When Your Spouse Is Private Sector: Coordinating Mixed-Retirement Household Planning

Maximizing Contributions to TSP and 401(k)

Both spouses should focus on strategic retirement contributions to take advantage of employer matches and maximize savings. This foundation of federal-private retirement planning ensures both partners have complementary accounts.

• Contribution Strategies: If available, each spouse should contribute enough to get the employer match. Beyond that, consider maxing out contributions if possible, especially with the increased limits for 2025.
• Diversified Investments: Mixed-retirement households can benefit from a diversified portfolio. For Feds who are self-managing their portfolio, TSP’s Lifecycle Funds can be a simple, low-maintenance option. Private-sector spouses can explore a range of funds through their 401(k), including target date funds, which are the private sector equivalent of the Lifecycle Funds. To make the most our of your investment vehicles through your repspective employers, however, both spouses should consider working with a professional to develop a customized investment allocation that is tailored to your goals. 
• Catch-Up Contributions: The Internal Revenue Service (IRS) allows extra contributions for those 50 and older, both Fed and non-Fed, which presents a significant opportunity to supercharge retirement savings in your final working years. Starting in 2025, these limits will increase, meaning there’s even more opportunities to grow your money.

Planning for Healthcare Coverage in Retirement

Healthcare can be a significant expense in retirement, so understanding the options is key.

• For Our Feds: Federal retirees can continue coverage under the Federal Employees Health Benefits (FEHB) program if certain requirements are met. This is a big plus, especially when combined with Medicare.
• For Private-Sector Spouses: Very few private-sector spouses retain access to their own employer-sponsored health plans during the transition to retirement, which is why ensuring that you have family coverage through FEHB is important for Fed families. Another important point to note: in order for your non-Fed spouse to have continued health insurance coverage under FEHB in the event of the death of the Fed, they need to receive at least a 25% survivor benefit on the Fed’s FERS pension. The bottom line here? Early planning is essential to ensure your household remains adequately covered without incurring unnecessary expenses.
• Medicare Integration: Coordinating FEHB with Medicare can be a big strategy for federal retirees and private sector spouses with FEHB coverage. 

Coordinating Pension Distributions and Retirement Dates

Careful planning can make the transition easier when one spouse retires before the other. Mixing in mixed-retirement household strategies like staggering withdrawals or aligning pension distribution choices can make a big difference in meeting household goals.

• Staggered Withdrawals: Start withdrawing from one spouse’s retirement account and let the other continue to grow tax-deferred. This can meet income needs without depleting savings too quickly. This is particularly relevant when one spouse is closer to RMD age. 
• Pension Distribution Choices: FERS pensions offer annuity payments for federal employees, while private-sector plans may offer lump-sum or annuity options. Discussing household goals like lifestyle or relocation can help guide these decisions.

Strategic Financial Planning: The Key to Success

Mixed-retirement households have unique challenges, but with a strategic approach, these challenges can turn into opportunities. By coordinating benefits, optimizing Social Security timing, and taking advantage of retirement contributions, you can have a retirement that works for both of you.

For personalized guidance tailored to your household’s needs, reach out to the team at Serving Those Who Serve at [email protected]. We’re here to help you navigate the details and create a plan supporting your retirement vision.