Retirement Roadmap for Laid-Off Federal Employees: Your Guide to Financial Security

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8 Things to Know If You Plan to Take Early Retirement from the Federal Government
Smart Financial Moves for Laid-Off or Retiring Federal Workers
Why Retirement Planning for Federal Employees Matters More Than Ever
Why Work with an Advisor on Your Financial Roadmap

Earlier this year, about 75,000 federal employees accepted President Donald Trump’s buyout offer to leave their federal government jobs. That’s about 3.75% of the federal workforce, shy of the White House’s goal of 5% to 10%, according the Business Insider.

These actions have accelerated retirement planning discussions, not just for government workers in Washington, DC, but around the country. Deciding to retire early as a federal employee can feel like standing at a crossroads. Your pension, health insurance, and other benefits may change in ways that affect your long-term security and day-to-day budget.

Before you make any decisions, it helps to step back and look at the big picture—your likely income streams, cost-of-living adjustments, and ongoing access to health and life coverage. At this level, it’s not about memorizing every regulation; it’s about understanding how your paycheck, protection, and peace of mind could shift if you leave the workforce sooner than planned.

So imagine your career as a long highway cruise—smooth riding under clear skies—until suddenly, road construction signs appear: early-retirement offers, buyouts, or layoff notices. You’re rerouted off the familiar interstate of federal service onto unknown backroads.

Before you hit every turn and detour, you need a map: your personalized Financial Roadmap. It shows you how to navigate exit ramps like Thrift Savings Plan (TSP) withdrawals, merge lanes for Social Security and Medicare, and rest stops for emergency funds—so you arrive at retirement security without running out of gas.

8 Things to Know If You Plan to Take Early Retirement from the Federal Government

Federal employees are entitled to a combination of pension benefits, including the TSP, Social Security, the Federal Employee Retirement System (FERS) annuity (a time and compensation-weighted annuity), various insurance options, and for those with long tenure, possibly even the Civil Service Retirement System (CSRS). The system is quite complex. Federal employees considering retirement will need to make decisions swiftly, many of which may be irrevocable. Here are 8 things to know if your federal job gets cut:

1. How much might your pension be reduced?
   • Some early retirement paths let you keep your full annuity; others come with a permanent reduction for each year you’re under the “full-age” threshold. Typically, in exchange for a 10% reduction in benefits, your spouse will be entitled to a 50% survivor benefit pension. There may also an option to take a smaller reduction, such as 5% in exchange for a 25% survivor benefit pension.

2. Can you keep your federal health coverage?
   • If you have been enrolled in Federal Employees Health Benefits (FEHB) for the requisite period prior to retirement, you may continue your plan. However, you will be responsible for paying premiums after separation. Alternatively, you may wish to consider whether you have access to a superior plan through a spouse’s benefits. Such a plan could potentially save you money; for instance, it might offer better coverage or involve an employer that pays all premiums.

3. How does Medicare work with the federal employee health care program?
   • Federal employees who are age 65 have the option to either keep their federal employee health care plans or switch to Medicare as their medical insurance. This decision requires consideration because Medicare premiums are income-based. If a spouse is still working and earns a high income, the Medicare premiums will be adjusted accordingly.
   • If you enroll in Medicare Part B, your Federal Employees Health Benefits can serve as secondary insurance.

4. What happens to your TSP?
   • Your balance stays intact. You’ll stop contributing, but you can roll over or withdraw funds, keeping in mind taxes and long-term growth.
   • When deciding whether to keep retirement savings in TSP or roll them over into an IRA, note that the TSP offers five fund options. Rolling over a TSP into an IRA provides access to thousands of options including stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs) and more.
   • However, it is important to consider that having more options is not necessarily better. The TSP may meet your investment objectives adequately and has very low fees. If the options provided by the TSP align with your portfolio needs, it can be a viable choice to maintain funds there.
   • Additionally, dependent on your spouse’s financial position and overall family income, there may be advantages to keeping employer plan balances in terms of the ability to fund Roth contributions, as a back door Roth.

5. Will you receive a cost-of-living adjustment (COLA)?
   • Early FERS retirees typically wait until age 62 for COLAs, while CSRS retirees get them immediately.

6. Is a FERS supplement available to you?
   • If you retire under certain authorities and meet the minimum age, you may get a temporary bridge benefit until Social Security kicks in—subject to earnings limits.

7. What life and other insurances continue?
   • Federal employees who use the Federal Employees’ Group Life Insurance (FEGLI) may also be eligible to continue their coverage into retirement, or to continue with reduced coverage. Life insurance and dental/vision plans often carry over if you meet enrollment windows. Flexible spending accounts close at separation.

8. Are you eligible for unused leave payouts?
   • You’ll receive a lump-sum payment for unused annual leave, and unused sick leave can boost your service credit for pension calculations.

Smart Financial Moves for Laid-Off or Retiring Federal Workers

Do I know my legal rights and appeal options?

Even contract-year or probationary staff have recourse if procedures weren’t followed. Keep performance records and explore U.S Merit Systems Protection Board appeal timelines.

1. Am I staying in touch about possible rehires?
   • Agencies sometimes reverse layoffs or offer recall—monitor official notices and update your contacts.
2. How will I protect my finances and benefits?
   • File for unemployment immediately, build or tap an emergency fund, and review what benefits (like leave payouts) you’ll receive.
3. Am I documenting everything and asking for help?
   • Save all emails, meeting notes, and performance feedback. Lean on peers, career coaches, unions, or mental-health professionals for guidance and support.
4. What new opportunities can I explore?
   • Broaden your search to other federal agencies, local government, or the private sector. Network, refresh your resume, and stay open to consulting or part-time work.

Why Retirement Planning for Federal Employees Matters More Than Ever

As you enter your 50s and beyond, time becomes both your greatest asset and your most precious resource. Whether you’re facing an unexpected layoff or simply want to lock in your financial future, acting now can make all the difference. Here’s why getting serious about retirement planning—and teaming up with an objective financial advisor—matters more than ever:

What Can an Independent Financial Advisor Do for You?

• Independent Guidance: A third-party advisor has no stake in selling you a particular product. Their sole focus is helping you clarify goals, evaluate trade-offs, and choose strategies that fit your unique situation.
• Financial Wellness: Beyond retirement income, they can help optimize cash flow, tax planning, insurance, and investment risk—so you’re prepared for every chapter ahead.
• Accountability Partner: Regular check-ins keep you on track, flag emerging gaps, and adjust your plan when life (or the markets) throw you a curveball.

How Should You Approach Social Security and Medicare?

• Social Security Claiming Strategy: Deciding when to claim can add or subtract hundreds of dollars per month. An advisor can help you model break-even ages, spousal benefits, and the impact of working while you delay.
• Medicare Options: From Part A and B to Medigap or Medicare Advantage, the choices are complex. Early enrollment, penalties, and supplemental coverage all carry long-term cost implications—your advisor can guide you to the plan that minimizes out-of-pocket risk.

What About Cash Flow, Emergency Funds, and Risk?

• Cash Flow Planning: As income sources shift from paychecks to pensions, TSP withdrawals, and Social Security, you’ll need a roadmap to cover living expenses, healthcare premiums, and taxes.
• Emergency Fund Calibration: A solid 6–12 months of living expenses can help prevent you from tapping retirement savings in a downturn.
• Risk Tolerance as You Age: Your capacity for market swings typically decreases as retirement nears. An advisor can help rebalance your portfolio to protect gains while still pursuing growth.

When and How Should You Put an Estate Plan in Place?

• Basic Documents First: A will, durable power of attorney, and healthcare proxy can be drafted relatively quickly—and they ensure your wishes are honored if you become incapacitated.
• Legacy & Beneficiary Designations: Naming—or updating—TSP, IRA, and life-insurance beneficiaries is often the easiest way to move assets to the next generation with minimal probate.
• Charitable Giving & Trusts: If philanthropic goals or multi-generational planning are on your mind, trusts and donor-advised funds can help you leave a lasting impact.

By taking these steps now and working with a financial professional from Aurelius Family Office—you can build confidence in your plan, reduce uncertainty, and create the freedom to focus on what truly matters: enjoying your life’s next adventure.

Why Work with an Advisor on Your Financial Roadmap

Sometimes life gets messy. Plans change. You may have to drop everything to deal with a family emergency – or face a health challenge as you age. Every road trip is easier when you have a savvy navigator spotting warning signs and suggesting better routes. A financial advisor can play that role to navigate:

• Route Planning & Reroutes: They survey your current mileage—pension projections, savings balance, debt loads—and chart the smoothest path to your destination: a worry-free retirement. If markets stall or life throws a detour, they’ll find an alternate course.

• Road Sign Alerts: Early-retirement penalties, COLA delays, or Medicare enrollment deadlines can blindside you. Your navigator flags these hazards in advance so you can adjust speed or change lanes.

• Fuel Management: How much risk can your portfolio bear? Where and when should you top off on cash reserves? They monitor your fuel gauge—cash flow and emergency funds—to prevent a breakdown.

• Checkpoint Planning: From Social Security claiming milestones to updating your estate-plan documents, they set markers on your map and remind you when you’re nearing each stop.

• Co-Pilot Accountability: Regular check-ins keep you on route, confirm you’re fueling at the right stops, and ensure you’re still headed toward the right scenic overlooks—like leaving a legacy or funding your bucket-list dreams.

Take the Next Exit: Your Call to Action

Your journey from sudden layoff to retirement freedom is like a road trip through varied terrain—some stretches smooth, some under construction. To keep your wheels turning and reach your destination with confidence:

1. Pull Over for a Plan Review: Stop at the Aurelius financial planning rest stop for a full diagnostic—pension outlook, benefit continuations, portfolio reviews, and cash-flow mapping.

2. Check Your Road Signs: Review your TSP options, Social Security timing, Medicare enrollment windows, and estate-plan waypoints.

3. Engage Your Navigator: Take advantage of a free consultation with an independent, fee-only advisor at Aurelius who knows these highways inside and out and will tailor your map to changing conditions.

4. Starting this New Life Journey with Aurelius Provides Access to Inside as well as Outside Advisors and Planners: Our Legal Services plan provides access to estate planning attorneys and law firms nationwide. Our Medicare and supplemental insurance consultant will guide you through retiree medical insurance benefits. Concerned about replacing or maintaining life and disability insurance; our consultants will help you with that too. And fee only means you will never be pressured to buy commission based financial products from us, because Aurelius does not offer or sell them!

Don’t let an unexpected exit ramp derail your trip. Bottom line, these challenges could be a blessing in disguise. Once you regain your financial footing, you may discover new time for work you love, deepened friendships, volunteer projects, entrepreneurship, or spiritual growth. Your life experiences and relationships are likely very marketable and may present new opportunities you may not have considered.

Visit https://aurelius.net/ today to plot your course, identify warning signs, and accelerate toward financial freedom. Your smoothest ride may be just around the bend.

Disclosures

Aurelius Family Office, LLC (“AFO”) is an SEC registered investment adviser. Registration with the SEC does not imply a certain level of skill or expertise. This communication is for informational purposes only, and is not intended to provide specific investment, legal, tax, or other professional advice. Investments involve risk of loss.  Information regarding AFO’s services, fees, conflicts of interest and related matters can be found by clicking the following link https://adviserinfo.sec.gov/firm/summary/323016 and viewing the latest Form ADV, Part 2 Brochure and Part 3 Relationship Summary. Please visit us at https://aurelius.net/.