Your First Year of Federal Retirement: A Month-by-Month Guide

Last Updated: March 1, 2026 Reading Time: 9 min

The first year of federal retirement is not an income switch you flip. Interim pay arrives at 60-80% of your expected annuity. Your dental and vision bills start landing in your personal bank account. Your full annuity check, when it finally arrives, may actually be smaller than your interim checks. And then there is OPM's current backlog of 54,018 claims, the highest since 2012.

This guide covers what actually happens in your first year, month by month, with verified 2026 data and the exact dollar costs of the most common mistakes. Use the FERS Retirement Calculator to estimate your monthly income before Day 1.

Key Takeaways

• The first year of federal retirement averages 77 days before OPM finalizes your case: 48 days for digital, 97 days for paper. With the current backlog, complex cases are running 5 to 7 months in 2026.
• Interim pay covers only 60-80% of your estimated net annuity. Only federal income tax is withheld. You pay dental, vision, and LTCIP premiums directly during this period.
• The FERS Supplement does not appear in interim pay. It starts only after full adjudication, with retroactive lump-sum backpay to your retirement date.
• Your first full annuity check may be smaller than your interim checks. OPM retroactively collects all unpaid insurance premiums in one lump sum.
• The 5 costliest mistakes in the first year of federal retirement cost retirees tens of thousands of dollars. The specifics are below, with exact dollar figures.
• Have 3 to 6 months of expenses in reserve before you retire. The interim pay gap is real.

First Year of Federal Retirement: Month-by-Month Timeline

Pre-Retirement (6-12 Months Before)

Decisions you make here determine how smooth your transition will be.

• Verify your service computation date on your SF-50. Errors here add weeks to OPM processing.
• Complete any military service credit buyback. It must be paid in full before your retirement date.
• Notify your agency HR at least 6 months out. Some agencies need that lead time.
• Build a 3 to 6 month cash reserve. Budget for interim pay, not full annuity.
• Confirm your High-3 Calculator figures match your actual SF-50 history. A wrong high-3 average means a wrong annuity estimate.
• Choose your retirement date strategically. See the best dates to retire in 2026 for timing that maximizes your leave payout and first full check.

Day 0: Separation

• Your last day of work. Retiring on the last day of a pay period maximizes your annual leave credit.
• Your agency HR submits your retirement package to OPM, either via the digital ORA system or paper SF-3107.
• FEHB and FEGLI coverage transfer from your agency to OPM. Coverage is continuous with no gap.
• Contact BENEFEDS immediately to set up direct billing or bank auto-draft for your FEDVIP dental and vision and LTCIP premiums. These will not be deducted from your interim annuity.

Days 1-14: Annual Leave Lump Sum

Your final paycheck includes, or is quickly followed by, a lump-sum payment for all unused annual leave, up to a maximum of 448 hours.

The tax reality: This payment is fully taxable as ordinary income. Federal income tax, state income tax, and FICA taxes all apply. Federal withholding is typically at the 22% supplemental rate.

Do not spend it. This is your income bridge for the months before your full annuity arrives. A GS-15 Step 10 with 448 hours of unused leave will receive approximately $39,600. Expect to owe $9,500 to $12,700 in federal taxes on that amount alone. Set aside 25-30% for your tax bill and use the rest as a cash reserve.

Days 7-30: CSA Number and Interim Pay Begin

OPM assigns you a Civil Service Annuitant (CSA) number, which you need for all future OPM communications and to check your application status at servicesonline.opm.gov.

Interim annuity payments begin within 7 days of OPM receiving and confirming your eligibility. The amount is 60-80% of your estimated net annuity.

Critical gotcha: Your interim check may be larger than your eventual full annuity payment. Why? Because during interim pay, none of your FEHB, FEGLI, FEDVIP, or LTCIP premiums are being deducted. When OPM finalizes your case, your first full annuity check includes a retroactive lump-sum deduction for all those unpaid premiums going back to your retirement date. Plan for a smaller-than-expected first full check.

State income tax: OPM withholds federal income tax during interim pay, but not always state income tax. If your state taxes retirement income and OPM does not have a withholding agreement with your state, you are responsible for making quarterly estimated state tax payments.

Weeks 4-6: TSP Access

TSP access is a common source of confusion in federal retirement. Your agency must notify TSP of your separation. This takes up to 30 days, though some agencies take 6 to 8 weeks. Once TSP is notified, allow 10 additional days for a withdrawal to process.

Outstanding TSP loans: If you have an open TSP loan at separation, you have 90 days to repay the balance. Miss that window and the outstanding balance is declared a taxable distribution. If you are under age 59.5, add a 10% early withdrawal penalty on top of income taxes.

Rule of 55: If you separated from federal service in the calendar year you turned 55 or older, you can make TSP withdrawals without the 10% early withdrawal penalty. The rule ties to the calendar year, not your exact birthday.

Before making any TSP decision, use the TSP Calculator to model withdrawal scenarios against keeping your balance invested.

Months 3-5 (Average): Full Annuity Adjudication

This is when OPM finalizes your case and your full annuity begins.

• Digital ORA applications: 48-day average.
• Paper applications: 97-day average.
• 2026 reality: With 54,018 claims in the backlog, complex cases involving military buybacks, multiple agencies, or survivor benefit elections are running 5 to 7 months. See OPM retirement processing times for full data.

When your case closes: OPM calculates your exact annuity. FEHB, FEGLI, FEDVIP, and LTCIP deductions resume. The retroactive premium adjustment is collected as a lump sum from your first full annuity check. Your official "Federal Retirement Benefits" statement arrives by mail.

Months 3-9: FERS Supplement Starts (If Eligible)

The FERS Special Retirement Supplement (SRS) is not paid during interim. It starts only after full adjudication, with retroactive lump-sum backpay to your retirement effective date.

Who qualifies: Employees who retired at their MRA with 30+ years, VERA or VSIP retirees who met their MRA, and special provision employees (law enforcement, firefighters, air traffic controllers) who retired before their MRA.

Who does not qualify: MRA+10 retirees, age-62 retirees (the supplement ends at 62 anyway), and disability retirees.

2026 earnings limit: $24,480. Earn more than that in wages or self-employment and the supplement is reduced $1 for every $2 over the limit. TSP withdrawals, investment income, and rental income do not count. Reductions for 2026 over-earnings begin in July 2027.

For full supplement rules, see the FERS Supplement earnings limit guide.

OPM Processing in 2026: What the Numbers Actually Mean

Metric	Value
Overall average processing time	77 days
Digital (ORA) average	48 days
Paper average	97 days
Total backlog (January 2026)	54,018 claims
Digital backlog	19,618
Paper backlog	34,400
New claims received (January 2026)	18,923
Claims processed (January 2026)	15,571
Net backlog growth in January 2026	+3,347
Real-world timeline, complex cases	5 to 7 months

The backlog is at its highest level since 2012. OPM received 18,923 new claims in January 2026 and processed only 15,571, meaning the backlog grew by over 3,300 in a single month. The 151,068 federal employees who left service in 2025 are the primary driver.

What this means for your federal retirement: File digitally via ORA if at all possible. Digital applications average 49 fewer days than paper. If your case is complex, plan for a 5 to 7 month interim pay period and budget accordingly.

The 5 Costliest First-Year Mistakes

Mistake 1: Cashing Out TSP Too Early

A $300,000 TSP withdrawal at a 22% federal tax rate costs $66,000 in taxes in a single year, often pushing the retiree into a higher bracket. If you are under age 59.5 at separation, add the 10% early withdrawal penalty: another $30,000. Total loss versus a staged strategy: up to $96,000.

Use TSP installment payments or partial withdrawals instead. Take only what you need while interim pay is reduced. The TSP withdrawal guide covers all withdrawal options in detail.

Mistake 2: Missing the Medicare Part B 8-Month Enrollment Window

When you retire (end active employment), an 8-month Special Enrollment Period begins for Medicare Part B. Miss it and you pay a permanent 10% premium surcharge for each 12-month period you delayed.

A retiree who delays 3 years pays a 30% permanent surcharge. At $202.90 per month for 2026, that is an extra $60.87 per month or $730 per year, for the rest of their life.

Spouse warning: Retiree FEHB coverage does not give your spouse a Special Enrollment Period for Medicare Part B. Your spouse must enroll at their own age-65 Initial Enrollment Period. This is one of the most frequently misunderstood rules in the first year of federal retirement.

Use the FEHB Calculator to compare the cost of adding Medicare Part B against your current FEHB plan's out-of-pocket exposure.

Mistake 3: Spending the Annual Leave Lump-Sum Payment

The lump-sum leave payment feels like a bonus. It is not. It is a taxable income event that will increase your first-year federal retirement tax liability.

A GS-15 Step 10 with 448 hours of unused leave receives approximately $39,600. At a 24-32% effective marginal tax rate, expect to owe $9,500 to $12,700 in federal taxes on that payment alone. If you spent the whole check before tax time, you may face a large IRS bill in April.

Set aside 25-30% for taxes. Use the remainder as your income bridge during the interim pay period.

Mistake 4: Not Adjusting Tax Withholding in the First Year

OPM's default withholding often does not match your actual tax liability in your first year of federal retirement, when you have partial-year W-2 income, a large lump-sum leave payment, interim annuity income, a FERS Supplement backpay lump sum, and potentially TSP withdrawals all landing in the same calendar year.

The result: a surprise tax bill of $5,000 to $15,000 at filing time, plus potential underpayment penalties.

Submit IRS Form W-4P to OPM to set your annuity withholding. Use the IRS Tax Withholding Estimator at irs.gov to account for all income sources. If your state taxes retirement income and OPM does not withhold for your state, make quarterly estimated state payments.

Mistake 5: Misreading the FERS Supplement Earnings Test

A retiree under 62 who returns to part-time consulting earns $40,000 in 2026. They assume their FERS Supplement is safe because they are not working full-time. It is not.

• 2026 earnings limit: $24,480
• Excess earnings: $40,000 minus $24,480 equals $15,520
• Supplement reduction: $15,520 divided by 2 equals $7,760 per year

If their supplement is $1,200 per month ($14,400 per year), they lose more than half of it.

The one-year lag means excess 2026 earnings reduce the supplement starting July 2027. This is not reversible for the year it happened. Track earned income separately from TSP withdrawals, investment income, and rental income, which do not count against the federal retirement earnings limit.

FEHB and Medicare Coordination

FEHB continues into retirement if you have been continuously enrolled for the 5 years immediately before your retirement date. The government continues to pay approximately 72% of your premiums. One difference from active employment: premiums are deducted post-tax, with no premium conversion benefit.

At age 65, you face two decisions:

Medicare Part A: Enroll at 65. Most federal employees qualify for premium-free Part A after 40 quarters of Social Security-covered work. One exception: if your FEHB plan is HSA-eligible, enrolling in Part A ends your ability to contribute to an HSA.

Medicare Part B: The 8-month Special Enrollment Period starts from your retirement date, not from when you lose employer coverage. Many retirees assume their FEHB coverage gives them unlimited time to decide. It does not.

Whether to take Part B depends on your FEHB plan's out-of-pocket exposure, your health and care utilization, and the $202.90 monthly premium (plus any IRMAA surcharges for higher earners). Running the numbers with the FEHB Calculator before deciding can save thousands over the long term.

TSP After Separation

TSP access is frequently misunderstood in the first year. The account is not immediately available after you separate, and a wrong decision here can cost tens of thousands in unnecessary taxes. The key rules:

Access timing: Agency notifies TSP within 30 days of separation (up to 6-8 weeks for some agencies). Add 10 days for withdrawal processing. Plan for up to 10 weeks before your first TSP distribution arrives.

Rule of 55: No 10% penalty if you separated from federal service in the calendar year you turned 55 or older. You still owe income taxes on every traditional TSP dollar withdrawn.

Under 55: You can avoid the early withdrawal penalty with IRS Section 72(t) installment payments based on life expectancy tables, sustained for at least 5 years or until age 59.5. See the full TSP withdrawal guide for options.

Roth TSP: Qualified distributions from Roth TSP are tax-free. To be qualified, the account must be at least 5 years old and you must be at least 59.5.

Loan repayment: 90 days after separation to repay any outstanding loan balance. After that, it becomes a taxable distribution (plus 10% penalty if under 59.5). Do not ignore an outstanding loan.

For detailed withdrawal modeling, use the TSP Calculator to compare installment payments, partial withdrawals, and keeping the balance invested.

Use the FERS Retirement Calculator to estimate your monthly annuity based on your years of service, high-3 salary, and retirement date before you separate.

Frequently Asked Questions

How long does it take to get your first full FERS annuity check after retiring?

The OPM average is 77 days overall: 48 days for digital ORA applications and 97 days for paper. In 2026, with OPM's backlog at 54,018 claims, complex cases are running 5 to 7 months. You will receive interim pay (60-80% of your estimated annuity) within 7 days of OPM receiving your application. Federal retirement income does not start in full on Day 1.

Is the FERS Supplement included in interim pay?

No. The FERS Supplement is not paid during the interim period. It begins only after OPM fully adjudicates your retirement case, typically 3 to 9 months after retirement. Once finalized, you receive a retroactive lump-sum payment covering all supplement amounts owed from your retirement date, plus ongoing monthly payments going forward.

What deductions come out of interim annuity payments?

Only federal income tax. During interim pay, no FEHB premiums, FEGLI premiums, FEDVIP dental and vision premiums, LTCIP premiums, or state income taxes are withheld. You must pay dental, vision, and LTCIP directly to BENEFEDS via bank auto-draft during this period. When your full federal retirement annuity begins, OPM retroactively collects all unpaid premiums as a lump-sum deduction from your first full check.

When do I need to enroll in Medicare Part B as a federal retiree?

If you retire at or after age 65, you have an 8-month Special Enrollment Period beginning on your retirement date to enroll in Medicare Part B without penalty. After those 8 months, you must wait for the General Enrollment Period (January through March) and pay a permanent 10% premium surcharge for each 12-month period you delayed. The 2026 standard Part B premium is $202.90 per month.

Can I withdraw from my TSP immediately after retiring?

Not immediately. Your agency must first notify TSP of your separation, which takes up to 30 days (some agencies take 6 to 8 weeks). Once TSP receives the notification, withdrawals take about 10 additional days to process. If you have an outstanding TSP loan, you have 90 days after separation to repay it or the balance becomes a taxable distribution, plus a 10% penalty if you are under age 59.5.

What is the FERS Supplement earnings limit in 2026?

The 2026 FERS Supplement earnings limit is $24,480. For every $2 you earn above this in wages or self-employment income, your supplement is reduced by $1. TSP withdrawals, investment income, rental income, and your FERS annuity itself do not count toward the limit. Excess 2026 earnings will reduce your supplement starting July 2027.

Related Resources:

• FERS Retirement Guide: Complete guide to FERS eligibility, pension calculation, and benefit elections
• Best Dates to Retire in 2026: Optimize your retirement date for maximum leave payout and first check timing
• OPM Retirement Processing Times 2026: Full backlog data, digital vs. paper breakdown, and tips for faster processing
• FERS Supplement Earnings Limit 2026: Complete rules for the supplement earnings test and how to stay under the limit
• TSP Withdrawal Guide 2026: All TSP withdrawal options after separation, including installments, partial withdrawals, and RMDs

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Sources: OPM Retirement Processing Times (January 2026 data); FedSmith: OPM Backlog January 2026; BENEFEDS Transition to Retirement; Medicare.gov: Part B Premiums and Penalties; SSA OACT Earnings Test Amounts; IRS Publication 721; TSP.gov: Loans; OPM: FEHB and Medicare; OPM: Annual Leave Lump-Sum Payments.