government jobs
Civil Service Retirement Benefits
Once you’re working, there is never a bad time to start your retirement planning.
View your working career in two part. First, the years that you’re actually working and second, the years that you’ll draw your retirement from working. You can plan for your retirement on your own or hire a financial planning professional. Regardless of what you choose, planning is essential for a financially secure retirement.
Historically, a government job has been viewed as a more secure job than a private industry job. While the salary may not be as high as a similar job private industry, the benefits in many instances are better. One of those benefits is retirement.
Retirement Plans
A government retirement usually means a defined benefit retirement which the IRS defines as “Defined benefit plans provide a fixed, pre-established benefit for employees at retirement.” A defined benefit plan will provide a set monthly payment during your retirement. In most instances, you can ensure that retirement payments continue with your spouse if you should pass on. The continuance will reduce your monthly retirement payments. Your payment is typically a function of your highest salary with the government agency, the number of years of service with the government agency, and a multiplier determined by the agency.
RETIREMENT TIP – Do you have prior employment with a government agency? Are you a military veteran?
Check with your agency’s retirement office to see if you can transfer or buy service credit to add to your retirement in your new new government job. If you do qualify, buy your service credit as soon as you can. Typically, you are buying the service credit at the salary level of the job that you currently occupy. As you promote, the cost of buying service credit will increase. We know of one government employee who worked as a part-time library page with one agency and then bought the service credit as an entry-level administrative employee at another agency. The employee retired as a manager and the service credit provided a nice increase in her monthly retirement.
The Federal Employees’ Retirement System Basic Benefit Plan is a defined benefit plan for federal employees hired after December 31, 1983. Federal agencies contribute funds to FERS on behalf of employees, in an amount defined by law. Upon retirement, FERS participants receive a benefit based on their highest three consecutive years of pay and number of years of service.
403(b) and 457(b) Deferred Compensation Plans
Deferred compensation is a supplemental voluntary plan that can provide additional retirement income and of financial security. Deferred compensation plans for government state and local government employees provide many of the same benefits of a 401k in private industry. Depending on the agency you work for, you may be eligible to participate. The major plans include 457(b) for state and local government employees and 403(b) for teachers. Note that 403(b) plans are exempt from the protections of the Employee Retirement Income Security Act. This effectively means that 403(b) providers do not have a fiduciary duty to participants. More on that and a word of caution on 403(b) plans.
Federal Thrift Savings Plan (TSP)
The TSP is a retirement savings plan for federal employees. It is a defined contribution plan, similar to the 401(k) plans that many private employers offer their employees. The retirement income you receive from your TSP account will depend on how much you put into the account, plus any matching contributions and the earnings on your investments.
Note: All of the above are general observations. The specific retirement benefits for the job(s) that you’re applying for may vary. Please check with the agency to verify your retirement benefits.