Retirement Accounts

Retirement Strategies for Government Employees

Learn how government employees can achieve their retirement goals.

Stephanie Faris

Stephanie Faris

Published September 4th, 2020

Updated December 16th, 2020

Key Takeaways

Government employees have benefits through a retirement system that includes a combination of a pension and an option to fund a defined

In most cases, pensions will be fully funded by the government, but sometimes employees must contribute a small amount

Employees should still take time to make sure they’ll have enough funds to take care of themselves after retirement

Government employees are at a distinct advantage when it comes to saving for retirement. You’ll have a pension, as well as the opportunity to participate in a defined contribution plan known as a Thrift Savings Plan (TSP) that functions much like 401(k)s and 403(b)s. But that doesn’t mean you shouldn’t plan for retirement.

Local and federal retirement planning isn’t all that different than what private-sector employees do. You’ll need to decide how much money will be necessary to live comfortably, then make sure you’re setting enough aside each year to cover it. But first, it’s important to fully understand the options available to you.

Understanding Federal Government Employee Retirement Benefits

Federal retirement planning starts by knowing your benefits. To participate in the Federal Employees Retirement System (FERS), you’ll have 0.8% of your basic pay contributed to the plan. The government will kick in 10.7% or more. At retirement, you’ll typically receive 1% of your pay during your top three earning years multiplied by your years of service. You can also contribute up to 11% of your income to a Thrift Savings Plan, an amount matched by the government by up to 5% of your basic pay, depending on the amount of your contribution.

Hired Before January 1, 1984

If you were hired before January 1st, 1984, check to see if your retirement is funded through the Civil Service Retirement System (CSRS). If this is your retirement plan, Social Security taxes aren’t taken out of your pay. Unless you pay into Social Security through other jobs, this means you won’t receive a Social Security payment upon retirement.

Hired in 1984 or Later

Those hired from January 1st, 1984 on are automatically added to the Federal Employees Retirement System (FERS). This is where you’ll get the best federal employee benefits, including Social Security. Your agency will contribute toward your pension, giving you a nice income at retirement, although it will likely be reduced compared to what you make while working.

Thrift Savings Plan (TSP) Contributions

Traditional TSP retirement advice goes along with what you’d hear about a 401(k) or 403(b) plan. You should, at the very least, contribute the amount necessary to get the full match. Your agency will automatically put 1% of your basic pay into the plan, whether you contribute or not, but a TSP financial advisor will likely say you should invest at least 5%. Your agency will contribute 4% of your base pay as long as you’re putting 5% into the plan.

State and Local Government Employee Pensions

If you’re a state or local government employee, you’ll also have a pension, although the details of that pension will vary. Pensions historically were funded by the government, but today’s pensions are primarily funded through investments. In some areas of the U.S., government employees contribute a small amount to their own pensions, but if you’re a state or local government employee, most of your pensions will be paid through the money your governing authority is investing.

Bottom line

If you’re a government employee, it’s important to learn about your retirement savings and calculate what you’ll need to retire at your desired age. There are local and federal retirement planning consultants who can sit down with you and help you calculate your savings, then make recommendations to boost it even further. You can even set up retirement savings that supplements your government retirement accounts to ensure you’re taken care of in your golden years.


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Stephanie Faris
Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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Stephanie Faris
Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

To empower a confident, worry-free retirement for everyone.

Legal

Retirable, Inc. ('Retirable') is an SEC registered investment advisor. By using this website, you accept our Terms and Conditions and Privacy Policy. Retirable provides holistic retirement planning services, which are available only to residents of the United States. You must be at least 18 years of age to become a Retirable Premium user. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.

Investing involves risk and past performance is not indicative of future results. Increased spending increases the risk of depleting your savings and performance is not guaranteed. It is very important to do your own analysis before making any decisions based on your own personal circumstances.

For more information, see our Form ADV Part II and other disclosures.

Retirable is a financial technology company and is not a bank. Banking services provided by Thread Bank, Member FDIC. The Retirable Business Visa® Debit Card is issued Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. FDIC insurance is available for funds on deposit through Thread Bank, Member FDIC. Pass-through insurance coverage is subject to conditions.

Your deposits qualify up to a maximum of $3,000,000 in FDIC insurance coverage when placed at program banks in the Thread Bank deposit sweep program. Your deposits at each program bank become eligible for FDIC insurance up to $250,000, inclusive of any other deposits you may already hold at the bank in the same ownership capacity. You can access the terms and conditions of the sweep program athttps://go.thread.bank/sweepdisclosure and a list of program banks athttps://go.thread.bank/programbanks. Please contact [email protected] with questions on the sweep program.

* The interest rate on Retirable Consumer Deposit Account Tier 2 is 3.4% with Annual Percentage Yield (APY) of 3.45%. The interest rates are accurate as ofSep 19, 2024. Rate is variable and is subject to change after account opening. Fees may reduce earnings.

** Refer to the fee schedule in your Consumer Deposit Account Agreement

© 2024 Retirable Inc. All rights reserved.

We're accredited and certified by

To empower a confident, worry-free retirement for everyone.

Legal

Retirable, Inc. ('Retirable') is an SEC registered investment advisor. By using this website, you accept our Terms and Conditions and Privacy Policy. Retirable provides holistic retirement planning services, which are available only to residents of the United States. You must be at least 18 years of age to become a Retirable Premium user. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.

Investing involves risk and past performance is not indicative of future results. Increased spending increases the risk of depleting your savings and performance is not guaranteed. It is very important to do your own analysis before making any decisions based on your own personal circumstances.

For more information, see our Form ADV Part II and other disclosures.

Retirable is a financial technology company and is not a bank. Banking services provided by Thread Bank, Member FDIC. The Retirable Business Visa® Debit Card is issued Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. FDIC insurance is available for funds on deposit through Thread Bank, Member FDIC. Pass-through insurance coverage is subject to conditions.

Your deposits qualify up to a maximum of $3,000,000 in FDIC insurance coverage when placed at program banks in the Thread Bank deposit sweep program. Your deposits at each program bank become eligible for FDIC insurance up to $250,000, inclusive of any other deposits you may already hold at the bank in the same ownership capacity. You can access the terms and conditions of the sweep program athttps://go.thread.bank/sweepdisclosure and a list of program banks athttps://go.thread.bank/programbanks. Please contact [email protected] with questions on the sweep program.

* The interest rate on Retirable Consumer Deposit Account Tier 2 is 3.4% with Annual Percentage Yield (APY) of 3.45%. The interest rates are accurate as ofSep 19, 2024. Rate is variable and is subject to change after account opening. Fees may reduce earnings.

** Refer to the fee schedule in your Consumer Deposit Account Agreement

© 2024 Retirable Inc. All rights reserved.

We're accredited and certified by