Planwell Financial Planning Guides Federal Employees Through Retirement Maze
There’s been a lot of confusion and conflicting information around the 2025 federal pay raise numbers.
—
Are federal employees getting a 7.4% pay bump or just 2%? This is an important distinction when it comes to retirement planning, especially for those close to calling it a career.
The 7.4% figure making headlines has been proposed by the FAIR Act to provide a federal pay raise for civilian federal employees covered by the annual statutory general schedule. The FAIR Act aims to bridge the pay gap that federal employees have been experiencing. According to the Federal Pay Council, federal employees on average earned 27.54% less in 2023 than their private sector counterparts. Historically, federal pay raises have been following the alternative pay plan schedule which would assume a 2% pay raise in 2025.
“This pay raise discrepancy is leading to a lot of misunderstanding among federal workers on how their potential high-3 pension calculations could be impacted,” explains David Fei, co-founder of PlanWell Financial Planning in Reston, VA. “Clarifying these numbers is crucial for those in their final years of service.”
For federal employees under either the FERS or CSRS retirement systems, their pension benefit is determined by calculating their “high-3” average annual salary from their three highest-paid consecutive years. Even a few percentage points difference in those final pay raises can translate into higher lifetime monthly payments.
Fei and his partner Brennan Rhule have been working closely with federal employee clients nearing retirement to model out the pension implications based on the actual 2% raise versus holding out another year or two for potentially larger increases that would increase the high-3 average.
“In some cases, it can make sense to delay retirement slightly to take advantage of higher anticipated pay bumps and lock in a higher high-3 calculation,” notes Rhule. “But that decision requires carefully weighing issues like annual leave payouts, cost of living adjustments, tax scenarios and more.”
The two CERTIFIED FINANCIAL PLANNER™ at PlanWell have built deep specializations in the intricacies of federal retirement and benefits planning through accreditations like the Chartered Federal Employee Benefits Consultant (ChFEBC™) designation. This focused expertise allows them to provide more contextualized advice compared to general financial advisors.
Widely circulated reports touting misleadingly large federal pay raise percentages have added confusion for federal workers trying to solidify their retirement timelines and projections. Having an advisor who can cut through that noise is critical.
“There’s so much nuance and so many variables that impact an individual federal employee’s situation,” says Rhule. “We take a fully customized approach, analyzing all the angles to determine if working an extra period makes sense from a lifetime retirement income perspective.”
In addition to the high-3 calculations and leave payout factors, the PlanWell team also must evaluate variables like:
– Anticipated future cost of living adjustments
– Tax implications of larger salary increases
– Changes to Thrift Savings Plan (TSP) and retirement account contributions
– Eligibility timelines for retiree health insurance and other benefits
“It’s a complex puzzle,” states Fei. “Having watched federal pay raise cycles for decades really allows us to guide our clients through all the potential retirement impacts more effectively.”
As the federal workforce continues aging, more and more employees are facing these types of decision points. Partnering with an advisor who truly understands the granular rules and financial planning implications can ensure federal workers maximize their retirement benefits over the long run.
“At the end of the day, federal workers have spent decades dedicated to public service,” says Rhule. “Our job is to make sure that career commitment pays off as lucratively as possible in retirement through informed, specialized guidance.”
Planwell Financial Planning underscores its dedication to free financial education by offering federal retirement webinars. Designed to help federal employees navigate the complexities of their FERS benefits, these online workshops delve into topics like pensions, FEGLI, Social Security, and more. Individuals interested in attending can access Planwell’s webinar schedule.
Contact Info:
Name: Brennan Rhule
Email: Send Email
Organization: Planwell Financial Planning
Website: https://www.planwellfp.com/
Release ID: 89126465
In the event of any inaccuracies, problems, or queries arising from the content shared in this press release, we encourage you to notify us immediately at error@releasecontact.com. Our diligent team will be readily available to respond and take swift action within 8 hours to rectify any identified issues or assist with removal requests. Ensuring the provision of high-quality and precise information is paramount to us.