By Brian Bloxom, ChFEBCSM
Financial pitfalls are something that we all experience in our lives. Pitfalls that include things like failing to create a financial plan, saving for retirement too late in life, neglecting to monitor your expenses, or being inadequately insured. As a federal employee, there are certain financial hazards you must steer clear of to safeguard your financial future. Let’s examine some critical points that can support you in navigating the complexities of your unique financial situation and the exclusive benefits available to you. Whether you’re just starting your career or are a seasoned employee, these insights can help you make informed decisions about your finances and plan for a successful future.
Thrift Savings Plans
One important benefit federal employees are entitled to is a thrift savings plan (TSP). A common financial pitfall among these retirement savings plans has to do with how they are invested. The federal employee must understand that TSPs are intended for long-term investing, not just to the point when retirement begins, but through retirement. Because of this, the federal employee must invest in specific funds that align with that long-term investment approach. The funds that are allowed inside a TSP are not available to the general public. Some of these funds are titled C, S, I, L, F, and G funds; C, S, and I funds are stock funds, and F and G funds are fixed-income funds. In general, most folks in their early years allocate more to stocks, and folks in their later years allocate more to fixed income; however, their risk tolerance should play a role in determining their allocations.
In addition to how the funds are invested, it’s equally important to do your best to contribute the maximum amount allowed when you are younger and when you reach age 50 (eligible to contribute an additional “catch-up” contribution).
Failure to Include or Update Beneficiary Designations
Some of the special accounts or forms that federal employees may have to be aware of include the following:
- Unpaid compensation and unused annual leave of a deceased federal employee
- Federal employees group life insurance
- Thrift savings plan
- CSRS or FERS
The financial pitfall that we typically see here is not including or updating beneficiary designations on the above-mentioned accounts or forms. This is important, especially if the federal employee gets married, has children, gets divorced, or experiences any other major life change.
Emergency Funds
Having adequate emergency funds applies to all individuals, but this point is also important to make when considering pitfalls for federal employees. While federal employees have very strong job security, emergency funds still play a major part in their financial plan. The reason for this is because of the potential for a government shutdown, which could eliminate certain sectors or lay off less-tenured employees.
Failure to Stay Informed
Benefits for federal employees can get complicated and they may change over your career. Because of this, many federal agencies offer multi-day seminars for mid-career employees and employees nearing retirement. To stay abreast and more informed, it’s a great idea to attend and actively participate in such seminars when possible. The earlier you start understanding the nuances that federal employees are faced with, the better off you will be to make decisions today that have a big impact on your financial future.
Partner With a Trusted Professional
At Sentinel Wealth Partners, we collaborate closely with our clients to develop a personalized financial strategy that offers financial confidence and clarity to set them up for a bright and successful future. Our aim is to help you make smart plans, so you can fully enjoy your retirement by creating the life you’ve always desired. Whether you’re approaching retirement, already savoring your golden years, or are a government employee without a financial advisor, please don’t hesitate to 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.
Disclosure
“Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Sentinel Wealth Partners and Cambridge are not affiliated. Sentinel Wealth Partners is not engaged in the securities business. Cambridge does not offer tax or legal advice.”