Investing 101: Develop a Plan

As a federal employee, you are better off than a lot of workers in the private sector in terms of developing the initial stages of your retirement plan.

The federal government gets the process started for you. Depending on when you were hired, you are likely automatically enrolled in the Thrift Savings Plan, the federal government’s version of a 401(k).

At some point, your agency will make required contributions to your TSP investment, whether or not you are making your own contributions. You are also required to make contributions to your basic annuity (your pension), which you will automatically receive when you qualify upon retirement.

And of course, like all working Americans, you are required to make contributions to Social Security, which you will receive upon retirement.

So as a federal employee, you are immediately set up with three retirement investments: your TSP, basic annuity (pension), and Social Security.  But that doesn’t mean you are done planning for retirement.

In fact, these investments may fall short of the lifestyle you desire for retirement — what we in the world of finance and investing call the retirement gap.

You need to develop a plan to address that retirement gap. When you retire, you will no longer collect a full-time salary. You should ensure your federal retirement investments come close to replacing that lost salary.

A recent survey of Americans found that those who did not have a retirement plan were not well prepared for retirement. And, they saved very little money.

However, American workers who had a retirement plan in place were extremely prepared for retirement. For example, 35 percent of Americans with a retirement plan saved at least $100,000, and they invested their money significantly more than workers who lacked a plan.

Think of a retirement plan as your roadmap to smoothing the road to retirement. It is also a chance for you to objectively evaluate your federal benefits (pension/TSP) to determine whether they will provide you with a sufficient amount of retirement earnings.

From our experience, however, federal benefits often fall short of expectations; thus, the unsettling retirement gap enters the picture for many federal workers.

In a recent blog, for example, we examined some of the flaws with the TSP. Forming a retirement plan, however, is easier said than done. And examining your federal benefits — which are governed by thousands of pages of rules — can be headache.

We can help you sort through the complexity and take a close look at your federal benefits package. Will it provide enough retirement income to close the retirement gap? Should you consider other investment alternatives beyond what the federal government offers you?

Contact one of our federal benefits specials for a no-cost consultation.