Essential Points for Federal Workers Preparing for Retirement
In the world of retirement planning, understanding the intricacies of federal employee benefits is essential. One individual, with a background in helping federal employees navigate their retirement plans, has dedicated their career to this very purpose.
This expert, who boasts a mentor who is a retired deputy commander at the U.S. Defense Logistics Agency, offers insights through the Kiplinger Building Wealth program. The program features financial advisers and business owners who share strategies to build and preserve wealth, focusing on retirement, estate planning, and tax strategies that are particularly relevant to federal employees.
One such strategy involves the Thrift Savings Plan (TSP), a great investment offering low costs, a generous 5% match, and a Roth option. However, it has limitations, such as only having five investment options. Many clients opt to roll over their TSP to an Individual Retirement Account (IRA) to access more investment options.
Another strategy to consider is the survivor pension. A married federal employee can choose a survivor benefit for their spouse, with options including 50% or 25% of the pension, each costing a percentage of the ongoing pension, or no election, which does not cost anything but prevents the spouse from using FEHB if the federal employee passes away. It's important to note that the FERS survivor pension benefit does not pay out if the spouse dies first.
Option B of FEGLI becomes more expensive as the individual ages, making it an expense worth reconsidering. As an alternative strategy, a federal employee could replace the survivor pension with life insurance, which could provide more flexibility and benefits, such as leaving a potential legacy to family, taking cash value out, or utilizing it for long-term care.
If eligible, an individual may find better life insurance options with better features/benefits than FEGLI. If an individual has had Basic FEGLI coverage for at least 5 years before retirement, they are eligible for a "75% reduction", keeping 25% of their Basic life benefit for no cost for the rest of their life.
Tax planning is crucial in retirement, and seeking help from a Certified Public Accountant (CPA) and a financial planner specializing in tax planning is advisable when considering Roth conversions. Roth conversions can be used as a strategy to turn a forever-taxed investment into a never-again-taxed investment, potentially saving money on hard-earned dollars in retirement.
The individual's firm has many clients who are current or retired federal employees, leading the individual to specialize in federal employee benefits. In fact, the term "Federal Employee Specialist" was first supported by a human resources professional specialized in federal employment within their company.
Many of the individual's family members are retired federal employees, a testament to their dedication to this niche. The article was written by a contributing adviser, not the Kiplinger editorial staff. Their records can be checked with the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA).
One cautionary tale comes from a federal employee the individual worked with previously, who had a negative experience with a financial planner who did not specialize in federal benefits and was unfamiliar with the TSP. This underscores the importance of choosing a financial advisor with the right expertise and qualifications.
The program includes professionals with certifications such as CFP®, ChFC®, IAR, AIF®, CDFA®, and more. These certifications, along with the individual's personal experience and dedication to helping federal employees, make them a valuable resource in navigating the complex world of federal retirement planning.
Lastly, it's worth considering the Rule of 55 to avoid a 10% penalty if retiring early. A federal employee can get a 10% increase to their pension calculation by waiting another year to retire if they are over 62 and have 20 years of service.
In conclusion, the Kiplinger Building Wealth program offers valuable insights for current and retired federal employees looking to build and preserve their wealth. With a focus on retirement, estate planning, and tax strategies, and a team of certified professionals specializing in federal employee benefits, it's a resource worth exploring.
Read also:
- Condor Reveals Q2 Results for 2025 and Secures a $5 Million Bridge Loan
- More than half of British homes adhere to insulation standards established during the 1970s.
- While Éowyn's storm caused a massive €301 million in damages, fossil fuels maintain their position as the leading power source.
- Transition in Energy: Merz Administration Plans Enactment of Heating Revolution from 2026
