Common misconceptions about federal retirement benefits

The Office of Personnel Management is still catching up from increased retirement applications, stemming from the high number of federal employees who opted into the Voluntary Early Retirement Authority (VERA) and the deferred resignation program (DRP). In February 2026, OPM released a justification statement for a recent contract award to modernize its human resources systems. In the statement, OPM referred to an “expected doubling of the retirement application backlog.” As of May 2026, the average time for OPM to process federal retirement applications is 76 days (50 days for digital applications and 100 days for paper applications). 

It’s always a good time for federal employees to improve their understanding of the retirement process, including separating facts from common misconceptions. 

Misconception: Retirement pay begins right away

Fact: A retiree’s agency doesn’t send their retirement packet to OPM until the date of their retirement. At that point, OPM begins processing the retirement packet. OPM does have a processing backlog; it can take up to 90 days for them to begin.

Retirees can expect their first, estimated annuity payment within two to three months. OPM refers to this as “interim” pay: Usually, it’s about 60-80% of what your actual annuity will be.

Misconception: TSP is all you need after retirement

Fact: Federal employees will have three main sources of income in retirement: their pension, Social Security and their Thrift Savings Plan account.

When planning their budget for retirement, they can easily calculate how much the first two will provide each month. Their TSP will need to bridge the gap between that amount and the monthly cost of the lifestyle they intend to live during retirement. That’s why there’s no easy answer to how much feds should have in their TSP accounts when they retire. It differs for every person.

In addition, the TSP offers different ways to withdraw: partial, full, installment or annuity. It’s recommended that any federal employee within the retirement horizon transfer some or all of their TSP balance into an IRA or Roth IRA in the private sector. As long as they transfer the funds an IRA or Roth IRA, there are no taxes, penalties or fees.

Misconception: Federal Employee Health Benefits (FEHB) go away at retirement, or become more expensive.

Fact: Under certain eligibility requirements, federal employees can continue their FEHB coverage into retirement. These requirements include enrollment in FEHB for at least five consecutive years leading up to, and having coverage on, the retirement date. It is important to note that qualified spouses, dependent children, and children with disabilities can be covered without meeting this five-year rule. Employees become classified as annuitants upon retiring, at which point the government will continue to cover about 72% of the FEHB premium.

In addition, retirees can also enroll in Medicare parts A and B, offering nearly comprehensive coverage, with Medicare as the primary payer and FEHB as secondary. To reduce costs, some retirees opt for a basic FEHB plan.

Misconception: Federal Employee Group Life Insurance (FEGLI) will remain the same price after retirement

Fact: Basic FEGLI insurance costs between $10-$30 per pay period. It’s very inexpensive while employed, but the price increases dramatically in retirement. How much it increases in price depends on the plan; there are four FEGLI options, including Basic, Option A, Option B and Option C. Federal employees often don’t know what plan they have, or how much they’re paying for it. Understanding their plan can help prospective retirees maximize their FEGLI benefits in retirement.

Misconception: Survivor’s benefits are automatic and free

Fact: Federal employees will need to make some decisions about survivor’s benefits on their retirement application. The pension is the main place where retirees need to consider their options along with their potential beneficiaries — these will primarily be spouses, except in a few special circumstances. Each of these options comes with a cost, in the form of a monthly percentage deducted from the overall pension. The options and percentages vary between the Federal Employees Retirement System and the Civil Service Retirement System.

Misconception: Spouses will automatically continue to be covered by FEHB into retirement

Fact: This is the biggest caveat about survivor’s benefits: If survivors were on the federal retiree’s health insurance plan, that health insurance will cease if there is no survivor’s benefit. Any amount of survivor’s benefit will continue the health insurance plan, so prospective retirees and their spouses should speak with a federal retirement consultant, and consider the holistic picture of their assets, the spouse’s income, their needs and budget, life insurance, and whether they have any additional financial obligations, like debt or a child in college.

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