Top 5 Mistakes FERS Retirees Make (And How to Avoid Them)

After years of federal service, you’ve reached the next chapter in your life. Finally, it is time for you to live each day on your terms and you have earned it! But before you step into this exciting new chapter, let’s make sure you avoid some common retirement pitfalls that can derail even the most thoughtful plans.

You’ve worked hard to get here, don’t let these avoidable mistakes disrupt your retirement. With the right plan, you can turn your FERS benefits into lasting financial freedom into retirement.

1. Overlooking a TSP Withdrawal Strategy

Your Thrift Savings Plan (TSP) plays a big role in your retirement income. But many retirees don’t think about how they’ll take money out. Understanding your options can help you saving in taxes and prevent you from running out of funds sooner than expected.

Pro Tip: Consider setting up an annuity or rolling your TSP into an IRA for more flexibility and tax advantages.

2. Underestimating the Impact of Inflation

Your pension provides steady income, but inflation quietly eats away at purchasing power. Gas prices, groceries, and healthcare costs will continue to rise—even in retirement.

Pro Tip: Keep part of your portfolio invested for growth to stay ahead of inflation. Consulting with an experienced financial advisor is helpful.

3. Ignoring Healthcare Costs

Healthcare can be one of the largest expenses in retirement. FEHB coverage continues, but premiums and out-of-pocket costs can add up fast.

Pro Tip: Review your FEHB options annually and budget for potential long-term care needs.

4. Not Understanding Total Income 

Many retirees may focus on one retirement income stream forgetting that there are sometimes more than one, or on the otherhand, overestimate the amount of each income stream. Gather all information on each income stream (e.g. TSP, Pension, Social Security, etc.), and other assets (e.g. real estate, cash, emergency savings)

Pro Tip: If you can rely on your pension and TSP for a few years, waiting on receiving social security could pay off big time.

5. Neglecting Tax Planning

Taxes don’t stop at retirement. Pension payments, TSP withdrawals, and Social Security benefits are usually taxable, albeit at a lower rate than non-retirees. Without proper planning, you could be overestimating your income or overpaying taxes in some cases. 

Pro Tip: Work with a financial professional who understands FERS to create a tax-efficient withdrawal plan.