Financial Pitfalls Federal Employees Should Avoid

David Packer |

We’ve all made financial mistakes. Whether you took out an expensive loan on a fancy car you don’t drive or you waited too long to start saving for retirement, it isn’t always easy to make the right decision. As a federal employee, you are provided with a different set of financial tools than those working in the private sector, so there are specific mistakes you need to avoid to ensure your financial future stays on track. Let’s break down a couple of points to help you understand the nuances of your financial situation and unique benefits as a federal employee.

Thrift Savings Plans

One important benefit federal employees are entitled to is a thrift savings plan (TSP). A common financial pitfall among these retirement savings plans has to do with how they are invested. The federal employee must understand that TSPs are intended for long-term investing, not just to the point when retirement begins, but through retirement. Because of this, the federal employee must invest in specific funds that align with that long-term investment approach. The funds that are allowed inside a TSP are not available to the general public. Some of these funds are titled C, S, I, L, F, and G funds. With this long-term approach in mind, the federal employee should check how the TSP is invested, making sure that it is allocated more so with stock funds (C, S, and I). However, if you are in the later years of retirement, it’s important to ratchet down the allocation of stock to an increased allocation of the fixed-income funds (F and G).

In addition to how the funds are invested, it’s equally important to do your best to contribute the maximum amount allowed when you are younger and when you reach age 50 (eligible to contribute an additional “catch-up” contribution).

Failure to Include or Update Beneficiary Designations

Some of the special accounts or forms that federal employees may have to be aware of include the following:

  • Unpaid compensation and unused annual leave of a deceased federal employee
  • Federal employees group life insurance
  • Thrift savings plan
  • CSRS or FERS

The financial pitfall that we typically see here is not including or updating beneficiary designations on the above-mentioned accounts or forms. This is important, especially if the federal employee gets married, has children, gets divorced, or experiences any other major life change.

Emergency Funds

Having adequate emergency funds applies to all individuals, but this point is also important to make when considering pitfalls for federal employees. While federal employees have very strong job security, emergency funds still play a major part in their financial plan. The reason for this is because of the potential for a government shutdown, which could eliminate certain sectors or lay off less-tenured employees.

Failure to Stay Informed

Benefits for federal employees can get complicated and they may change over your career. Because of this, many federal agencies offer multi-day seminars for mid-career employees and employees nearing retirement. To stay abreast and more informed, it’s a great idea to attend and actively participate in such seminars when possible. The earlier you start understanding the nuances that federal employees are faced with, the better off you will be to make decisions today that have a big impact on your financial future.

Take the Next Step

At Bridgerland Financial, we work closely with our clients to design a financial plan that provides confidence and clarity while also helping to safeguard their future. We help our clients plan wisely so they can live fully by building the retirement they’ve been dreaming of. If you’re nearing retirement, are already enjoying your golden years, or are a government employee and you don’t already have an advisor helping you on your financial journey, schedule an appointment online or reach out to us at or (435) 535-1630.

About David

David Packer is founder and financial advisor at Bridgerland Financial, an independently managed financial firm in Utah. With 20 years of industry experience, David serves his clients by helping them bridge the gap between their working years and their retirement. He provides tailored, comprehensive financial plans to his business owner and individual clients so they can retire with confidence. David has a bachelor’s degree in finance and holds the Chartered Retirement Planning Counselor℠, CRPC® credential. Outside of the office, David loves to spend time with his wife and five kids and stay involved in his community. He currently serves on the board of directors of the Cache Valley Chamber of Commerce. He and his wife, Melonie, spent years as foster parents and eventually adopted their foster children. David loves playing and watching all kinds of sports, including officiating high school sports, and won’t turn down a good board or card game. Learn more about David by connecting with him on LinkedIn.