Costly Postal Retirement Mistakes
US Postal workers are members of the Federal Employee Retirement System known as (FERS) or the Civil Service Retirement System (CSRS) depending on hire date. Postal retirement benefits will vary slightly depending on what postal retirement system the worker is a part of (FERS or CSRS). This article will go over common mistakes of all postal employees preparing for retirement and while in retirement that can be avoided to maximize the postal retirement benefit package.
First up Basic Life Insurance and FGLI Option B in Retirement
Unlike other federal employees postal workers have had the luxury of not paying for the Basic life coverage while in service, however this changes in retirement. The basic life coverage can be very expensive typically about $100 per month for a $50,000 policy, a suggestion is to keep only the 25% basic coverage amount which drops the cost of the coverage drastically and will convert to a final expense policy free and clear after age 65. Now FEGLI Option B in retirement is something you should drop as soon as you are approved for a private sector policy. We show postal employee’s savings upwards to 80% for the same amount of coverage in the private sector compared to the FEGLI Option B in retirement. Click here for instant quote.
Maximize the TSP Funds
Another common mistake postal workers make while in service and preparing for retirement is not maxing out their TSP contributions each year especially FERS employees who take advantage of the 5% match provided by the government. The current maximum allowed by the IRS to be contributed to the TSP under the standard deferral limit is $17,500, the majority of postal employees do not maximize this benefit and it will cost them dearly in retirement.
Employees who are putting in the max can run into a problem if they are trying to put in the $17,500 over a period of less than 26 pay periods. The TSP will only give you matching on your contributions if you contribute to the TSP each and every pay period. If an employee has reached the $17,500 maximum in October, they will not receive matching on the pay periods from October until December 31st. The TSP (because you have met your max) will not accept any contributions once you hit the limit. If you want to do the max, take the $17,500 and divide it out over 26 pay periods so you don’t leave any matching funds on the table.
Contact one of our Postal Retirement Experts for more TSP wining strategies in retirement.