Retirement decisions that can't be reversed

If you are retiring at the end of 2024, you may have already completed and submitted your retirement applications and have begun counting down the days until your life after retirement begins. Completing the applications for retirement includes making some very important, and sometimes irrevocable, decisions. Here are the retirement decisions that require careful consideration since they cannot be changed once you have been separated from your agency roles. 

Date of Final Separation: AKA your retirement date. 

Location of this decision:   

• SF 3107 (FERS Application for Immediate Retirement), Section B, #2 

• SF 2801 (CSRS Application for Immediate Retirement), Section B, #2 

• RI 92-19 (FERS Application for Deferred or Postponed Retirement), Schedule B for applicants with immediate MRA + 10 eligibility, Part 2 and Schedule C for Applicants with Deferred MRA + 10 eligibility 

For employees who are old enough with enough service to retire with an immediate unreduced benefit (MRA with 30 years of service; 60 with 20 years of service; or 62 with at least 5 years of creditable civilian service for FERS and 55 with 30 years; 60 with 20; or 62 with 5 years for CSRS), retirement is considered a voluntary action and you may change your mind up to the last day on the job as well as during the time while your claim is being finalized. Once the payment based on your application has been authorized, your retirement is then permanent. Keep in mind that if you withdraw your application after your date of final separation from your agency, you are still “separated” and would be required to be reinstated. Additionally, you may not withdraw your application if OPM has received a certified copy of a qualifying court order awarding benefits to a spouse or a former spouse. There is also an exception allowing an agency to decline your withdrawal of a retirement application when there is a valid reason and explains this reason in writing (from 5 CFR Part 715). A valid reason includes, but is not limited to, administrative disruption or the hiring or commitment to hire a replacement. Avoidance of adverse action proceedings is not a valid reason. 

An involuntary separation may qualify an employee for a discontinued service retirement when the separation is against the will and without the consent of the employee other than a separation for cause or misconduct or delinquency. This situation includes a reduction-in-force (RIF), abolishment of position, lack of funds, expiration of an incumbent's term of office and unacceptable performance (unless due to employee misconduct), along with other situations as outlined in 5 CFR 831.503 Regulations.   

Lump Sum Payment for Accumulated and Accrued Annual Leave 

Remember that if you change your mind about retirement after the “use or lose” deadline any accrued annual leave over the ceiling (generally 240 hours) will be forfeited if not used by the final day of the leave year.  Under certain circumstances, forfeited annual leave may be restored (i.e. administrative error, exigency of the public business, sickness).  While the current federal leave year doesn’t end until Jan. 11 for most federal employees, the last date for scheduling “use or lose” annual leave is Nov. 30.  

Many federal employees are planning to retire on Dec. 31, 2024, so that they may cash in the maximum lump sum annual leave payout before the end of the 2024 leave year.  This may include the balance of annual leave hours carried over from 2023 plus the annual leave that was accumulated and not used during 2024. For some, this is a lump sum payment equal to the salary that they would have received if they had remained employed through the expiration of 440 hours of accumulated and accrued annual leave. As the 2024 leave year doesn’t end until Jan. 11, 2025, for most federal employees, this means that 64 hours (there are eight workdays, including one paid holiday, from Jan. 1 to Jan. 11 multiplied by eight hours per day) will be paid at the 2024 salary rate and the remaining 376 hours will be paid at the 2025 pay rate. The new pay rate may not be finalized until close to the end of the leave year, which means the additional payment for the pay increase may be delayed until the initial lump sum payment is made to the retiree.  

Annuity Election:  AKA Survivor Benefit Election  

Location of this decision:    

SF 3107 (FERS Application for Immediate Retirement), Section D, #1 - #5  

SF 2801 (CSRS Application for Immediate Retirement), Section F, #1 - #5  

RI 92-19 (FERS Application for Deferred or Postponed Retirement), Section F for all applicants 

All applicants must elect one option in this section of the application.   

If you are single and do not have anyone who is financially dependent on you, the election would generally be #3, An Annuity Payable During My Lifetime.   

If you are married at retirement and do not indicate your annuity election or your spouse does not consent to an election of less than the maximum survivor annuity, your application will be processed based on the maximum survivor benefits for your spouse.  If your marriage ends through death or divorce, the election to provide a spousal survivor annuity is void and your CSRS or FERS annuity can be restored to the unreduced amount. To continue to provide a survivor annuity for a former spouse, the requirement must be included in the divorce decree or court order. The Office of Personnel Management (OPM) must honor the terms on a court order unless you were married for less than nine months, or you have less than 18 months of service subject to retirement deductions, or he or she remarried before age 55 (unless your marriage lasted for 30 years or more).   

An “insurable interest” election (#4 election) may be made when there is a person named who may reasonably expect to derive financial benefit from your continued life and you can provide evidence that you are in good health.  Additional evidence may be required. Generally, an insurable interest election cannot be canceled, however, if you elect an insurable interest annuity for your current spouse because a former spouse is entitled to the spousal survivor annuity, your election can be converted to a spousal survivor annuity if your former spouse loses entitlement through death or remarriage before age 55 (unless you had been married for 30 or more years). This must be elected within two years of the former spouse losing entitlement.   

You may change or revoke a survivor election within 30 days after the first regular monthly annuity payment. After this date, the election cannot be changed other than for the following reason: 

• You may request to provide a survivor annuity for your spouse or increase a partial survivor election within 18 months after your retirement has been finalized (but before your death).   

• There is a penalty for this type of change based on the difference between the reduction for the new election and original survivor benefit election.  There is a charge of 24.5 percent of this amount plus interest.   

As OPM phrases it, “if you acquire a spouse after retirement,” you may provide a current spouse survivor annuity for your new spouse if you elect this within two years of your marriage or remarriage (in the event your marriage that was in effect at the time of your retirement has ended). You will be required to pay a deposit equal to the difference between the amount of retirement benefit you were actually paid and the amount that would have been paid if the survivor election had been in effect continuously since the time of retirement or since the date the initial reduction had been terminated, whichever applies. Interest is assessed against the amount owed. This deposit is paid by a permanent actuarial reduction which is generally less than 5% of your annuity.   

Credit towards retirement for active-duty military service 

Make sure you have paid your military service credit deposit in full before you retire.  Maintain a copy of the “paid in full” document provided by your payroll provider to prove that the dates of military service have been covered by this important deposit payment. If you are a FERS employee or a CSRS employee who began covered service on or after Oct. 1, 1982, if military service is needed for retirement eligibility, then you must pay the military service credit deposit in full before retirement to meet the eligibility requirements for immediate retirement. According to OPM’s Benefits Administration Letter, #23-105 (dated 9/8/2023), there is no requirement to pay a military service deposit. Therefore, it is your decision to pay (or not pay) a deposit for any distinct period of creditable military service and the following items continue to be your responsibility:  

• Seek counseling from your employing agency about the military service deposit requirements and process  

• Obtain the required military service records and basic pay documentation (e.g., RI 20-97, Estimated Earnings During Military Service)  

• Ensure your military service deposit is paid in full prior to separation from Federal service (e.g., retirement, resignation, removal, termination, etc.) 

Your agency is responsible for providing accurate and complete military deposit counseling that includes determining the credibility of any period of active-duty military service. You should request two retirement estimates; one that includes the credit for military service and the other one based only on your civilian federal service. You should be informed of the amount of interest that is owed if you pay the deposit for military service credit after your third anniversary of civilian federal employment when the interest begins to accrue. Your military service credit deposit must be paid in full to your agency on or before your separation date (retirement date). This includes a final payment made in your final salary payment which may be received after the date of your separation.   

Continuation of Health Insurance in Retirement 

You are eligible to continue health benefits coverage, upon retirement, if you meet all the following requirements: 

• You are entitled to retire on an immediate annuity under a retirement system for civilian employees (including retirements under FERS Minimum Retirement Age + 10); and 

• You have been continuously enrolled (or covered as a family member) in any FEHB plan(s) for the 5 years of service immediately before the date the annuity starts, or for the full period(s) of service since his/her first opportunity to enroll (if less than 5 years). 

When you elect not to enroll or if you cancel your enrollment, you will be required to certify by your signature on the Health Benefits Election form (SF 2809) that you understand the effect this has on eligibility to carry coverage into retirement. OPM has more details about this important requirement.

You can cancel your coverage after you retire, but you can only get it back under limited circumstances. For example, if you’re continuously covered as a family member on your spouse’s FEHB enrollment, you can resume your own enrollment if your coverage under your spouse’s enrollment ends for any reason. But if you’re not covered under a family member’s FEHB, and you cancel your enrollment, that’s a one-way ticket out of the program. 

If you postpone the beginning date of your annuity when you are eligible to retire under an MRA+10 retirement, you will be eligible to temporarily continue your health benefits coverage under temporary continuation of coverage provisions for up to 18 months, but you must pay the full premium. When your annuity payments begin, if you had FEHB coverage for the five years immediately before you separated, you again can enroll in an FEHB plan, and the Office of Personnel Management will pay the government share of the premium. 

Continuation of Life Insurance in Retirement 

When you retire, you are eligible to continue FEGLI if you meet all of the following requirements:  

• You are entitled to retire on an immediate annuity under a retirement system for civilian employees; 

• You have been insured for the 5 years of service immediately before the starting date of your annuity, or for the full period(s) of service during which you were eligible to be insured if less than 5 years;  

• You are enrolled in FEGLI on the date of retirement; and  

• You have not converted to an individual policy.  

If you are eligible to continue your Basic insurance, you must choose the amount of Basic insurance you want to continue after age 65 (or retirement, if you are already age 65 or older when you retire). The choices are 75% reduction, 50% reduction, and no reduction. Remember that your coverage does NOT reduce when you reach age 65 if you are still an employee at that time. 

If you choose 75% reduction, your Basic insurance reduces by 2% of the preretirement amount each month beginning at age 65 until 25% of the pre-retirement amount remains. If you choose 50% reduction, your Basic insurance reduces by 1% of the pre-retirement amount each month beginning at age 65 until 50% of the pre-retirement amount remains. If you choose no reduction, your Basic insurance will not reduce, and 100% of the pre-retirement amount is payable as a death benefit. 

If you choose 75% reduction, the coverage will be free after you retire and reach age 65. If you choose 50% reduction or no reduction, you will pay an extra premium for this coverage after you retire and reach age 65.  

When you are retired and reach age 65, Option A coverage automatically begins reducing by 2% of the pre-retirement amount each month until 25% of the pre-retirement amount remains. Option A is free once it starts to reduce. There is no reduction election to make at time of retirement for Option A.  

At the time you retire, you must choose how many of your Option B and/or C multiples you want to continue. You must also choose whether to have some or all those multiples reduce (“Full Reduction”) or not reduce (“No Reduction”) after age 65 (or retirement, if later). You may choose Full Reduction for some multiples and No Reduction for other multiples of your Option B and/or C coverage. In addition, shortly before reaching age 65, you will receive a notice providing you a second opportunity to make this election. You can elect to keep your original reduction election(s) made at retirement or change them by returning the notice to OPM at that time. 

If you choose Full Reduction, after you are retired and upon reaching age 65, each multiple starts reducing by 2% of the pre-retirement amount each month until the amount has been reduced by 100% and the final value equals zero. Until the reduction starts, you pay the same premiums as active employees, appropriate to your age. When the reduction starts at age 65, Options B and/or C withholdings stop. If you choose No Reduction, your Options B and/or C coverage will not be reduced at all. After age 65, you will continue to pay the same premiums as active employees, appropriate to your age.   

You can learn more about FEGLI before and after retirement in the FEGLI Handbook. 

You can’t continue your life insurance coverage unless you are receiving an annuity. If you postpone the beginning date of your annuity under an MRA+10 type of retirement, your life insurance will terminate. When your annuity begins, if you meet the usual requirements for continuing coverage into retirement, the life insurance coverage you had when you separated will resume. 

Maintaining Your TSP Account 

Your TSP account will remain active as long as your vested account balance in your TSP account is $200 or more after your separation from federal employment.  You can also transfer eligible money into the TSP after you retire. If you close your TSP account, you may not reopen the account unless you return to federal employment. There are a variety of withdrawal options available to use your TSP money after you retire from federal service. You don’t need to request a withdrawal immediately; however, you will be subject to required minimum distributions when you reach a certain age (age 73 if you were born between January 1, 1951, and December 31,1959; and 75 if you were born after December 31, 1959).  See the tax publication for more details on RMDs. 

TSP Annuity Election 

One of the distribution options available from the TSP is the option to purchase a life annuity through a contract that the TSP has with MetLife. Annuity purchases are irrevocable; changes cannot be made once an annuity is purchased. The factors that affect the amount of your monthly annuity payments include the following:  

• the amount used to purchase your annuity  

• your age when your annuity is purchased (and the age of your spouse or other joint annuitant if you choose a joint annuity)  

• the annuity option you choose  

• the “interest rate index” when your annuity is purchased 

Here is a fact sheet with more details about this distribution option:  https://www.tsp.gov/publications/tspfs24.pdf  

Remember these important tips: 

• Using either the ThriftLine Service Center options on tsp.gov or the tools available in My Account will help you calculate and model potential annuities.  

• It is best to compare different types of annuities and benefit amounts to determine which one best fits your needs.  

• Interest rates change monthly, and timing may be a factor in determining your benefit amount.  

For more information, read the TSP booklet Tax Rules about TSP Payments.  

Claiming Social Security 

Once you file for your Social Security retirement benefit, there are only two ways to reverse the decision. You can cancel your benefits application up to a year after your benefit approval. But you can only do this once and still be able to reapply later. Or you can suspend benefit payments if you’ve reached full retirement age but are not yet 70 years old. You’ll earn delayed retirement credits for each month your benefits are suspended, which will result in a higher benefit payment later.