit retirement paperwork, they discover how many decisions they wish they had made differently – or how many deadlines they cannot go back and change.
This page is designed to give you a clear, accurate, and honest overview of how DoD retirement benefits work – including the decisions that matter most, the deadlines that cannot be missed, and the places where a second opinion can make a measurable difference.
Ready to review your specific situation? Schedule a Federal Retirement Strategy Session – 30 minutes, no pressure, no obligation. We will walk through your FERS estimate, TSP balance, and key elections together so you leave with clarity, not more questions.
The Department of Defense is the largest federal employer in the United States, with more than 900,000 civilian employees supporting operations across the country and around the world (U.S. Department of Defense, 2023). That scale creates a workforce with career histories that are rarely straightforward.
Many DoD civilians bring prior military service into their federal civilian career. Others have served in overseas assignments, specialized operational roles, or mission-critical positions that come with compensation structures – differentials, allowances, hazard pay – that raise specific questions about how earnings are calculated under the High-3 average salary formula.
These are not issues that a general overview of federal retirement planning can address adequately. The interactions between military and civilian service, in particular, require careful review well before a retirement date is finalized.
If you served on active duty before entering civilian federal service, you may be eligible to make a deposit – commonly called a military service buyback – to receive credit for that time toward your FERS retirement. This deposit is based on your military earnings and, if completed, can increase your total years of creditable service, potentially moving your retirement eligibility date forward and increasing your monthly pension.
Important: This deposit accrues interest over time. The longer you wait to make it, the more it costs. Reviewing your military service records and calculating the deposit amount well in advance of retirement is worth doing early.
For most DoD civilians hired after January 1, 1984, the Federal Employees Retirement System (FERS) provides the foundation of retirement income. FERS is a three-part system: a lifetime pension, contributions to the Thrift Savings Plan (TSP), and Social Security benefits.
Your FERS pension is calculated using a straightforward formula, though the inputs to that formula require careful review:
For a DoD civilian earning a High-3 of $95,000 with 28 years of service, the base annual FERS annuity would be approximately $26,600. At 30 years of service, that rises to approximately $28,500. At 32 years with the 1.1% multiplier, it would be approximately $33,440. These are meaningful differences – and the gap widens over a 20- or 25-year retirement.
If you served on active duty before entering civilian federal service, you may be eligible to make a deposit – commonly called a military service buyback – to receive credit for that time toward your FERS retirement. This deposit is based on your military earnings and, if completed, can increase your total years of creditable service, potentially moving your retirement eligibility date forward and increasing your monthly pension.
Important: This deposit accrues interest over time. The longer you wait to make it, the more it costs. Reviewing your military service records and calculating the deposit amount well in advance of retirement is worth doing early.
Eligibility under FERS depends on your age and years of creditable service:
Early retirement options – including Voluntary Early Retirement Authority (VERA) and Discontinued Service Retirement – may also be available depending on agency authorization. These require age 50 with 20 years of service, or any age with 25 years, subject to DoD approval.
If you retire before age 62 and meet eligibility requirements, you may receive the Special Retirement Supplement (SRS). This is a temporary payment designed to approximate the Social Security benefit you have earned until you reach age 62. It is subject to an earnings test and ends at 62 regardless of whether you claim Social Security at that point (OPM, 2024b).
The Thrift Savings Plan (TSP) is the federal government’s defined contribution retirement plan – comparable to a 401(k), but with lower administrative fees and a limited, straightforward fund lineup. For most DoD civilians, TSP accumulation represents their largest pool of flexible retirement assets.
For 2025, the IRS contribution limit for TSP is $23,500, with an additional $7,500 catch-up contribution for employees age 50 and older (Internal Revenue Service [IRS], 2024). Under FERS, the government matches your contributions dollar-for-dollar on the first 3% of salary, and 50 cents on the dollar for the next 2% – a maximum of 5% in matching contributions. Contributions below the matching threshold leave government money on the table permanently.
The right choice depends on your current tax bracket relative to your expected tax bracket in retirement. For many mid-career DoD employees, a split between Traditional and Roth contributions provides flexibility. For employees approaching retirement with significant TSP balances, Roth TSP conversions during the window between retirement and age 73 – when Required Minimum Distributions begin – can be an effective tax strategy.
Once you separate from federal service, several TSP withdrawal options become available: partial withdrawals, installment payments, full distributions, and annuity purchases. Each carries different tax implications and flexibility trade-offs.
At age 73, Required Minimum Distributions (RMDs) begin on Traditional TSP balances under IRS rules. Missing an RMD results in a penalty of 25% of the amount that should have been withdrawn (IRS, 2023). Planning TSP withdrawals in coordination with pension income, Social Security, and other accounts is where sequencing strategy matters most.
Learn more about tax-efficient withdrawal strategies in retirement
Understand when and how RMD rules apply to your TSP
Explore whether to leave your funds in TSP or consider a rollover
The Federal Employees Health Benefits (FEHB) program is one of the most valuable – and most misunderstood – components of federal retirement. Unlike most private-sector health benefits, FEHB can continue into retirement with the government still contributing to the premium. For many DoD retirees, this is worth tens of thousands of dollars over a retirement lifetime.
To carry FEHB coverage into retirement, you must have been continuously enrolled in the program for the five years immediately preceding your retirement date, or since your first opportunity to enroll if that is less than five years (OPM, 2024c). This is one of the few retirement rules with no exception process. Employees who are not currently enrolled and are approaching retirement need to address this now.
At age 65, most federal retirees become eligible for Medicare. The decision about whether to enroll in Medicare Part B – which covers outpatient services and carries a monthly premium – is not automatic and not simple. Many FEHB plans reduce their cost-sharing significantly when a member has Medicare Part B as primary coverage, which can lower out-of-pocket costs substantially. Other plans provide less benefit from the coordination.
Missing Medicare Part B enrollment windows can result in a permanent late enrollment penalty of 10% per year for each year you delayed after eligibility (Centers for Medicare & Medicaid Services [CMS], 2024). This decision should be evaluated well before age 65.
To allow your spouse to continue FEHB coverage after your passing, a survivor annuity must generally be in place. Without the survivor annuity election, your spouse loses FEHB eligibility when you die. This is one of the interconnected decisions where a choice in one area directly determines an outcome in another.
Under FERS, you may elect a survivor annuity for your spouse at the time of retirement. This decision is permanent – it cannot be changed after your retirement begins. Electing a survivor benefit reduces your own monthly pension during retirement, but provides continued income to your spouse after your death.
For a DoD employee with a $2,500 monthly pension, the full survivor election costs approximately $250 per month – a meaningful reduction in take-home income. Whether that trade-off is appropriate depends on your spouse’s own income, life expectancy considerations, and other assets. There is no universal right answer. This is exactly the kind of decision that benefits from a structured review before the retirement paperwork is submitted.
Your TSP account is distributed according to your TSP beneficiary designations, not your will. If no beneficiary is named, the TSP follows a statutory order of precedence under federal law (Federal Retirement Thrift Investment Board [FRTIB], 2023). Review and update these designations regularly – particularly after marriage, divorce, or a family death.
Because pension elections and survivor benefit selections are typically permanent once filed, reviewing your projected income before retirement is important.
Because many DoD civilian employees previously served on active duty, military service credit deposits (often called “buybacks”) are an especially important planning consideration. Buying back eligible military time may increase total creditable service under FERS, which can affect both retirement eligibility and pension calculations. Understanding how military service integrates with civilian federal service is a common topic for DoD employees preparing for retirement.
For many Department of Defense employees, the TSP becomes the largest retirement asset.
Planning considerations often include:
DoD employees retiring before age 59½ may also have questions about early withdrawal rules.
Understanding the tax treatment of TSP withdrawals is especially important in the early retirement years.
Learn more about tax-efficient withdrawal strategies in retirement
Understand when and how RMD rules apply to your TSP
Explore whether to leave your funds in TSP or consider a rollover
Learn how your FEHB coverage works in retirement and what eligibility requirements apply
Understand how the 5-year continuous FEHB enrollment requirement affects your ability to keep coverage
Get an overview of Medicare coverage and how it works with federal benefits
Review how enrolling in Medicare Part B interacts with FEHB coverage
Explore FEHB survivor options and considerations for federal spouses
Learn what happens to FEHB premiums and out-of-pocket costs in retirement
Understand when to enroll in Medicare to avoid penalties
See how health coverage decisions may influence your retirement timing and budget
Federal Employees Health Benefits (FEHB) coverage may continue into retirement if eligibility requirements are met.
Common review areas include:
Health insurance decisions can influence retirement timing and long-term budgeting.
Decisions must often be made at retirement and may not be reversible.
Reviewing your options ahead of filing retirement paperwork helps ensure elections align with your long-term goals.
Understand how survivor annuity elections affect your pension amount
See how electing a survivor benefit may reduce your monthly pension
Explore broader planning considerations for federal employees with spouses
While every situation is different, reviewing the tax implications before retirement can help reduce uncertainty.
At Plan Your Federal Retirement, we focus exclusively on federal retirement education and planning conversations.
At Plan Your Federal Retirement, we focus exclusively on federal retirement education and planning conversations.
Eligibility depends on your age and years of creditable service. Common eligibility combinations include MRA + 30 years, age 60 with 20 years, or age 62 with 5 years.
In many cases, prior active-duty service may be creditable toward your FERS pension if a deposit is made. Specific eligibility rules apply.
FERS pension income is generally subject to federal income tax, though a portion representing employee contributions may be excluded.
Yes, if you meet the 5-year continuous enrollment requirement prior to retirement.
Your TSP account remains yours after separation from service. Distribution options are governed by TSP and IRS rules.
Rollover decisions depend on individual circumstances and should be evaluated carefully.
The Special Retirement Supplement may provide temporary income for certain retirees before age 62. Eligibility rules apply.
Social Security benefits are separate from your FERS pension, but both may influence retirement income planning decisions.
Depending on eligibility category and years of service, retiring before age 62 may affect benefit calculations.
No. We are an independent financial services firm and are not affiliated with or endorsed by the U.S. Department of Defense or any federal agency.
Many important retirement decisions occur in the final 5–10 years of federal service.
It may be helpful to schedule a conversation to review general planning considerations.
