Why Specialist Financial Planning is Essential for Federal Employees

Turning Complexity and Uncertainty Into Clarity and Confidence

In my years as a financial planner, I’ve seen many federal employees struggling to get the most out of their benefit packages – not because their benefits aren’t some of the best packages around, but because they are complex and vary from one employee to the next. It is often hard to get good advice if you don’t take the time to seek it out.

Given that their work enhances the lives of Americans, it’s no surprise that the federal government offers awesome benefits that rival any in the private sector. To make the most of what they‘re offered, many will benefit from building a bond of trust with a financial planner who specializes in working with these unique benefit plans and can help them map out a course of action and stay on track.

When federal employees first talk with me, I often hear a familiar story: “I’ve read all of the materials ten times, and even attended seminars, but I still don’t understand everything my plan offers and how to make the most of it.”

The bottom line is that to satisfy their unique financial planning needs and make the most of their opportunities, federal employees need an advisor who understands their world and ‘gets’ their heart’s desire to enjoy their lives with certainty and confidence in their future.

And that means no money stress.

A qualified financial planner with real experience in serving federal employees can help you achieve your goals throughout life, whether these include education funding for your children, buying a home, or building a nest egg for a comfortable and carefree retirement.

What Are Your 12 Key Financial Considerations of a Federal Employee?

Federal employees have unique financial considerations due to their complex employment benefits and retirement plans. It is important that you understand these benefits in order to make smart decisions about your finances and retirement. These include:

1. Thrift Savings Plan (TSP): The retirement savings plan for federal employees offers tax advantages and low-cost investment options. Consider maximizing your contributions to the TSP to take full advantage of employer matching contributions and tax-deferred growth.

The TSP also offers very low fees and allows you to diversify with five index funds and a target date fund and even a Roth option within the TSP.

Regardless of whether or not you contribute to a TSP, the government will automatically match one percent of your salary. If you do contribute, they may match up to five percent of your salary and that can do wonders for your retirement savings.

2. Retirement Systems: Understand the retirement system you are enrolled in, such as the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Familiarize yourself with the eligibility requirements, pension calculations, and survivor benefits associated with your retirement system.
3. Federal Employee Health Benefits (FEHB): Evaluate your health insurance options through the FEHB program. Assess the costs, coverage, and flexibility of different plans to choose the one that best suits your needs and potential retirement healthcare expenses.

Federal employees can keep their health insurance in retirement and continue paying only the employee portion of the premium – this is a huge boon typically not available in the private sector. Beyond health insurance, FERS includes death and disability benefits as well as a supplemental pension for employees until they reach social security age.

4. Social Security: Understand how your federal service affects your Social Security benefits, including the potential impact of the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO).
5. FERS Annuity Supplement: If you are covered under FERS and retire before becoming eligible for Social Security benefits, you may be eligible for the FERS Annuity Supplement. Understand the requirements and potential impact on your overall retirement income.
6. Survivor Benefits: Assess the survivor benefit options available under your retirement system. Understand the implications and costs associated with providing survivor benefits to your spouse or other beneficiaries.
7. Long-Term Care Insurance: Consider the need for long-term care insurance to protect your retirement savings from potential high long-term care costs. Evaluate the Federal Long Term Care Insurance Program (FLTCIP) and compare it with other private insurance options.
8. Leave and Payouts: Review your accrued leave balance and determine how much unused annual and sick leave you can carry over or potentially cash out upon retirement. These payouts can provide a financial cushion or contribute to your retirement savings.
9. Estate Planning: Develop a comprehensive estate plan, including wills, trusts, powers of attorney, and healthcare directives. Consider consulting with an estate planning attorney to ensure your wishes are properly documented and your assets are protected.
10. Buying a House as a Federal Government Employee: Buying a house as a federal government professional is usually a seamless process. However, you may still want to work with a financial planner to determine the answers to questions like:

• What type of mortgage should I take out?
• How much can I afford?
• Where can I secure the best interest rates?
• Am I eligible for any home buying assistance programs?

If you work for the government, you may be eligible for the FHA Good Neighbor Next Door Loan. This program comes with perks like lenient credit requirements, down payment assistance, and reduced closing costs.

11. Repaying Your Student Loans

If you work for the federal government and have earned a college or graduate degree, you may be eligible for student loan forgiveness.  The Department of Education’s Public Service Loan Forgiveness (PSLF Waiver) Program allows public service employees to qualify for federal student loan payment reduction. In addition, your debt may be forgiven after you make 120 payments.

A financial planner will help you determine if you may benefit from the PSLF program, and you can also work with your planner to create a student loan repayment plan.