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2025 Guide for Federal Employee Retirement Benefits from Fiduciary Financial Planners
The new year is just around the corner, which means many things for the federal workforce. A good portion of federal employees are very likely retiring on December 31 as it is generally considered the best date for federal employees to retire. Current federal retirees and those receiving social security retirement benefits can also expect the annual cost-of-living adjustments to boost their income. This article will also look at TSP contributions, health premiums, how to request a federal retirement estimate, and what’s the latest news about the 2025 federal pay raise.
COLA for FERS, CSRS, and Social Security
The cost-of-living adjustment for Social Security and federal retirees receiving a CSRS (Civil Service Retirement System) pension will 2.5% for 2025. For FERS (federal employee retirement system) annuitant, this means a 2025 COLA of 2.0%.
CSRS | FERS | |
2023 COLA | 8.7% | 7.7% |
2024 COLA | 3.2% | 2.2% |
2025 COLA | 2.5% | 2.0% |
Learn how FERS, Social Security, and TSP work at a Free FERS Retirement Webinar!
2025 Federal Pay Raise for Military and Civilian Employees
The 2025 pay raise for military personnel was finalized at 4.5% last week when Congress passed a budget avoid a government shutdown. The federal pay raise for civilian employees was just finalized today, December 23, at 2.0% despite a last ditch effort for 4.5%.
Military | Civilian | |
2023 Pay Raise | 4.6% | 4.6% |
2024 Pay Raise | 5.2% | 5.2% |
2025 Pay Raise | 4.5% | 2.0% |
2025 TSP Contribution Limits and Catch-Up Amounts
The Thrift Savings Plan (TSP) contribution limits for the 2025 tax year will be $23,500 for all employees. The normal catch-up amounts, for those age 50 or older, will remain at $7500. Unlike previous years, though, federal employees between the ages of 60 and 63 can contribute $11,250 for their total catch-up amount in 2025.
2025 TSP Secure 2.0 Catch Up Contributions
Age | Contribution Limit | TSP Catch-Up Contributions | Total TSP Contribution Limit (2025) |
Younger than 50 | $23,500 | Not Eligible | $23,500 |
50 and Older | $23,500 | $7500 | $31,000 |
60 to 63 | $23,500 | $11,250 | $34,750 |
64 and Older | $23,500 | $7500 | $31,000 |
Want to know how much your TSP balance will be at retirement? Check out the TSP Calculator to prepare for your retirement.
Federal and Postal Health Benefit Premium Increases for 2025
The Federal Employee Health Benefits (FEHB) program will see a premium increase of 13.5% for health insurance plans. As for the new PSHB (Postal Service Health Benefits) plans, there will be an average increase of 11.1% compared to coverage postal workers received under FEHB in 2024. The Federal Employee Dental and Vision (FEDVIP) plans are set to increase by an average of 2.97% for dental coverage and 0.87% for vision plans, respectively.
2025 Average Premium Increase | |
FEHB | 13.5% |
PSHB (Postal Service) | 11.1% |
FEDVIP, Vision | 0.87% |
FEDVIP, Dental | 2.97% |
Healthcare costs are rising each year and the increase in premiums reflects this reality. Planning for health expenses in retirement is a crucial factor to consider when developing a retirement plan under FERS. As for life insurance, the cost of FEGLI (Federal Employee Group Life Insurance) premiums have not increased since October of 2021.
FLTCIP to Stay Suspended Until December 2026
In 2022, the Federal Long Term Care Insurance Program (FLTCIP) stopped accepting new applications for long-term care policies. Earlier this month, OPM extended the suspension until at least December 19, 2026.
Knowledge is Confidence!
FERS Annuity Calculator: Estimate Your Federal Employee Retirement
Utilizing tools like the FERS annuity calculator can help you estimate your retirement benefits and make informed decisions about your future. Learn the importance of the high-3 average salary, and how to effectively use an annuity calculator to plan your retirement.
What is Computation for Federal Retirement Benefit?
Annuity computation under both FERS and CSRS involves calculating the benefit amount based on your high-3 average salary and years of creditable service. For FERS, the annuity is typically 1% of your high-3 average salary multiplied by your years of service, or 1.1% if you retire at age 62 or older with at least 20 years of service. CSRS annuity computation is more generous, generally calculated as 1.5% of your high-3 average salary for the first five years, 1.75% for the next five years, and 2% for each year thereafter. Understanding these formulas is essential for estimating your retirement benefits accurately.
Information to Get Started Calculating Your FERS Pension
Key details include your high-3 average salary, years of creditable service, and your expected retirement age. Additionally, you should have information about any unused sick leave, as this can be converted into additional service time under certain conditions. Gathering this information beforehand will ensure a more accurate estimate of your retirement benefits.
Your High-3 Average Salary is Used to Calculate Benefit Amount
Your high-3 average salary is a critical component in calculating your annuity. It is the highest average basic pay you earned during any three consecutive years of service. To input this into the calculator, you need to identify the period where your salary was highest and calculate the average. This figure is then used in the annuity computation formula to determine your benefit amount. Ensuring accuracy in this step is vital, as even small discrepancies can significantly impact your estimated retirement benefits.
Length of Service, Sick Leave, and Military Deposits
Calculating your creditable service involves determining the total years and months you have worked as a federal employee. This includes any periods of military service, which can be credited towards your retirement if you make a deposit for that time. Additionally, unused sick leave can be converted into creditable service, potentially increasing your annuity, but unused sick leave cannot be used for eligibility. If you have less than 20 years of service, and your basic annuity is computed with a factor of 20 years because of sick leave, you will not be eligible for the extra 1.1% multiplier (if retiring at age 62 or older). The Office of Personnel Management (OPM) provides guidelines on how to calculate this time, ensuring you receive the full benefit of your service.
How to Plan for Retirement from Federal Service
The best way to start planning for retirement as an employee of the federal government is to attend a free retirement workshop and then sign up to request a FERS retirement system benefit estimate report. After that, you can work with the best fiduciary advisors for federal employees to map out the optimal retirement plan for your financial goals. FERS retirees who retire comfortably either figured it out on their own or worked with a Certified Financial Planner (CFP) at PlanWell.
Click here to learn the PlanWell difference.
How Can Financial Advisors Assist in Retirement Planning?
Financial advisors can play a vital role in retirement planning for federal employees. They offer expert guidance on maximizing your retirement benefits, managing your TSP, and making informed decisions about your annuity and survivor benefits. Advisors can also help you navigate the complexities of the federal retirement system, ensuring you understand your options and make the best choices for your financial future. Engaging with a knowledgeable advisor can provide peace of mind and confidence as you approach retirement.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
