The NEXT 10 Worst Mistakes
Federal Employees Can Make

The choices you make now will determine the success of your retirement.  Some of these choices are not easy.  The following 10 worst mistakes are easy to make.

11.  Missing the chance to contribute to the Thrift Savings Plan (TSP).

CSRS employees who do not contribute to the tax-deferred TP are missing a good chance to increase their retirement income.  FERS employees who do not contribute are missing out on government contributions to their TSP accounts and the growth of a critical part of their retirement package.  CSRS employees can contribute up to $15,500 of their pay pre-tax this year.  FERS employees can also contribute up to $15,500 of their pay pre-tax.  It is particularly critical for FERS employees to make contributions to the TSP as son as they can during their federal careers because the TSP is intended to make up about one-third of their income in retirement.  A FERS employee who maximizes his or her TSP contributions by mid-career (e.g., abut 15 years before retirement) may have TSP contributions two to three times higher than the FERS employee who maximizes his or her TSP contributions five years before retirement.  Note that current employees over age 50 who contribute the maximum to the TSP are allowed to make $5,000 in “catch-up” contributations.

12.  Not purchasing long-term care insurance coverage at the right age.

Everyone knows that long-term care insurance rates are based on a person's age when he or she applies.  From an actuarial perspective, people pay the same overall average total in long-term care insurance premiums.  Younger people pay smaller amounts over a longer period of time, while older people pay higher rates over a shorter period of time.  The key factor is that acceptance rates among younger groups of employees are significantly higher than for older employees and retirees.  Since you also have to be sure that you can continue to pay the premiums after retirement, you need to have a good idea of what your net retirement income will be after reductions (e.g., for survivor annuity, etc.), federal and state income taxes, and other premium deductions (e.g., for group health and life insurance).  If you are in good health, it may be best to wait until you are in your fifties to consider purchasing long-term care insurance.  At that point, you will have a better grasp of your financial situation, the assets you'll need to protect, and the amount of long-term care insurance you can afford.

13.  Mismanaging your sick leave.

CSRS employees receive credit for their unused sick leave in the computation of their retirement annuities.  Retirement annuities are based on years and whole months of federal service and unused sick leave.  If an employee is retiring with 30 years, six months and 15 days, his or her total service for annuity computation purposes will be exactly 31 years.  If the same employee has an unused sick leave credit of exactly six months, he or she will be giving away 15 days that could have been used before retirement.

14.  Leaving annual leave calculations to the last minute.

Most federal employees have a ceiling of 240 hours of annual leave that they can carry over from one year to the next.  Leave above the ceiling at the end of a leave year falls into the “use or lose” category.  An employee who carries over 240 hours of annual leave and plans to retire the following November 30th can be paid a lump sum for the 240 hours plus the leave accrued through November 30th, a total of up to approximately 432 hours (depending on annual leave usage in that last year of employment).  Everyone needs to be sure to check on this closely if they plan to retire at the end of the calendar year.

15.  Forfeiting your ability to pay your military service credit deposit.

Employees must pay their military service credit deposits to their employing agencies before they retire.  They cannot pay the Office of Personnel Management after they retire.  CSRS employees hired before October 1, 1982, must pay the deposit to assure retirement credit continues if they are eligible for Social Security at age 62, or their date of retirement, if later than age 62.  CSRS employees hired after October 1, 1982, must pay the deposit to have military service included in their annuity computation.  FERS employees must pay the military deposit to get credit for the military service for both retirement eligibility and retirement computation purposes.

16.  Choosing the wrong date on which you will retire.

Retirement annuity benefits become payable on the first business day of the month after the month in which the annuity benefits begin to accrue.  For example, if a person retires on June 30th, retirement benefits begin to accrue on July 1st, and are payable on August 1st.  For some retirees (disability retirees and involuntary retirees), annuity benefits begin to accrue on the day after the person separates from government service or the person's last day in a pay status.  For CSRS retirees, benefits begin to accrue immediately if they separate from the government during the first three days of the month.  For everybody else, retirement benefits begin to accrue on the first day of the month after the month in which the person separates for retirement.  For a voluntary retiree who separates on June 15th, benefits begin to accrue on July 1st.  If he or she decides to retire on June 30th, benefits begin to accrue on July 1st, and there is no break between being paid salary and annuity.  Employees who separate under early optional retirement authorities or voluntary separation incentive programs need to be careful in selecting their retirement dates, because these are voluntary retirements, not involuntary retirements.

17.  Failing to carefully select the time of year in which you will retire.

Many people retire at the end of a calendar year for several reasons.  They can maximize their annual leave accrual to add to their carry-over leave so they can get the largest lump-sum annual leave payout.  They ensure that the annual leave payout is received in January, which is the first year of retirement and for which their tax liability will be lower.  In addition, depending on the timing of the federal employees' pay increase, they may be able to be paid at a higher rate for their lump-sum annual leave.  This would occur if the pay increase coincides with the end of the leave year.  Under these conditions, the pay increase can also boost the value of the retiring employee's basic FEGLI insurance and Option B additional insurance coverage.

18.  Waiting until after retiring from the federal government to join NARFE.

As hard as federal agencies try to educate employees about their benefits, there is a gap in knowledge and understanding on the part of many employees.  NARFE can help bridge a part of that gap through its Web site, monthly NARFE magazine; inforNational brochures; e-mail systems; chapter meeting presentations; and chapter Service officers, who assist members with retirement issues.  In addition, NARFE contracts with Federal agencies to conduct formal pre-retirement seminars for federal employees.

19.  Making decisions without consulting a Chapter Service Officer, local NARFE Service center volunteers or NARFE's Retirement Benefits Services Department on benefits questions.

NARFE can ease your way into retirement.  Service Officers and other chapter members may be able to answer many questions you have prior to or at the time of retirement.  Since personnel and human resource functions have been centralized in many agencies or regions, a NARFE chapter can be a source of information and can provide conduits through which information can be obtained.

20.  Silencing your voice by not supporting NARFE legislative issues that have an impact on your future.

NARFE needs everyone's support of its legislative program to ensure that all current and future retirees' benefits, rights and interests are protected.  Current employees enjoy some advantages that retirees do not.  The most notable at this time is the premium conversion program, under which current employees pay their FEHBP premiums with pre-tax dollars, a tax saving of up to $400 annually.  Employees who are about to retire are often astonished to learn that they will lost right when they retire.

Workers need to be aware that Social Security benefits they are expecting to receive may be less than anticipated as a result of the Social Security Government Pension Offset and/or windfall Elimination Provision.  NARFE is working to eliminate this benefit loss, but we need the support of federal employees like you.

Join NARFE Today.

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Alexandria, Virginia 22314-1914
Call TOLL FREE: 1-800-627-3394
or visit NARFE Online at

This page was updated 23 September 2010.

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