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Top 5 Tips for Young Federal Employees | Fed Retirement Planning

Top 5 Tips for Young Federal Employees

By September 28, 2015Uncategorized

When you meet with as many people in the same industry as I have over the years, you start to hear similar sentiments.

Federal employees are no different.

The phrase most often uttered out of federal employee’s mouths when I help them prepare for retirement is:

I wish I would have done that sooner.

Almost without fail, this phrase is uttered in one form or another. And, there’s good reason for it.

When you’re young and starting out in service with the government you’re not worried about how much is going to be in your TSP when you retire. You don’t care what the cost of your insurance is. Pension, what’s that?

However, there will come a time when you WILL care, and I don’t want you to be like so many federal employees who are now retiring and didn’t receive the help they needed when they were starting their career.

Today, we are focusing on things we can do today that will change tomorrow.


1. Start a Rainy Day Fund

I’ve written and spoken on the importance of a Rainy Day Fund many times. A Rainy Day Fund is simply an amount of money, I typically suggest anywhere from 3-12 months worth of expenses put into an account that is highly liquid. This could be a checking account, savings account, money market account or something similar.

In my opinion, it is the starting point to investing.


Because neither you or I can predict the future.

How many times have you heard or seen someone have to make drastic decisions because one of lifes unexpected events occured.

Such as:

  • a medical emergency
  • a lost job
  • a deduction in pay
  • a families member’s passing
  • a childbirth
  • ________

It’s easy to fill in the blank for your own situation.

If you’re not prepared for these unexpected occurrences than you’re potentially putting yourself and your family at risk.

So, before you go any further, start a Rainy Day Fund.

2. Know How Much You’re Paying for Your Benefits

This is a tip that has confused me for quite some time.

People get upset if they get overcharged a couple bucks at a restaurant, but have no idea how much they are paying for their benefits.

One such benefit that I always tell people to check is their life insurance.

Believe it or not, the majority of you reading this who have life insurance are probably paying more than you think.

The reason is because your life insurance, specifically Option B, except for basic life insurance (click here to read the Basic Life Insurance Basics) increases in price every 5 years until age 85.

My suggestion seems like an obvious one, but I’ll state it anyways. Apply for life insurance outside of the federal retirement system and compare the prices and benefits. One reason the price has to increase as you age is because FEGLI is a group policy.

This means everybody paying for FEGLI is based off of the average of the people within their age group. What this equates to is people with multiple heart attacks, strokes, cancers, obesity problems, smokers, and any other thing you can think of are all combined and an average is derived.

In a commercial policy, the price is based off of the individuals health.You may be surprised how much a commercial policy could save you over your career and it never hurts to see what your other options are.

If you don’t know how much is coming out of your paycheck for things such as Pension, TSP, Life Insurance, Health Insurance, or any of your other benefits how are you supposed to plan for the future?

Knowing the cost of your benefits and how much they will increase in the future, or how you can reduce the cost is essential to having a strong foundation from which to build your retirement.

Finally, it’s easy. Call your HR rep. Look at your paystub. If you’re still struggling leave me a comment and I’ll see how I can be of help.

3. Invest 5% in your TSP (for those who have a match)

Now , not everybody should invest 5% in their TSP.

Some can’t afford to, others have plans to invest elsewhere, and still others don’t receive a match.

However, you most likely should invest 5% in your TSP if you can afford it, have low debt, and receive a match.

Why 5%?

Because the majority of full time federal employees will receive an agency match of up to 5% of their salary contribution.

What this means is, if you contribute 5% of your salary to the TSP, your agency will contribute a matching 5% to your TSP equaling 10%.

By not contributing 5% to your TSP you’re essentially leaving free money on the table.

And everybody likes free money, right?

I also think that many of you should NOT invest more than 5% into the TSP. The reason? You have more options, less restrictions, and more freedom investing any additional dollars outside of the TSP.

This is advice that isn’t just given to federal employees, but also often to those with 401(k)’s as well.

Within the TSP you only have 5 investment choices plus the L-Funds. Outside of the federal system there are a million and one things to invest in and also fewer withdrawal restrictions. (Click here to watch my video on the TSP Withdrawal Options)

You also don’t have the option for a Roth IRA within the TSP. Many people will argue that you have a Roth TSP which you do, but they differ in multiple ways. You can read more about that here in the Roth TSP vs. Roth IRA Showdown.

4. Get Rid of Debt

Too many today live their life buried in debt. It’s what many call the “American Dream.” The problem with the “American Dream” is you are constantly trying to keep up with bills never seeming to get ahead.

Many begin living paycheck to paycheck.

You don’t have to do that!

Bring your debt down to a manageable level outside of mortgage debt and THEN start investing. Does this mean all debt is bad debt? Hardly, but many today are over-leveraged.

This also applies to student debt.

Many young federal employees will have student debt as the federal government is constantly seeking top talent. For those of you reading this, it’s important to pay that down, especially with how high student loan rates can be. There’s various ways this can be accomplished, but with hard work, proper planning, and discipline it’s more than doable.

5. Seek Help!

There are resources available to help you plan for retirement.

One of which is right here, so pat yourself on the back for being proactive.

But don’t put things on the backburner until you’re too old to change things. Register for webinars, read available articles, ask your co-workers, talk to your HR rep. Do anything that will increase your knowledge on your benefits/retirement.

Here’s a few of my favorite places for information on federal benefits/retirement:

Technology has allowed the passing of information to be easier than ever. There’s so many resources and people using technology to help others, seek them out! Location is no longer a barrier and a lack of information availability is no longer an excuse.

And, while I’m on the subject, here is another piece of advice.

Fact Check!

Make sure that the advice being dispensed is accurate. With complex subjects comes misinformation, with a majority of it being on accident.

The advice given is only good as the advisor. AND, often times your uncle who’s sole investment experience was making a lot of money buying Wal-mart stock is not the best advisor for you.

So, what are some things you wish you had been told/known earlier in your career?

– Cooper Mitchell

Author Cooper Mitchell

Hello, I'm Cooper. I am the President of and an Investment Advisor Representative for Dane Financial, LLC. I specialize in helping Federal Employees better understand their benefits and prepare for retirement through Comprehensive Financial Planning and Investment Management. When I'm not helping federal employees, you can find me focusing on other entrepreneurial pursuits, spending time with my beautiful Wife, worshipping Christ, blogging, lifting (somewhat) heavy weights, and reading non-fiction.

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