Goal: Make sense of your benefits package and pick the programs right for you.
How To Cover Your Benefits Bases:
1. Pick a health/vision/dental insurance plan that suits your working style (i.e. HMO for staying put/PPO for travelling Govvies).
2. Contribute 5% to your retirement account or enough to get the full employer match, whichever is greater.
3. Enroll in FSA plans for planned expenses such as child care or regular prescription copays.
4. Consider life insurance if you have dependents or want to help out whomever would be collecting your stuff.
5. Copy all enrollment forms and beneficiary designation forms and keep them safe. Tell your emergency contact person where to find this information.
God bless benefits open season. No, really. It’s the only time when people are nagged enough to fill out a new year’s worth of forms. These benefit programs quite often pull you out of a jam when life throws you a curveball. So here’s a shoutout to all the persistent HR people who make people take care of themselves – you are not nearly recognized enough!
New government employees launch their careers with a myriad of tools and services to help them get their jobs done. For example, take the standard-issue government identification badge – a photo ID that does not have your home address or credit card number on it. Not only does it protect your identity but flashing your grainy mug will get you into any government building without having to empty the contents of your day into a plastic bin. While your government ID helps you move around the federal space the benefits package will encourage you to stay there.
The federal benefits package is like Red Bull for your financial future. The super-low-cost Thrift Savings Plan, life insurance programs and tax-saving Flexible Spending Accounts will put each of your hard-earned pennies to good use. Whether your first day was last week or ten years ago take a closer look at your benefits package to make the most of your total compensation:
Start with health, dental and vision insurance. Isn’t this why most of us work, anyway? Be sure to pick a plan that suits your work style – cubicle living or road warrior. If you’re in a major metropolitain area don’t overlook the HMO option, though they are starting to surpass PPOs in cost. Check on the total annual out of pocket maximum just to see how much you may be in the hole in a worst case scenario. Then check the copayments so you know how much to put into the medical FSA (more on that later).
Next, all hail the TSP. If you only take 10 minutes to prepare for retirement, contribute as much as you can afford to an L fund in the TSP. There, you’re finished. Every year increase your contribution by 1% to make sure retirement plans don’t fall by the wayside while you plug through work, school, home ownership and major life events. If you want to take it up a notch, select a combination of the C,S,I and F funds that suit your risk tolerance (read: not selling when the market gets hairy). The L funds are great if you can’t stand to even think about this, but every L fund still puts some of your money in the G fund. The G fund is not designed to appreciate in value and is not the right place for a Young Gov’s retirement dollars. L funds are a great start, but as you get more comfortable and educated, try to create a portfolio without the G fund so your money keeps growing.
Next come the oh-so-scary Flexible Spending Accounts. FSAs are especially helpful to young feds who don’t own a home and itemize their tax deductions. The program enables feds to put their own pre-tax money into an account, use the funds to pay for qualified expenses and receive the money back tax-free. Normally one would only be able to save taxes on medical expenses totaling over 7.5% of their adjusted gross income. FSAs are best for planned expenses like prescription copays and day care. If you don’t have regular qualified expenses (check the list to see if it’s qualified), and FSA may not be right for you due to the use-or-lose catch. If you take regular medications or have regular medical treatments, check the copayment amounts on the health insurance plan and calculate how much you’ll spend during the year and set that amount as the enrollment level.
FSAs are also great to help you save because you can be reimbursed by direct deposit. In this scenario you can charge a medical expense one day, submit the claim, and have the money back before the credit card bill is due. If you’re not sure how much to elect start with the $250 minimum. If you spend more than $20 per month on anything from chiropractor visits to contact lenses to prescription copayments you’ll save enough taxes to cover a nice birthday dinner. Even better, if you can afford to pay the expenses out of your current monthly cash flow, have the reimbursements directly deposited into a savings account for an instant emergency fund.
While these other benefits all help you manage your life, life insurance helps your loved ones manage after you’re gone. Everyone needs a little insurance, even if your only dependent is your laptop. After all, someone is probably going to have to take off work and come and get it, pack up your things and put to rest the life you’ve left behind. Do them a favor and leave enough money to help them do the job. For most Young Govs with no dependents, one year’s worth of your salary will more than do it. Just make sure to submit the beneficiary designation form and leave a copy of it where this person will find it. Or better yet – send a copy to them so that they’ll have it and can collect as soon as possible.
If you have dependents and need much more insurance consider looking outsde the government. Life insurance has dropped in price significantly over the last several years and married couples can get a discount to boot!
Through these benefits programs young feds can launch their financial goals in tandem with their federal careers. The FSA requires you to re-enroll annually while FEGLI and the TSP programs don’t require any new paperwork year-to-year. While you focus on building a name for yourself in the federal space let these programs build the financial momentum needed to keep the work you love. Starting up with the federal government is no easy feat. Knowing your benefits package is boosting your compensation today and in the future will help you through the rough spots.