Financial Planning & Retirement Planning For Federal Employees

The approach to financial planning for federal employees is quite different than for private sector employees. By law, all federal employees are provided the same benefit options whereas in the private sector the benefits vary by employer or corporation.

The ‘Old’ and ‘New’ Civil Service Retirement Systems

The Office of Personnel Management (OPM) works with each federal agency to ensure their employees receive their guaranteed annuity claims upon retirement. Prior to 1984, employees could expect to receive not only monetary annuities but also insurance and other benefits through the Civil Services Retirement System (CSRS). The employees of that era are mostly retired now -- the youngest are in their late 50s -- and can expect many years from a generous retirement package. However, without a financial plan and investment strategies the oldest of the CSRA retirees are experiencing a shock when they realize their previously comfortable annuity is not enough to meet today’s high cost of assisted living or nursing homes. For the oldest of the CSRA retirees living in their own home is still financially doable, but outside of their home may not be as possible without a review of their finances first.

FERS – Basic Pension, Social Security and TSP

Since 1987, federal employees have found that the Federal Employee Retirement System (FERS) that replaced the CSRS is not as generous and indeed is more in line with the private sector in its volatility. In the private sector, an individual might expect a 401(k), social security, and possibly a corporate retirement package. By comparison, federal employees retiring under FERS are provided social security, a thrift savings plan (TSP) and a basic pension. It is not as generous as CSRS, but it does provide flexibility through the TSP which offers investment choices for different risk comfort levels. Investments range from low-risk treasury fund investments to the higher-risk international stocks investments. There are options for choosing a life-cycle fund that is composed of investments that change as you get older. This option is designed to help meet retirement goals with little effort.

This is just a brief overview of the federal retirement system offering and there is certainly more to it than meets the eye. It is important to scrutinize your short and long-term financial goals to determine which investment strategies may work best within the TSP. Financial planning for federal employees is a unique situation that we feel best be reviewed by a trusted CERTIFIED FINANCIAL PLANNER™ professional such as John Clawson.

At Shenandoah Valley Financial Services, we are trained on the ins and outs of federal employee retirement options. We work with our federal clients to understand their financial situation now and the risk they are willing to take to pursue the best retirement scenario later as they age. A review of finances offers an opportunity to devise a financial plan and retirement strategies for government employees.

If you are an active or retired federal employee, contact us to discuss your current financial situation and long-term retirement goals. With sound financial planning, we can help you can achieve financial freedom.