Financial Planning for Federal Employees

Financial Planning for Federal Employees

July 28, 2020

At Shenandoah Valley Financial Services, Financial Advisor John Clawson, a CERTIFIED FINANCIAL PLANNER™ professional, and Advisor Associate Amy Flores Velasquez, have pursued additional education to help them in providing financial planning and investment guidance for employees of the Federal Employee Retirement System (FERS). 

Federal Employee Retirement System (FERS) & Financial Planning 

The Shenandoah Valley Financial Services team now has a focus on financial planning and investment for federal employees. Due to the defined pension plan under the Federal Employee Retirement System (FERS), federal employees have unique financial planning and investment needs. These needs are different from the 401(k) and other retirement plans in the private sector. To break it down and explain, the FERS retirement plan provides benefits from 3 different sources: 

  1. A Basic Benefit Plan,
  2. Social Security,
  3. and Thrift Savings Plan (TSP).

The Basic Benefit Plan 

The Basic Benefit Plan is a pension in which the employee receives a set amount, no matter the amount the employee has contributed. The amount depends on the length of service and the highest three consecutive years of service. Often those three are the last three years worked; however, if you held a higher paying position earlier in your career, your high three could be taken from that period of time in your career. 

The calculation only takes into consideration your basic salary. It does not include any overtime, bonuses, or other extra payments you may have received.

Social Security 

Unlike some public pension plans, employees covered under FERS pay into the Social Security Fund at the same rate as a private employee. 

Social Security replaces a percentage of a worker’s pre-retirement income based on their lifetime earnings. The portion of your pre-retirement wages that Social Security replaces is based on your highest 35 years of earnings and varies depending on how much you can earn and when you choose to start your benefits.

Thrift Savings Plan (TSP) 

Think of the Thrift Savings Plan as being similar to a 401(k). Established by Congress in 1986, the TSP offers the same types of tax benefits and savings as a 401(k). For example, tax deferment is applied to TSP. Each pay period, the agency you worked for deposits 1 % of your basic pay into the TSP. If you wanted you have the option of making additional contributions, which your agency will match as a certain percentage of your pay.

Because the TSP does not operate as a pension like the Basic Benefit Plan and Social Security, your earnings after 30 years would be based on the funds you choose, the amount of money you contribute above the amount your employer deposits, and market conditions that are outside of your control.

Another thing to remember about your TSP, just like a 401(k), there is a limit to how much you can contribute. Because your agency only matches up to a certain percentage, speaking to a financial advisor can help you maximize your earnings.

If you are a local to Northern Virginia, John Clawson CFP® is an experienced financial advisor in Winchester. He is able to assist with managing your money to help you make the most of life. Whether you are a retired federal employee or just starting, John can help you by:

  1. Maximizing your pension,
  2. Coordinating benefits with private sector options,
  3. and getting the most benefits for the money you have put into retirement planning.

Contact John today to review your retirement and discuss improvements to your financial planning strategy.


This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. (07/20)