Federal Retirement

Top 5 Reasons Why Age 62 is the Sweet Spot for FERS Retirement

Posted on by Ben Derge
FERS Retirement - Age 62 Sweet Spot

For federal employees who are eligible to retire at their MRA or at 60, waiting until age 62 comes with a handful of perks. While early retirement may seem tempting, waiting until 62 under FERS can unlock a suite of financial advantages that significantly impact long-term stability and income. Before helping feds retire before this key age, financial planners should remind them of the benefits should they continue to work.

1.    Enhanced Pension Formula: The 1.1% Multiplier

Retiring at age 62 with at least 20 years of service boosts your pension multiplier from 1.0% to 1.1%. This seemingly small increase translates to a 10% permanent boost to your pension. For example, a high-3 average salary of $100,000 with 20 years of service yields:

  • At 1.0%: $20,000/year
  • At 1.1%: $22,000/year — an extra $2,000 annually for life.

This example also doesn’t account for the extra service that would come with holding off on retiring for a year or more, which would also most likely translate to a higher average salary used when computing the FERS Retirement annuity. Working longer also often means higher earnings, which directly impact your pension.

2.     Immediate Cost-of-Living Adjustments (COLAs)

FERS retirees under age 62 do not receive COLAs until they reach that age. Waiting ensures your pension begins adjusting for inflation right away, preserving purchasing power. Skipping COLAs for 5 years (e.g., retiring at 57) can lead to thousands in lost income in the long run.

Exceptions include:

  • Disability retirees
  • Survivor annuitants
  • Special Provisions employees (e.g., law enforcement, firefighters, air traffic controllers)

There’s also compounding growth to consider. Each year’s COLA builds on the previous year’s adjusted amount. Missing five years of COLAs means losing out on compounding increases.

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3.    Social Security Eligibility

Age 62 marks the earliest eligibility for Social Security benefits. While delaying Social Security can increase monthly payouts, retiring at 62 offers the flexibility to start benefits if needed. And although an earlier exit might mean collecting the special retirement supplement (SRS), this can be limited by earnings received if a federal retiree decides to work elsewhere after leaving government service. Delaying Social Security can also increase spousal or survivor benefits, which would be based on your higher delayed amount.

4.  Delay FERS Retirement, More Time to Grow TSP

Continued employment allows for additional contributions to the Thrift Savings Plan (TSP). Federal employees that hold off retirement continue to benefit from the government matching, catch-up contributions, and most importantly, compounded growth over extra years. Delaying withdrawals means extending potential for growth When FERS employees retire later, they postpone accessing retirement savings in their TSP, meaning investments continue to earn returns, potentially increasing the balance significantly. The longer you wait you apply for retirement, the less pressure there is to draw down your savings, helping your TSP money last longer. Also, if contributing to a Roth TSP, a portion of any extra growth would be tax-free upon making qualified withdrawals.

5.    Delayed Onset of Retirement Expenses

When longevity of retirement assets are extended, financial strain is reduced. It’s all about making that nest egg last as long as retirement does. The goal is to stretch resources across a potentially 30+ year span. The longer assets last, the less strain on your financial goals. Strategic withdrawals can help federal retirees stay in lower tax brackets, and using Roth conversions can optimize taxable income over time.

Healthcare costs often spike as people get older. Preserving assets ensures not having to sacrifice care or lifestyle when expenses rise. Knowing assets are built to last reduces anxiety, allowing federal retirees to enjoy golden years without constantly worrying about money.

Learn more about Federal Benefits and FERS Retirement Strategy when you Enroll in the Federal Benefits Basics Course.

Financial Planning for Feds

Strategies for Federal Employees Saving for Kids’ Education

Posted on by Ben Derge
Fed Options - College Planning Help when Servicing Federal Clients

For financial planners serving the federal workforce, it’s important to note the Federal Academic Alliance ended in January 2026 – here are alternative methods to achieve the same financial goals when saving for their dependents’ college expenses.

Strategies for Federal Employees Saving for Kids’ Education

For financial planners serving the federal workforce, it’s important to note the Federal Academic Alliance ended in January 2026 – here are alternative methods to achieve the same financial goals when saving for their dependents’ college expenses.

The Underused Federal Academic Alliance is Over

 On December 1, 2025, the Office of Personnel Management issued a memo announcing that the Federal Academic Alliance will officially no longer be available on January 30, 2026. The program, which offered tuition discounts and waived application fees to federal workers and their immediate family members, is ending due to, according to OPM, low participation. The program operated through dozens of partner colleges and universities. For advisors, the main takeaway here is a reminder that when employees don’t know what’s available, they can’t use it.

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For years, the alliance offered tuition discounts and waived application fees to federal workers and their families, yet participation remained so low that most employees never knew it existed. Now that it’s gone, federal families are left facing the full weight of today’s education costs, which average around $38,270 per year for a four‑year undergraduate degree.

Without the Alliance’s built‑in discounts, federal employees need structured, proactive college savings strategies more than ever. Financial professionals who step in early can help clients avoid “sticker shock” and build a sustainable plan that protects both their children’s education and their own long‑term financial security.

How Retirement Savings Plays a Role

The first rule of advising federal families is simple: retirement comes first. Many federal employees feel pressure to prioritize their children’s education, but sacrificing retirement savings can create long‑term financial strain that no scholarship or loan can fix.

A practical starting point is ensuring clients contribute enough to their Thrift Savings Plan (TSP) to receive the full federal match.

Unused Funds from 529 Accounts Can Be Transferred to Roth IRA

When clients are ready to save, planners must help them choose the best savings account for kids college based on tax advantages, flexibility, and long‑term goals. Three vehicles consistently rise to the top.

With the closure of the Academic Alliance, advisors can steer families toward vehicles, where participation not only secures tax-advantaged growth but also ensures employees don’t miss out on resources that can shape their children’s futures. For example, 529 plans can be especially important now that remaining unused 529 plan balances, up to $35,000 total per beneficiary, can be rolled into a Roth IRA. To qualify, the 529 account must have been open for at least 15 years, and rollovers are subject to the annual Roth IRA contribution limits ($7,500 in 2026, or $8,600 if age 50+). The Roth IRA must be owned by the 529 beneficiary, who also needs earned income in the year of rollover.

For most federal families, a 529 plan is the most powerful and flexible option. Earnings grow tax‑free, and withdrawals remain tax‑free when used for qualified education expenses such as tuition, room and board, and required materials.

Alternatives for Cutting Costs of Education

Even without the Academic Alliance, federal families still have access to meaningful resources, if they know where to look.

FEEA Scholarships

The Federal Employee Education & Assistance Fund provides merit‑based scholarships to federal employees, spouses, children, and even grandchildren. Advisors should encourage eligible families to apply annually.

FAFSA, Grants, and Tax Credits

Every college‑bound family should complete the FAFSA, regardless of income assumptions. Advisors can also guide clients through secondary tax strategies, including:

  • Savings bond interest exclusions for qualified education expenses
  • Dependent care assistance plans for families balancing childcare and education
  • American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) eligibility

These tools can meaningfully reduce out‑of‑pocket costs when layered with a strong savings plan.

Federal employees rarely act on obscure benefits or complex tax rules without guidance. With the Federal Academic Alliance gone, planners who proactively introduce college savings strategies and help clients choose the best savings account for kids college become indispensable partners in their financial lives.

If you serve the federal workforce, now is the time to strengthen your process. Schedule a meeting with Fed Options to see how our automated solutions and Benefits Analysis Strategy streamline your workflow.

Frequently Asked Questions: College Savings & Federal Benefits

Q: What happened to the Federal Academic Alliance? A: The Federal Academic Alliance, which previously provided tuition discounts and waived application fees to federal workers, their spouses, and children, was officially shut down on January 30, 2026. The Office of Personnel Management (OPM) ended the program due to low participation.

Q: Should federal employees prioritize funding their children’s college over their own retirement? A: No, parents should not sacrifice their retirement contributions to fund a college education. Financial planners should advise their clients to first ensure their post-career years are secure by contributing enough to their Thrift Savings Plan (TSP) to receive the full federal match.

Q: What happens if there is money left over in a 529 plan? A: A major advantage of 529 plans is that after 15 years, up to $35,000 total (subject to annual Roth IRA contribution limits) can be transferred to a Roth IRA for the 529 plan’s beneficiary.

Q: Are there any specific scholarships or grants available exclusively to federal families? A: Yes. Federal employees, along with their spouses, children, and grandchildren, may be eligible for merit-based scholarships awarded by the Federal Employee Education & Assistance Fund (FEEA). Clients should also be reminded to complete the Free Application for Federal Student Aid (FAFSA) to access federal grants, loans, and work-study programs.

Q: How can financial planners streamline the process of advising federal employees on these benefits? A: Financial professionals can utilize platforms like Fed Options to reduce administrative burdens and access automated solutions for analysis, notes, and applications. Fed Options provides a Benefits Analysis Strategy with outlined notes, tools, and resources to help advisors clearly explain the financial impacts of an employee’s benefit choices.

Read Next: Top Federal Retirement Myths

 

Federal Pay

2027 Federal Pay Raise: Possible 7% for Military, Civilian Pay Unmentioned

Posted on by Ben Derge
2027 Annual Pay Raise for Federal Employees

White House released budget suggestions for upcoming fiscal year and no civilian pay raise was mentioned for second year in a row, 5 to 7 percent was suggested for military members.

2027 Pay Raise for Federal Employees: Military vs. Civilian

The White House has released its FY 2027 budget proposal on Friday, April 3rd and once again, civilian federal employees were not included in the administration’s recommended pay adjustments. While the budget calls for a 5–7% raise for military members, it also proposes a 10% cut to non‑military discretionary spending, a signal that civilian pay is not a priority for the second year in a row.

Here’s the full breakdown of what this means, what it doesn’t, and what to watch for next.

No Civilian Pay Raise in 2027 Budget Request

This is now the second year in a row that the administration has omitted a civilian pay raise from its budget request. However, it is important to note that this did not prevent a raise last year from materializing, the president signed an executive order in December that gave a 1 percent across-the-board raise to civilian federal workers while Congress enacted a 3.8% raise for some law enforcement personnel and active military members.

The budget proposal is influential, but it is not binding. Civilian pay is typically finalized through one of two channels:

  • Congressional action (rare)
  • Executive Order (common)

The FAIR Act proposed a 4.1% raise for federal employees in 2027, but similar acts have never made it through the House of Representatives in recent history and it is as unlikely this year to get through Congress along with the President’s approval. The White House suggested slashing nonmilitary federal spending by 10% in the upcoming fiscal year and a large civilian pay increase would not align with those spending goals.

Military Raise vs. Civilian Federal Pay Raise Historical Chart

The FY 2027 proposal includes a 5–7% raise for military members and 0% proposed raise for civilian feds This contrast is politically significant but not unprecedented. Military pay raises are often treated separately from civilian adjustments, and the absence of a civilian raise in the budget does not preclude one later. The disparity between the two numbers is a little unusual, though.

Year Military Raise (Basic) Civilian Raise (GS)
2027 (prop.) 4.10% ???
2026 3.80% 1.00%
2025 3.00% 1.70%
2024 5.20% 4.70%
2023 4.60% 4.10%
2022 2.70% 2.20%
2021 3.00% 1.00%
2020 3.10% 2.60%
2019 2.60% 1.40%
2018 2.40% 1.40%

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What Happens Next?

Congressional Budget Negotiations (Summer 2026)

Congress could legislate a raise, but historically they defer to the executive process unless making a political point. If it were to occur via Capitol Hill, it would likely be packaged in the fiscal year budgetary talks over the summer and not as standalone legislation.

Alternative Pay Plan (by August 31, 2026)

This is the most important date for civilian feds trying to determine their annual pay raise. This document typically reflects what the President will sign by the end of the year – unless there’s a pay freeze and then no executive order is needed.

Executive Order (December 2026)

Formally implements the raise for January 2027, often falling in the 1–2% range unless driven by inflationary or political pressures.

What Advisors Should Tell Their Federal Clients Right Now

  • “No news” does not mean “no federal pay raise.” The omission of a salary increase from the budget is notable, but not determinative and definitely not a surprise.
  • The real signal comes in late August. The Alternative Pay Plan is the document that matters. If it isn’t issued, an automatic civilian raise of over 30% would be triggered so the pay plan is practically a guarantee.
  • Congress could still act—but usually doesn’t. Advisors should monitor summer budget discussions but avoid over‑promising.
  • Prepare clients for a modest raise. Based on recent history, a 1–2% adjustment remains the most likely outcome unless economic or political conditions shift. Offer financial strategies or products that can help them with their retirement goals regardless of future annual raises.

The FY 2027 budget proposal, along with the FAIR Act, are early indicators of upcoming pay increases for federal employees but hardly determinative. Advisors should track congressional discussions over the summer, but the decisive moment will come by August 31, when the White House releases its Alternative Pay Plan.

Are you falling for these 3 federal retirement myths?