[LAST UPDATED: April 2026] [VERIFIED]
The Complete Federal Retirement Guide: FERS, CSRS, TSP, FEHB & FEGLI
Federal government retirement is among the most complex retirement situations in the United States. Unlike private-sector workers, federal employees navigate two pension systems (FERS and CSRS), a unique savings plan (TSP), transferable health insurance (FEHB), and group life insurance (FEGLI) — each with distinct rules, timing, and irreversible elections that affect income for decades. This comprehensive guide covers: how your pension is calculated with worked dollar examples, when you can retire by birth year, what happens to your health insurance, how to handle your TSP at retirement, and what elections permanently affect your spouse after you are gone. RetireStack is not affiliated with OPM or TSP. This is educational content — [SEEK EXPERT ADVICE] for your specific situation.
Federal Employees Retirement System
FERS Retirement: The Complete Breakdown
FERS covers virtually all federal employees hired after 1983. It is a three-legged retirement system: a defined benefit pension, Social Security, and the Thrift Savings Plan. Each leg has its own rules — and the interactions create the planning complexity that trips up even seasoned professionals.
High-3 Average Salary: How OPM Calculates Your Pension Base
Your FERS pension starts with your "High-3" — the average of your highest three consecutive years of basic pay. For most employees who received regular step increases, the High-3 is simply the final three years before retirement. However, if you took any period of lower pay (part-time work, leave without pay, or a step reduction), OPM will search your entire employment record for the highest consecutive 36-month average.
What counts as basic pay: Base salary including locality pay. Locality pay is included — a significant factor in high-cost areas like Washington DC (+33.26%), San Francisco (+44.15%), and New York (+37.24%). What does not count: overtime, bonuses, cash awards, allowances, differentials, or night/Sunday pay.
Worked Example — High-3 Calculation
Jennifer is a GS-13 Step 10 in Washington DC. Her base salary in Year 1: $132,400. Year 2: $136,200 (after a within-grade increase). Final year before retirement: $139,600. Her High-3 = ($132,400 + $136,200 + $139,600) ÷ 3 = $136,067. A $10,000 difference in High-3 changes her annual pension by $250–$300 — worth $7,500–$9,000 over 30 years of retirement.
Standard Rate — All Retirements
1.0%
Per year of creditable service. Applies to all FERS retirements unless the enhanced rate conditions are both met simultaneously.
Example: $120,000 High-3 × 28 years × 1% = $33,600/year ($2,800/month)
Enhanced Rate
Age 62+ AND 20+ Years — Both Required
1.1%
10% higher. Worth $3,000–$6,000+ per year depending on salary. Both conditions must be satisfied at the retirement date.
Example: $120,000 High-3 × 28 years × 1.1% = $36,960/year ($3,080/month) — $3,360/yr more
FERS Special Retirement Supplement: The Bridge Payment
The FERS Special Retirement Supplement (SRS) is paid from your retirement date until age 62, bridging the gap to Social Security eligibility. It approximates the Social Security benefit earned during federal service. Available only to those who retire on an immediate annuity — not a deferred retirement. CSRS employees have no equivalent.
Calculation method: OPM estimates your projected full Social Security benefit (assuming your entire career was Social Security-covered), then multiplies by (federal service years ÷ 40). Example: estimated SS benefit $2,200/month × (30 federal years ÷ 40) = SRS of $1,650/month.
⚠️ Earnings Test Warning [SEEK EXPERT ADVICE]
In 2026, if you earn more than $22,320/year from wages after retiring, your SRS is reduced $1 for every $2 above the limit. Earn $32,320 → SRS cut by $5,000/year. Earn $50,000 → SRS largely eliminated. The supplement is not inflation-adjusted and ends permanently at age 62 regardless of whether you claim Social Security then.
FERS Minimum Retirement Age (MRA) by Birth Year
Your MRA determines the earliest you can retire with an immediate annuity. Full retirement paths: (1) MRA + 30 years service, (2) age 60 + 20 years, or (3) age 62 + 5 years. The MRA+10 provision (10 years at MRA) permanently reduces the pension 5% per year under age 62.
| Birth Year |
MRA |
Full Immediate Retirement Requires |
| Before 1948 | 55 | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
| 1948 | 55 + 2 mo | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
| 1949–1952 | 55 + 2–10 mo | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
| 1953–1964 | 56 | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
| 1965–1969 | 56 + 2–8 mo | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
| 1970 or later | 57 | 30 yrs at MRA; or 20 yrs at 60; or 5 yrs at 62 |
Source: OPM FERS Handbook. [LAST UPDATED: 2026]
Early Retirement: VERA & VSIP Implications
A Voluntary Early Retirement Authority (VERA) allows agencies to offer retirement to employees age 50 with 20 years of service, or any age with 25 years. A VSIP ("buyout") is a cash payment up to $25,000 to encourage voluntary departures.
The key tradeoff: Under VERA, your pension is calculated at your current years and High-3 — no early pension penalty. However, you will not receive the FERS Supplement until you reach your normal MRA, potentially creating a multi-year income gap. The lifetime pension reduction from fewer service years often exceeds the buyout amount. Run the numbers before accepting. [SEEK EXPERT ADVICE]
FERS COLA: When It Starts and How It Works
FERS retirees receive no COLA before age 62 — regardless of how early they retired. A FERS employee retiring at 57 receives a fixed, uninflation-adjusted pension for five full years. At 3% annual inflation, that equals roughly 14% purchasing power lost before COLA begins at 62. After age 62, the FERS COLA formula applies:
CPI-W ≤ 2%
Full COLA
FERS COLA = CPI-W
CPI-W 2–3%
2.0% Cap
FERS COLA capped at 2%
CPI-W > 3%
CPI − 1%
FERS COLA = CPI-W minus 1%
Compare to CSRS: full CPI-W COLA every year starting immediately on retirement day one. In sustained high-inflation years, this difference compounds into a significant real-income gap between FERS and CSRS retirees of the same age.
FERS Survivor Benefit Election: Break-Even Analysis
The survivor benefit election is permanent and irrevocable — made once at retirement. Your spouse must consent in writing to any election below full benefit. Three options exist under FERS:
Full Benefit
50%
of pre-reduction pension to spouse for life
Cost: 10% pension reduction
Spouse retains FEHB coverage
Partial Benefit (FERS only)
25%
of base pension to spouse for life
Cost: 5% pension reduction
FEHB continues for surviving spouse
No Benefit
$0
Spouse receives nothing from pension
Cost: 0% pension reduction
Requires written spousal consent; FEHB ends at death
Break-Even Calculation Example
For a $3,000/month pension: full survivor benefit costs $300/month (10%). Your spouse receives $1,500/month after your death. Break-even = months of cost to you ÷ monthly survivor payout = 300 ÷ 1,500 = 0.2 — meaning your spouse only needs to survive about 2.4 years after your death to make the election net-positive. For most couples with a same-age or younger spouse, the math strongly favors the full benefit. Use the Survivor Benefit Calculator → to model your specific numbers.
Civil Service Retirement System
CSRS Retirement: The Legacy System Guide
CSRS covers federal employees hired before 1984 (or who declined the 1987 FERS transition). Fewer than 2% of the active federal workforce remains under CSRS — but for those who are, it is one of the most generous defined benefit pensions in the United States, often replacing 60–80% of pre-retirement salary.
CSRS Tiered Annuity Formula
Unlike FERS's flat 1% multiplier, CSRS uses progressively higher percentages for each tier of service years:
First 5 years: 1.5% × High-3 × 5 = 7.5% of High-3
Next 5 years: 1.75% × High-3 × 5 = 8.75% of High-3
Remaining years: 2.0% × High-3 × N = 2N% of High-3
Cap: 80% of High-3 (approximately 41 years 11 months)
Worked Example — 32 Years of Service
Margaret has 32 years and a $105,000 High-3.
First 5 yrs: 1.5% × $105,000 × 5 = $7,875/yr
Next 5 yrs: 1.75% × $105,000 × 5 = $9,187/yr
Remaining 22 yrs: 2% × $105,000 × 22 = $46,200/yr
Total: $63,262/year ($5,272/month) — 60.25% of High-3 salary, before survivor benefit election.
FERS vs CSRS: Key Differences at a Glance
| Feature |
FERS (1987–present) |
CSRS (pre-1984) |
| Pension Formula | 1% (or 1.1%) × High-3 × Years | 1.5–2.0% × High-3 × Years (tiered) |
| Social Security | ✅ Full eligibility | ❌ Not eligible (WEP/GPO may apply) |
| TSP Matching | ✅ Up to 5% agency match | ❌ No employer TSP match |
| Typical Pension % | 20–40% of salary | 60–80% of salary |
| COLA Start | Age 62 (reduced formula) | Day 1 of retirement (full CPI-W) |
| Employee Contribution | 0.8% of salary | 7% of salary |
| FERS Supplement | ✅ Until age 62 | ❌ Not available |
| Pension Cap | No cap on pension amount | 80% of High-3 (~42 years service) |
CSRS Offset Explained
CSRS Offset applies to federal employees hired before 1984 who had a break in service after 1983 and were rehired. These employees pay into both CSRS and Social Security simultaneously. Their CSRS pension is calculated using the standard tiered CSRS formula, but at age 62 (or when they claim Social Security), the pension is permanently reduced — "offset" — by the Social Security benefit amount attributable to federal service.
The practical effect: total income stays roughly the same, but the funding source shifts partially from OPM to Social Security. CSRS Offset employees do receive full Social Security on any non-federal employment history, giving them more income diversification than pure CSRS retirees.
CSRS Voluntary Contributions Program (VCP)
CSRS (but not FERS) employees can make additional after-tax contributions to the Voluntary Contributions Program — earning 3% interest compounded annually, guaranteed by the U.S. Treasury. Contributions are limited to 10% of cumulative career basic pay. At retirement, VCP funds can be withdrawn as a lump sum (with interest) or converted to an additional lifetime annuity at OPM's published rates.
Key advantage: CSRS employees nearing retirement can contribute up to the career-maximum limit as a lump sum even in the final years — converting regular after-tax savings into a government-backed annuity at attractive rates. The 3% interest rate is fixed; actual value depends on how long you defer and what alternative investments would have returned. [SEEK EXPERT ADVICE] for personalized VCP analysis.
TSP in Retirement: The Major Decision
The Thrift Savings Plan is the federal government's defined contribution retirement plan — with $800B+ in assets across 6.7 million participant accounts. What you do with your TSP balance at retirement is often the most consequential financial decision of a federal employee's life.
TSP Fund Options: What They Are and How to Allocate Approaching Retirement
G Fund
Government Securities
Unique: no principal risk, Treasury-rate returns (~4–5%). The only investment in the world where you cannot lose money but earn market-rate interest. No private market equivalent.
F Fund
Fixed Income Index
Bloomberg U.S. Aggregate Bond Index. Moderate risk/return. Can lose value when interest rates rise. Used for diversification away from equities.
C Fund
S&P 500 Index
Large U.S. company stocks. Highest long-term return potential, highest volatility. Historical average ~10%/yr over multi-decade periods. Core growth holding.
S Fund
Small/Mid-Cap Index
Dow Jones U.S. Completion TSM (stocks not in S&P 500). Higher growth potential than C Fund over long periods, more volatility. Often used to complement C Fund.
I Fund
International Index
MSCI EAFE (Europe, Australasia, Far East). Geographic diversification. Returns in USD, so currency risk applies. Lower recent returns but provides diversification benefit.
L Funds
Lifecycle / Target Date
L Income through L 2065. Automatically become more conservative as target date approaches. L Income is designed for those already in retirement. Simplest option for hands-off investors.
Allocation approaching retirement [ESTIMATE]: Many advisors recommend gradually shifting 5–10 years before retirement from C/S/I funds toward G and F funds to reduce sequence-of-returns risk. At retirement, a common allocation is 40–60% G Fund (stable income), 20–30% C Fund (long-term inflation protection), 10–15% F Fund (bond diversification), remainder in S and I. This is general guidance — your ideal allocation depends on your FERS pension coverage ratio, other income sources, and risk tolerance. [SEEK EXPERT ADVICE]
TSP Withdrawal Options at Retirement
Lump Sum
Withdraw all or part at once. Subject to ordinary income tax in the year taken. Best used for IRA rollovers, large one-time purchases, or debt payoff — not recommended for all TSP funds simultaneously due to tax concentration.
Installment Payments
Monthly, quarterly, or annual payments. You choose the amount (fixed dollars) or let TSP calculate by life expectancy. Remaining balance stays invested. Flexible — you can change the amount or frequency at any time after enrollment.
Life Annuity (MetLife)
TSP's built-in annuity via MetLife. Irrevocable once elected. Guaranteed income for life or joint life. Limited flexibility vs. commercial products — no income riders, limited death benefits, payout rates can lag the private market.
Many retirees use a combination — keeping part in TSP installments (especially in the G Fund) for flexible spending while rolling another portion to an IRA for commercial annuity purchase or broader investment flexibility.
Keep TSP vs. Roll to IRA: When Each Makes Sense
✅ Reasons to Keep TSP
- Ultra-low expense ratios (~0.049% in 2025 — about $4.90 per $10,000)
- G Fund: unavailable anywhere else in the financial market
- Age 55 rule: penalty-free withdrawals if you separated at 55 or older
- Creditor protections in some states exceed IRA protections
- Simplicity — fewer accounts to manage
↔️ Reasons to Roll to IRA
- Access to commercial annuities — SPIAs, FIAs with income riders unavailable inside TSP
- Greater investment flexibility — TSP limited to 5 core funds
- Estate planning flexibility — beneficiary options, inherited IRA rules
- Roth conversion strategies to reduce RMDs and future tax burden
- Consolidate accounts from multiple employers into one IRA
Roth TSP vs Traditional TSP in Retirement Tax Planning
Traditional TSP
Pre-tax contributions reduce income today. All withdrawals are fully taxable as ordinary income. RMDs required starting at age 73. For FERS retirees already receiving a pension plus Social Security, traditional TSP withdrawals can push taxable income into higher brackets — sometimes triggering additional taxation on SS benefits and Medicare surcharges.
Roth TSP
After-tax contributions. Qualified withdrawals are completely tax-free — including all earnings. No RMDs on Roth accounts if rolled to a Roth IRA before age 73. For FERS employees expecting substantial pension + Social Security income in retirement, Roth TSP provides a tax-free bucket that can significantly reduce lifetime tax burden and Medicare Part B IRMAA surcharges.
Federal Employees Health Benefits
FEHB in Retirement: Keeping Your Health Coverage
The ability to carry government-subsidized health insurance into retirement — at the same employer contribution rate — is one of the most valuable benefits available to federal employees. Most private-sector workers lose employer health coverage at retirement and face the full individual market rate. Federal retirees don't.
The 5-Year Continuous Enrollment Rule
To carry FEHB into retirement, you must have been continuously enrolled in any FEHB plan for the five consecutive years immediately before your retirement date. The plan type doesn't matter — you can switch plans each year during open season. What breaks the continuous enrollment clock: any gap in coverage, including switching to a non-FEHB plan (e.g., a spouse's employer plan) or failing to continue FEHB enrollment during extended leave without pay.
⚠️ No cure exists for a missed 5-year requirement. If you are within 5 years of planned retirement and have any FEHB coverage gaps, re-enroll immediately and maintain it without interruption. This is irreversible — you cannot retroactively satisfy the requirement. Use the FEHB Eligibility Checker → to confirm your status now.
FEHB Premium Costs in Retirement
The government pays approximately 72% of the average FEHB premium for retirees — the same employer share as for active employees. Your premium share is deducted from your monthly pension check. There is no separate "retiree rate" for the same plan an active employee uses.
One modest cost increase: while employed, FEHB premiums are deducted pre-tax via payroll under a Section 125 plan. Post-retirement, premiums are deducted from pension income — which does not receive the same pre-tax treatment. This slightly increases the after-tax cost of the same premium. [ESTIMATE based on 2026 program structure]
FEHB + Medicare at Age 65: Coordination Strategy
At 65, you become eligible for Medicare. Unlike most Americans, federal retirees are not required to drop FEHB when enrolling in Medicare. The dominant strategy for most federal retirees:
Medicare Part A — Enroll (usually free)
Part A covers inpatient hospital care. Most federal retirees have 40+ Medicare-covered quarters and pay no Part A premium. With FEHB primary, Part A acts as secondary for hospital stays — reducing out-of-pocket costs. Enrolling in Part A is almost always recommended.
Medicare Part B — Evaluate Carefully ($185.70/mo in 2026)
Part B covers outpatient services. With FEHB already covering most outpatient care, many federal retirees skip Part B and pay no premium. Some FEHB plans waive cost-sharing when you have Part B, making it cost-effective for high utilizers. The calculus depends entirely on your specific FEHB plan. [SEEK EXPERT ADVICE]
Federal Employees Group Life Insurance
FEGLI in Retirement: Keep, Reduce, or Replace?
FEGLI covers about 4 million federal employees and retirees. The no-underwriting advantage during employment makes it valuable — but costs in retirement can become very expensive, particularly for Option B optional coverage, which escalates dramatically by age band after 65.
Basic Insurance: Post-65 Reduction Elections
FEGLI Basic coverage (typically equal to annual salary + $2,000, rounded to next $1,000) continues in retirement. At age 65, the Basic coverage amount begins reducing unless you elected at retirement to maintain it. Three options that must be chosen at retirement:
75% Reduction (Full Reduction)
Coverage reduces 2%/month after 65 — fully gone by age 67. No premiums after 65. Best if you have no dependents and don't need the death benefit in retirement.
50% Reduction
Coverage reduces 1%/month after 65, stopping at 50% of original amount. Small ongoing premium. Maintains a meaningful death benefit while limiting cost.
No Reduction
Coverage stays at 100% permanently. Higher ongoing premiums. Best for significant financial obligations, estate planning, or if private insurance is unaffordable due to health.
Option B Cost Escalation by Age Band [ESTIMATE based on 2025 OPM rates]
Option B (optional coverage, typically 1–5× annual salary) is the most dangerous cost in federal retirement life insurance planning. Premiums jump dramatically at each 5-year age band. Many retirees are shocked when they see what they'll pay at 70+:
| Age Band |
Monthly per $1,000 |
Annual per $100K Coverage |
Annual per $500K Coverage |
| Under 35 | $0.043 | $52 | $258 |
| 55–59 | $0.217 | $260 | $1,302 |
| 60–64 | $0.433 | $520 | $2,598 |
| 65–69 | $1.040 | $1,248 | $6,240 |
| 70–74 | $2.167 | $2,600 | $13,002 |
| 75+ | $3.467 | $4,160 | $20,802 |
[ESTIMATE] Based on 2025 OPM FEGLI premium tables. Rates subject to change. Verify current rates at OPM.gov.
Keep, Reduce, or Replace: Decision Framework
1
Assess actual need for coverage
If your spouse has independent income, all dependents are financially independent, and debts are paid, the need for life insurance in retirement may be limited to final expenses — which Basic coverage alone can handle without Option B's escalating cost.
2
Compare private term life insurance before retirement
Healthy individuals retiring in their 50s or early 60s can often qualify for 20-year level term policies at significantly lower costs than FEGLI Option B — especially for coverage amounts above $200,000. Get a health evaluation before you retire; FEGLI's no-underwriting advantage means you may not need it if you're healthy now.
3
When FEGLI is worth keeping
If you have chronic health conditions, family history of serious illness, or are rated at higher premiums for private insurance, FEGLI's flat-rate no-underwriting coverage can be worth the cost — especially for Basic and lower multiples of Option B. Use the FEGLI Analyzer → to model your specific situation against private alternatives.
RetireStack is not affiliated with the Office of Personnel Management (OPM), the Thrift Savings Plan (TSP), or any U.S. government agency. All content is educational and for informational purposes only. Federal retirement rules are complex and change — verify with OPM and consult a licensed federal retirement specialist before making retirement elections. Content estimates are labeled [ESTIMATE]. [LAST UPDATED: April 2026]