Why Five Years Is the Magic Number
Retirement does not happen on a single day. The decisions you make in the five years leading up to your retirement date can have a dramatic impact on your financial security for the next 25 to 35 years. Waiting until your final year — or worse, your final months — to start planning often means missed opportunities that cannot be recovered.
Five years gives you enough time to optimize your TSP allocation, evaluate your insurance options, project your income, and make strategic moves like Roth conversions that require multiple years to execute effectively. Think of this checklist as your flight plan for a smooth landing into federal retirement.
Year 5: Build Your Foundation
Get your service computation date verified. Contact your HR office or use your Electronic Official Personnel Folder (eOPF) to confirm your service computation date (SCD) for retirement purposes. This date determines your years of creditable service, which directly affects your pension calculation. Discrepancies — such as uncredited military service, breaks in service, or deposits owed for prior service — are much easier to resolve five years out than five months out.
Request an initial retirement estimate. Ask your HR benefits specialist for a preliminary retirement annuity estimate. While this number will change as your salary and service years increase, it gives you a baseline to work with. Understand how the formula works: High-3 Average Salary x Years of Service x 1% (or 1.1% if you retire at age 62 or later with 20+ years).
Inventory all your retirement accounts. Compile a list of every retirement and investment account you and your spouse hold:
- TSP balance and allocation
- IRAs (traditional and Roth)
- Accounts from previous employers (401k, 403b)
- Taxable investment accounts
- Savings accounts and CDs
- Any pensions from prior employment
This inventory is the starting point for projecting your retirement income and identifying gaps.
Evaluate your debt situation. Ideally, you want to enter retirement with minimal debt. If you have a mortgage, car loans, or other obligations, develop a plan to pay them down over the next five years. Every dollar of debt you eliminate reduces the income you need in retirement.
Year 4: Optimize Your TSP
Review and adjust your TSP allocation. With four years until retirement, your TSP should begin shifting toward a more conservative allocation — but not too conservative. You still have four years of growth potential and decades of retirement ahead. A common mistake is moving entirely to the G Fund years before retirement, forfeiting growth that you will need to sustain a 25- to 30-year retirement.
A reasonable approach at this stage might be 40-50% in stock funds (C, S, I), 20-30% in the F Fund, and 20-30% in the G Fund. Adjust based on your personal risk tolerance and other income sources.
Maximize your TSP contributions. If you are not already contributing the maximum ($23,500 in 2026, plus $7,500 catch-up if age 50 or older), now is the time to increase. Every additional dollar contributed in these final years benefits from tax-deferred or Roth growth, and these are likely your highest-earning years, making each percentage point more impactful.
Consider Roth TSP contributions. If you have been contributing entirely to traditional TSP, switching some or all contributions to Roth TSP creates tax diversification. Having both pre-tax and after-tax retirement funds gives you flexibility to manage your tax bracket in retirement.
Consolidate old retirement accounts. If you have 401(k) or IRA accounts scattered across multiple providers, consider consolidating them. You can roll outside accounts into your TSP (taking advantage of its low fees) or into a single IRA. Consolidation simplifies management and makes retirement income planning much easier.
Year 3: Plan Your Insurance
Verify FEHB enrollment continuity. To carry FEHB into retirement, you must be enrolled for the five consecutive years immediately preceding retirement (or since your first opportunity to enroll, if less than five years). Verify that your enrollment has been continuous with no gaps. If you have a gap, you may still have time to correct it.
Evaluate your FEHB plan. Compare your current plan against other available options during Open Season. In retirement, you can continue to change plans each year, but start thinking about which plan best serves your expected healthcare needs. Consider factors like premium cost, prescription drug coverage, provider networks, and how the plan coordinates with Medicare (which you will become eligible for at age 65).
Review FEGLI coverage and costs. Pull up the FEGLI cost tables and project what your premiums will be in retirement, especially for Option B coverage. If you are carrying multiple multiples of Option B, the post-retirement costs may be unsustainable. Now is the time to explore private term life insurance as a replacement while you are still healthy enough to qualify at favorable rates.
Assess your life insurance needs. Do you still need the same coverage you carried when your children were young and your mortgage was large? Many employees approaching retirement can significantly reduce their life insurance coverage without compromising their family's financial security.
Research long-term care insurance. The Federal Long Term Care Insurance Program (FLTCIP) and private long-term care policies should be evaluated. Long-term care is one of the largest financial risks in retirement, and premiums increase significantly with age. Applying in your mid-to-late 50s gives you better rates and better chances of qualifying medically.
Year 2: Model Your Income and Taxes
Build a detailed retirement budget. Move beyond rough estimates and build a month-by-month budget for your first year of retirement. Include:
- Housing costs (mortgage/rent, property taxes, insurance, maintenance)
- Healthcare premiums (FEHB, Medicare Part B if applicable, dental, vision)
- Food, transportation, utilities, and daily living expenses
- Travel and leisure
- Insurance premiums (life, long-term care, auto, home)
- Taxes (federal and state income tax on your pension, TSP withdrawals, and Social Security)
Compare this budget against your projected income (FERS pension, SRS, TSP withdrawals, Social Security, and any other sources).
Project your tax situation. Retirement changes your tax picture significantly. Your FERS pension is taxable. Traditional TSP withdrawals are taxable. Social Security may be partially taxable. But Roth withdrawals are not. Model your tax liability for each year of retirement, and identify opportunities for Roth conversions in lower-income years.
Consider the Roth conversion strategy. If you plan to execute Roth conversions after retirement, now is the time to set up the accounts and develop the plan. Determine how much you could convert each year, which tax brackets you would fill, and how the conversions would affect Medicare IRMAA two years later.
Evaluate the Special Retirement Supplement. If you are eligible for the SRS, calculate the estimated amount and understand the earnings test. If you plan to work part-time after retirement, model how your earnings will affect the SRS payment. This information is critical for your income projection.
Year 1: Finalize the Details
Request your final retirement estimate. With your retirement date within a year, ask for an updated annuity estimate that reflects your current salary and service. This should be close to your actual benefit.
Attend a pre-retirement seminar. OPM and many agencies offer pre-retirement planning seminars. These cover the mechanics of filing for retirement, health insurance decisions, life insurance elections, and the timeline for receiving your first annuity payment. Even if you have done extensive independent research, these seminars can identify issues you may have overlooked.
Set your retirement date strategically. The specific day you retire can affect your benefits:
- End of the month: FERS annuity payments begin on the first day of the month after separation. Retiring on the last day of a month means your annuity starts the next day with no gap.
- After a pay period: Retiring at the end of a pay period avoids complications with partial-period pay calculations.
- Leave balances: Your annual leave balance is paid out as a lump sum. Sick leave is credited toward your retirement service computation. Use annual leave for time off and preserve sick leave for the service credit.
Update your beneficiary designations. Review beneficiaries on your TSP, FEGLI, FERS pension, IRAs, bank accounts, and any other financial accounts. Make sure designations align with your estate plan and reflect your current wishes.
Prepare your retirement application. The SF-3107 (Application for Immediate Retirement) should be submitted to your HR office well in advance of your retirement date. Some agencies require 60 to 90 days' notice. Gather all supporting documentation, including proof of military service deposits, court orders affecting benefits, and spousal consent forms if applicable.
Decide on your FERS survivor benefit. At retirement, you must elect your survivor benefit level: full (50% of your unreduced pension, costing you a 10% reduction), partial (25% for a 5% reduction), or none. If you are married, your spouse must consent in writing to anything less than a full survivor benefit. This decision is permanent.
Plan your TSP withdrawal strategy. Decide how you will access your TSP funds in retirement — monthly payments, single withdrawals, or a combination. You can also leave funds in the TSP indefinitely and begin required minimum distributions at age 73. Consider whether a rollover to an IRA makes sense for greater investment flexibility.
The Final Countdown: 90 Days Out
In your final 90 days, focus on the practical and administrative details:
- Confirm your retirement date and application status with HR
- Verify your FEHB plan will carry into retirement
- Make your FEGLI elections (which reductions you want at age 65)
- Set up direct deposit for your annuity payments
- Plan for the interim payment period — OPM typically pays a reduced interim annuity while processing your full retirement claim, which can take several months
- Cancel or redirect any payroll deductions (charity, union dues, parking, etc.)
- Download copies of your eOPF, SF-50s, and earnings statements for your records
The Most Important Step
The single most important item on this checklist is to start. Many federal employees intend to plan five years out but keep pushing it to next year. Every year you delay reduces the options available to you. Open a spreadsheet, call your HR office, log into tsp.gov, and take the first step today. Your future retired self will thank you.