WHEN SHOULD I START FEDERAL RETIREMENT PLANNING?

JUNE 20, 2018

When it comes to talking about one’s federal benefits, many people are so confused they don’t know where or when to start federal retirement planning.

In today’s day and age, there is a ton of federal retirement information on the web and sometimes too much information can easily cause confusion. This confusion can lead to a lack of planning for retirement. The lack of planning could end in not having enough money to retire. Do you really want to go back to work in retirement? Once you understand your federal benefits clearly, your confusion will be exchanged for clarity. Having clarity then allows you to effectively create a plan for a confident retirement.

Furthermore, because so much is riding on your future, the sooner you start federal retirement planning, the better! Let’s go through a few reasons.

Catch things early

If you owe a deposit or redeposit on any period of employment, interest accrues, so the earlier you make a deposit or redeposit, the less you pay. It is important for you to consider whether or not it’s worth you making the deposit for your retirement plan. Every penny counts in retirement so identifying this early could save you money.

Eligibility to keep federal benefits in retirement is something to be aware of early on as well. For instance, in order to carry your FEHB into retirement, you need to have the coverage for at least five years prior to retirement, retire on an immediate annuity, and be insured on your retirement date. If you didn’t realize that until 2 years prior to retirement and are unable to keep FEHB, then you might be slightly unhappy or find yourself working longer in order keep it. Many factors play into similar scenarios such as the one just mentioned. Attending retirement trainings throughout your career can help keep you up to date with the ever-changing rules of federal benefits.

Creates less stress

By having a plan, you are tackling the many decisions early, at your own pace versus last minute. You also will have fewer surprises because you have dealt with your retirement early on. Having a plan keeps you on track and accountable. This allows you to set yourself up for a potentially successful retirement.

Many federal employees have found that working with financial professionals will also reduce stress. Starting to plan early allows you more time to vet and build strong working relationships with professionals who can help you long term.

Build a bigger nest egg

How much money will you need when you retire? Chris Hogan, the nation’s #1 best-selling author of Retire Inspired: It’s Not an Age; It’s a Financial Number said it best — If you want to have options in your golden years, you need a sizable nest egg. We can all agree that saving is easier said than done. Here are some helpful tips to get you started.

1. Save, Save, Save!

No matter what you tell yourself, it’s never too late to save. However, it takes self-discipline, time and diligence. While there are numerous types of savings, one important basic account is an emergency fund. If your car breaks down or your air conditioning unit stops working in the middle of July, you have the money in your emergency fund to cover the expense.

2. Contribute to Thrift Savings Plan (TSP)

The TSP is a separate entity in and of itself. Similar to the private sector’s 401(k) account, the earlier you begin contributing to your TSP, the more time it has to potentially grow. According to one of Dave Ramsey’s studies, half of the baby boomers have less than $10,000 set aside for retirement. The federal government encourages FERS individuals to contribute to the TSP by matching your contributions up to 5%. Think about it, if you’re a FERS employee and contribute 5% to your TSP, the government will match you 5%. That’s a 100% return on your investment! Contributing to your TSP in such a way over the years of your federal career can help you build your retirement savings for the future. In short, it is never too early to begin planning for federal retirement. Federal employees are blessed with numerous options and potential income streams. However, as previously stated, the many blessings can at times cause confusion.

3. Reduce debt

Debt as a whole is a huge concern for many considering federal retirement planning. One of the biggest questions is, “Should I pay my home off before I retire?” The answer varies by situation but it is worth looking into. Credit card debt, student loan debt, credit card debt and student loan debt are also something to consider reducing before retiring as well. something to consider reducing before retiring as well. Reducing debt prior to retirement frees up income and could reduce stress in your retirement years.

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