If you’re not working with federal employees and military personnel, you might be overlooking a solid opportunity for your retirement planning services. Although the number of federal and military employees has been shrinking, it’s still a significant workforce: an October 2013 New York Times article reports there are roughly 2.7 million federal civilian employees and 1.4 million active duty military.
There’s a catch, though. Some of the retirement plans and benefits offered to these groups are similar to those available to those in the private sector. But other features are unique to government plans, which mean you’ll need to develop additional expertise to attract and retain these clients.
John Cermak, CFP, a financial advisor with First Command Financial Services Inc. in Arlington, Va., estimates that 90 percent of his clients are current or retired federal and military employees. I recently asked him about the key distinctions in planning for these clients.
The military’s retirement plan, which is the same across the services, differs significantly from the average private sector plan, he notes. It’s a defined benefit plan and after 20 years service, the retirement benefit is 50 percent of the three years’ highest base pay at that point. The annual benefit increases by 2.5 percent for every additional year served. The benefit is not capped and can exceed 100 percent of base pay for those serving 40-plus years.