3 Reasons Why Federal Employees Should Hire A Financial Advisor

Personal finances can be complicated, especially when you’re a federal employee with a robust benefits package that includes a FERS pension, survivor benefits, the Thrift Savings Plan, and life insurance. And while OPM and your HR specialists provide plenty of information, the responsibility of integrating your federal benefits into a customized financial plan is yours alone.

Even though some federal employees may relish the process of budgeting, managing investments, and reviewing tax law changes, the thought of creating a financial plan can be overwhelming for many. It is for this select group that it makes sense to consider hiring a financial advisor.

So, if you’re one of those federal employees who feel overwhelmed, stressed, or confused by your finances, then here are three reasons it is often a good idea to hire a financial planner.

Financial Planner vs. Financial Advisor

Before we move forward, let’s make sure we’re on the same page. The term financial advisor is a catch-all that usually includes financial planners and investment advisors. However, in this article, the term refers to a Certified Financial Planner (CFP) practitioner who provides comprehensive financial planning services (preferably a fee-only advisor, meaning they do not accept commissions).

1. Help With A Comprehensive Plan

Although many federal employees believe that financial planners purely manage investments, this is often just one piece of an overall plan. When working with an advisor, the primary focus should be to create an initial plan that synthesizes the major areas of your financial life so that all your resources support you in reaching your short- and long-term goals. When creating your financial plan, the areas reviewed should include your assets, liabilities, cash flow, insurance, estate, taxes, and federal employee benefits.

In reviewing these areas, financial advisors can often uncover risks and opportunities that impact your ability to accomplish your goals. This is why creating a comprehensive financial plan is the most significant benefit financial planners provide their clients. So, if a step-by-step guide on how to use your resources to achieve your goals efficiently appeals to you, working with a financial planner might make sense.

2. Help You Avoid Mistakes

Financial planning can be complicated; not only does it require an understanding of finance, economics, and taxation, but it also demands that you stay up to date with legislative changes. Don’t get me wrong, financial planning is not rocket science. Still, just as most of us would hire a contractor to remodel our home or an electrician to repair our a/c unit, most of us should hire a professional to help us with our financial planning. We typically hire professionals to avoid costly mistakes and hiring a financial advisor is no different.

Although you won’t find “hire me, so you don’t screw up” on any advisor website, helping clients avoid mistakes is a significant way that advisors demonstrate their value.

For example, some federal employees may decide not to elect the FERS survivor benefit because they want to maximize their FERS pension and avoid the 5-10% reduction cost of the benefit. However, they may not realize that in order for their spouse to maintain FEHB coverage if they were to die, the spouse must be entitled to a survivor benefit. Avoiding this mistake alone could save a federal employee’s spouse tens of thousands of dollars in healthcare costs.

Another common mistake that can easily be avoided with the help of an advisor is aligning investments with the goal’s time horizon. For instance, a federal employee may have their entire TSP invested in the C fund, which worked wonderfully throughout their working years but then they fail to trim the risk of their portfolio back as retirement approaches. This could be a devastating mistake if a significant downturn in the market were to occur within a couple of years of retirement.

Again, this is another error that, if avoided, could save a federal retiree tens if not hundreds of thousands of dollars and, more importantly, could be the difference between thriving in retirement and merely surviving.

3. Save You Time

If you don’t work with a financial advisor, will you build a plan for yourself? Creating a comprehensive financial plan requires understanding multiple disciplines. So, if your strategy will consist of a combination of winging it and Google, do you want or have the time to spend hours researching financial questions and evaluating your options? Truth be told, depending on your financial acumen, you might spend hours just looking up definitions and trying to decipher your financial documents.

Whether you decide to hire a financial advisor or not, don’t let do-it-yourself turn into no-one-does-it.

Moreover, proper financial planning is not a one-time event. Once you create your initial plan, you should review your progress periodically to ensure your plan’s accuracy and ongoing appropriateness.

Ok, now that we established that financial planning is a time-consuming endeavor, ask yourself: If you can find the time to create a financial plan? Is that the best use of your time? Remembering that time is the most precious commodity we have, does it make sense for you to invest the time and energy required to develop, implement, and monitor your financial plan? The answer could certainly be yes, but for many, the answer will be an unequivocal no.

Final Thoughts

Although some of the benefits, such as less stress and avoiding errors, are difficult to quantify, there are many measurable benefits of working with an advisor, reducing taxes, increasing the long-term performance of your investments, and saving time, being a few.

And while many federal employees get by just fine without the help of an advisor, if you are feeling overwhelmed, unsure, or stressed by your finances or looming financial decisions, you should consider working with a financial planner.

If you do decide to work with a financial planner, finding one doesn’t have to be a daunting task. You can find potential advisors using the directory of the National Association of Personal Financial Advisors or the XY Planning Network, both of which are membership groups of fee-only advisors.


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2023 Legislative Change Notice

The SECURE ACT 2.0 passed and impacted many of the articles on this website. While the articles were correct when written, it’s impossible to re-write every article. Please consult a qualified professional (i.e., CFP®, CPA, or attorney) before implementing any strategy.


Author: Jose Armenta, MsBA, CFP®, ChFC®, EA

Hi, I’m Jose Armenta, a Certified Financial Planner practitioner. For over 14 years, I have worked with or among federal employees, from serving in the Marine Corps to my stint as a police dispatcher and now as a financial planner specializing in helping FERS federal employees. In that time, I have spoken to hundreds of federal employees about their benefits and retirement. Helping federal employees maximize their benefits, reduce taxes, and live confidently is a passion of mine. When I am not perfecting financial plans, you’ll find me at the shooting range, playing the drums, or breaching blanket forts with my three little ones.