Financial Planning For Federal Employees

Being a government employee implies a different financial landscape compared to those employed in the private industry, given their exclusive perks and retirement strategies. Therefore, it becomes essential to partner with financial consultants who are well-versed with benefits unique to government employees. These experts can assist civil servants to maximize their pension benefits and devise payout policies that cater to their partner’s financial requirements post-retirement. As a Federal employee, a financial consultant can help you carve out strategies that align with your financial goals and retirement plans.

The Importance of Tailored Financial Guidance for Federal Workers

Government employees are entitled to some of the most lucrative benefits in the country, albeit understanding these can be daunting. This often necessitates personalized financial advice during their service years and post-retirement. Such guidance is best sought from professionals adept at managing such intricate scenarios. Here are a few instances where such advice can be beneficial:

• During Service: Government employees, during their tenure, need to be knowledgeable to make informed decisions about their TSP, The Federal Employees Health Benefits Program (FEHB), Basic Benefit Plan, and Federal Employees’ Insurance. Given the myriad benefit choices, deciding the best option without expert guidance can be a challenge for government employees.
• After Retirement: On retirement, government employees become eligible for FERS, the exclusive retirement system for government staff. However, navigating through FERS can be complicated; unlike Civil Service Retirement System, FERS comprises three elements: Social Security, (TSP), and Basic Benefit Plan.
• Basic Benefit Plan: This acts as a pension for government employees, calculated based on their highest three-year average earnings. The typical formula entails 1% of this average multiplied by their tenure.
• Thrift Savings Plans: This is a deferred savings and investment scheme, similar to a private sector [401(k). It reduces taxable income and offer contribution matching for government employees.
• Social Security: FERS participants, in contrast to CSRS, contribute to Social Security and are entitled to its benefits. Just similar to what private-sector employees receive. That can include monthly benefits starting from age 62, disability benefits, death, and survivorship benefits.

Sources of Financial Guidance for Federal Employees

Federal workforce members have various avenues to seek financial counsel within and outside the government sector. The goal is to identify a knowledgeable advisor who can effectively strategize to meet future financial needs. Here are some potential resources to consider.

Resources in the Private Sector

There’s a wide array of resources available in the private sector designed to assist federal employees with financial planning. Some of these include:

• Chartered Federal Employee Benefits Consultants (ChFEBCs): These specialists have in-depth knowledge of Federal Benefits and provide services throughout all U.S states, D.C., Puerto Rico, and The U.S. Virgin Islands.
• Certified Financial Planners (CFPs): CFPs are certified by The CFP Board and often focus on particular areas of financial planning, one of which is assistance for Federal Employees.
• Federal Retirement Consultants (FRCs):  These consultants hold degrees in finance or business and specialize in retirement.
• Additional private advisors: Federal workforce members can also explore other private entities for Benefits advice, like Federal Employee Tax Planners and Federal Employee Benefits Advocates.

Resources in the Government Sector

Federal employees looking for financial advice have resources within the government sector as well:

• Employee Assistance Program (EAP): EAP is a private firm, contracted by the government to aid Federal employees in achieving their financial goals.
• Office of Personnel Management (OPM): The OPM is a governmental agency offering various services, including information on FERS, CSRS, and retirement FAQs.
• Robo-resources: For immediate calculations or eligibility checks, Federal workers can utilize government tools like GuidedPlanner, The Federal Ballpark Estimate, and a FERS eligibility checker.

Boosting Pension Revenue for Federal Employees

Retirement planning can be quite overwhelming, particularly for Federal employees due to specific benefits they have that are not available to private-sector employees. The CSRS benefits federal employees hired before 1983.

Significant differences exist between FERS and CSRS, with the most remarkable being that while CSRS is solely a pension program, FERS comprises three components. Other differences include Social Security contributions and benefits, with CSRS employees not participating or receiving benefits, unlike FERS employees. Additionally, CSRS recipients get cost of living adjustments (COLA) throughout their participation, whereas for FERS recipients, COLA starts at early retirement.

FERS Payout Strategies for Surviving Spouses

FERS offers a survivor benefit that varies depending on different situations. For instance, if a Federal Employee dies while in service, the surviving spouse is entitled to a lump sum payment plus the larger amount between ½ of the annual pay rate or ½ of their ‘high-three’ average, provided the deceased had a minimum of 18 months of service. Essentially, bereaved spouses receive 50% of the Federal employee’s salary plus a lump sum.

While this is generally what bereaved spouses receive, several exceptions exist, for instance, the bereaved spouse and the Federal worker must have been married for at least nine months or have a child together. Eligibility also applies if the death was accidental.

Financial advisors can help spouses understand all eligibility criteria and exceptions for obtaining benefits. Another key aspect to consider is that survivorship benefits are taxable income. Therefore, for tax planning, bereaved spouses need a strategy that considers their personal benefits, such as a pension or Social Security.

Final thoughts

Planning for retirement as a Federal employee can be quite complex, but with the right information and strategies, it can become a manageable task. Careful consideration needs to be given to benefits like FEGLI, TSP, and FERS as these can significantly impact financial security during retirement. Staying informed and seeking expert advice when necessary can lead to maximized benefits.

Recommendations for Retirement Planning

• Engage a financial advisor for effective retirement planning. We provide a free strategy session at no cost.  Schedule your session today!
• Gain a clear understanding of your estimated retirement income. Calculating this can be complex, but our retirement calculator provides an estimate, simplifying planning for your financial future.