Maximizing Your Federal Retirement Benefits

Chris Reddick |

The federal government has a more generous retirement program than most other levels of government and the private sector. You essentially have three components that you take advantage of to maximize your retirement income. I also suggest two more that you might want to consider. It would help to think beyond what is offered from federal retirement benefits to take advantage of other retirement savings options.


Essentially, Federal Employees Retirement System or FERS is a defined benefit pension plan. What does this mean? You get a monthly annuity payment in retirement. For example, retiring at age 62 based on years of service times average high three years salary (cost of living adjustment yearly) times 1.1 will be your monthly retirement benefit. You get the same monthly income (indexed for inflation) until you pass away. The benefit is more significant at age 62 with a COLA and an extra .1.

The formula indicates that the longer you work for the federal government and the higher your salary, your lifetime benefit increases. Therefore, the recommendation is to retire at the full retirement age and get at least 20 years of service to maximize this lifetime benefit.

Pensions are increasingly rare. So take advantage of the monthly income to provide for a more comfortable retirement. You can use the Federal Ballpark Estimator to estimate what you will get with FERS.

Social Security

Social Security is not just for federal workers as it is a benefit for all workers that pay into the system through the payroll tax. This, like FERS, is a pension that has a lifetime monthly income indexed for inflation. To maximize Social Security, typically, you should not collect the benefit until your full retirement age. Second, if you can delay taking Social Security up to age 70, your benefit will increase through delayed credits. Social Security and FERS represent the federal workers’ retirement bedrock.


The Thrift Savings Plan or TSP is the defined contribution plan in which you get a 5% match (from the federal government) on your employee contributions up to $20,500 in 2022. It is different from Social Security and the FERS since you set up an account and what you save is what can be withdrawn plus earnings in retirement. Therefore, it would be best to try to max out the TSP and contribute at least up to the match of 5% and preferably up to the maximum limit of $20,500.

There is a $6,500 catch-up at age 50 and over for a total amount deferred is $27,000 in 2022. The TSP is, in my opinion, one of the best-defined contribution plans in the marketplace. It has very low expenses and has performed consistently well over time. However, the website is challenging to navigate and change investment choices compared to more traditional brokerages like Fidelity and Schwab.


I would also recommend contributing to an Individual Retirement Account or IRA. This is where you can put away an additional $6,000 in 2022 (under age 50) in either a Roth IRA or traditional IRA. This is often an overlooked area of saving for retirement for federal workers. Many think that if they save in the TSP, that will be enough retirement income. But to maximize retirement, it is recommended to save beyond the TSP and open an IRA. The Roth IRA is especially beneficial since contributions and earnings come out tax-free in retirement. But there are income limits that need to be considered for direct contributions into a Roth IRA.

Brokerage Account

A final way to maximize retirement is to open a brokerage account and invest the money in low-cost ETFs. Again, you have many suitable options, such as low-cost index target-date funds that can be used to match your retirement age. Remember that this should be the fourth after the TSP and IRA are maximized, as you pay taxes on the capital gains and dividends and get taxed on the earnings from the sale of index funds. But it represents another way to maximize your retirement savings beyond what is traditionally done with the TSP and IRA.

Keep in mind that each circumstance is unique, and you should consult with a financial planner for guidance. Reach out to me on the contact form below to learn more about whether you are on track for retirement in your federal career.


*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on to avoid any federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.

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