When comes to retiring under FERS, it is often described as a 3-legged stool. There is a fourth leg, however- The Strategic Leg® - Financial Planning and Investment Advisory Services from Serving Those Who Serve.
Federal Retirement under FERS
Compared to other retirement systems offered to workers in both private and public sectors, federal benefits are often referred to as ‘the gold standard' of retirement plans. And while there is certainly a lot of truth to this sentiment, it also comes with a catch. When the switch was made from the old Civil Service Retirement System (CSRS) to the newer Federal Employee Retirement System (FERS), a lot of choice and responsibility was left on the individual federal worker to construct their own retirement. While CSRS made things relatively easy by not including social security and the TSP as part of the retirement system, when these two components come into play for a CSRS retiree, like with the social security offset, it can quickly become overwhelmingly complicated.
For FERS retirees, their retirement system has been presented as a 3-legged stool:
With the FERS pension providing less retirement income than CSRS, FERS retirees are expected to make up this shortfall by contributing to the thrift savings plan (TSP) and social security. Choosing how much to contribute to a TSP account, and what funds to invest in, is a crucial part of building a stable retirement from federal civilian service under FERS.
The Strategic Leg
With financial planning and investment advisory services provided by Serving Those Who Serve advisors, feds can get a “leg” up by adding a fourth pillar to this model of FERS: the strategic leg:
While FERS might be ‘the gold standard’ of retirement plans these days, this is only the case with a thorough strategy. Many FEDS believe having a pension in place and contributing enough to get their 5% TSP match will be sufficient to live comfortably after leaving service. However, neglecting to review the choices and consequences that are entailed with a FERS retirement can have a detrimental impact.
For social security, knowing when to withdraw can vary drastically depending on one’s financial situation. For FERS as well, claiming retirement benefits at the minimum retirement age or at age 62 can similarly impact your pension amount. And with TSP, strategy is needed to determine a fed’s investment allocation, which includes how much risk they’re willing to take, and also how to time withdrawals so the money isn’t drained too hastily. The new mutual fund window is also opening up this summer, and will offer thousands of new investment choices in the TSP. More choice is not a bad thing, but it will leave more room for error, and therefore there will be an even greater need to develop a sturdy financial plan. For planning your federal retirement, strategy is everything.
Learn about adding The Strategic Leg to your Federal Retirement plan today! – Meet with a Serving Those Who Serve advisor today to talk about your financial plan and our investment advisory services. CLICK HERE TO SCHEDULE
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Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ 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 Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
