Federal vs. Private Sector Retirement Programs

There are several significant advantages that federal retirement systems have over private-sector plans. In some ways, federal retirement systems (for both military and civilian service) differ from many employer-sponsored retirement plans in the private sector – and that is a good thing.

First, most private-sector retirement plans consist of a 401(k)-style plan. Fewer than 20% of businesses offer a defined benefit plan like the FERS or Blended Retirement System (BRS).

Consider how vulnerable your retirement years would be if you didn’t have the safety net of a FERS or BRS pension. I didn’t include Social Security because it is a given that it covers 96% of American workers, including BRS, FERS, and private sector employees.

Secondly, many private-sector schemes do not guarantee monthly payments for the rest of one’s life. These systems often give retirees the choice of a lump-sum payment or lifetime payments, whereas FERS and BRS only offer a lifetime annuity (pension) with no option for a lump sum.

Both FERS and BRS guarantee lifetime income. However, neither of the two systems allows the retiree the option of receiving a lump-sum payment. 

Although having a choice is a wonderful thing, monthly checks, such as those received by FERS and BRS pensioners, provide financial certainty in the future and insulate the retiree from the adverse effects of bad money decisions. According to a recent MetLife survey, 1/3 of retirees who got a lump payment spent it within five years.

Although the financially smart will lament the lack of options in their defined benefit plan, they are likely to have funds in the TSP and IRAs for future investments. This group would not have been among the one-third of lump-sum winners who spent all of their funds within five years.

Another distinction between the private sector and federal retirement systems (FERS or BRS) is that private-sector employees don’t receive cost-of-living adjustments (COLAs). Many retirees from various levels of government, like the state, local, etc., receive COLAs, but only a tiny percentage of private-sector pensioners do.

It’s easier to take for granted how lucky we are to be a federal employee or a member of the uniformed services. But we have reason to be grateful for our retirement benefits.

Contact Information:
Email: [email protected]
Phone: 3604642979

Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure:
Disclosure:
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