By: Steven Puckett
Retirement is often described as a destination—something that happens automatically when we reach a certain age. But for federal employees, the path to retirement is more nuanced. It requires forethought, education, and a deep understanding of how various components of the federal benefits system interact.
In conversations with federal employees across different agencies and stages of life, one pattern emerges consistently: many approach retirement with a sense of uncertainty. That uncertainty, unfortunately, stems not from a lack of desire to prepare, but from common and avoidable misconceptions.
Below, we’ll explore three of the most frequent retirement planning mistakes federal employees make—and how you may address them with clarity and confidence.
Mistake 1: Delaying Retirement Planning Until It’s “Time”
The most pervasive mistake among federal employees is waiting too long to begin serious retirement planning. While it’s common to think of retirement as something to consider only in the final few years of service, the reality is that many of the most important financial and lifestyle decisions are made decades beforehand.
Planning for retirement should begin early not because you need to make final decisions right away, but because doing so gives you options. For instance, understanding the impact of your FERS pension, Social Security eligibility, and the Thrift Savings Plan (TSP) well in advance allows you to make informed decisions about debt, savings, and career choices along the way.
It’s also worth noting that even employees nearing retirement—or those already retired—can still benefit from strategic planning. Adjusting expenses, evaluating tax implications, considering relocation, or rethinking your withdrawal strategy are all examples of actions that can improve your financial stability well into retirement.
Procrastination in retirement planning usually stems from discomfort, not laziness. The process can feel overwhelming, especially given the unique federal systems involved. But avoidance limits your future options. Instead, consider setting aside even an hour to review your current standing, project your income sources, and identify areas for refinement. Clarity begins with a single step.
Mistake 2: Misunderstanding the Purpose and Allocation* of the TSP
Another critical misstep federal employees make involves the Thrift Savings Plan (TSP)—specifically, how it’s allocated and what role it’s intended to play in retirement.
TSP is often viewed simply as a savings account, but in reality, it’s a core component of your retirement income strategy. It complements your FERS pension and Social Security benefits, creating a three-legged stool designed to support you financially throughout retirement. But just having a TSP account isn’t enough. How those funds are invested over time matters deeply.
Younger federal employees frequently allocate their TSP too conservatively—often defaulting to the G Fund, which offers stability but minimal growth. Over the span of a 25- or 30-year career, this conservative approach can result in missed opportunities for compound growth. On the other end of the spectrum, individuals approaching retirement sometimes maintain overly aggressive positions in market funds like the C, S & I funds, exposing themselves to the risk of significant market losses just before—or during—retirement withdrawals.
Allocation decisions must reflect both your time horizon and your risk tolerance. They should also evolve as your situation changes. While fear of market volatility is understandable, letting that fear dictate your long-term investment choices can undermine your future security. Relying on generic financial advice—whether from coworkers, online forums, or well-meaning relatives—is also problematic. Retirement investments require personalization. The best decisions are made when your risk profile, income needs, and timeline are all factored into the strategy.
Mistake 3: Trying to Time the Market
Market timing is perhaps one of the most damaging habits that can undermine a federal employee’s retirement. The impulse to “get in” or “get out” of the market based on short-term headlines or temporary dips is common—but historically, it proves counterproductive.
Markets fluctuate. That is their nature. When investors attempt to avoid losses by pulling funds during downturns, they often miss the rebounds that follow. In contrast, those who stay invested with a long-term strategy tend to come out ahead—not because they avoided all losses, but because they remained positioned to benefit from recoveries.
For federal employees, this principle is particularly important. If you’re within a few years of retirement—or already in it—your ability to recover from market losses diminishes, especially if you’re withdrawing funds. Pulling from a TSP account that has dropped in value locks in those losses, limiting your long-term income. This scenario, known as sequence of returns risk, can have a lasting impact.
The solution isn’t to fear investing. Rather, it’s to ensure your allocation is tailored appropriately. If you’re retiring soon, you may benefit from a strategy that includes conservative assets for near-term withdrawals, while keeping more growth-oriented investments for long-term needs. Above all, avoid making decisions based solely on emotion or short-term news cycles. A disciplined, well-aligned strategy will almost always outperform reactionary shifts.
Taking the Next Step
Federal retirement planning is not a one-time event. It’s a process that spans your career and evolves as your life changes. Whether you’re new to federal service or nearing your retirement date, the most effective thing you can do is engage proactively.
Start by examining your income sources. Know your pension formula. Understand how Social Security fits into your timeline. Review your TSP allocations—and reassess them regularly. If you’re already retired, continue evaluating your withdrawal strategy, tax exposure, and long-term healthcare costs.
The decisions you make today will define the flexibility, stability, and confidence you experience in the years to come.
*Asset Allocation does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.
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