Four money decisions, one short window
A reduction in force, a deferred resignation, early retirement or a move to the private sector all start the same clock. Within weeks you're making decisions about your TSP, your life insurance, your pension and your home, often with no one looking at how they affect each other.
Most federal employees get handed forms. We hand you a plan that puts all four on one page:
- Your TSP: what to leave, what to move, and what it will cost you in taxes later.
- Your FEGLI life insurance: what you lose when you leave and what replaces it.
- Your FERS pension: which retirement options you may qualify for before you sign anything.
- Your mortgage: keeping your monthly outflow under control while income changes.
Don't rush the paperwork. Most of these choices can't be undone once they're made. A free 30-minute call can save you from an expensive one.
Your TSP: the Tax-Deferred Trap with a federal badge
The TSP is a good, low-cost plan. But traditional TSP money is Bucket 2: every dollar you take out later is taxed as ordinary income, and those withdrawals can make up to 85% of your Social Security taxable and push you into Medicare IRMAA surcharges.
When you leave federal service, your main choices are:
| Option | Upside | Trade-offs |
|---|---|---|
| Leave it in the TSP | Very low cost, no action needed, you can still convert to Roth inside the plan | Still Bucket 2, limited investment choices |
| Take withdrawals or installments | Income when you need it | Taxed as income; withdrawals before 59½ can carry a 10% penalty unless an exception applies |
| Roll some to an IRA or fixed indexed annuity | More choices; an annuity adds a 0% floor and can provide lifetime income through an optional rider, which may carry a fee | Gives up the TSP's low costs; annuities have surrender periods; must be done as a direct rollover |
| Convert some to Roth | Moves dollars into Bucket 3 permanently | Taxes are due in the year you convert, so the amount and timing matter |
- The age 55 rule. If you leave federal service in or after the year you turn 55 (50 for law enforcement, firefighters and air traffic controllers), TSP withdrawals generally avoid the 10% early withdrawal penalty. Roll that money to an IRA first and you can lose that advantage.
- Outstanding TSP loans. A loan balance you don't repay after you separate can be treated as a taxable distribution. Know your deadline before your last day.
- A lower-income year is a planning window. The year after you leave, your income may drop. That can be the right time to move some TSP dollars toward Bucket 3. We model it with your CPA before anything moves.
We document in writing why any rollover is in your best interest, including the low costs and features you'd give up in the TSP. If leaving your money where it is wins, we'll tell you.
FEGLI: the Insurance Gap most federal employees don't see coming
FEGLI is group term life insurance tied to your job. When you separate, coverage continues for 31 days, and then it's gone unless you convert it to an individual policy, which is usually expensive.
Even if you keep FEGLI into retirement, Option B premiums climb in five-year age bands and get steep after 50. Many retirees end up dropping coverage right when their family needs it most.
- We compare what your FEGLI costs today and at 60, 65 and 70 against an individually owned policy.
- Permanent coverage you own can follow you to any job, and some policies include living benefits you can use for a qualifying chronic, critical or terminal illness.
- Coverage requires health and financial underwriting, so the best time to apply is while you're healthy and still employed.
Your FERS pension: know your options first
Depending on your age, your years of service and how you're leaving, you may qualify for an immediate, a deferred or a discontinued service retirement. A discontinued service retirement can be available after an involuntary separation, generally at age 50 with 20 years of service or at any age with 25.
Your agency's HR office and OPM decide your eligibility. What we do is show how each pension choice, your survivor benefit election and your TSP plan fit together, so you can see your taxable income in retirement before you commit.
Your mortgage: protect the house during the transition
For most federal families, the house is both the biggest bill and the biggest asset. Marcus is a licensed mortgage broker, so the home is part of the plan from day one.
- Buying or refinancing soon? Lenders verify your job right before closing. If your position may change, talk to us before you lock a rate or sign a contract. On some loans, a signed offer for a new job can be used to qualify.
- Idle Equity. If you have significant equity and high-interest debt, restructuring it can lower your monthly outflow before money gets tight. Borrowing against your home has real risks, and we walk through them.
- Already falling behind? Our Homeowner Relief Center covers every option before foreclosure, and the sessions are free.
Questions we hear often
Can I leave my money in the TSP after I leave federal service?
Yes. You don't have to move your TSP when you separate. For many people the TSP's low costs make leaving some or all of it there the right call. We compare it against your other options in writing.
What happens to my FEGLI when I leave?
Coverage continues for 31 days after your last day, and you can convert it to an individual policy during that window without proving your health. Conversion is often expensive, so compare it with a policy you own before the 31 days run out.
Should I roll my TSP into an IRA or annuity?
Sometimes, but not automatically. Rolling over can give up the TSP's low costs and, if you left at 55 or later, penalty-free withdrawals. We document why any move is in your best interest, and if staying put is better, we say so.
Can I still get a mortgage if my federal job is ending?
It depends on your next source of income. Lenders need stable, verifiable income, and severance usually doesn't count toward qualifying. Talk to us before you lock a rate or sign a contract so the timing works.
Is Money Experts part of the TSP or OPM?
No. Money Experts is an independent firm. We are not affiliated with or endorsed by the TSP, the Federal Retirement Thrift Investment Board, OPM or any government agency.