By Brian Bloxom, ChFEBCSM
December is here, and for many that means a time to reflect and be thankful as the busy Christmas season arrives. One thing that I’ve learned in life is that even in the midst of a pandemic, we all have something to be thankful for. If you’re a federal employee, one thing that you have to be thankful for is your employment benefits. Federal workers have a generous array of benefits that can make a big difference in your financial life if you know how to maximize them.
Thrift Savings Plan (TSP)
The thrift savings plan, or TSP, is the federal government’s version of the private sector 401(k) plan. It is a defined contribution plan, meaning that what you get in retirement is based on how much you choose to contribute and how you invest it.
As an employee, you have a lot of control over your TSP. You get to control how the money in it is invested, how much money you want to put into it, and whether you want to invest before-tax or after-tax dollars. To invest before-tax dollars, you will use a traditional account and not pay any taxes on the money until you withdraw it. After-tax dollars would be invested into a Roth account and all withdrawals during retirement, even of earnings, are tax-free. You also get to decide how and when to withdraw the money in retirement.
Pension
Your pension is different from the TSP because you don’t put money into it and don’t have as much control over it. It is important to confirm your eligibility because it is based on several factors. The primary factors that affect your eligibility and benefit amount are your three highest years’ salary, years of service, and age. Once you retire, you will have several options for collecting your pension, and the one you choose can make a big difference in your lifestyle during retirement and that of your spouse if you pass away first. Because of this, it is vital that you choose the most appropriate annuity option for yourself and your family situation.
Social Security
If you have worked and paid into the Social Security system for at least 10 years (or have a spouse who has), then you are eligible for Social Security retirement benefits. Benefits are determined based on how much you have paid into the system and the age at which you choose to claim them. You can start receiving benefits anytime between the ages of 62 and 70. The longer you wait, the greater your benefit will be, so it is important to do a thorough analysis of what is best for your own unique situation.
Federal Employees Health Benefits (FEHB) Program
Federal benefits go beyond just retirement and can make a significant difference in your financial situation in the present. One of the most valuable benefits that the government offers is the Federal Employees Health Benefits (FEHB) Program for health insurance. You should make sure that you and your family dynamic are eligible based on your service time.
Federal Employees’ Group Life Insurance (FEGLI)
Life insurance is important because it can replace your wages and meet other financial needs if you are to pass away. It is helpful that the government provides it for employees like you; however, there are some important decisions that you will have to make regarding life insurance. First of all, how much insurance is appropriate for your situation? Needs vary based on lifestyle, debt, and goals. Should you consider private alternatives that may be fixed in costs or less expensive? Just because the government offers a group plan doesn’t mean it is the best option available for you. Finally, do you need to continue your life insurance coverage into retirement? Again, the answer will depend on your own personal situation.
Long-Term Care Insurance
Long-term care insurance is newer than life or health insurance, so people don’t usually know as much about it. The government does offer this coverage, but it may not be your best option. As you consider it, it’s important to review your outside options as well. During this process, it’s a good idea to take a step back and ask yourself, “What is my long-term care plan?” How you envision any long-term care that you may need will play into the decision of which insurance is best for you.
How I Can Help
As you can see, there are a lot of different factors that go into your federal benefits and getting the most value out of them. There are decisions to make about which insurance is best and what kind of coverage you need. You need to calculate how much to save for retirement and, when the time comes, how best to claim your benefits.
If you are a current or former federal employee, we at Sentinel Wealth Partners can help you navigate your benefits. In addition to having 25 years in the industry, I have undergone special training on federal benefits so that I can help people just like you. If you want a financial professional by your side as you make these important decisions, call my office at 703-832-0164, send an email to [email protected], or use my online calendar to book a meeting today.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits Consultant (ChFEBCSM), and Chartered Retirement Planning Counselor (CRPC) with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.