Leaving federal service before retirement doesn’t mean losing your valuable retirement benefits.
Federal employees contribute to both Social Security and the Thrift Savings Plan (TSP) as part of the Federal Employees Retirement System (FERS), and these benefits can often be carried with you to a new job, depending on certain conditions.
It’s important to understand that as a federal employee, you’re covered under Social Security, just like most workers in the private sector. The contributions made to Social Security from your federal salary, combined with contributions from any future employers, will still count toward your eligibility for Social Security retirement benefits.
Even if you leave federal service before retirement age, your Social Security earnings record remains intact, and the credits you’ve earned through your work history will follow you. These credits determine your eligibility and benefit amount when you reach retirement age, typically 62 or later.
The TSP, much like a 401(k) in the private sector, is a defined contribution plan that federal employees can continue managing even after leaving federal service. If you move to a job outside the federal government, you have several options for your TSP funds:
- Leave your funds in the TSP: You can maintain your account with no further contributions, allowing your investments to continue growing.
- Transfer or roll over your TSP: You can roll over your TSP into another qualified retirement plan, such as a 401(k) or an IRA, depending on your new employment.
- Withdraw your funds: Though not recommended due to tax penalties, you could opt to withdraw your TSP funds if you need immediate access to the money.
By understanding how these benefits carry over, federal employees who decide to leave before retirement can secure a strong financial foundation and continue building their retirement savings in a seamless way.
Planning ahead will ensure that you maximize the benefits earned through your federal career, even as you transition into new employment.
Want to learn more? Tonex offers FERS Retirement Refresher – FERS (Federal Employees Retirement System) Series, a 1-day course where participants receive a comprehensive understanding of the Federal Employees Retirement System (FERS) and its components.
Attendees also learn about FERS Basic Benefit Plan, Social Security, and Thrift Savings Plan (TSP) as well as learn how Social Security and the TSP benefits can transfer to other employment if leaving federal service before retirement.
This course is designed for federal employees at all career stages, including those planning for retirement in 1, 5 and 10 years and those seeking to enhance their current retirement plans. It is particularly beneficial for individuals looking to maximize their federal benefits and make informed decisions for a financially secure retirement.
Tonex also offers several other courses in the FERS series:
FERS Retirement Benefits – FERS (Federal Employees Retirement System) Series
Federal Benefits Overview
Introduction to FERS (Federal Employees Retirement System)
General Financial Planning for Federal Employees
For more information, questions, comments, contact us.