Retirement Planning For Federal Employees: How to Start and Quick Reference Guide

Feb 26

If you are a federal employee, you have access to unique benefits that can enable a successful retirement. Planning can help you optimize your benefits to meet your goals. In addition, in these times of turmoil, planning can provide a sense of stability and confidence that you are ready to face the future. Below are some tips on how to start planning and a downloadable Quick Reference Guide to help you kick things off.

Understanding Your Benefits

To plan, you first need to understand your benefits from top to bottom. This includes the benefits you may have earned as a federal employee, such as a Federal Employee Retirement System (FERS) annuity and Federal Employees Health Benefits (FEHB) retirement health coverage, and the benefits available to US taxpayers generally, with Social Security and Medicare being the most important.

To keep the process manageable, I recommend thinking about the programs in three broad categories:

Lifetime Income (FERS and Social Security)
Savings and Income (Thrift Savings Plan (TSP))
Healthcare (FEHB, Medicare and, potentially, Affordable Care Act coverage)

You may have other resources (such as an IRA from a previous job or a spouse’s benefits) that fit into these categories, but set those aside until you understand what you can expect from the programs listed above. That will simplify things and give you a baseline position to start from when considering the role of other assets in your retirement plan.

Within each of these three categories, your goal should be to understand each benefit in order to answer key questions, including:

Am I eligible?
When can the benefit start?
How much can I expect from the benefit, both now and in the future (in the case of FERS and Social Security)?
How much will my health care coverage cost and what will it cover (in the case of FEHB and Medicare)?
How much can I rely upon from my TSP balance, after taxes and any early-withdrawal penalties, if applicable?
How will the answers to these questions change if I work longer (accruing more years of service, for example).

You likely have some knowledge of your benefits gained over your years as a federal employee. Leverage your existing knowledge, but confirm and supplement it until you feel confident in your answers to each of the questions above.

To start, I recommend working through the Quick Reference Guide I have developed. This will give you an overview of how key programs apply to you. From here, you can go deeper to determine how each program applies to your unique situation.

If you try to tackle all of the programs at once, you may feel overwhelmed. To avoid this, focus on one category and program at a time (for example, Lifetime Income, with a focus on FERS). Work through the questions above, taking careful notes along the way. Don’t be intimidated by acronyms and formulas. Take it one step at a time and work through examples to test your understanding.

At the end of this article, I provide some links for online resources, both from the government and other sources. Take advantage of the resources from your agency and the OPM, but keep in mind that people you talk to may be stressed and overwhelmed with all that is happening now. They likely won’t have all of the answers and may make mistakes. Use your knowledge to confirm what you hear.

What’s Next

You have a good grasp on your benefits. What’s next? I recommend outlining several “what if” scenarios based on changes in variables you can control. For example, if you have the ability and willingness to work a few more years, you can calculate how much your monthly FERS and Social Security benefit will increase with added years of service. You may see that the change meaningfully impacts your ability to cover your projected retirement expenses. Or it may be clear that those extra years aren’t worth it. This exercise helps you understand your options and tradeoffs, which will lead to decisions that are aligned with your goals.

If this all feels daunting, a financial planner with in-depth knowledge of federal benefits, like my firm, can help. We work with you to develop a comprehensive plan that is customized to your situation. Explore our website to learn more about the services we offer, and click on the link at the top of this page to set up a discussion