Greg Klingler, Government Employees’ Benefit Association (GEBA)
There’s a lot to like about federal employment: unparalleled job stability, guaranteed income levels within specified periods of time, and of course, the ability to serve the public.
Couple this with a wide array of employee benefits – notably the recent expansion of FMLA and, as recent agency surveys have suggested, perhaps greater opportunities for telework – joining the federal workforce may be more attractive now than ever.
Given the instability of 2020, this may be especially true for recent college graduates and the recently unemployed, those finishing their military careers, and mid-career professionals seeking to build a late-career retirement nest egg.
But whatever your age and whatever your circumstances, it’s never too early or too late to consider how to take advantage of your federal benefits in the most efficient way.
Below is a summary of some of your most powerful benefits that may not be reflected on your bottom line, from the basic to the not-so-basic.
Your Thrift Savings Plan (TSP):
The end of your federal career might be the last thing on your mind when you’re just starting it, but statistics show that taking advantage of the Thrift Savings Plan (TSP) will provide you with your greatest source of wealth in retirement. Investing as early as possible and letting your money work for you for years or even decades is the best way to create substantial income in retirement. For unlike some private sector jobs, which offer no or a minimal employer match, the government will provide 1% to all employees and then match the first 3% of pay you contribute dollar-for-dollar and the next 2% at 50 cents on the dollar. This is a total of 5% in employer contributions to your retirement plan.
While every employee’s needs are different, generally starting with a goal of contributing 10% of your income to your TSP and making adjustments based on your individual needs is a good starting point.
As you set your initial contribution amount and investment allocation, you should also remember that contributions are flexible – you can always reduce your contributions when large expenses, for example a mortgage, a child, or health costs, arise in the future. In addition, allocations across the TSP’s five individual funds (G, F, C, S, and I Funds) or L Funds (a mix of “lifecycle” funds that correspond to your personal “time horizon”) should be periodically reviewed with an advisor, and potentially changes, to ensure you’re facing an appropriate level of risk as you progress through your career.
Your (Many) Insurance Options:
First and foremost, young employees who have the option to stay on their parents’ plan until they’re 26 typically should do so in order to access the significant cost savings this delivers. Those who have access to Tricare should maintain its coverage as well.
For all others, it’s important to read up on the Federal Employees Health Benefits (FEHB) Program in the context of your and potentially your dependents’ needs, the coverage offered, and the pros and cons of high- and low-deductible plans. It’s also smart to consider the potential value of a Flexible Spending Account (FSA), which allows you to put money aside on a pretax basis to pay for health, vision, and dental expenses not covered by the insurer.
Whatever their age, new federal employees might well assume that the life insurance available to them, Federal Employees’ Group Life Insurance (FEGLI), provides sufficient coverage to meet their needs. But in my 11 years of experience advising Federal employees it’s clear the vast majority of employees underestimate not only how much coverage they need, but also how much they have through FEGLI. So it’s definitely worth evaluating your current and future needs; what FEGLI offers in terms of flexibility, portability, family protection, and cost savings; and why supplemental insurance from other providers might better serve your needs in not only a more complete, but potentially more cost-effective, manner.
Dental & Vision:
Last but not least, as with health insurance and life insurance it’s important to consider what you need and what the federal government offers in terms of dental and vision coverage. The relatively small amount of dental coverage that may be included in FEHB plans is underwhelming for most employees in need of dental care, so they should consider an option from the variety of supplemental dental/vision options available. While the Federal Employees Dental and Vision Insurance Program (FEDVIP) may be attractive to many, it’s important to keep in mind that these plans are not subsidized by your employer, making reviewing Dental and Vision coverage outside your traditional federal insurance beneficial.
Your Agency-Specific Benefits
Lastly, while all of the above applies to all Federal employees, there are many benefits that differ based on your particular agency and/or your geographic location. You should therefore be sure to research or ask about perks such as opportunities for telework, on-site gyms or gym subsidies, commuter subsidies, travel or purchase discounts, etc., and pay attention to your agency’s website and newsletters in case they change. They might seem negligible at first, but employees who have access to and take advantage of benefits such as these often save $1,000s over the course of a year and $10,000s over the course of a career.
Taking stock of all of the above, it’s clear that federal employment offers a very attractive list of benefits to choose from.
While your salary isn’t a benefit per se, it is definitely the biggest benefit of having a job, whether Federal or otherwise – and keeping as much of it as possible requires that your employer gets your W-2 right. With that in mind, you should make 100% sure that you provide the right information to your employer, from your Social Security number to the spelling of your name, lest you trigger a potential audit. And, more importantly, you should use the IRS’s Tax Withholding Estimator to make sure that your employer withholds an appropriate amount of your salary for income taxes, Social Security, and Medicare – that is, enough to prevent you from owing a big tax bill in April, but not so much that you provide the government an interest-free loan all year (and not have the money to spend or save yourself).
But being a financially-savvy Fed means making choices and investing your hard-earned dollars in the benefits that will best serve your needs and support your financial future, and discussing them with a Chartered Federal Employee Benefit Consultant (ChFEBC) – aka a certified federal employee benefits expert – is often a good place to start.
Greg Klingler is Director of GEBA Wealth Management