Government Retirement Plans: A Practical Guide -

By The Advisor Group

Government retirement plans are essential for public employees, offering long-term financial security after years of service. These plans differ from private-sector options in their structure, benefits, and regulatory oversight. Below, we break down the main types, features, and best practices for managing your government retirement benefits.

Types of Government Retirement Plans

1. Defined Benefit (DB) Plans

How they work: Guarantee a monthly pension for life, calculated using a formula based on your salary and years of service.
Who manages risk: The government employer is responsible for investment performance and funding.
Example: The Federal Employees Retirement System (FERS) combines a DB pension with Social Security and the Thrift Savings Plan (TSP). Learn more: Defined Benefit Plans Guide.

2. Defined Contribution (DC) Plans

How they work: Employees and employers contribute to individual accounts. Employees choose investments and bear the risk.
Portability: Accounts can be rolled over to new employers or IRAs.
Examples:
- Thrift Savings Plan (TSP): Federal employees’ main DC plan, with low fees and agency matching.
- 403(b) and 457(b) Plans: Used by teachers, nonprofit, and municipal employees.
  See: Government Retirement Plans Toolkit.

3. Hybrid & Cash Balance Plans

How they work: Blend elements of DB and DC plans, offering both a guaranteed benefit and an account balance.
Benefit: Employees see their account grow and may choose a lump sum or annuity at retirement.
Key Features & Legal Framework

ERISA Exemption: Most government plans are not governed by ERISA but must comply with IRS qualification rules. See the IRS Plan Sponsor Guide.
Contribution Limits: For 2025, employees can defer up to $23,500 in DC plans, with an extra $7,500 catch-up for those 50+.
Funding Trends: Many state and local pensions face funding challenges, leading to reforms and adoption of hybrid models. See the NASRA Public Fund Survey.

How to Plan for Retirement

1. Set Your Retirement Goals

Define your desired retirement age and lifestyle.
Estimate your annual income needs using retirement calculators.

2. Assess Your Current Position

Calculate your net worth (assets minus liabilities).
Analyze your income, expenses, and debts.
Use worksheets like those from USA.gov’s Retirement Tools.

3. Project Your Retirement Income

Estimate annual expenses: housing, healthcare, insurance, daily living, and leisure.
Determine your replacement ratio (the percentage of pre-retirement income you’ll need).
Account for inflation and longevity risk.

4. Explore Plan Options

Compare 401(k), 403(b), 457(b), IRAs, and hybrid plans.
Review contribution limits and tax advantages for each plan.
For more, visit Admin316’s Retirement Plan Guide.

Why Work with The Advisor Group?

Navigating government retirement plans can be complex. The Advisor Group specializes in retirement plan administration and custom solutions for public-sector employees. We help you maximize your benefits, stay compliant, and plan for a secure future.

For expert guidance and resources, visit The Advisor Group (update with your actual site if different).

Additional Resources

Summary:
Government retirement plans come in several forms—DB, DC, and hybrid—each with unique rules and benefits. Understanding your options, setting clear goals, and working with a trusted advisor like The Advisor Group can help you achieve a secure and comfortable retirement. For more details or personalized advice, explore the resources above or contact us directly.

Government Retirement Plans: A Practical Guide