Federal & State Employee
Benefit Planning
FERS · FEGLI · SBP · TSP · FEHB · Medicare Coordination
Pension Optimization · Roth TSP · Retirement Timing
You’ve built something rare — a federal retirement with a pension, TSP, and lifetime health coverage. But the decisions you make at retirement are largely irrevocable. The SBP election. The FEGLI comparison. The TSP distribution strategy. The FEHB-Medicare coordination. Getting these right makes a six-figure difference over your retirement. We’ve helped federal employees in the DC metro area navigate every one of them.
Gap at Age 62
of Base Annuity
(CSRS, 2025)
Ratio (2024)
TSP Match
Most of Your Retirement Decisions
Cannot Be Undone After You Retire
Federal retirement is unlike any private sector plan. The decisions you make at the moment of retirement — SBP election, FEGLI reduction, TSP distribution start, FEHB enrollment, Social Security timing — are largely irrevocable. A wrong call costs you for decades.
SBP Election — Irrevocable at Retirement
You have one chance to choose your Survivor Benefit Plan coverage. If you elect full spouse coverage, you pay 10% of your base annuity every year for the rest of your life. If you decline, your spouse receives nothing from the pension if you die first. There is no do-over. This single decision has a lifetime cost that often exceeds $100,000 — and may be replaceable with life insurance at lower net cost.
Must be analyzed before the retirement date. Cannot be changed afterward except in narrow qualifying life events.
FEGLI Reductions — A Permanent Pay-or-Lose Choice
At retirement, you choose how to handle FEGLI coverage reductions. Option B can be kept at full value — but the premiums rise steeply with age, making it one of the most expensive forms of life insurance available. Electing to reduce coverage at retirement frees up income but may leave a gap. Replacing FEGLI with private coverage before retirement — while you’re healthiest — is often the most cost-effective path.
FEGLI open seasons are rare. Private insurance underwriting is easiest while you’re still actively employed and healthy.
Retirement Date — One Month Can Change Everything
For FERS employees, retiring at age 62 instead of 61 with 20+ years of service permanently increases the pension multiplier from 1% to 1.1% — a 10% lifetime annuity increase. Retiring in the last week of a leave year maximizes the annual leave payout. High-3 average salary timing around a promotion or step increase can permanently raise the pension base. These decisions require planning 12–18 months in advance.
Example: $80,000 high-3 salary. 25 years service. 1% = $20,000/yr pension. 1.1% = $22,000/yr. Difference: $2,000/yr for life.
TSP Beneficiary Designation — Often Outdated
The TSP passes by beneficiary designation — completely bypassing your will, trust, or estate plan. A designation made at onboarding 20 years ago naming a parent, prior spouse, or “my estate” can route hundreds of thousands of dollars to the wrong person, eliminate the spousal IRA rollover option, and trigger immediate taxation. This is one of the most common and easily corrected planning failures we find in federal employee reviews.
Fix: Log into TSP.gov and update your beneficiary designation. Align it with your estate plan and ensure it doesn’t say “my estate.”
We serve federal employees at NIH, FDA, USDA, Social Security Administration, NCI, NIST, Walter Reed, and throughout the DC metro area — as well as MCPS teachers, administrators, and Montgomery County government employees. We know your benefit systems and the irreversible decisions you face.
Book My Federal Benefits Review →FERS vs. CSRS — Understanding Your Foundation
| Feature | FERS (hired after 1983) | CSRS (hired before 1984) |
|---|---|---|
| Pension formula | 1% × High-3 × YOS 1.1% if age 62+ with 20+ yrs |
~2% × High-3 × YOS (tiered: 1.5% / 1.75% / 2%) |
| Social Security | ✅ Fully covered — pays SS taxes | ❌ Not covered (or CSRS Offset) WEP may reduce any SS earned elsewhere |
| TSP agency match | ✅ 5% (1% auto + 4% match) | 1% auto only — no match |
| FERS Supplement | ✅ Available until age 62 | N/A |
| Employee pension contribution | 0.8% – 4.4% of salary (depends on hire date) |
7% of salary |
| Minimum Retirement Age (MRA) | 55–57 (depends on birth year) + 10–30 years of service |
Age 55 with 30 yrs Age 60 with 20 yrs |
| Planning complexity | High — three moving parts (pension + SS + TSP) must be coordinated | Very high — larger pension, WEP exposure, no SS integration |
📅 FERS Minimum Retirement Age (MRA) by Birth Year
| Born | MRA |
|---|---|
| Before 1948 | 55 |
| 1948–1952 | 55 + 2 months / year |
| 1953–1964 | 56 |
| 1965–1969 | 56 + 2 months / year |
| 1970 or later | 57 |
💰 FERS Pension Examples (High-3 Salary $90,000)
| Years | At 1% | At 1.1% (age 62+) |
|---|---|---|
| 20 years | $18,000/yr | $19,800/yr |
| 25 years | $22,500/yr | $24,750/yr |
| 30 years | $27,000/yr | $29,700/yr |
| 35 years | $31,500/yr | $34,650/yr |
1.1% multiplier applies only if retiring at age 62 or later with 20+ years of service.
FEGLI vs. Private Life Insurance —
The Numbers Most Federal Employees Never See
FEGLI is convenient, but it becomes one of the most expensive life insurance options available as you age — and the cost accelerates sharply in retirement. Here’s what the premiums actually look like.
FEGLI Option B Premium Cost per $1,000 of Coverage (Biweekly)
| Age Bracket | Biweekly per $1,000 | Annual per $1,000 | Annual cost: $250K coverage | vs. Private Term (healthy) |
|---|---|---|---|---|
| Under 35 | $0.43 | $11.18 | ~$2,795/yr | Comparable |
| 35–39 | $0.65 | $16.90 | ~$4,225/yr | Slightly higher |
| 40–44 | $1.17 | $30.42 | ~$7,605/yr | Private often cheaper |
| 50–54 | $2.17 | $56.42 | ~$14,105/yr | Private significantly cheaper |
| 60–64 | $5.85 | $152.10 | ~$38,025/yr | FEGLI very expensive |
| 65–69 | $13.00 | $338.00 | ~$84,500/yr | Prohibitively expensive |
Approximate 2024 FEGLI rates. Actual rates may differ. Private term comparison assumes preferred health class. Source: OPM FEGLI rate tables.
❌ Keeping FEGLI Option B to Age 65+
Federal employee, $250K Option B coverage, retires at 62. By age 65 the cost is ~$84,500/year. Over 10 years from age 55 to 65, FEGLI Option B at full value costs an estimated $100,000+ in premiums — with no cash value accumulation.
✅ Replace with Private Policy Before Retirement
Age 52, healthy federal employee. $250K 20-year term: approximately $125–$165/month ($1,500–$1,980/yr). Total 20-year cost: $30,000–$39,600. Covers through age 72. Savings vs. FEGLI Option B over the same period: $60,000–$70,000+. Whole life alternatively builds cash value as a retirement asset.
⏰ Timing Is Critical
Private underwriting is easiest while you’re employed, healthy, and in your 40s or early 50s. If you wait until retirement or reduce FEGLI at the retirement date, you may face higher rates, exclusions, or simplified issue only. The best time to compare is 3–7 years before your planned retirement date.
The Survivor Benefit Plan (SBP) Election —
What It Costs, What It Provides, and When to Consider Alternatives
The SBP is the government’s solution to survivor income — but it comes at a cost that accumulates for decades, and it may not be the most efficient option for every family.
📋 How SBP Works
- Provides surviving spouse up to 50% of base annuity for life
- Cost: 10% of base annuity for full spouse coverage
- SBP premium is paid every month you receive your pension — whether you need it or not
- SBP income is subject to federal income tax as ordinary income
- SBP has a COLA — it increases annually with the same COLA as your annuity
- Election is irrevocable at retirement (with narrow exceptions)
- If your spouse predeceases you, SBP premiums stop but are not refunded
💰 SBP Cost Illustration
FERS retiree. Base annuity: $36,000/year ($3,000/month). Full spouse SBP coverage:
- Monthly SBP premium: $300/month (10% of $3,000)
- Annual SBP cost: $3,600/year
- Over 20 years: $72,000 paid in premiums
- Over 25 years: $90,000 paid in premiums
- Survivor receives: $1,500/month ($18,000/year) for life
- Break-even point for survivor: approximately 4–5 years after retiree’s death
🔄 The SBP Alternative: Private Life Insurance
Instead of paying $300/month in SBP premiums, some federal retirees purchase private life insurance that pays a lump sum death benefit to the surviving spouse — who then invests it for income.
Example: Age 55 federal employee. Instead of SBP, purchases $400,000 whole life policy for ~$280–$360/month. At death, survivor receives $400,000 income-tax-free (vs. SBP’s taxable $1,500/month). At 4% distribution, survivor generates $16,000/year — close to SBP — but retains principal, and the policy builds cash value the retiree can access while alive.
Key consideration: SBP has a COLA; life insurance death benefit is fixed. SBP income continues regardless of how long the survivor lives; a lump sum can be depleted. The right answer depends on ages, health, and financial picture.
When SBP Makes Sense vs. When Private Insurance May Be Better
✅ SBP May Be the Right Choice If:
- Retiree has health issues that make private underwriting expensive or unavailable
- Large age gap — younger spouse could receive SBP for 30+ years
- Spouse has limited financial management experience with large lump sums
- You want the COLA protection on survivor income
- You prefer guaranteed lifetime income for survivor vs. investment risk
🔄 Private Insurance May Be Better If:
- Retiree is healthy — private rates are competitive
- Retiree and spouse are similar ages — shorter survivor income period expected
- You want to preserve wealth and principal for estate/heirs
- Spouse has independent income (pension, investments) and needs supplemental only
- You want to access cash value while alive (whole life) — SBP has no cash-out option
TSP Strategy — Contributions, Distributions, Roth Conversion & Rollover
📊 The G Fund — TSP’s Unique Advantage
The G Fund earns long-term Treasury bond interest rates while providing short-term principal protection — a combination unavailable in any private IRA or investment account. There is no equivalent “safe” yield option outside the TSP. For retirees who want a stable, guaranteed return component in their portfolio, keeping at least a portion of savings in TSP to access the G Fund is often worth preserving even after retirement.
Can’t replicate the G Fund in an IRA. Consider a partial rollover strategy to preserve G Fund access.
🔄 Traditional TSP vs. Roth TSP
Traditional TSP: pre-tax contributions, tax-deferred growth, fully taxable distributions. Roth TSP: after-tax contributions, tax-free growth and distributions. For FERS employees with a pension that occupies lower brackets in retirement, Roth TSP contributions during peak earning years can be valuable — especially if the pension + Social Security income will push TSP RMDs into the 22–24% bracket regardless.
SECURE 2.0: Roth TSP no longer requires RMDs during the owner’s lifetime (effective 2024) — removing one of the prior disadvantages of the Roth TSP vs. Roth IRA.
🏦 TSP Rollover — The Partial Strategy
Rolling the entire TSP to an IRA at retirement provides more investment options and Roth conversion flexibility — but gives up the G Fund. A partial rollover strategy keeps the G Fund allocation in TSP while rolling equity funds (C, S, I Funds) to a Traditional IRA where they can be converted to Roth over the retirement window.
TSP also accepts rollovers IN from IRAs — which federal employees can use to consolidate pre-tax IRA balances into TSP before doing a backdoor Roth IRA contribution, clearing the pro-rata rule problem.
Full TSP rollover analysis →📋 TSP Beneficiary — Most Common Error
TSP beneficiary designations are separate from your will, trust, and estate plan. They must be updated directly at TSP.gov. Default order if no designation is on file: (1) spouse, (2) children equally, (3) parents, (4) estate. “Estate” as beneficiary triggers probate, loses spousal rollover, and creates immediate taxation. An outdated designation naming a deceased parent or prior spouse sends the balance to that person — your will cannot override it.
Action item: Log into TSP.gov → My Profile → Beneficiaries. Review now.
2024 TSP Contribution Limits
Annual elective deferral limit
(under age 50)
Additional catch-up contribution
(age 50+) = $30,500 total
FERS agency match
(contribute at least 5% to capture full match)
Average TSP expense ratio
(2024 — lowest of any major plan)
FEHB + Medicare Coordination — The Decision Most Federal Employees Get Wrong
The 5-Year Rule — Don’t Miss This
To carry FEHB into retirement, you must have been continuously enrolled in FEHB for the 5 years immediately before your retirement date (or for your entire federal career if less than 5 years). If you dropped FEHB at any point in the 5 years before retirement — even briefly — you lose the right to carry it into retirement. This is an irreversible, often overlooked requirement. Federal employees who are covered under a spouse’s private employer plan should verify their FEHB enrollment history well before their planned retirement date.
Option 1: FEHB Only (No Medicare Part B)
Keep FEHB without enrolling in Medicare Part B. Saves the Part B premium ($185/month base, more with IRMAA). Works well for healthy retirees with FEHB plans that have low out-of-pocket costs. Risk: some FEHB plans have higher cost-shares without Medicare as primary payer.
Best for: Low healthcare users, lower-premium FEHB plans, those concerned about IRMAA
Option 2: FEHB + Medicare Part B (Most Common)
Enroll in Medicare Part B at 65. Medicare becomes primary payer; FEHB becomes secondary (wraps around Medicare). Most FEHB plans waive or reduce cost-sharing when Medicare pays first. Many federal employees find that FEHB premiums are lower when they select a plan designed to coordinate with Medicare. Net cost often lower than FEHB alone for moderate-to-high healthcare users.
Best for: Higher healthcare users, peace of mind on out-of-pocket, comprehensive coverage
Option 3: Drop FEHB, Enroll in Medicare Advantage
Drop FEHB at 65 and enroll in a Medicare Advantage plan instead. Can significantly reduce premiums. Risk: Medicare Advantage network restrictions; if you want to return to FEHB later, you may only do so during Open Season — and your FEHB enrollment restarts. Losing FEHB is a one-way door in practice for most federal retirees.
Caution: Dropping FEHB is difficult to reverse. Analyze carefully before any decision to drop coverage.
FEHB + Medicare + IRMAA interaction: If you enroll in Medicare Part B, the premium is based on your MAGI from 2 years prior. A large Roth TSP conversion or TSP distribution in a given year can trigger IRMAA surcharges on your Part B premium the following year. Coordinating TSP/IRA withdrawals with FEHB-Medicare enrollment is part of a complete federal retirement income strategy. IRA and IRMAA planning →
Retirement Timing Factors That Can Add Thousands to Your Annuity
🎯 The 1% → 1.1% Multiplier Jump
FERS employees with 20+ years of service who retire at exactly age 62 (or later) get a 1.1% pension multiplier instead of 1%. This is a 10% permanent pension increase — for life. On a $90,000 high-3 salary with 25 years service, that’s a $2,250/year difference that compounds with COLA for the rest of your life. If you’re 61 years and 11 months with 20+ years of service, it may be worth waiting one more month.
📅 Annual Leave Year-End Lump Sum
Unused annual leave is paid out at retirement as a lump sum at your final hourly rate. The federal leave year typically ends in early January. Retiring in the last week of the leave year maximizes the annual leave payout vs. retiring mid-year. For a GS-14 Step 10 employee at ~$60/hr with 240 hours of annual leave, the timing difference can be worth $14,400 in lump sum pay.
💼 High-3 Salary Timing
Your FERS pension is based on the average of your highest 3 consecutive years of salary. A recent promotion, within-grade step increase, or pay raise that takes effect partway through a calendar year may or may not be fully captured in your high-3 depending on your retirement date. Retiring 12–18 months after a significant pay increase ensures the full increase is captured in the high-3 average.
🕐 FERS Supplement Earnings Test
If you retire before 62 and plan to work in any capacity, the FERS Supplement earnings test reduces your supplement by $1 for every $2 of earned income above approximately $22,320 (2024). Federal retirement income, investment income, rental income, and Social Security are not counted — only wages and self-employment. Consulting work, part-time employment, or a second career can significantly reduce or eliminate the supplement until age 62.
📆 Sick Leave Credit
Unused sick leave is credited toward your years of service for pension calculation purposes at retirement. Every 2,087 hours of sick leave = 1 additional year of service credit. For a FERS employee with a $90,000 high-3, one year of sick leave credit adds $900/year to the pension at the 1% rate. Federal employees should not burn down sick leave in their final months before retirement.
📊 Social Security Claiming Strategy
For FERS employees, Social Security is a meaningful component of retirement income — and the claiming age matters enormously. Each year of delay beyond full retirement age (FRA) increases the benefit by 8%. A FERS employee with a $36,000 pension and $24,000 Social Security at FRA who delays SS to age 70 increases it to ~$29,760/year — a $5,760/year increase for life. Combined with the pension income stack, timing Social Security optimally can add $50,000–$100,000 in lifetime benefits. Social Security planning →
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NIH · FDA · USDA · MCPS · Montgomery County · Serving the DC Metro Area Since 2010
You Built a Federal Career Worth Protecting.
Let’s Make Sure Every Decision at Retirement Is the Right One.
SBP or private insurance. Full FEGLI or replacement. TSP rollover or partial. FEHB with Medicare or without. Retire at 61 or wait for the 1.1% multiplier. These decisions have six-figure consequences — and most federal employees make them without a dedicated analysis. We’ve been doing this for federal employees in the DC metro area since 2010.
MD Life Insurance · Brookeville, MD 20833 · 301-569-2224 · info@mdlifeins.com · Licensed insurance producer. Federal benefit planning information is for educational purposes and does not constitute official federal benefits advice — federal employees should consult their agency HR, OPM, and TSP.gov for authoritative benefits guidance. FEGLI rates are approximate and based on published OPM rate tables; individual rates may vary. FERS/CSRS pension calculations are illustrative examples. SBP, TSP, and FEHB information reflects current federal policy and is subject to change. WEP and GPO information reflects 2025 law. This page is not affiliated with OPM, TSP, or any federal agency. Legal · Privacy Policy · Accessibility