Tips on what to do—and what not to do—when planning for retirement.

BY JOHN K. NALAND

Istockphoto / Luplupme

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

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’ Group 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.

Foreign Service retirees needing to update the DS-5002 should send it to HRSC@state.gov and send updated FEGLI beneficiary forms to the Office of Personnel Management as explained on the form.

2. TSP and Other Investments. Over the past 30 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.

If you have not taken the Foreign Service Institute’s retirement planning seminars, you owe it to yourself to do so.

3. Estate Planning. Most Foreign Service members and retirees have estate planning documents such as a will, power of attorney, and 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. 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 www.afsa.org/financial-planners-taxhelp-and-estate-planners.

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 (SCD) listed in your records may be wrong for retirement purposes. The SCD on your SF-50s (documenting promotions, reassignments, etc.) is for leave purposes only. While employees get leave credit for almost any federal employment, we only get retirement credit for certain employment.

If your retirement SCD is inaccurate when you apply for retirement, the State Department’s Office of Retirement may 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 23 State 49096, “Retirement Credit for Prior Federal and Military Service,” posted at www.afsa.org/retirement. If applicable, take action to add eligible service to your retirement SCD at least several years before you plan to retire because processing by multiple agencies may be required.

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.

Many 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 www.afsa.org/retirement. If applicable, submit divorce documentation to the Office of Retirement for review at least several years before you plan to retire.

Your dues help AFSA defend both the active-duty Foreign Service and the earned retirement benefits of Foreign Service annuitants.

6. Retirement Planning. If you have not taken the Foreign Service Institute’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.

The courses are RV105 (2-day; early and midcareer) 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).

Upcoming course dates can be seen at https://www.state.gov/retirement-planning-and-job-search-transition. Email FSICTC@state.gov for registration information.

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 (time-in-class limit reached) 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.

Also, retirements after 10 to 19 years of service under Minimum Retirement Age 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. In addition, you will likely want to update your beneficiary designations for life insurance, annuity, and TSP savings, and 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 2025 Foreign Service Annual Annuitant Newsletter at www.afsa.org/retirement.

AFSA membership qualifies you to be assisted by AFSA’s Counselor for Alumni and Retirees if you have questions or concerns about retirement benefits.

9. Survivor Benefits. If a Foreign Service employee dies, their 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 2025 AFSA Directory of Retired Members (page 24) and is posted at www.afsa.org/retirement.

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. Stay Up to Date. Each year, the State Department’s Office of Retirement posts an updated Foreign Service annuitant newsletter on https://www.state.gov/rnet/. All retirees should at least skim through that newsletter to make sure they are aware of important rules and procedures governing their federal benefits.

That website is also where you will find a form to change your health insurance during Open Enrollment or to file an annual earnings statement if you receive the annuity supplement. In addition, the 2025 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 website at www.afsa.org/retirement.

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 73 and need to figure out what to do about required minimum distributions from your investments?

The AFSA website at www.afsa.org/retirement has information on these topics.

12. AFSA Membership. The final potential pitfall is letting your AFSA membership lapse. AFSA membership qualifies you to be assisted by AFSA’s Counselor for Alumni and Retirees 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.

For questions about your membership, contact member@afsa.org.

John K. Naland served in the State Department Foreign Service for 29 years, including as director of the Office of Retirement. After retiring, he facilitated retirement planning seminars at the Foreign Service Institute for five years. He is a former AFSA president, State VP, and retiree VP, and is currently AFSA treasurer.

Read More...

• “Retirement Planning 101” by John K. Naland, The Foreign Service Journal, May 2016
• “10 Things I Wish I Had Known: Confessions of a Recent Retiree” by Dolores Brown, The Foreign Service Journal, October 2018
• “Reviewing Your Retirement Plan: 12 Things to Do” by John K. Naland, The Foreign Service Journal, April 2023