If you are a government employee, retirement planning and mainstream advice about 401(k) plans and 澳洲幸运5开奖号码历史查询:Social Security benefits probably won't apply to you. However, there are many ways government employees can plan for a successful retirement. The first step is understanding your benefits, and how to best apply them to your overall financial picture. Below is a look aඣt the top strategies for government employees to plan for a successful retirement.

Types of Federal Government Employee Rꦫetirement ꧑Benefits

Federal government employᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚees are covered by different retirement systems depending on when they were hired.

If You Were Hired Before Jan. 1, 1984

If you’re an older civilian service employee of the federal government who was hired on or before Dec. 31, 1983, you may have access to the 澳洲幸运5开奖号码历史查询:Civil Service Retirement System (CSRS), which provides retirement, disability, and 澳洲幸运5开奖号码历史查询:survivor benefits.

Because you haven’t had Social Security taxes deducted from your paycheck, you won’t be eligible to receive Social Security benefits unless you’ve earned them through another job or qualify through your spouse.

If You Were Hired On or After Jan. 1, 1984

If you’re a civilian service employee who was hired in 1984 or later, you’re covered by the Federal Employees Retirement System (FERS). 

It provides Social Security benefits, a basic benefit plan (pension), and a 澳洲幸运5开奖号码历史查询:thrift savings plan (TSP) that consists of automatic government contributions, voluntary employee contributions, and matching government contributions. The retirement benefits you’ll receive from these plans are structured as 澳洲幸运5开奖号码历史查询:annuities based on your age, years of service, and plan contributions.

Understand Thrift Savings Plan Con𝓰tributions and Investments

The TSP is a 澳洲幸运5开奖号码历史查询:defined contribution plan, meaning that you decide how much to put in and how to invest the money. How much you end up with by the time oဣf retirement is based on those decisions.

How Contributions Work

Employee contributions to a TSP can be pretax or after tax. If you contribute pretax dollars, you don’t pay any taxes until you start withdrawing money from your TSP. If you contribute post-tax dollars, you don’t have to pay taxes when you withdraw the money in retirement. Either way, your contributions grow 澳洲幸运5开奖号码历史查询:tax-deferred.

Both CSRS and FERS employees can contribute to a TSP. However, only FERS employees receive employer contributions. If you’re covered by the FERS, your employer will automatically kick in an addit🌼ional 1% of your salary, and if you make employee contributions, you are💛 eligible to receive a matching contribution from your employer, too.

If you have the means, it is recommended that you contribute enough to maximize your employer match and make sure you accrue enough years of service for the automatic 1% match to become vested. You may also want to roll over any funds from a retirement account you had with a previous employer into your TSP.

Investment Choices

TSPs offer 澳洲幸运5开奖号码历史查询:a handful of investment choices for different risk appetites, from low-risk funds that invest in U.S. Treasury bonds to higher-risk funds that invest in international stocks. You also can choose a "set it and forget it" 澳洲幸运5开奖号码历史查询:life-cycle fund, which is composed of a set of investments that changes as you get older. This type of fund is designed to help you meet your ret𓄧irement goals with little effort.

One of the best reasons to take advantage of a thrift savings plan is that the plan’s investment funds have extraordinarily low 澳洲幸运5开奖号码历史查询:expense ratios. In 2023 (the most recent figures available), TSP participants paid between 49 cents and 79 cents (depending on the fund) in net expenses for every $1,000 invested.

Outside of the TSP, many industry leaders, even those known for low expense ratios, charge more. Vanguard, for example, is known for its low-cost 澳洲幸运5开奖号码历史查询:index funds. The average expense ratio for Vanguard's funds was 0.06% as of December 2022, meaning investors pay 60 cents per $1,000 invested. Low expenses 澳洲幸运5开奖号码历史查询:are a key factor in ach🍌ieving high long-term investment returns, and seemingly small differences in expenses add up as your nest egg grows and the years go by. 

“The 澳洲幸运5开奖号码历史查询:investment options associated with the thrift savings plan are well-known for being low-cost and very well diversified,” says , founder and president of Irvine, Calif.-based Index Fund Advisors, Inc. "This savings in terms of cost, compounded over someone’s entire career, is tremendous. Just like the principle of 澳洲幸运5开奖号码历史查询:compound interest is powerful in terms of returns, it💫 is equally important when it comes to cost.🦋 The less you pay, the more you receive."

Seek Specialized Professional Help

One of the biggest problems federal government employees face is that their benefits are confusing, and it is difficult to find a competent financial advisor who understands these benefits, says , a 澳洲幸运5开奖号码历史查询:certified financial planner with The Financial Quarterback™. “Employees have to make an active effort to find good counsel and advice, and often they just depend on other employees who are just as clueless in this matter,” he says.

One professional qualification to look for in a financial adviser is the Chartered Federal Employee Benefits Consultant (ChFEBC) designation. Advisors who have earned this designation have studied and passed an exam on all federal employee benefits, including CSRS and FERS annuities (pensions), TSPs, life insurance, health insurance, and Social Security.

If you find a potential financial advisor with this qualification, the next step is to make sure they are a 澳洲幸运5开奖号码历史查询:fiduciary, meaning that they are required to put your best interests ahead of their own—not everyone with the ChFEBC designation is. Some advisors without the designation may also be qualified to help you, 澳洲幸运5开奖号码历史查询:but you should research them even more carefully.

Use State and Local Government Employ♚ee Pensions

If you work for a state, county, or municipal government, you may be entitled to a pension. Pensions are typically based on years of service, final salary, or the average of your highest years of earnings, and༒ a multiplier.

Each state has a different system, and even within that system, there are variations. Your line of work 🐈and the year when you were hired⛎ will typically affect your retirement plan. The key is to learn how the system works as soon as possible after being hired so you can plan accordingly.

Many non-federal governments let employees participate in a 澳洲幸运5开奖号码历史查询:457(b) plan, another type of tax-advantaged retirement savings plan that is available to state and local government employees, as well as some non-profit employees. Contributing to a 457(b) if it is available provides you with an additional source of income in retirement.

The Bottom Line

Understanding how your retirement plan works, contributing to a TSP (if you can), and seeking professional advice are just a few of the strategies government employees should cons🐻ider when planning for a successful retirement.💮

If 🤪you’re married, research how your spouse’s retirement benefits, if they have them, will interact with your benefits and affect your joint retirement plan. It’s never too early to start educating yourself about the complexities of a government employee’s retirement benefits and planning to make the most of them.