Some Federal Retirement Benefits Give You a Head Start

Some federal retirement benefits give Federal Employees a head start on retiring earlier than most.

As a Federal Employee, you know that you have one of the most complex benefits systems around.  But I believe that you also have one of the best.  And there are a few federal retirement benefits that really do give you a head start on retiring sooner than most people.

Let’s take a look at some of those benefits…

Excellent Defined Benefit Pension

As a Federal Employee, one fantastic benefit is in just having a CSRS or FERS pension in retirement.  Simply having a defined benefit pension gives you a huge head start on financial planning for retirement.

Most private companies have done away with their pensions and replaced them with 401(k) programs.  And while there are still excellent opportunities in 401(k) programs – you just can’t ‘count’ on how much income you’ll be able to take from your 401(k).

But with your CSRS or FERS pension, you’ll have a reliable source of fixed income in retirement.

And while many pension programs have disappeared all together – of the few that do remain, I would say that as a CSRS or FERS, you are usually eligible to retire at a younger age and start your pension compared to the few remaining pension programs I’ve seen.

Keeping FEHB in Retirement

Being able to keep FEHB into retirement is a tremendous benefit.  But even better – most Federal Employees will qualify to continue to have the government pay up to 72% of their FEHB premiums in retirement.

While some private sector companies may allow their retirees to stay on their health insurance plan (and not many do) – it is almost unheard of that they would continue to pay for the majority of the retiree’s premium costs.

So if you qualify to stay on FEHB into retirement (not everyone will) – not only do you get to stay on one of the best group health insurance plans around – the government will continue to pay the lion’s share of your premium.

A Quick Example…

Looking at a quick example; say you have an FEHB plan that costs you $400/month.

If the government is paying 72% of the premium, this means the total cost of your FEHB premium is really $1,429.

You are paying $400 of that cost, and the government pays the remaining $1,029… each month.

That is a tremendous benefit!

The Cost of Private Insurance

But let’s say for a second that you were only allowed to stay on FEHB if you paid 100% of your premium costs, in our example $1429/month.

This would still be *SIGNIFICANTLY LESS* than what most people would pay for private health insurance in retirement.  

Of course there are so many variables in private health insurance premium costs – but for an example, I was helping a client look for private health insurance (they weren’t a federal employee).

They were in good health, but weren’t going to be able to continue their health insurance into retirement.  We looked at a very high deductible in order to keep costs as low as possible – but even so, their premium costs would have been over $2,400/month.  

Can you imagine how your financial planning for retirement might be different if instead of $400/month for FEHB health insurance, you had to pay $2,400/month for private health insurance?

The reason I’m sharing these examples is to show you just how phenomenal your ability to keep FEHB in retirement is.  

For most private sector employees who can’t continue their health insurance into retirement – paying astronomical premiums for private health insurance simply isn’t an option.  And in these cases they often end up delaying retirement until they’re eligible for Medicare at 65.

So by being able to keep FEHB into retirement, and have the government continue to pay the lion’s share of your premiums – you have a tremendous head start on being able to retire sooner.

FERS Supplement

The FERS Supplement is a special benefit only for some FERS Federal Employees.  Unfortunately for CSRS, there is no counterpart.

The Supplement is separate from your FERS pension.  If you are eligible to receive the FERS Supplement – you receive an extra income that approximates a portion of your Social Security benefit.

So for FERS who retire under MRA+30 rules, they might be retiring at age 56 – long before they are eligible for Social Security.  But if they are eligible for the Supplement – they will receive their FERS Pension and the FERS Supplement.  This extra income can help bridge the ‘gap’ and make it possible for some people to retire sooner.

This is just a brief overview of the supplement.  Click here to find out more about the FERS Supplement.