The Ultimate Guide To Financial Planning For Federal Employees

The Ultimate Guide To Financial Planning For Federal Employees

February 23, 2021
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Financial planning is complicated, but we’re here to help you get organized and focused. If you’re a federal employee, you have access to benefit offerings and retirement plans that are unique to government workers. These options can be confusing because they depend on your role, branch, post, years of service, etc. Let’s discuss the basics of your benefits and retirement saving options and how they can fit into your overall financial plan. 

Overview Of CSRS And FERS 

If you were hired to a federal job on or before December 31, 1983, then you are eligible for the Civil Service Retirement System, or CSRS, which provides retirement, disability, and survivor benefits. Because Social Security taxes aren’t deducted from your paycheck, you won’t be eligible for Social Security benefits based on your work record with the federal government. 

Were you hired after 1984 or later? Then you are covered under the Federal Employee Retirement System (FERS), which does provide Social Security benefits, as well as a pension and access to the Thrift Savings Plan (TSP). 

The Thrift Savings Plan is a defined contribution retirement plan similar to the 401(k) plans that workers in the private sector save money into. In TSP, you decide how much to contribute and how you want to invest the money in the investment options offered. You can choose to contribute the money on a pre-tax or after tax-basis. If you choose after-tax, your contributions won’t provide you with a tax break today but can be withdrawn tax-free in retirement. 

Note that if you leave a federal job, you are eligible to apply for a refund of the money you contributed to your retirement plan. 

Life Insurance For Federal Employees

Another benefit of being a government employee is access to Federal Employees’ Group Life Insurance, which is life insurance for federal employees. Through FEGLI, workers are automatically signed up for a basic life insurance policy that is partially subsidized by the government. Workers can also choose among several options for additional coverage. Life insurance is a critical part of your financial plan if other people rely on your income. The OPM website offers a calculator where you can calculate premiums, coverage levels, and how the FEGLI coverage carried into retirement will change over time. 

Survivor Benefit Plan Basics

If you are enrolled in a FERS plan, then you are eligible to receive a pension in retirement, which can be passed down to your heirs after your death. However, you have options in how you can receive your pension and/or pass down to loved ones. If you prefer, you can maximize how much money you receive from your pension and leave nothing after you pass away, or take a smaller pension payment up front in exchange for being able to have your heirs receive 25% or 50% of your pension payout after you die. A trusted wealth manager can help you explore your options and arrive at a decision that benefits you and your heirs. 

Financial Advice Tailored To Federal Employees

The government’s Office of Personnel Management website is a wealth of information for federal employees searching for detailed information on their retirement and other benefits. 

If you need more tailored advice, consider working with a qualified wealth manager. And given that federal employees have unique retirement and benefit plans, it’s best to work with an advisor who is familiar with your situation.

Our team at Anderson Financial Strategies is qualified, experienced, and here to help you understand all the benefits available to you and to serve your specific needs. If you would like to explore our services for your family or business, please call us at 855-237-4545 to schedule an executive briefing to discuss your goals.

About Shon

Shon Anderson is president and chief wealth strategist at Anderson Financial Strategies, LLC with over 15 years of experience. As a fiduciary, Shon’s mission is to provide his clients with quality financial expertise along with rapidly responsive service through an honest relationship. He specializes in providing family office-style services to help his clients organize and focus their financial life. Shon graduated from Wright State University with a bachelor’s degree in financial services and an MBA in finance. He is a CERTIFIED FINANCIAL PLANNER™  (CFP®) practitioner and holds the Chartered Financial Analyst (CFA®) designation. His insights have been quoted in leading financial news publications such as CNBC, Yahoo Finance, Fox Business, Consumer Reports, Forbes, Bankrate.com, Investment News, and Kiplinger. Shon serves as an adjunct professor teaching personal finance courses at Wright State University, leads CFP® exam review courses for Keir Educational Resources, and is president of the CFA Society Dayton. Shon and his wife, Jessica, reside in Sugarcreek Township, Ohio, and are blessed with triplet daughters, Elizabeth, Bridgette, and Alexandra, along with their son, Jacob, and dog, Jack. Over the years, Shon has been involved in several volunteer organizations including the Wright State chapter of Delta Tau Delta as an alumni adviser and was a Big Brother in the Big Brothers/Big Sisters program. To learn more about Shon, connect with him on LinkedIn.