By Brian Bloxom, ChFEBCSM
Retirement weighs heavily on a lot of people’s minds. And rightly so, since your golden years can span a whopping 20-30 years. Luckily for you, as a federal employee, you have better benefits available to you than most private-sector workers. But that doesn’t mean you don’t need to be proactive about retirement; the key to looking to your future with excitement instead of worry is to learn to maximize the benefits that you have. Here’s how to do it.
Overview of CSRS and FERS
If you were hired for 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 in 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 the 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 If you choose after-tax, your contributions won’t provide you with a tax break today but can be withdrawn tax-free in retirement.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 (FEGLI), 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 transferred to your heirs after your death. However, you have options for 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 financial advisor can help you explore your options and arrive at a decision that benefits you and your heirs.
Financial Advice Tailored to Federal Employees
Even with all these benefits at your disposal, you’ll still need to strategize, make decisions, and create a plan that takes your unique situation into account. There are many different factors that go into your federal benefits and getting the most value out of them, and our team at Sentinel Wealth Partners would love to use our expertise and experience working with federal employees to help you navigate your benefits. Reach out to us today by calling our office at 703-832-0164, sending an email to [email protected], or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) and Chartered Retirement Planning Counselor℠, CRPC® professional 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.