Benefit Programs for Federal Employees
Martin Gross is Certified FRC (Federal Retirement Consultant)
The benefits available to employees of the Federal Government are Great! ARE THEY?
You be the judge. The feds do not provide very much assistance and, as a result, most Federal employees typically spend more than 20 years working there, and have no idea what they have or what to do with their assets when they retire to the “retirement country club”. Some are able to achieve that ideal retirement dream but most are not.
The Federal Retirement Plan is comprised of 3 main parts:
- Pension aka FERS (Federal Employee Retirement System) Pension
- TSP (Thrift Savings Plan) – Similar to a 401K
- FEGLI – Federal Employee Group Life Insurance
Sounds Great – Right? – Let’s take a look.
Here’s a 30,000 ft view.
Let’s be a little more specific:
FERS Pension
a) You can qualify for a lifetime pension by working for as little as 5 years
b) The pension can be as much as your highest consecutive 3 year average income times the number of years of service times 1.1%.
for example:
20 years of service with an average income of $100,000 will provide a $22,000/yr pension for the rest of your life.
c) The bad news is the pension available for a surviving spouse in the event of your death is substantially lower at a significant cost. There are better ways.
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TSP Thrift Savings Plan
The TSP provides for a choice of 5 different funds. The 2 most popular are the G-Fund and the C-Fund. The G-Fund invests in government bonds. It has returned less than 2% per year over the last 10 years and does not keep up with inflation. The C-Fund invests in common stocks, and has performed well over the last 10 years but is risky. In our opinion, that is not the place to be for your safe money that you need during your retirement. The stock market has been on a record roll since 2009. That seems to have come to an end. It is our opinion that during retirement, money needed to pay bills, your have to have money, should be in a safe, reliable, predictable place. There are better safe places to put your money than the TSP when preparing for or are already retired.
FEGLI – Federal Employees Group Life Insurance
The group life insurance plan is reasonable while you are still employed by the government. During retirement, however, the death benefit drops substantially and the premium (cost) increases substantially. This combination makes the FEGLI a bad deal once retired. It is more prudent to purchase life insurance on your own if you need protection for your family. There are various alternatives available to you.
Long Term Care
Long Term care is not available as part of the benefit package.
Bottom line
To properly plan for your retirement, the prudent thing to do is to work with a Certified Federal Retirement Consultant (FRC), who has your best interest at heart. The best thing about the Government benefit package is the FERS pension plan. The rest, not so much and is not the best place to prepare for your retirement. Working with a FRC certified retirement consultant, who specializes in retirement planning for Federal employees, will be your best bet. You can work together to utilize the best parts of the government package and couple that with other opportunities. That combination approach will result in a more efficient, lower cost, retirement financial plan as well as a happy, stress free retirement.
Call us or click on the link to set up a free, no obligation consultation to discuss your specific situation.