Top 5 Reasons Federal Employees Should Work with a Financial Advisor

Many people are nervous about retirement planning. Some become so anxious they put off addressing the need for planning. It’s easier to deal with all of this complexity with professional help. We know this because we help people find a financial advisor who specializes in what they need to manage their finances.

Federal workers have many choices. However, their options make planning more complex. The benefits of working for the U.S. government might be incredible, but if you do not know how to access them and make good decisions about them, you are likely to feel lost, since there is a lot to consider.

This guide delves into details, such as the Federal Employees Retirement System (FERS), the Civil Service Retirement System (CSRS), and the Thrift Savings Plan (TSP). It also explains why working with a financial advisor for federal employees who understands government employee benefits is helpful.

We’ll cover everything from managing your savings accounts to tax strategies, along with giving you the tools and insight needed to make informed decisions about your goals.

Use our free tool to get matched with a financial advisor and access the information you need to get started on your planning.

Financial Planning for Federal Benefits

Employees of the federal government should not delay in planning for their financial goals. Federal workers looking to optimize their support before and during the retirement process may find it advantageous to work with a specialist professional who understands the specifics of federal programs.

Let’s take a deeper dive into why federal workers can highly benefit from working with a specialized planner who understands the intricacies associated with federal financial and retirement savings programs.

5 Reasons Why Federal Workers Need Specialized Financial Professionals

Federal workers have unique needs, and general financial planners and professionals might not fully understand the complex federal programs. That’s why having a professional who is knowledgeable about the federal system is helpful.

Let’s look at five reasons why federal workers can benefit from connecting with an advisor who understands the specifics associated with federal programs.

Reason 1. Expertise in Federal Systems

For federal workers, having professionals who understand the complexities of the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) is crucial.

History of CSRS and FERS

Before we delve in, let’s look at a bit of the history of CSRS and how it transitioned to FERS. There are so many details, but understanding the background can help you understand how your money is managed.

The Civil Service Retirement System (CSRS) is a federal system that existed before the Federal Employees Retirement System (FERS). The CSRS is for employees who began employment as federal workers before 1984. The following are essential details about CSRS.

• Pension-Based: CSRS provides a monthly payment based on an employee’s years of service and highest salary over a consecutive three-year period.
• Voluntary Contributions: Some federal workers choose to make additional contributions.
• TSP (optional): CSRS employees may participate in TSP. However, they don’t receive matching government contributions like FERS employees.

Many federal workers who had started before 1984 were grandfathered into CSRS. It’s a defined benefit pension plan that does not include Social Security Income (SSI) coverage. CSRS employees do not pay into the SSI program and are not eligible for SSI based on their federal service.

FERS replaced CSRS for U.S. federal employees and began in 1987. It has three parts that can be managed, which are:

• Basic Benefit Plan: This is a benefits system where employees contribute a % of their pay, and the government also contributes. Employees receive a monthly annuity when retiring, based on their salary, years of service, and age when retiring.
• Social Security: Federal workers contribute to this program and are eligible for monthly SSI payments.
• TSP: The TSP is an investment plan like a 401(k) plan, where employees can make contributions, and the government provides matching contributions up to a specific limit.

When you work with professionals with experience in federal programs, their advice may lead to better planning for working, savings for retirement, and benefit utilization. Spend some time with your financial professional, ask questions, and get explanations about specifics you don’t understand.

Reason 2. Managing a Thrift Savings Plan (TSP)

Federal agencies contribute to TSPs along with voluntary contributions made by federal workers.

A specialized advisor can help federal workers manage their monetary goals and establish a plan to include TSP. Advisors may assist with investment choices, contribution strategies, and withdrawal planning. Having a TSP may help create savings to meet income needs when retiring.

The government will help by putting money into your TSP, and, to get the full benefit, it’s a good idea for you to contribute as well. Find an advisor to ask if you don’t have one. Then, ask your advisor! They can do the math for you.

Reason 3. Understanding Federal Programs

A specialized advisor may help navigate the various programs available to federal workers. Think of these items as gifts from your Uncle Sam. In addition to SSI, federal programs include:

• Health Coverage: The Federal Employees Health Benefits (FEHB) provides healthcare.
• Group Life: The Federal Employees Group Life (FEGLI) is group term life insurance for federal workers, retirees, and their family members.
• Dental and Vision: The Federal Employees Dental and Vision Program (FEDVIP) is a voluntary, optional benefit paid by federal workers.
• Long-Term Care: The Federal Long-Term Care Program (FLTCIP) was taking applications until December 19, 2022. Applications are currently suspended.
• TSP: TSP is savings for when you retire that may augment a federal worker’s benefits, which is similar in some ways to a 401k plan for the private sector. Federal agencies contribute to the TSP, and workers may contribute as well.
• Voluntary Savings Account: A Voluntary Savings Account (VSA) is an additional account option for CSRS members.
• Family Medical Leave Act: The Family Medical Leave Act (FMLA) gives federal workers 12 weeks of paid family leave for the birth or adoption of a child.
• Employee Assistance (EAP): EAP is free counseling and confidential assistance for problems with drug and alcohol abuse, family problems, and psychological disorders.
• Flexible Spending Accounts: The Federal Flexible Spending Account Program (FSAFEDS) offers tax-free savings programs for qualified health care and dependent care expenses.
• Paid Time Off (Sick/Vacation Leave): Federal employees generally get 13 paid sick days a year, but vacation time is calculated based on years of service and may have other variables.
• Paid Holidays: 11 federal holidays are given off to employees as paid.
• Telework and Flexible Work Schedules: Remote work and schedule flexibility are allowed for some positions. This will align with the policy of each individual agency.
• Transit Subsidies: Payments for those using transit systems to commute to work.
• Student Loan Repayment Program: Under the Public Service Loan Forgiveness Program (PSLF), student loan debt is forgiven after ten years of working for a qualified organization.
• Childcare Subsidies: These payments help with childcare expenses.

Considering all these programs, it is easy to understand why it’s helpful to work with a specialist advisor who can assist in making decisions about programs, coverage, taxes, benefits, and future needs.

Get matched with the right advisor today!

Reason 4. Tax Planning Strategies for Federal Employees

It almost goes without saying that tax planning is essential. A specialized advisor may assist federal workers, who often face unique tax situations. If you try to go at this effort alone, it’s possible to make mistakes or miss out on things that could help.

Here are some examples of tax-saving strategies, deductions specific to federal workers, and other factors you might not have considered:

• TSP Contributions: Pre-tax contributions reduce taxable income.
• Contribution Catch-Up: Additional TSP contributions for employees over 50.
• Health Savings Account (HSA): Contributions are tax-deductible for those in high-deductible health plans.
• Flexible Spending Account (FSA): Pre-tax contributions for eligible healthcare and dependent care expenses.
• Federal Employee Retirement System (FERS) Contributions: Tax-deferred until withdrawal.
• FEHB Premiums (Pre-Tax): Health coverage premiums are deducted pre-tax.
• Moving Expense Deductions: For a job-related relocation under specific conditions.
• Public Service Loan Forgiveness (PSLF): No tax on forgiven student loans.
• Remote Work Deductions: If not reimbursed, under certain circumstances, home office expenses may be deductible.
• Charitable Contributions: Direct payroll contributions to eligible charities may be tax-deductible.

Federal workers have many advantages over the private sector. However, some federal workers are unaware of all the tax strategies they may benefit from or the tax deductions they can use. A federal employee can benefit from working with an advisor with the proper expertise to achieve the desired economic results and develop a suitable investment plan.

Reason 5. Preparing for Healthcare Costs When Retiring

Helping to plan for healthcare costs is a vital role for a professional. There are strategies for managing healthcare expenses to consider, which include understanding Medicare and Medicare supplemental costs and coverage. Also, there is a need to consider planning for long-term healthcare needs. A specialized advisor helps estimate and plan for these costs.

Sound overwhelming? Why not reach out to begin working with a specialized planner today? Get matched to a professional who is equipped to help federal employees navigate the complexities of the federal systems.

How to Choose a Specialized Financial Professional

Most people appreciate getting some guidance on how to attain the best benefits from federal programs, along with tips on what to look for in a specialized advisor, including relevant certifications and experience.

Find an advisor with experience in federal programs and SSI knowledge who can create a personalized plan. 

Relevant certifications include being a Certified Financial Planner (CFP), a Chartered Federal-Employee-Benefits Consultant (ChFEBC), and a Retirement Income Certified Professional (RICP).

The following are 10 questions to ask potential advisors to gauge their expertise and suitability. Evaluate their knowledge of the critical factors that impact your benefits.

1. How familiar are you with FERS and CSRS?
2. Can you explain how you have helped federal workers maximize their TSP contributions and withdrawal strategies?
3. What experience do you have coordinating federal health coverage (FEHB) and Medicare?
4. How do you account for SSI in the context of FERS retirees?
5. Do you have experience advising clients on federal employee group life (FEGLI) and other coverage?
6. How long have you advised federal workers?
7. Can you provide references from federal workers or retirees you’ve worked with?
8. How do you ensure your advice is always in my best interest and not influenced by commissions or sales incentives?
9. Do you provide personalized plans, or do you use more of a general approach?
10. Will you regularly review and update my plan, especially when there are changes in programs or tax laws?

Working with a Specialized Financial Professional for Federal Workers and Where to Find One

We can help federal workers find qualified professionals specializing in employee programs. We provide these services with our advanced advisor match tool:

• Personalized Matching: You can input your specific needs and preferences to receive tailored recommendations.
• Advisor Credentials: Our tool connects users with advisors who have relevant certifications, such as Certified Financial Planner (CFP) or Chartered Federal Employee Benefits Consultant (ChFEBC).
• Convenience: Using our tool to find an advisor without wasting time on extensive searching and reducing uncertainty is easy.

Now that you have a good overview of the complexities of these decisions for federal workers, you might agree it would be advantageous to work with a specialized advisor. Getting specialized advice may help manage plans when retiring. Reach out to a qualified advisor for personalized guidance.

Ready to find the perfect advisor who understands the needs of federal workers? Use Our Free Advisor Match Tool to get help.