As federal employees you have great retirement benefits, right?
At least that is what everyone says.
But do you know what all your benefits are and how to maximize all 8 of them?
This guide will help make sure you do.
The 8 Big Ones
You have 8 big benefits and this guide will at least get you started in knowing how to maximize each of them.
4 of the benefits provide retirement income while the other 4 provide financial protection.
The Retirement Income
There are 4 major benefits that provide income in retirement.
FERS Pension
Everyday it becomes more and more rare for an employer to offer a pension for their employees.
Why?
Because it is really expensive to provide.
Your FERS pension is an incredible benefit that will provide a stable monthly income for the rest of your life in retirement.
Most in the private sector can only dream about having a pension.
The key to maximizing your pension is by understanding how it is calculated so you can take the actions needed to increase it.
FERS Supplement
The FERS supplement is one of the most unique benefits that you enjoy.
But unfortunately, not all federal employees will be eligible.
It is meant for those employees who retire before age 62 to have a “bridge” monthly payment to get them to age 62 at which point they could choose to start Social Security if they wanted to.
To be eligible you have to retire before age 62 and hit one of these criteria:
-Retire over 60 with at least 20 years of service
-Retire over your MRA (minimum retirement age) with at least 30 years of service.
To maximize this benefit you have to understand that it will end at age 62 and that working a job/business can decrease or eliminate your FERS supplement payments.
Note: The rules are different for special provision employees like fire fighters, law enforcement, or air traffic controllers.
TSP (Thrift Savings Plan)
This is the part of your retirement income that YOU have the most control over and is often the difference between great retirements and okay ones.
You decide how much to contribute and how to invest the money.
The TSP is relatively easy to use with high quality funds which is as much as someone can ask from their savings plan at work.
While the government does offer their 5% matching contributions it is up to you to make sure your money is always working hard for you.
Social Security
You can start Social Security anytime between age 62 and 70.
If you start it early at 62 then you’ll get less every month but for every month you delay benefits beyond 62 your monthly benefit gets bigger.
So the decision comes down to do you want a small monthly payment for a longer period of time or a bigger monthly payment for a shorter period.
But the perfect age to start it will depend on your situation.
The Protection
There are 4 benefits that provide financial protection.
FEHB (Health Insurance)
This is one of the best benefits you have as a federal employee. You have access to incredible plans and the government pays about 70% of the premium for you.
So if you are paying $200/pay period then they are paying about $500/pay period for you.
And one of the best parts is that most employees can keep their FEHB into retirement with the government continuing to pay their share of the premium.
The two main requirements to keep FEHB into retirement are:
-Retire with a full immediate retirement
-Be covered under FEHB for 5 consecutive years before retirement.
FEGLI (Life Insurance)
Almost everyone should have life insurance at some point in their life.
FEGLI (Federal Employee Group Life Insurance) is a simple way to get the coverage you need.
The main advantages are that you can often get coverage even if you have health issues that would stop other companies from covering you.
The downside is the cost often goes up significantly as you age.
The most important thing to know to maximize FEGLI is how the price/coverage changes over time.
FEDVIP (Dental/Vision Insurance)
FEDVIP is an easy way to get dental and vision coverage through your job.
The upside is that it is convenient. The downside is that it is not always cheaper than outside policies.
LTC (Long Term Care Insurance)
This benefit has had rocky times recently. As of December 2022, anyone who wasn’t already enrolled in this benefit will not be able to for at least 24 months.
It is not clear what will become of this program as it has proven to be much more expensive to operate than expected.
If you are in the market for long term care insurance I would search for a policy on the open market.
Final Thoughts
Maximizing your benefits does not always mean that you are using all of them.
It means using only the ones that make sense for you and using them in a way that is best for your life.
