Twelve Retirement Pitfalls to Avoid

What to do and what not to do when planning for life post-career.

BY JOHN K. NALAND / Aleksandra Alekseeva

During my service as director of the State Department’s Office of Retirement, I spent a lot of time assisting employees and retirees who were facing the delay or denial of some federal benefit due to their own failure to take necessary actions. While there is no need for you to spend weekends studying the Foreign Service Act and the Foreign Affairs Manual, you do owe it to yourself and your family to do due diligence in key areas. Below are a dozen common retirement benefits pitfalls and how to avoid them.

For Everyone


all diplomatic and consular posts
Federal Employees’ Group Life Insurance
Foreign Service Pension System
Foreign Service Retirement and Disability System (the “old” system)
Human Resources Service Center (at the Department of State)
Individual Retirement Account
Job Search Program
minimum retirement age
permanent change of station
required minimum distribution
service computation date
time in class
Thrift Savings Plan

1. Beneficiary Designations. There are sad cases every year of benefits not going to the immediate next of kin because the employee or annuitant neglected to update their beneficiary designations after marriage, divorce or other relationship change. Federal survivor benefits are paid to whomever is designated on beneficiary designation forms, even if there are different instructions in the person’s will. The forms are TSP-3 (Thrift Savings Plan), SF-1152 (unpaid compensation for employees), DS-5002 (unpaid annuity for retirees) and SF-2823 (Federal Employees’ Government Life Insurance, or FEGLI).

Employees and retirees who need to revise their TSP-3 should send it to TSP as explained on the form. Employees needing to update other forms should submit them to their agency’s human resources office (State employees to Foreign Service retirees from all agencies should submit non-TSP forms to, except that retirees must send updated FEGLI beneficiary forms to the Office of Personnel Management as explained on the form.

2. TSP and Other Investments. Over the past 25 years, inflation has cut the purchasing power of each dollar in half. If you or your survivor anticipate drawing on your TSP savings or other investments such as IRAs and mutual funds several decades from now, most experts recommend investing in funds containing more stocks than bonds to increase your chances of generating long-term rates of return that outpace inflation.

From time to time, you should review the stocks-versus-bonds balance in your investments to make sure the balance is appropriate for your investment timeline and risk tolerance. Consider talking with a financial adviser before making a major financial move. A list of financial and tax advisers who have assisted Foreign Service members is at

3. Estate Planning. Most Foreign Service members and retirees have estate planning documents such as a will, trust, power of attorney and/or medical directive. But if 10 or more years have passed since your documents were written, most estate planners suggest getting an attorney to review them to determine if they need updating due to changes in your state’s laws or procedures. An immediate review is advised if you move to a different state, gain or lose a family member, or have significant changes in assets. A list of estate planners who have assisted Foreign Service members is at

For Active-Duty Employees

4. Prior Service Credit. If you worked elsewhere in the federal government prior to joining the Foreign Service, the service computation date listed in your records may be wrong for retirement purposes. The SCD that you have seen on your SF-50s over the years (documenting promotions, reassignments, etc.) is for leave purposes only. While employees get leave credit for almost any federal employment, we get retirement credit only for certain employment.

If your retirement SCD is inaccurate when you apply for retirement, the State Department’s Office of Retirement may have to inform you that you are not yet eligible to retire, or that your monthly pension payment will be lower than you expected. To avoid such bad news, see ALDAC cable 21 State 10876, “The Retirement Process: Retirement Credit for Prior Service,” posted at If applicable, take action to add eligible service to, or remove ineligible service from, your retirement SCD. In some cases, processing by multiple agencies is required, so you should initiate action at least several years before you plan to retire.

5. Divorce. Foreign Service ex-spouses enjoy a default statutory entitlement to retirement benefits under the Foreign Service Act if they meet certain requirements. The default entitlements can be altered through a court order or spousal agreement. The order or agreement, however, must include specific language to be valid. Even many Washington, D.C.–area divorce attorneys are unaware of this and unknowingly draw up divorce paperwork that the State Department’s Office of Retirement cannot accept.

An explanation of the rules is in ALDAC cable 19 State 53266, “Divorce and Foreign Service Retirement Benefits,” at If applicable, submit divorce documentation to the Office of Retirement for review at least several years before you plan to retire.

6. Retirement Planning. If you have not taken any of FSI’s retirement planning seminars, you owe it to yourself to do so. Watching in-depth presentations by subject matter experts may help you avoid major oversights in your retirement planning. As of this writing, the classes are being presented online and are thus available to employees anywhere in the world. The courses are RV105 (2-day; early and mid-career) and RV101 (4-day; late career). RV101 has two subcomponents that can be taken individually: RV103 (1-day; financial planning and estates) and RV104 (1-day; annuity, TSP and Social Security).

State Department employees can register via the FSI intranet site. But if the training is in conjunction with a permanent change of station (PCS) or home leave, then register via your career development officer (CDO). Non-State employees register via their agency’s human resources office, which submits a funded SF-182 Request for Training to FSI. For registration procedures for eligible family members (EFMs), see, and then click on the course number.

7. Short-Career Retirement. While most Foreign Service members serve at least 20 years before retiring, it is possible to retire after five to 19 years. If you are considering this, be aware that most such options come with substantial financial penalties.

For example, most pensions based on less than 20 years of service are calculated at a 41 percent lower rate (1 percent instead of 1.7 percent per year of your high-3 salary, the average of your three highest years of pay). Exceptions include FS-1s or above who TIC out (reach their time-in-class limit) prior to attaining 20 years of service and employees with less than 20 years of service who retire on the last day of the month in which they reach age 65. In the latter case, those employees should not retire via the FSI Job Search Program, because it ends before the last day of the month. Also, retirements after 10 to 19 years of service under minimum retirement age (MRA) provisions prior to age 62 are subject to substantial reductions. To learn more, attend an FSI retirement planning seminar or contact a retirement counselor at your agency.

For Retirees

8. Marital Changes. Post-retirement divorce, marriage or death of a spouse or former spouse are occasions to change your survivor annuity election by removing a former spouse or adding a new spouse. But you face a deadline to do so: one year for retirees in the “old” FSRDS retirement system, and two years for those in the “new” FSPS system. If you miss the deadline, you forfeit the opportunity to elect survivor benefits.

In addition, you likely will want to update your beneficiary designations for life insurance, annuity and TSP savings (see details earlier in this article). You may also wish to adjust your Federal Employees Health Benefits election. Therefore, you should promptly report post-retirement marital changes to the Human Resources Service Center. For more information, see the 2021 Foreign Service Annual Annuitant Newsletter published by the State Department’s Office of Retirement at under the “What’s New?” tab. It is also on the AFSA website at

9. Survivor Benefits. If a Foreign Service employee dies, his or her agency automatically initiates the process of authorizing survivor benefits. But when a Foreign Service retiree dies, a next of kin must take the first step. Until that happens, no benefits can be paid to survivors.

Because our family members often are unfamiliar with offices and functions in Foreign Service agencies, AFSA created a list of steps to take in the event of the death of a Foreign Service retiree. The checklist is in the 2021 AFSA Directory of Retired Members (pages 23 and 24), and it is also posted at We suggest that retirees download and print the checklist (perhaps on a brightly colored sheet of paper), show it to your next of kin, and leave it in a place where they can easily find it if the need arises.

10. Keep Up-to-Date. Each November, the State Department’s Office of Retirement posts an updated Annual Annuitant Newsletter on under the “What’s New?” tab. You must access that newsletter if you need a form to change your health insurance during open season or to file an annual earnings statement if you receive the annuity supplement. But all retirees should at least skim through the newsletter to make sure you are aware of important rules and procedures governing your federal benefits. In addition, the 2021 AFSA Directory of Retired Members has 25 pages of guidance on retiree issues. A larger collection of fact sheets, guides and videos is on the AFSA Retirement Services webpage at

11. Age Milestones. Are you approaching age 62 and need to decide when to file for Social Security? Are you approaching 65 and need to decide whether to sign up for Medicare Part B (note that there are stiff financial penalties for signing up late)? Are you approaching 72 and need to figure out what to do about required minimum distributions (RMDs) from your investments? AFSA’s Retirement Services webpage has information on all these topics, including videos of presentations at AFSA by experts on Social Security, Medicare Part B and TSP.

12. AFSA Membership. The final potential pitfall is letting your AFSA membership lapse. Membership qualifies you to be assisted by AFSA’s Retirement Benefits Counselor Dolores Brown ( if you have questions or concerns about retirement benefits. Your dues help AFSA defend both the active-duty Foreign Service and the earned retirement benefits of Foreign Service annuitants.

If your membership depends on you writing a check each year, please switch from paper billing to paying dues via annuity deduction. Switching will ensure that your membership does not inadvertently lapse due to lost or unnoticed mail. Contact to make the switch.

If you have colleagues who are not AFSA members, please urge them to join. Whether they elected not to join at the start of their career or resigned years ago for some transient reason, AFSA needs them now to boost our strength. The benefits of membership are detailed at, which includes a link to join online.

John K. Naland served in the Foreign Service for 29 years, including as director of the Office of Retirement. In the five years since retiring, he has facilitated retirement planning seminars at the Foreign Service Institute. He is currently serving as AFSA retiree vice president.