If you’re a woman who just began a career with the federal government, you likely did so for some great reasons. Like using your skills, knowledge, and education to contribute to the good of society.
And, if you’ve just begun your federal career, the last thing on your mind might be retirement planning.
In truth, a career launch is the right time to plot your retirement. Reviewing your options and understanding how much to set aside now can pave the way toward a resource-rich retirement that provides you with a highly successful post-work life.
Why Start Now?
There are multiple reasons why long-term retirement strategies should be removed from the back burner and placed firmly on top of mind:
- You could outlive your spouse: Research shows women have higher life expectancies than men.
- You might earn less than your male counterparts: Women tend to spend fewer years in the workforce because of time off taken to raise children or care for family members.
On the positive side, you’re a federal employee. This means access to the following productive tools that help you create and maintain a solid foundation for your successful retirement strategy.
#1 — The Federal Employee Retirement System
The Federal Employee Retirement System — FERS — is a three-pillar plan that supports you when you retire. This consists of:
- The Basic Benefit
- Thrift Savings Plan
- Social Security
Your agency automatically withholds Basic Benefit and Social Security amounts from your salary each pay period. When you retire, your income comes from Social Security, while the Basic Benefit results in a monthly annuity.
#2 — Thrift Savings Plans
As mentioned above, the Thrift Savings Plan is one of three pillars to support your retirement. To fund a TSP, your agency automatically deposits an amount equal to 1% of the basic pay earned during a pay period into a TSP account. That money is then moved into one of five indexed funds.
There are also long-term TSP retirement strategies for women. You can increase TSP contributions with an agency match of up to 5% of your gross salary. But don’t stress if you can’t reach the $23,000 annual elective deferral limit. Another TSP advantage is compounding, which reinvests the returns on your original investment. This helps your TSP grow over time.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
#3 — Federal Employee Health Benefits and HSAs
TSPs and annuities are one part of your retirement net. Another is the Federal Employee Health Benefits and Health Savings Accounts. You can take advantage of these benefits now and when you retire.
FEHB: Protecting your health
The FEHB is your health care insurance plan, which covers all things medical for you and your family. The government pays up to 75% of the premiums, and you pay the remainder. FEHB coverage can range from annual physicals and preventative care to fertility services (including the recent addition of in-vitro fertilization).
The FEHB also covers healthcare costs when you retire, as long as:
- You retire on an immediate annuity under your FERS retirement plan.
- You or a family member has been continuously enrolled in an FEHB program plan for at least five years before the start of your annuity.
- You or a family member has been continuously enrolled in an FEHB program since the first opportunity to join the program, if less than five years.
HSAs: Covering costs
Depending on your FEHB plan, you could be eligible for an HSA. You contribute a portion of your pre-tax salary to an HSA that, in turn, generates tax-free interest. Withdrawals from your HSA are tax-free if used for co-pays, deductibles, coverage gaps, or other medical expenses.
Or you could keep the money in the HSA and let it grow. Unused funds are carried over annually, with no limit. This makes your HSA helpful for any medical expenses generated when you retire.
#4 — Roth IRAs
Having a FERS, TSP, and FEHB available doesn’t preclude you from investing in “outside” accounts like a Roth IRA. Unlike a traditional IRA, you’re taxed on your Roth IRA contributions. On the upside, once you reach 59 ½, withdrawals from a Roth IRA are tax-free.
When going this route, keep in mind that:
- You’re capped on your annual contributions.
- If your household income reaches a certain amount, you might be unable to deduct contributions at tax time.
Additionally, there are multiple Roth IRA options out there. To find the right one for your situation, consider working with an expert Certified Financial Planner™, like one with Serving Those Who Serve.
Get a Head Start On Planning
While retirement might be years away, planning and preparation are important. Proactive strategies help ensure you’ll have the right resources to support you when it’s time to say goodbye to your career.
You don’t have to do this alone. Serving Those Who Served has helped federal government employees understand their benefits and create a solid financial foundation for decades. Additionally, 66% of our staff is women, providing a deep understanding of female federal employees' issues while on the job and in retirement.
To learn more, email [email protected] or visit our website.
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Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.