Federal employees spent much of 2011 thinking about what proposed legislation might be affecting you, or worrying about a furlough, or addressing how future budget cuts might impact your agency. These are all things that happen to you. This month’s Steps to Retirement Planning focuses on the things related to your benefits that are within your control.
1. How much you save – whether it’s saving in your Thrift Savings Plan or outside investments or real estate, you control how much you save now. This is a piece that Congress can’t dictate. You get to determine how much you’re willing to forego today in order to protect your interests for the future.
2. Where you save – if you’re in FERS, of course, you’ll save at least 5% in the TSP…you get a 5% match from the government. Savings beyond the 5%, however, are a different story and require more thought. TSP has very low fees (which can erode your return), but there are a limited number of investment choices. You may want to investigate a wider range of investment options or you might prefer that some of your funds go to a Roth IRA investment where the growth is tax-free. There will be a Roth TSP option coming in 2012, so pay attention to determine whether it makes sense for you to save something here.
3. How you allocate the funds you’re saving – this is probably the most common question we hear from federal employees. How should I allocate my TSP? It’s particularly difficult in the economic times we live in. Many TSP participants started in the TSP in the ‘90s when investing was nearly as easy as throwing a dart. The last eleven years have been more difficult. There’s no one who cares about your TSP more than you do, so developing a strategy for allocating and managing your TSP is more important than ever before. If your pension benefits were cut, the TSP is the piece of your retirement that you control.
4. Keeping the cost of your benefits (i.e., insurance coverage) at the appropriate level – you’ll notice that I didn’t say keeping them low at all costs. You have to evaluate the overall expenses involved with your coverage.
For example, if you choose a low-cost Federal Employee Health Benefit option, only to pay huge out-of-pocket expenses, it didn’t doyou much good to save on premiums. Your overall health care expenses are the marker you’re looking to lower.
The same is true for the Federal Employees Group Life Insurance plan. Start with how much coverage you need, then start to look at the best place to obtain your coverage. This is different from the FEHB in that you can go outside of the federal universe to look for this other coverage. Are you healthy enough to get private life insurance? Would it provide a lower cost, longer term coverage or better benefits? Having a plan that is tailored to your situation can save you money.
Watch this column in future months for more tips on taking control of your benefits. If you’d like to take advantage of a complimentary insurance review, contact our office.
