Separating from corporate retirement plans, federal employee federal retirement planning provides some unique advantages. First up is the FERS retirement plan. The FERS plan contains special benefits from three separate sources: a basic plan, Social Security, and a Federal Retirement Scholarship Plan (loss). Click for more on federal retirement plans.
This retirement plan was designed by Congress to help employees who have worked for many years in federal jobs to save money for their later years.
But why are we focusing on federal retirement planning for federal employees? This group of workers represents one of the largest groups of retired Americans. Retirees comprise a large portion of our population - many retirees return to work each year as the economy remains weak.
These are the people who could benefit most from the many federal services including financial planning assistance. Let's look at how they fit into our retirement plans. Browse to this link to understand more on federal retirement.
A good part of federal retirement planning focuses on lifestyle changes. In order to take advantage of all the retirement benefits we've talked about - which include investment in the TSP (social security), IRA (retirement accounts like 401Ks) and pensions - you need to change your spending habits. One way to accomplish this is to change your investing strategies.
The key to investing successfully over the long run is to use a combination of asset allocation techniques and a strong discretionary income protection policy. For many federal employees, changing their lifestyle and investing practices requires a waiver of their current employer. So many federal employees have employer-sponsored policies that don't allow them to invest in an IRA or TSP.
Another strategy we will cover in this article is called Thrift Savings. It is a combination of investing for retirement in a traditional IRA, social security benefits and a Thrift Savings Plan. Many federal employees are able to participate in both plans because of the federal tax breaks for retirement savings.
You should also note, though, that in the early years of retirement, a traditional IRA usually isn't enough to provide decent living standards. In addition, if you quit your job during the first few years you're working, you may be unable to invest sufficiently in the traditional IRA.
So what is a Thrift Savings Plan? In essence, it is a combination of investing for retirement in a traditional IRA, a special account set up by the Social Security Administration, possibly interest from a private lender and possibly employer provided Thrift Savings Loans.
A Thrift Account allows you to withdraw large portions of your benefits without paying taxes on them until they mature - usually in about ten years. If you have a large portion of your benefits that you want to withdraw early, a traditional IRA might not be enough to meet your needs.
If you start taking cash withdrawals during your first ten years of federal service, you can meet the requirements for a Thrift Plan at a much earlier stage. That's because you have already begun to build a nest egg to take you through the later years of your career.
In fact, starting a Thrift Account at the very beginning of your career is often the best way to reach retirement age. Check out this article: https://www.britannica.com/topic/pension to get more info on the topic.
