man at desk stressed about retirement

Top 5 Financial Planning Mistakes Federal Employees Make

Maryland ranks fourth in the nation for employment within the federal government. Located in the state’s capital, Scarborough Capital Management helps a lot of these employees navigate their retirement plans and plan for the future. We offer Thrift Savings Plan (TSP) retirement advice, TSP analysis and pension reviews. In our experience, we see some of the same mistakes.

While the basic elements of financial planning are the same for most people, there are certain programs and benefits open to federal employees that make their financial planning process a little more complicated.

Fortunately, while these financial planning mistakes are easy to make, they’re also easy to avoid with a little planning, foresight and regular review.

Here are our top 5:

1. Not Updating Beneficiary Designations 

Outdated beneficiaries are a common problem across the board; however, it’s especially a concern for federal employees, because there are 4 separate areas where this is done:

  • Pension (often called your annuity)
  • Thrift Savings Plan (TSP)
  • Insurance Plan
  • Payroll

If any of these are outdated, whatever designations you made most recently will be followed. Sometimes this ends up being an ex-spouse.

To ensure your assets aren’t left to the wrong people, it is vitally important to keep your beneficiary designations up-to-date. If your circumstances or intentions change (for example, in the event of marriage or divorce, or a birth or death in the family), you must submit a new beneficiary designation form. You must also fill out a new form if the name or address of one of your beneficiaries changes.

As a general rule, it’s a good idea to review your beneficiaries at least once a year.

2. Not Putting Enough Into a TSP to Receive Maximum Match

Federal employees are eligible to contribute to a Thrift Savings Plan (TSP), with a variety of investment options to save for retirement. (For more specifics on your TSP, check out our guide, here.)

In many organizations, your employer offers a matching contribution for your TSP contributions. For example, if you choose to contribute 3 percent of your salary annually and your employer offers a 100 percent match, your employer will contribute another 3 percent into your fund choices.

Just like a 401(k) match in the corporate world, the TSP match is basically free money – a benefit you should take advantage of. In addition, these matched contributions are not subject to vesting requirements.


Financial oversights can be costly. Contact Scarborough Capital Management to see how we can help.


3. Not Understanding Retiree Healthcare Coverage 

Federal employees, retirees, their families and their survivors are fortunate enough to be eligible for healthcare benefits from the widest selection of health plans available in the U.S., under the Federal Employees Health Benefits (FEHB). This variety is a blessing, but also a potential curse, because the plans, benefits and options can be confusing and overwhelming.

Before making enrollment decisions, make sure you compare costs, benefits and features of the different plans available.

You can choose from plans with higher deductibles, lower premiums, health savings accounts, etc. Make sure you understand the options available to you so you can choose the plan that’s best for you.

4. Not Having Other Retirement Plans to Rely On in Retirement

We’ve all heard the saying: Don’t put all of your eggs in one basket. That’s especially true when you’re talking about your nest egg.

Not that long ago, when you retired with a pension and Social Security, you could reasonably expect the income from those sources to be enough to maintain your lifestyle in retirement, but times have changed. We’re also living longer today, so you have to account for longevity risk – no one wants to outlive their retirement income.

Instead of one or two retirement income streams, today’s retirees typically rely on income from many different sources, because diversified retirement income offers many benefits. Diversification helps protect you against pension collapse or drastic stock-market losses. Several income sources would allow you to withdraw from one source while continuing to grow others (or before you are eligible to withdraw from another retirement account).

Other potential sources of retirement income you can plan for might include various retirement savings accounts, such as 401(k)s and IRAs, Life Insurance Retirement Plans (LIRP), a part-time job, or profit made from selling assets, such as your home.

Discuss your portfolio with a financial advisor to make sure your strategy fits your risk tolerance and meets your individual goals.

5. Getting Help from the Wrong Financial Advisor

No matter how diligent and prepared you aspire to be, your financial situation is only as good as the advice you receive and decisions you make.

Do your homework when considering financial advice or choosing a financial professional to work with. Not every advisor has your best interests at heart. And, as always, there is no one-size-fits-all financial guidance. Everyone’s financial circumstances, retirement plans and timelines are different. Make sure you work with an advisor who specializes in situations like yours.

In addition to those we have covered here, there are many other financial planning mistakes federal employees make by working with the wrong financial advisor. Some might be small and financially impact you right away; others may be astronomical, and you might not feel for months or even years.

Save yourself the aggravation, time and money, and do your due diligence, finding a financial advisor you feel comfortable with and who complements your financial needs and goals. For example, if you’re looking for an advisor who specializes in TSP retirement advice, make sure the advisor you choose has experience with these plans.

If you’re looking for a financial advisor in Annapolis, MD or you’re ready for a second opinion, schedule a no-obligation consultation with the advisors at Scarborough Capital Management to see if it’s a good fit.

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