Financial planning for federal employees – here are the top 5 things to know.
Welcome to the final piece of our 11-part series of “listicles.” We’ve been going over 5 key points to remember for several areas of retirement planning and employee benefits for members of the Federal Workforce. The first ten topics we covered were FERS, CSRS, the TSP, FEHB, FEGLI, social security, tax planning, FLTCIP, Survivor Benefits, and Estate Planning. Now we’ll be covering Financial Planning.
Attend our next no-cost webinar to learn more about financial planning for federal employees and retirees
1. Financial Planning for Federal Employees
Federal employees have a great benefits package compared to the private sector, but to take full of advantage, individuals really need to do a ton of research or partner with a trusted professional. Think of the voyage to retirement like steering a ship across the ocean. If you’re not efficient at navigating, you’re either not going to end up where you want to go or you’re going to need a navigator to help you stay on course. At Serving Those Serve, we aim to provide the information needed for feds to educate themselves through articles, podcasts, and webinars, but our advisors are available if you need help to make the best decisions for what matters most to you.
2. More than Just the TSP
While the Thrift Savings Plan (TSP) is a crucial component to a comfortable retirement for federal workers, especially those under FERS, there is a lot more to coordinate when it comes to managing federal benefits and planning for retirement. Ideally, a federal employee should look for a financial advisor who can answer questions about what age to retire, when to make a military deposit, and countless other questions about the federal space. A good financial planner for feds should have extensive knowledge about FEGLI, FEHB, Medicare, long-term care. survivor benefits, social security, and more – plus how they interact with each other – and shouldn’t just focus on the investments in the TSP. That being said, the TSP is very important. Having an allocation that properly reflects one’s risk tolerance, formulating feasible contribution and withdrawal strategies, and knowing how to optimize utilization of the Roth TSP are the main things a financial planner at Serving Those Who Serve can help with.
3. Federal Pension, Life Insurance, and Annuities
It can be argued that having no financial planner is better than having a bad one. There are a handful of financial planners who like to say they are experts on federal retirement but really are trying to push financial products off which they stand to make a sizable commission. Strategies like “pension max,” where FERS or CSRS survivor benefits are waived and replaced by a life insurance policy, seem great on the surface but there are caveats, like a surviving spouse won’t be eligible for FEHB. Same goes for annuities. Often presented as a safe financial vehicle that can provide steady guaranteed income, annuities can be more complex or expensive than they appear initially, ultimately hurting the quality of one’s retirement.
4. Not Just Federal Benefits
Proper financial planning is conducted holistically – looking at someone’s entire financial situation, and not just benefits related to federal service. Helping with outside investment accounts, saving for goals other than retirement (like college tuition for children), and managing debts and expenses are some of the ways a financial advisor can help develop a solid retirement and financial plan for your individual situation. This can include Social Security and Medicare, which are benefits also available to non-federal employees, but can significantly impact federal benefits like one’s FEHB premium and retirement income.
5. A Fed-Focused Financial Advisor
When working with a federal employee, there are 4 attributes that a financial advisor should possess. First, they should be a Charted Federal Employee Benefits Consultant (ChFEBC℠), which is the only designation recognized by FINRA regarding specialization in the federal landscape. Second, the advisor should be held to a fiduciary standard, not just the financial industry suitability standard. A fiduciary is obligated to act in their client’s best interest ahead of their own. This leads directly to the third characteristic a financial planner for feds should exhibit: they should be an Accredited Investment Fiduciary (AIF®. Hallmarks of this designation include transparency, disclosure of fees, and developing appropriate investment strategies. Lastly, a fed-focused financial advisor should also be a CFP™ (CERTIFED FINANCIAL PLANNER). Advisors with this designation, which is considered the gold standard of financial planning, have laboriously studied numerous facets of the financial planning, from investments to insurance to estate planning, and are required to continue their education to maintain the certification. Want to meet with one our advisors? Schedule here.
Next Steps
If you’d like to dive into more detail about financial planning for feds, check out this page. On that page, you can also register for the next Financial Planning webinar with Ed Zurndorfer. It’s never too early (or too late) to learn about your retirement benefits and start making a plan! For an even deeper dive into your retirement planning as a federal employee, check out our entire (no-cost) webinar series.
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Until Next Time,
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The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. 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. **
