Common Questions

 1.      Should I provide a survivor benefit at retirement for my spouse?

Answer:  In most cases, yes, unless your spouse has sufficient assets of his/her own to continue with a comfortable lifestyle in the event of your post-retirement death.  The answer to this question cannot be fully addressed without projecting assumptions about you and your spouse following your retirement.  You give up a certain percentage portion of your annuity to provide a “survivor benefit” at retirement for your spouse.  In some cases, private life insurance bought before retirement with a “solid” insurance company may be a better way to provide a “survivor benefit”.  Always remember, however, that you must provide at least some survivor benefit at retirement to ensure that your spouse can continue your FEHBP coverage if you die first.

 2.      What are my Thrift Savings Plan “withdrawal” options at retirement?

Answer:  You have numerous “withdrawal” options from your TSP—both before retirement and in retirement.

While you are still working:

1.      Loans can be made from funds you currently have on deposit in the TSP.  The interest rate is reasonable (i.e., the G Fund interest rate) and amounts can be borrowed for any purpose.  These loans must be paid back at retirement.

2.      If you become disabled, you may make a total or partial withdrawal.  There will be no 10% penalty, but there will be taxes due on the amount withdrawn.

3.      Withdrawals are allowed for hardship purposes.

4.      An age-based in-service withdrawal option was made available in 1997 to both CSRS and FERS participants.  If you are 59 ½ or older and are still working for the government, you are allowed a one-time full or partial withdrawal from your TSP before retirement.  There would be no 10% penalty, but there would be taxes owed on the amount withdrawn, unless you roll your withdrawal over to an IRA.  You can continue working for the government and if you are a FERS participant, the government will continue to match your TSP contributions.

At retirement or later:

At age 55 or older, you can begin making withdrawals from your TSP account with no 10% penalty but with taxes due on the amount withdrawn.  Your basic withdrawal options include:

1.      Lump sum

2.      Periodic payments

3.      Total or partial rollover to IRA (no taxes or penalties)

4.      Annuity

5.      IRS calculation

At age 50 or older, you can make a withdrawal with no 10% penalty but taxes due on the amount withdrawn.  Your option here is:

1.      An annuity 

3.      Can I withdraw from my TSP before retirement?

Answer:  See above.

4.      Should I make a deposit for temporary time (non-career appointment)?

Answer: For CSRS participants, if no deposit is made, non-deduction service prior to 10/1/82 can be used for eligibility purposes; however, your annuity computation will be reduced by 10% of the deposit due.  Similarly, if no deposit is made, non-deduction service after 10/1/82 can be used for eligibility; however, the time is not credited to your annuity computation.  The deposit is 7% of basic pay plus interest.

For FERS participants, if no deposit is made, non-deduction service prior to 1/1/89 cannot be used unless a deposit is made.  The deposit is 1.3% of basic pay, plus a variable market interest rate.  However, FERS participants are not allowed to make deposits for non-deduction service after 1-1-89.

Before you decide whether or not to make a deposit (where allowed by OPM), you need to go to your personnel office and request a computer printout that will show your annuity gain if you make the deposit or loss if you don’t.

5.      Should I make a redeposit if I left the government and took my contributions out?

Answer: For both CSRS and FERS participants, if contributions were never taken out, you can use those years for eligibility and your annuity calculation.

If you’re covered by CSRS and took your contributions out, if you redeposit them plus interest, you can use those years for purposes of both eligibility and the annuity calculation (the amount of the redeposit would be the contributions you took out plus interest).  If you do not redeposit these contributions and they applied to refunded service that ended before 10-1-90 and did not involve disability retirement or death in service, you will get credit for eligibility; however, your annuity will be actuarially reduced (based on your life expectancy).  For a period of no-deposit refunded service after 9-30-90 that does not involve disability retirement or death in service, you will get credit for eligibility; however, you will not receive credit towards your annuity calculation.

FERS participants cannot get credit for FERS-contribution refunds they have received since redeposits of such refunds are not allowed after they are rehired as a FERS.

6.      Will my CSRS (not CSRS Offset) annuity be reduced by any Social Security benefit if I am eligible for social security at retirement?

Answer: Only a CSRS Offset annuity would be reduced by the Social Security benefit earned as a federal employee at age 62 (if eligible for Social Security)

7.      Should I continue my FEHBP coverage after I sign up for Medicare?

Answer: Medicare generally pays less than 50% of your bills once you are eligible at age 65.  In most situations, people need a “supplement” to Medicare.  Many individuals view their FEHBP coverage as a good “supplement” option, since they have the same choice of “carriers” in retirement as non-retirees, and the government (if they meet the qualification standards) pays the same premium percentage as it would if they were still employed.

8.      Can I enroll my present spouse under my FEHBP plan after I’ve retired?

Answer:  No, she/he must be enrolled before you retire.

9.      Do I need government life insurance coverage (FEGLI) after retirement?

Answer: This is part of “financial” planning.  Your need for life insurance, in retirement, is based on a systematic projection of what your spouse or loved ones might need if you die during retirement.  If you do have insurance needs and you are insurable, keep in mind that FEGLI is relatively expensive coverage.  You might consider buying private life insurance way before retirement.

10.  I am a CSRS (or CSRS Offset) participant and have never heard of the Voluntary Contribution Program.  What is it?

Answer:  It is a retirement-savings program available through OPM, which provides an additional retirement-income opportunity to those offered through the TSP and your CSRS (or Offset) annuity.

Under the VCP plan, you are allowed (if you do not owe a deposit for a period of non-career appointment or a redeposit) to contribute up to 10% of your “after tax” pay dollars into a special fund set up by OPM.  All the interest you earn on your VCP contributions grows on a “tax deferred” basis.  Your gains are taxed when you withdraw money from your VCP account.  At age 55, for every $100 (interest and contributions) that you have in the fund, you will be eligible for an increase in your annuity of $7.00 a year.  The VCP’s interest rate for 2000 is 5.875%.

11.  I’m a FERS participant and won’t be eligible for Social Security retirement benefits until age 62.  What will I receive prior to age 62 as a substitute for social security?

Answer: OPM has created a “special retirement supplement” which is available to most FERS participants who retire before age 62, including FERS-covered employees who retire: at the minimum retirement age (MRA) with 30 or more years, at age 60 with 20 or more years, or through an “involuntary” retirement when they reach the MRA.  This retirement supplement is calculated on the Social Security benefit you earned as a government employee.  At age 62, when you become eligible for Social Security, this “supplement” ends.  Like Social Security benefits, this supplement is subject to an earnings test.  Law enforcement officers, firefighters, and air traffic controllers do not have an “earnings test” applied to their special supplement until they reach the MRA.

12.  Do I need to make a deposit for “post-56” military service as a CSRS participant to use the time as Creditable Service?

Answer: If you’re covered by CSRS and were hired before 10-1-82, and become eligible for Social Security benefits at age 62, and if there is no deposit made, the military years may be used for eligibility and annuity computation until age 62, then the military years are dropped from the annuity calculation from age 62 on.

13.  Should I apply for my Social Security benefit at age 62 or wait until age 65?

Answer:  If your “full Social Security retirement age is age 65, you will receive a 20% lower benefit if you apply for it at age 62.  This is a permanent reduction.  Wisely or unwisely, some people prefer to take a reduced benefit at age 62 and then by various schemes, such as investing in the “market,” they hope to make up the reduction, plus more.

14.  As a FERS participant, should I plan on making a deposit for my military service to use that time as creditable service?

Answer:  In most cases, it behooves FERS participants to “buy back” military time for their civilian service annuity.  (However, be careful about “waiving” military retirement pay in order to “buy back” military service, since it’s important to calculate the trade-offs first.) 

15.  Can a CSRS (or CSRS Offset) participant use unused sick leave to become eligible for retirement?

Answer: No, CSRS and CSRS Offset workers cannot use unused sick leave to meet the length of service requirement for becoming eligible for retirement.  However, at the point they retire, they can use an unlimited amount of accrued sick leave in the calculation of their retirement annuity.

16.  Will I pay taxes on my annuity?

Answer:  Yes, both CSRS and FERS participants must pay taxes on most of their annuity payments.  Determining the proper amount of taxes is a complicated calculation, the basic requirements of which are outlined in IRS Publication 721.

17.  Do I need a will if I am young and in the early stages of my career?

Answer:  Possibly, because you may want to name a guardian for your minor children or make sure your assets pass to the right people.

18.  How much income will I “need” at retirement?

Answer: A “rule of thumb” might be:

1)      If you retire and are still paying on your mortgage, you may need approximately 80% of the “gross” income you were living on before retirement.

2)      If you retire with “no” debt, you may need approximately 60% of the “gross” income you were living on before retirement.

19.  How do I find a good consultant in my area, to help me with my retirement planning?

Answer:  The best way is referrals (e.g., asking your co-workers).

20.  Are CSRS participants eligible for any Social Security retirement benefits at age 62?

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Last modified: August 16, 2008