Common Mistakes Federal Employees Make in Retirement Planning
Federal employees enjoy unique, sometimes better, benefits than other non-public sector employees. Make sure you take full advantage pf your federal benefits by planning for retirement adequately. If you want to live a happy and comfortable life post-retirement, avoid these crucial mistakes.
4 Common Federal Employee Retirement Planning Mistakes
Failing To Review Your Personnel Records
Federal employees should regularly check their Official Personnel Folder (OPF) and make sure that the information is correct and up-to-date. Some things to check include whether you are covered by the correct retirement system, the accuracy of leave and Service Computation Date (SCD), and beneficiary designations. These things will affect when you can retire and the processing of your retirement benefits. So, regularly checking and updating your information in the OPF should be part of your retirement planning.
Not planning Ahead While Your Wait to Receive Your Retirement Benefits
Retirement benefits typically take about 6 months to be processed. That means your pension will not be released for 6 months after you retire. Since you will also not be getting salary during these months, it is important to save enough to cover basic and unexpected expenses during this time. It’s important to prepare for this ahead of time so you don’t have to struggle at the start of your retirement. If you are nearing retirement and still have not saved for this period, you can apply for a loan for federal employees through the ACCESS LOANSTM loan program for federal employees. These loans are affordable, and the approval process is simple and easy.
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Not Investing In TSP as a Long-Term Investment Plan
The Thrift Savings Plan (TSP) is one of the unique benefits offered to federal employees. This is similar o a 401(k) plan in that it allows employees to contribute a part of their pre-tax salary into a savings account or invest it in a Roth TSP which is also not taxed when withdrawn after retirement. Another benefit of the TSP is agency matching, which means that your agency matches a percentage of your contributions.
Most employees favor the IRA over the TSP, which is quite sensible. However, federal employees do not need to choose between IRA and TSP since they can have both. Investing a small portion of your salary to TSP is a good way to bolster your retirement income.
Not Planning For The Inevitable
The average federal employee retirement age is 62. At this age, you may or may not be in the best shape of your life. As such, federal employees should prepare themselves financially when it comes to urgent medical needs and expenses. The possibility of requiring urgent care or hospitalization as get older is inevitable. Employees are advised to maintain their federal employees’ health benefits (FEHB), as well as loan-term care (LTC) insurance. Likewise, having additional savings tucked away for security is a good thing. Federal employees should also prepare an estate plan, which would name their beneficiaries who will have access to their bank accounts, TSP and IRA accounts, and so on.
The earlier you prepare for retirement, the easier your retirement will be. Start planning for your retirement now and avoid these three crucial mistakes.
* ACCESS LOANS™ products are funded and serviced by Safra National Bank of New York (“SNBNY”).
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