Have You Recently Left Your Federal Government Job?

About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C., area who works with clients virtually across the country. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals at any stage of life take control of their finances and fulfill their dreams. Feel free to schedule a Free Consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals. 

Have you recently left your federal government job or planning to leave soon? There's a helpful checklist of issues to consider after a job change below. There are also a few tips to help you make informed decisions about your Thrift Savings Plan (TSP) to protect your retirement savings and secure your financial future. 

The Thrift Savings Plan (TSP) offers federal employees and uniformed service members several investment options to help them build retirement savings. These options include individual funds and lifecycle funds designed to cater to different risk tolerances and investment strategies. If you'd like guidance as you consider your options, feel free to schedule a Free Consultation.

DOGE

In recent weeks, significant layoffs have affected federal employees across various agencies, aligning with the Trump administration's initiative to reduce the federal workforce. Notably, the Department of Education announced it would lay off nearly half of its workforce as part of President Donald Trump's initiative to eliminate the department. These cuts align with Trump's mandate to downsize the government, with Elon Musk's Department of Government Efficiency (DOGE) leading these efforts. If you've been unfortunate enough to lose your job as a result of this initiative we can help.

Issues To Consider If You Lose Your Job

The loss of a job can cause serious stress for you, personally and financially. To help you guide you through a disruption in employment, we’ve created the checklist “What Issues Should I Consider If I Lose my Job?”

In this checklist, we cover a number of issues to consider when facing unemployment, including:

• Severance options, if any are offered
• Employer benefits, including continuation of health insurance, sick pay, etc.
• Eligibility for unemployment benefits
• Budget adjustments
• Health insurance options
• Employer-sponsored retirement accounts, stock plans, and other benefits
• Income tax considerations
• Retirement or future employment options

Post-Separation Options for TSP Accounts:

Whether you’re making a career change, or you have just been laid off, managing your Thrift Savings Plan (TSP) plan may be at the bottom of your to-do list. However, moving your TSP plan is an incredibly important step that must be carefully planned. When leaving one employer and starting with another, there are typically three workable opportunities for ensuring the continued growth of your retirement funds. Understanding which option offers the most advantages and aligns with your next chapter in life is the first step.

Leave Funds in the TSP: Separated employees can maintain their TSP accounts, allowing continued management of investments among the TSP's fund options. While new contributions via payroll deductions are not possible after separation, individuals can transfer or rollover eligible funds from other retirement accounts into their TSP. This approach benefits from the TSP's low administrative costs and simplified investment choices.

Roll Over to Another Retirement Account: Individuals may choose to roll over their TSP balance into an Individual Retirement Account (IRA) or a new employer's retirement plan. This option can provide access to a broader range of investment choices and consolidate retirement assets, simplifying account management. 

Withdraw Funds: Direct withdrawal of TSP funds is possible but may result in significant tax implications. Withdrawals from the traditional portion of the TSP are subject to federal income tax, and if taken before age 59½, may incur a 10% early withdrawal penalty. Withdrawals from the Roth portion are tax-free if the account has been open for at least five years and the account holder is at least 59½ years old. 

TSP Investment Options

Individual Funds

TSP offers five core funds that allow investors to tailor their portfolio based on risk and return preferences:

• G Fund (Government Securities Investment Fund)
  • Invests in U.S. Treasury securities.
  • Low risk, designed to preserve capital and generate steady returns.
  • Guaranteed by the U.S. government, making it the safest TSP option.
• F Fund (Fixed Income Index Investment Fund)
  • Tracks the Bloomberg U.S. Aggregate Bond Index.
  • Offers moderate risk with the potential for higher returns than the G Fund.
  • Includes corporate and government bonds but is subject to interest rate risk.
• C Fund (Common Stock Index Investment Fund)
  • Mirrors the S&P 500 Index, investing in large U.S. companies.
  • Offers growth potential but comes with stock market volatility.
  • Best suited for long-term investors seeking higher returns.
• S Fund (Small Capitalization Stock Index Investment Fund)
  • Tracks the Dow Jones U.S. Completion Total Stock Market Index.
  • Includes mid-sized and small companies, excluding those in the S&P 500.
  • Higher risk than the C Fund but also offers greater growth potential.
• I Fund (International Stock Index Investment Fund)
  • Invests in international stocks from developed markets (excluding emerging markets).
  • Tracks the MSCI EAFE (Europe, Australasia, and Far East) Index.
  • Exposed to currency fluctuations and international market risks.

Lifecycle (L) Funds

L Funds are designed for participants who prefer a diversified, hands-off investment approach. These funds automatically adjust asset allocations as the target retirement date approaches.

• L Income: Focuses on capital preservation with minimal risk for those already retired or withdrawing soon.
• L 2025, L 2030, L 2040, L 2050, L 2060, L 2065: Each fund gradually shifts from aggressive (more stocks) to conservative (more bonds and G Fund) as the retirement date nears.

These funds are ideal for those who prefer a simplified investment strategy without having to manage allocations manually.

Choosing the Right TSP Investment

• Low-Risk Tolerance? The G Fund or an L Fund near your retirement date may be suitable.
• Looking for Growth? The C, S, and I Funds provide higher return potential.
• Diversification? A combination of different funds can balance risk and reward.

Federal employees impacted by layoffs should carefully review their TSP investments to ensure they align with their financial goals and risk tolerance. If you decide to leave your hard-earned savings in your TSP, it’s a good idea to have an advisor review the plan’s progress over time. If you'd like a well-tailored Financial Plan with a custom investment plan feel free to schedule a Free Consultation.

Different Ways You Can Work With Us

Wealth Management - Combines ongoing financial planning and investment management. The financial planning fee is waived if we manage at least $1,000,000 in investments for you. You can review our investment management fee structure here. Tax Preparation and the ability to create a Will or Revocable Trust-based Estate Plan will be included.

Ongoing Financial Planning - Starting at $400/month, our most popular program now includes tax prep. This is a good fit if you have several goals and want the option to manage your investments. We'll cover everything from spending, insurance, taxes, investments, retirement planning, and estate planning. Our goal is to give you and your family an easy-to-understand comprehensive plan to provide you with confidence you're making the right financial decisions.

One-Time Financial Plan With Ongoing Support - Starting at $4,800, this is an accelerated version of the service above with additional support for one year after your start date. This service requires prepayment for the year and is offered at a significant discount from the annual pricing for ongoing planning. Tax Preparation and the ability to create a Will or Revocable Trust-based Estate Plan will be included.

Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report we already generate for clients and our work with the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.

Three-Hour Ask Me Anything - This is a good fit if you have 2-3 goals you want help with. These three one-hour meetings need to be completed within three months. The fee for this service is $2,000. You also get a free 30-minute meeting to help us get started.

Financial Coaching - Our financial coaching program starts at $99/month. This is ideal for someone who is looking to simplify and automate their finances. We'll also serve as an accountability partner and help you overcome obstacles that may be stopping you from accomplishing your goals. You can learn more about our coaching program here. If you think this program might be a good fit for you, schedule a 15-Minute Demo.

Hourly Financial Planning -Billed at $400 per hour. For each hour of meeting time, we'll bill at least one additional hour for meeting preparation and follow-up.

Our Full-Service Process For New Clients

Net Worth and Budget

The first thing I do for new clients is assess their current financial situation. We do this with the aid of financial planning software. We review assets, liabilities, income, and expenses. If you'd like to test drive my comprehensive financial planning software, visit Right Capital and create a profile. View this Right Capital video to learn more.

Insurance

As a Fee-Only Firm, we don’t sell insurance or charge commissions. However, we like to review home, auto, and umbrella insurance to ensure you have the proper coverage. We’re happy to work with your existing agent or refer you to an independent broker to ensure you get the best deal. We also look at your employee benefits, long-term and short-term disability insurance, along with life insurance to make sure your family is protected.

Tax Preparation and Tax Planning

Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report and Tax Planning we already generate for clients. We also use the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.

Investments

Whether you want us to manage your investments or you want to manage them yourself and you're just looking for a second opinion, we can help. We'll help you optimize your investments to make sure you’re not leaving any money on the table. Here’s an example of the quantitative analysis I can do for your investment accounts where we also evaluate your current fees.

If you’d like to review your risk tolerance, complete our risk tolerance questionnaire. This will give you your personalized risk number as seen on page 1 of the sample portfolio above. Feel free to check out the article 10 Best Tips for Beginning Investors from U.S. News where I shared a few investment tips.

Retirement Planning

This is where we bring everything together. Take a look at the links below for examples of some of the deliverables we prepare for clients.

• Get Your Free Retirement Check Up
• Elements® Financial Monitoring App
• One Page Financial Plan
• Financial Independence Presentation

Estate and Legacy Planning

If you're looking for a cost-effective solution to get your estate planning documents in place, we can help. We have partnered with a leading Estate Planning platform to deliver high-quality Estate Planning documents for a fraction of the cost of working with an attorney. I included a blog post below that highlights the key documents that should be in your Estate Plan and my normal pricing.

What's In Your Estate Plan?

Revocable Living Trust-Based Estate Plan

• Individual - $1,600
• Couple - $2,100

Will-Based Estate Plan

• Individual - $900
• Couple - $1,400

I hope we get the opportunity to work together. If you'd like to see if any of these services are a good fit for you, feel free to schedule a free consultation or send me an e-mail.

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