6 Common Myths About Federal Retirement Benefits You Need to Be Aware Of

If you’re a federal employee, you’ve likely heard or read about many do’s and don’ts regarding your retirement planning. However, depending on the source, some of the information may or may not be true. To help you effectively plan for your retirement, let’s dispel some of the myths surrounding federal employees’ retirement.

Myth 1: Social Security Will Not Be There When I Retire

Almost all workers contribute to Social Security through payroll contributions, and almost every elderly American gets Social Security Benefits. However, a recent report by Social Security trustees reveals that legislators have a wide range of policy choices that would reduce or close Social Security’s long-term financial shortfall.

Myth 2: The G Fund is the Safest Investment Option for My Thrift Savings Plan (TSP) Account

You may never get negative returns if you opt for the G Fund, but to enjoy financial freedom during your retirement years, you should invest your retirement funds for maximum benefits. First, visit the TSP website to get more information on retirement investing. Then, based on your circumstances, you will learn about the various funds (C, F, S, G, and I) and how to diversify and get the most out of your TSP funds. If you don’t want to be actively involved in managing your funds, you can also opt for Lifecycle fund options.

Myth 3: The Best Day to Retire is the Last Day of the Leave Year

Some employees carry over an unused leave balance of 240 hours annually. They’re willing to accumulate leave accruals until they have over 440 hours in unused annual leave balance in their last working year. That way, they get to maximize their payout. Retiring at the end of the leave year is a smart move for such employees. Suppose you’re not one of those individuals who save up their leave. In that case, you can opt for other dates for retirement based on your retirement eligibility, the weather, tax planning, and other considerations.

Myth 4: If You Maintain Federal Employee Benefits (FEHB) Coverage in Retirement, Avoid Enrolling in Medicare Part B

Federal retirees opt for FEHB coverage with only hospital insurance (Medicare Part A) for two reasons. Firstly, the FEHB plan will provide coverage even if they don’t get Part B, which covers outpatient care and doctor’s services. Secondly, some retirees want to avoid the premiums with Medicare Part B. They don’t want to pay more premiums on top of what they’re paying for their FEHB plan. However, the benefits of dual coverage can help you minimize the out-of-pocket amount you spend on healthcare.

Myth 5: With Over 30 Years of Service, You Can Afford to Retire Comfortably

Many employees have the misconception that once they reach the minimum retirement age for the Federal Employees Retirement or Civil Retirement System, they can retire comfortably. However, this isn’t always true.

For many federal workers, retiring after 30 years of service will only afford a pension that will replace slightly over 50% of the gross federal salary but won’t be enough to replace net income. So to retire comfortably, you might also need retirement savings, life, health insurance coverage, Social Security benefits on top of your government pension.

Myth 6: CSRS is Better than FERS

CSRS offers certain benefits, including the cost of living adjustments (COLA) throughout the retirement years. However, while FERS doesn’t offer COLA, it does offer flexibility that allows federal workers to get lifetime health insurance even if they’ve worked for only ten years before reaching retirement age. FERS can also help you maximize Social Security benefits and avoid the impact of Government Pension Offset and Windfall Elimination Provision.

At Premier Protection, we can help you plan for a comfortable retirement. Contact us today to learn more!

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