Retirement planning is a crucial aspect of financial stability for anyone nearing retirement. The Federal Employees Retirement System (FERS) plays a significant role in ensuring that employees have a good foundation as they transition into retirement. Being a part of this system, as a federal employee, you have the unique power of a pension. The Basic Benefit Plan (FERS Pension/Lifetime Annuity) plays a notable role in your retirement income.
What is the Basic Benefit Plan?
Federal employees contribute to the Basic Benefit Plan through automatic payroll deductions. In addition, their employing agency makes contributions while they are employed. Upon retirement, employees receive monthly payments, for life, calculated based on their “high-3” average salary (the highest average basic pay earned during any three consecutive years of service) and years of creditable federal service.
The Importance of The Federal Pension in Retirement Planning
The Federal Pension play a pivotal role in providing financial security during retirement for several reasons:
- Predictable Income: Unlike stocks or other investments that fluctuate in value, pensions offer predictable monthly payments, giving retirees more confidence knowing they have a steady income.
- Longevity Protection: Annuities from the Basic Benefit Plan ensure that retirees do not outlive their savings, provide income for life and reduce the risk associated with longevity.
- Inflation Protection: Many pensions, including FERS annuities, include cost-of-living adjustments (COLAs) that help maintain the purchasing power of retirees’ income in the face of inflation.
- Spousal and Survivor Benefits: Pensions often provide options for spousal benefits and survivor annuities, ensuring that the retiree’s family is cared for even after their death.
Planning for a Smarter, Secure Retirement
While the federal pension is a cornerstone of retirement income for federal employees, it’s crucial to incorporate the other pillars of your retirement income into your financial planning:
- Diversify Savings: Utilize the TSP to its fullest potential by making the maximum allowable contributions and taking advantage of agency matches.
- Early Planning: Start planning for retirement early to ensure a smooth transition. Consult with a Fed-focused advisor to create a comprehensive retirement strategy.
- Stay Informed: Keep up to date with changes in FERS regulations, Social Security policies, and TSP options.
The federal pension, as part of FERS, plays an indispensable role in ensuring that federal employees have a secure and stable income during their retirement years. By offering predictable, lifelong payments and protection against inflation and longevity risks, pensions provide a solid foundation for a comfortable retirement. Coupled with Social Security and the Thrift Savings Plan, federal employees can confidently look forward to their future, knowing their financial well-being is well-supported.
Looking for assistance? We can help!
If you are looking for a guide to help you plan your retirement, Benchmark Financial Group can help. It all starts with gathering your information, discussing your goals, and preparing a plan so that we may help you maximize your income in retirement. With the right strategy, you may get your income equal to or exceed your pre-retirement net income. To get started, schedule an appointment today with Benchmark Financial Group by filling out the form online or calling David Raetz at 913-534-8256 to discuss your financial needs. Benchmark Financial Group is happy to help you navigate your options and determine the best path to move toward your financial goals.
*Securities and Advisory Services Offered Through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.
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