Private sector vs public sector is a decision for many professionals. For the beginning of my career, I found employment with the federal government. As a fresh graduate, the salary is pretty competitive with what I could receive in the private sector. The private sector has its own perks, but here I’m going to focus on what’s good about the public sector. I’m focusing on the best part of federal employment: the sweet benefits and how they can help folks on the path to financial independence.
1. The Federal Pension System and the TSP
Federal employment is one of the last options for folks who want to have a reliable retirement pension. After working 5 years for the federal government, an employee is fully vested and can defer payments even if one retires early. For folks who labor for Uncle Sam for 20 years, the pension uses a fun math formula to calculate the yearly payments. It’s (“high three” pay average) x (years of service) x (multiplier). The multiplier is either 0.01 or 0.0011, depending on age. So someone who’s high 3 is $50,000 with 30 years of service at the age of 59 would get $15,000 per year. Combined with Social Security and other retirement accounts, this is pretty decent! There is one part of the federal retirement plan that excites me more than the pension: the Thrift Savings Plan.
My most popular post is about the Thrift Savings Plan. It focused on why it’s great and what the investment options are. Let me reiterate here: the TSP is phenomenal. The fees are really low compared to many 401(k) plans and there are convenient index fund options. There are even target date funds that will rebalance (get more conservative) over time. The hardest part of the TSP is having to get your account number physically mailed to you so that you can change your allocation. If you want to know more about the TSP and the different investment options in it, check out my Ultimate TSP Investing Guide.
2. Flexibility in Leave Time
Flexibility with leave time is a huge benefit to federal employment. Where I work, the supervisors are encouraged to allow employees to use their leave time. We are even allowed to earn and hold on to 24 credit hours that supplement our leave time. I know folks who have used credit hours to take vacations that they could not have with annual leave time alone. There are some folks who worked in the private sector (engineering) before working for the fed and they always mention how much easier it is to use their leave time now.
People don’t just take a day or two off at a time either. Lots of folks take a week or two off at a time for vacations. I’ve only been there for a year and I got cleared to take a week and a half to go to Florida in the near future. Having this kind of flexibility for some travel is definitely enough for me now. More long-term travel is one of my FI goals. The ability to take a couple weeks every year or so should be enough to tide me over for now.
3. Federal Health Care Options
We all need health insurance. Under federal employment, I had a lot of different options (over a dozen plans). These spanned all different levels of coverage and cost. They offered some really expensive plans with super low deductibles. There were even a few high deductible plans with HSA’s that are popular with others in the FI community. I selected a middle of the road option. It wasn’t the more expensive, but it offered some really good family coverage. My wife was pregnant with twins at the time so this was an important feature! For example, we didn’t pay a single bill for prenatal care or for our 6 day hospital stay when the boys were born. The wide range of options available cover the health care needs of a very diverse workforce. That kind of flexibility makes federal health care great for those pursuing FI.
Other, Smaller Benefits
There are more than three reasons why federal employment is advantageous to folks pursuing financial independence. One is that there are regular opportunities for raises. In addition to a cost of living increase decided by Congress, each department gets a certain amount to give in raises and bonuses. Additionally, my branch prefers to hire from within on bigger promotions. Federal employees also get discounts on rental cars, theme park tickets, and free TSA precheck.
Final Thoughts
One of the common terms that I’ve used a lot in this article is flexibility. Flexibility is a huge reason so many people pursue financial independence. For a lot of folks, they’re seeking the flexibility to work on their own terms, the flexibility to travel, and the flexibility to choose their own path. For Americans, federal employment offers more flexibility than many private sector employers. And having this while on the path to FI makes the process of saving and waiting for compound interest much easier.
