US Gov vs federal contractor - medical benefits in retirement?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

I am a contracted 35 year-old programmer working for Uncle Sam with a security clearance making low-to-mid six figures in a low cost of living area of the country at a major gov agency. I am on the fence as to whether I should become a government employee for the retirement benefits.

Job stability issues aside, is there any reason why one would leave a contractor slot for a gov employee slot under the following conditions?

1.) Retirement pension : US GOV offers 5% match, whereas, my current employer offers 6% match plus additional company performance bonuses. There is a 1% of base salary under a defined benefit (DB) plan that is not available for contractors. The salary of a contractor is much higher than a gov employee. Due to the lack of a DB, I contribute more to my retirement each year (about 25% of pay that includes 401k, IRA and misc).

2.) Health insurance in retirement : This is where I question whether I should switch to a US Gov career rather than a contractor. Govies get medical insurance in retirement whereas contractors don't. Is this a good reason to make the switch? I do have 2.5 years already with the GOV (prior service). I am told by HR that I could receive medical benefits in retirement if I put a total of 5 years in as a govie. However, I wonder if the loss of a high income during those extra 2.5 years will be worth it.

Thoughts?
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
User avatar
dm200
Posts: 23214
Joined: Mon Feb 26, 2007 1:21 pm
Location: Washington DC area

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by dm200 »

doss wrote:I am a contracted 35 year-old programmer working for Uncle Sam with a security clearance making low-to-mid six figures in a low cost of living area of the country at a major gov agency. I am on the fence as to whether I should become a government employee for the retirement benefits.

Job stability issues aside, is there any reason why one would leave a contractor slot for a gov employee slot under the following conditions?

1.) Retirement pension : US GOV offers 5% match, whereas, my current employer offers 6% match plus additional company performance bonuses. There is a 1% of base salary under a defined benefit (DB) plan that is not available for contractors. The salary of a contractor is much higher than a gov employee. Due to the lack of a DB, I contribute more to my retirement each year (about 25% of pay that includes 401k, IRA and misc).

2.) Health insurance in retirement : This is where I question whether I should switch to a US Gov career rather than a contractor. Govies get medical insurance in retirement whereas contractors don't. Is this a good reason to make the switch? I do have 2.5 years already with the GOV (prior service). I am told by HR that I could receive medical benefits in retirement if I put a total of 5 years in as a govie. However, I wonder if the loss of a high income during those extra 2.5 years will be worth it.

Thoughts?
Neither a federal employee or retiree, but I know a lot of folks who are.

DB plans have nearly completely disappeared from other than public entities, and there are some advantages of a DB plan (such as better asset protection and risk of making a bad investment decision).

A friend of ours is a federal retiree and he explained to me that, in his case, the health insurance retiree benefit is very beneficial for him and his wife. His having a spouse that benefits from such retiree insurance makes the difference. They have chosen to not pay for Medicare part B (after extensive analysis that the husband did). Different situations might lead to different conclusions. There is, probably, an even bigger advantage for a qualified federal retiree who (and/or whose spouse) has not qualified for Medicare.

Of course, since you are young - who knows what changes will happen over the next decades?

While this is probably much less common now, some friends of ours got burned with a bad health insurance choice they made a few years ago. Husband long time federal employee and wife long term private sector employee. At that time, her health insurance family benefits were less expensive, so he opted out. Since he was not on the federal health insurance for five years when he retired, he did not get some significant retiree benefits.
strafe
Posts: 1070
Joined: Sat Mar 03, 2007 11:49 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by strafe »

Not worth it for such a huge pay cut. No federal employees are earning in the mid six-figures ($400-600k) other than in demand medical specialists and the President. Heads of federal agencies are still low six figures (around $200k). The benefits just aren't worth the much compared to your current mid 6-figure income as a contractor.
SVT
Posts: 387
Joined: Mon Oct 13, 2008 8:56 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by SVT »

strafe wrote:Not worth it for such a huge pay cut. No federal employees are earning in the mid six-figures ($400-600k) other than in demand medical specialists and the President. Heads of federal agencies are still low six figures (around $200k). The benefits just aren't worth the much compared to your current mid 6-figure income as a contractor.
My guess is that he's actually low to mid 100's but I could be wrong.
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

SVT wrote: My guess is that he's actually low to mid 100's but I could be wrong.
I'm sorry, I was not clear. :oops: It is 130k salary, not 400-600k!

Does this change the game or is it still recommended to try and go govie for the health insurance ? I can put in 20 years and be eligible for the Defined Benefit plan, but don't feel too confident that i would be able to attain the salary I would as a contractor.

Another thought that I just had thanks to a post in this forum was the medical benefits for my wife in retirement. The gov health insurance would help with that whereas again I'd be on the hook for it as a contractor. So, the combo of me + my wife's medical care in retirement could be a bigger factor than the retirement funds I'd save over the years with a higher contractor salary?
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
rgs92
Posts: 3436
Joined: Mon Mar 02, 2009 7:00 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by rgs92 »

Absolutely get the federal gov't job. Each year you age over 40 in the private sector you will have a bigger target on your back and you will feel more vulnerable and miserable each year, and if you get let go (very likely) you will be out in the cold bouncing from one short term contractor job to another with few benefits and it could easily end your career at 50. The federal job would be worth it at half the salary you mention.

This is a no-brainer. It's a gamble to go into the private sector. The ones who will disagree are just on the good side of the fence and don't know enough people who through no fault of their own are left to wither in the cold. Even with lots of education, you could find yourself in the position of a steelworker in the private sector, especially in I.T. Trust me. I learned the hard way.

To anyone who disagrees, I ask respectfully how many middle-aged programmers or systems analysts,etc. do they see in their offices.
Swansea
Posts: 1528
Joined: Sat Feb 13, 2016 4:16 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Swansea »

strafe wrote:Not worth it for such a huge pay cut. No federal employees are earning in the mid six-figures ($400-600k) other than in demand medical specialists and the President. Heads of federal agencies are still low six figures (around $200k). The benefits just aren't worth the much compared to your current mid 6-figure income as a contractor.
Medical Specialist who are federal workers do not come anywhere close to making 400 to 600K. Working with special appointment authorities and pay incentive, one can get pay into the 200K plus range, but even that is far from the norm.

"To continue your health benefits enrollment into retirement, you must: (1) have retired on an immediate annuity (that is, an annuity which begins to accrue no later than one month after the date of your final separation); and (2) have been continuously enrolled (or covered as a family member) in any FEHB Program plan (not necessarily the same plan) for the five years of service immediately preceding retirement, or if less than five years, for all service since your first opportunity to enroll."
bogleenigma
Posts: 241
Joined: Sun Jul 29, 2012 11:19 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by bogleenigma »

[quote="doss"]I am a contracted 35 year-old programmer working for Uncle Sam with a security clearance making low-to-mid six figures in a low cost of living area of the country at a major gov agency. I am on the fence as to whether I should become a government employee for the retirement benefits. Job stability issues aside, is there any reason why one would leave a contractor slot for a gov employee slot under the following conditions?

You have a lot of things to balance here and I think the important factor that you have not revealed to us is how much of a salary decrease you would take to be a government employee. I've been mulling over this calculation for a number of years now. I currently make $159k as a psychiatric nurse practitioner in the civilian world. I've always wanted to work at the Veterans Administration and the highest pay I could expect would be $110k. As much as I would LIKE to believe that the benefit of actually having a inflation indexed pension + uber low cost funds in TSP + medical insurance in retirement + other government benefits would be in my favor, the fact remains that those benefits are not going to compensate me for losing $49k in salary. The difference between us, also, is that I don't work in a position, as others above have mentioned, where my employer is NOT likely to can me as I get older. Mine is a profession where many folks continue to work until their late 60's, 70's, and sometimes 80's. If I could only take a $30k a year salary cut to work for the VA, I would do it in a second. The reduced price of health insurance alone would be substantial.

Government employees are quite happy in retirement. My father in law retired at 62 from the Army Corp of Engineers and started drawing spousal benefits on his wife's SS, and his pension. When he hit full retirement age they switched up and now he is getting his SS and she is getting his spousal benefits. His yearly income with pension + SS (not including her spousal benefit with SS) is higher than what he made in his last few years of working. Couple that with the nice balance he has in his TSP with ultra low cost funds. It's not a bad life.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by delamer »

Swansea wrote:
strafe wrote:Not worth it for such a huge pay cut. No federal employees are earning in the mid six-figures ($400-600k) other than in demand medical specialists and the President. Heads of federal agencies are still low six figures (around $200k). The benefits just aren't worth the much compared to your current mid 6-figure income as a contractor.
Medical Specialist who are federal workers do not come anywhere close to making 400 to 600K. Working with special appointment authorities and pay incentive, one can get pay into the 200K plus range, but even that is far from the norm.

"To continue your health benefits enrollment into retirement, you must: (1) have retired on an immediate annuity (that is, an annuity which begins to accrue no later than one month after the date of your final separation); and (2) have been continuously enrolled (or covered as a family member) in any FEHB Program plan (not necessarily the same plan) for the five years of service immediately preceding retirement, or if less than five years, for all service since your first opportunity to enroll."
Swansea is correct. Your 2.5 years of prior service are meaningless in terms of getting health insurance in retirement. All that matters is that you have coverage in the 5 years immediately preceding your retirement and that you get an immediate, not deferred, annuity. Because of your age, you'd have to wait until age 60 to retire and get an immediate annuity (under age 60/20 years of service; you won't have the 30 years of service needed to retire at your MRA).

For people I know in the private sector, the cost/quality of health insurance is the biggest barrier to pre-Medicare retirement.

I would consider other benefits like annual and sick leave, your current cost for health benefits, and how your 401(k) compares to the excellent TSP. And of course the relative job security.

Good luck.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
stan1
Posts: 14235
Joined: Mon Oct 08, 2007 4:35 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by stan1 »

You are 35 so anything can happen over the next 30 or 60 years. Your employer's contract with the government will most likely be recompeted at least every 5 years unless you've managed to find a situation where the government routinely does sole source procurements for services (not supposed to be done that way). Perhaps you are working at a location such as a national lab that has a longer term administration contract. If the contract is recompeted your employer may have to bid lower labor rates to win (letting you go in the process), or another company may win and offer you a job (but only with a pay cut).

As a federal employee and retiree COLAs and benefits are controlled by the political process not the labor market. Changes to federal benefits are 2 votes and one signature away from becoming law. Historically changes such as converting from CSRS to FERS retirement systems were not retroactive for most people -- but change was retroactive for some (people hired between 1984 and 1986 were moved from CSRS to FERS).
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
User avatar
grabiner
Advisory Board
Posts: 35265
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by grabiner »

delamer wrote:Swansea is correct. Your 2.5 years of prior service are meaningless in terms of getting health insurance in retirement. All that matters is that you have coverage in the 5 years immediately preceding your retirement and that you get an immediate, not deferred, annuity. Because of your age, you'd have to wait until age 60 to retire and get an immediate annuity (under age 60/20 years of service; you won't have the 30 years of service needed to retire at your MRA).
Government employees can retire at MRA (57 for the OP) with 10 years of service with a reduced annuity; they can still keep insurance into retirement.
Wiki David Grabiner
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by delamer »

grabiner wrote:
delamer wrote:Swansea is correct. Your 2.5 years of prior service are meaningless in terms of getting health insurance in retirement. All that matters is that you have coverage in the 5 years immediately preceding your retirement and that you get an immediate, not deferred, annuity. Because of your age, you'd have to wait until age 60 to retire and get an immediate annuity (under age 60/20 years of service; you won't have the 30 years of service needed to retire at your MRA).
Government employees can retire at MRA (57 for the OP) with 10 years of service with a reduced annuity; they can still keep insurance into retirement.
I did not know, or had forgotten, that.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
User avatar
Sbashore
Posts: 952
Joined: Wed Feb 20, 2008 9:38 pm
Location: USA

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Sbashore »

I'd say go with the Federal position. I've seen both sides. I'm a retired federal employee and the combination of pension/SS and medical benefits has me sitting quite comfortably, especially since I also have Medicare A and B.

I also know someone who worked, although not as a contractor, at a major corporation that began as a matter of unofficial policy to look for ways to let people go as they got older. I saw quite a few people get fired or "retired" ahead of when they wanted to go. Planning to work until 66 and getting laid off at 59 or 62 isn't fun and can disrupt plans.

Given both scenarios, I prefer the one I'm in.
Steve | Semper Fi
soboggled
Posts: 901
Joined: Mon Jun 27, 2016 10:26 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by soboggled »

If you can get say 75% of your current pay, go government.
Decent if not great pay with COLA and merit increases guaranteed every year, maybe the best overall benefits in the US, total job security, don't have to work hard, worry or compete unless you want to, and great inflation-adjusted retirement benes that will let you live comfortably and securely.
On the other hand, you'll never get rich and your mind may turn to sludge.
If you like your job, you can wait awhile but I recommend it to anybody not looking to be wealthy and you have patience with bureaucracy - maybe when a little older? The risk that you may easily become technologically obsolete is very real in a fast-moving field, so unless you want to be an entrepreneur or manager private industry becomes tougher every year.
imlearner
Posts: 40
Joined: Sun Feb 28, 2016 6:26 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by imlearner »

I moved from LCOL area to HCOL and took 10% pay cut for federal job. For me it was serving the public and job stability. Stress level at my new job is 50-70% less than in private sector(sometimes gets boring). But It was NOT easy to get in the door, You ll see what I mean :) . So I figured the sooner the better. Once I hit my 3 years mark, I can go back to private sector if I like. But then I ll have reinstatement eligibility for life.
soboggled
Posts: 901
Joined: Mon Jun 27, 2016 10:26 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by soboggled »

imlearner wrote:I moved from LCOL area to HCOL and took 10% pay cut for federal job. For me it was serving the public and job stability. Stress level at my new job is 50-70% less than in private sector(sometimes gets boring). But It was NOT easy to get in the door, You ll see what I mean :) . So I figured the sooner the better. Once I hit my 3 years mark, I can go back to private sector if I like. But then I ll have reinstatement eligibility for life.
I have to laugh when some complain they aren't paid as much as private industry, then see the very long lines trying to get a job there.
Swansea
Posts: 1528
Joined: Sat Feb 13, 2016 4:16 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Swansea »

soboggled wrote:If you can get say 75% of your current pay, go government.
Decent if not great pay with COLA and merit increases guaranteed every year, maybe the best overall benefits in the US, total job security, don't have to work hard, worry or compete unless you want to, and great inflation-adjusted retirement benes that will let you live comfortably and securely.
On the other hand, you'll never get rich and your mind may turn to sludge.
If you like your job, you can wait awhile but I recommend it to anybody not looking to be wealthy and you have patience with bureaucracy - maybe when a little older? The risk that you may easily become technologically obsolete is very real in a fast-moving field, so unless you want to be an entrepreneur or manager private industry becomes tougher every year.
While I agree that WGIs are approved 99% of the time, they are not given every year in the GS system. Yearly to steps 2, 3, and 4, then every two years to steps 5, 6 and 7, and finally every three years to 8, 9, and 10 where they stop.
Engineer250
Posts: 1082
Joined: Wed Jun 22, 2016 1:41 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Engineer250 »

rgs92 wrote:Absolutely get the federal gov't job. Each year you age over 40 in the private sector you will have a bigger target on your back and you will feel more vulnerable and miserable each year, and if you get let go (very likely) you will be out in the cold bouncing from one short term contractor job to another with few benefits and it could easily end your career at 50. The federal job would be worth it at half the salary you mention.

This is a no-brainer. It's a gamble to go into the private sector. The ones who will disagree are just on the good side of the fence and don't know enough people who through no fault of their own are left to wither in the cold. Even with lots of education, you could find yourself in the position of a steelworker in the private sector, especially in I.T. Trust me. I learned the hard way.

To anyone who disagrees, I ask respectfully how many middle-aged programmers or systems analysts,etc. do they see in their offices.
Actually quite a few. But this is a valid point depending on your industry. Programmer working at Tesla is different than a programmer working at Ford. Same product, two different cultures.
grabiner wrote:
delamer wrote:Swansea is correct. Your 2.5 years of prior service are meaningless in terms of getting health insurance in retirement. All that matters is that you have coverage in the 5 years immediately preceding your retirement and that you get an immediate, not deferred, annuity. Because of your age, you'd have to wait until age 60 to retire and get an immediate annuity (under age 60/20 years of service; you won't have the 30 years of service needed to retire at your MRA).
Government employees can retire at MRA (57 for the OP) with 10 years of service with a reduced annuity; they can still keep insurance into retirement.
This is all true, you'd have to have at least 5 years in the system to get healthcare, and you really need 10 at 57 to retire at the earliest. So if you were hoping to retire early this may not pan out for you.
doss wrote: I'm sorry, I was not clear. :oops: It is 130k salary, not 400-600k!

Does this change the game or is it still recommended to try and go govie for the health insurance ?
Are there federal employees where you are at doing what you do? Can you ask them what their GS level is? Where I am at, GS-12 seems to be the top for most engineers and most qualified professionals. This is also the highest they could probably bring you in at. In my area that maxes out at around $100k. There are a bunch of people in my office "stuck" at the highest step as a GS-12. You need to compete to a new position to get the next grade and pay level. Having gone from private to govt, it's funny to me that govt has the rep of being merely rewarded each year for existing. Annual fed raises have been around 1-1.5% last couple years, after however many years of pay freezes. In the private sector I was easily getting around 2.5%, with promotions at the discretion of my boss. In the govt you have to compete for promotions, and it might be favoritism/politicial, or it might be so much bureaucracy who knows who gets selected.
soboggled wrote:I have to laugh when some complain they aren't paid as much as private industry, then see the very long lines trying to get a job there.
Who stands in lines anymore to get a job? :wink: I could easily jump back to private industry tomorrow and make 5-10% more right now. People I work with are leaving govt and getting 15-20% more. It's only people who have 20+ years in the system or are near the MRA that are trying to stick out.

The new pension plan (FERS) is not as great as the old one was (CSRS). People hired in before 2013 were paying in 1.X% of their own salary for the FERS pension. "New" government employees like myself pay in 3.1%. Because I am young, I am almost but not quite better off investing that 3.1% in the stock market rather than getting it sucked into the pension system. If I leave federal government prior to full retirement, it won't inflation adjust in that time period. So it really becomes worth it when you stick it out for 20+ years and go for full and immediate retirement rather than leave early and take deferred retirement.
soboggled wrote:On the other hand, you'll never get rich and your mind may turn to sludge.
Oh hey it's like you know what my federal government experience is like :oops:
Where the tides of fortune take us, no man can know.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by LadyGeek »

I removed an off-topic comment and a reply related to the competency of government employees. The posts were derailing the thread. Please stay factual and on-topic, which is:
doss wrote:I am a contracted 35 year-old programmer working for Uncle Sam with a security clearance making low-to-mid six figures in a low cost of living area of the country at a major gov agency. I am on the fence as to whether I should become a government employee for the retirement benefits.

Job stability issues aside, is there any reason why one would leave a contractor slot for a gov employee slot under the following conditions?

1.) Retirement pension : US GOV offers 5% match, whereas, my current employer offers 6% match plus additional company performance bonuses. There is a 1% of base salary under a defined benefit (DB) plan that is not available for contractors. The salary of a contractor is much higher than a gov employee. Due to the lack of a DB, I contribute more to my retirement each year (about 25% of pay that includes 401k, IRA and misc).

2.) Health insurance in retirement : This is where I question whether I should switch to a US Gov career rather than a contractor. Govies get medical insurance in retirement whereas contractors don't. Is this a good reason to make the switch? I do have 2.5 years already with the GOV (prior service). I am told by HR that I could receive medical benefits in retirement if I put a total of 5 years in as a govie. However, I wonder if the loss of a high income during those extra 2.5 years will be worth it.

Thoughts?
This thread is now in the Personal Finance (Not Investing) (career guidance).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
imlearner
Posts: 40
Joined: Sun Feb 28, 2016 6:26 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by imlearner »

soboggled wrote:
imlearner wrote:I moved from LCOL area to HCOL and took 10% pay cut for federal job. For me it was serving the public and job stability. Stress level at my new job is 50-70% less than in private sector(sometimes gets boring). But It was NOT easy to get in the door, You ll see what I mean :) . So I figured the sooner the better. Once I hit my 3 years mark, I can go back to private sector if I like. But then I ll have reinstatement eligibility for life.
I have to laugh when some complain they aren't paid as much as private industry, then see the very long lines trying to get a job there.
True. There are few I know, all they do is complain but we have those both sectors, whether private or government.
Slacker
Posts: 1032
Joined: Thu May 26, 2016 8:40 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Slacker »

acura301 wrote:I've been mulling over this calculation for a number of years now. I currently make $159k as a psychiatric nurse practitioner in the civilian world. I've always wanted to work at the Veterans Administration and the highest pay I could expect would be $110k...the fact remains that those benefits are not going to compensate me for losing $49k in salary. The difference between us, also, is that I don't work in a position, as others above have mentioned, where my employer is NOT likely to can me as I get older. Mine is a profession where many folks continue to work until their late 60's, 70's, and sometimes 80's. If I could only take a $30k a year salary cut to work for the VA, I would do it in a second. The reduced price of health insurance alone would be substantial.
When you consider the tax difference, perhaps it is almost only a $30k take home pay cut. $49K @ 28% = $35,280 take home and add in the State Taxes you pay on $49K at your top bracket.

[edited to add in state taxes statement]
Last edited by Slacker on Wed Aug 17, 2016 9:51 pm, edited 1 time in total.
Slacker
Posts: 1032
Joined: Thu May 26, 2016 8:40 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Slacker »

Engineer250 wrote:
doss wrote: I'm sorry, I was not clear. :oops: It is 130k salary, not 400-600k!

Does this change the game or is it still recommended to try and go govie for the health insurance ?
Are there federal employees where you are at doing what you do? Can you ask them what their GS level is? Where I am at, GS-12 seems to be the top for most engineers and most qualified professionals. This is also the highest they could probably bring you in at. In my area that maxes out at around $100k. There are a bunch of people in my office "stuck" at the highest step as a GS-12. You need to compete to a new position to get the next grade and pay level. Having gone from private to govt, it's funny to me that govt has the rep of being merely rewarded each year for existing. Annual fed raises have been around 1-1.5% last couple years, after however many years of pay freezes. In the private sector I was easily getting around 2.5%, with promotions at the discretion of my boss. In the govt you have to compete for promotions, and it might be favoritism/politicial, or it might be so much bureaucracy who knows who gets selected.
Electrical Engineer here working as a GS-13 (on my way to GS-14 in a few months after I finish a special certification, otherwise I'd have to wait an extra year to get to GS-14).
Engineer250 wrote:
soboggled wrote:I have to laugh when some complain they aren't paid as much as private industry, then see the very long lines trying to get a job there.
Who stands in lines anymore to get a job? :wink: I could easily jump back to private industry tomorrow and make 5-10% more right now. People I work with are leaving govt and getting 15-20% more. It's only people who have 20+ years in the system or are near the MRA that are trying to stick out.
My private industry equivalent can pull over $200K if they are half decent. I don't like working 80hr+ weeks though.
Engineer250 wrote: The new pension plan (FERS) is not as great as the old one was (CSRS). People hired in before 2013 were paying in 1.X% of their own salary for the FERS pension. "New" government employees like myself pay in 3.1%. Because I am young, I am almost but not quite better off investing that 3.1% in the stock market rather than getting it sucked into the pension system. If I leave federal government prior to full retirement, it won't inflation adjust in that time period. So it really becomes worth it when you stick it out for 20+ years and go for full and immediate retirement rather than leave early and take deferred retirement.
Actually, I pay 0.8% into FERS as a pre-2013 hire. I think the current hires right now (not sure when it started) will pay around 4% or 4.4% towards their pension.
Slacker
Posts: 1032
Joined: Thu May 26, 2016 8:40 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Slacker »

I don't know if this has any weight for your decision making, but since you have 2.5yrs of service (military or prior federal service) you only have 6 months to go to hit 4weeks of vacation per year on top of the 2.5 weeks of sick time.

If you were military, get your DD214 to them right away and then you'll have to do additional paperwork to get your military service credited towards FERS (plus you'll have to "buy" your service years). If prior fed, I don't know but I would guess it should be much easier to get your service date credits.
Paul78
Posts: 436
Joined: Sat Dec 12, 2009 10:17 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Paul78 »

Slacker wrote:
Engineer250 wrote:
doss wrote:
Actually, I pay 0.8% into FERS as a pre-2013 hire. I think the current hires right now (not sure when it started) will pay around 4% or 4.4% towards their pension.
I got in late 2012 at the .8% of salary into FERS

then they we to FERS-RAE for just one year (2013 hires) at 3.1% of salary

then they went to FERS-FRAE starting for 2014 hires at 4.4% of salary

All three groups get the same pension. I am also guessing the number will eventually jump to closer to 7% which would be closer to a 50/50 split between employee/government funding the pension.

Being hired late 2012 as oppose to 1/1/14 ends up getting me over an extra years salary in my pocket by the time I retire :sharebeer
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

Well, the military upped their enlistment age to 39, so I still have some time :sharebeer But that would be a huge paycut.

So, yea, looks like 4.4% due to the new FERs structure. That sucks. What's the point, then? That's like paying 4% in broker fees, if you think about it.

Since I was RIFed and did not voluntary separate from my 2.5yr gov job, I wonder if there are any special clauses for reinstatement to the older FERs (doubt it).
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
finite_difference
Posts: 3626
Joined: Thu Jul 09, 2015 7:00 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by finite_difference »

doss wrote:Well, the military upped their enlistment age to 39, so I still have some time :sharebeer But that would be a huge paycut.

So, yea, looks like 4.4% due to the new FERs structure. That sucks. What's the point, then? That's like paying 4% in broker fees, if you think about it.

Since I was RIFed and did not voluntary separate from my 2.5yr gov job, I wonder if there are any special clauses for reinstatement to the older FERs (doubt it).
I think even at 4.4% you are still getting a pretty good deal. Not many places have pensions. You'll also have access to the TSP, which likely has lower fees than your current 401k.

The Federal medical benefits in retirement just mean you can keep your same (subsidized) insurance until you are 65 and under Medicare? A good deal but you are still responsible for paying 25%, which I think can still be a lot depending on the plan. Just how much that is worth depends on what the insurance landscape looks like when you retire and how healthy you are, right? (If you are healthy until 65 then there is not much benefit?) So you need to check if the salary difference is big enough that you can easily pay for your own high quality private medical insurance at retirement.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Slacker
Posts: 1032
Joined: Thu May 26, 2016 8:40 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Slacker »

According to this article on "fedsmith" you have to have at least 5 years of creditable prior service to have the lower FERS rate as opposed to falling under FERS-FRAE:

http://www.fedsmith.com/2014/04/07/fers ... this-mean/
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

It looks like the key is the FERS computation which is a defined pension at 30% of your salary in retirement.

.01 x "high 3 average salary" x years of service .

So, assuming my situation:

.01 x "135000 assumption of high 3 average salary" x 20yrs of service = $27,000/yr pension

The pension, according to Vangauards retirement calcuator, is what really tips everything over and shows how switching to govie from contractor is the better deal. A $105k govie salary and saving only $15k/yr for retirement is better than the $150k contractor salary and saving over 30k for retirement! So, yes, a higher salary in the contractor world and even saving twice as much as the govie still does not beat the pension for life that the govie gets.

The pension + FEHB medical benefits + more time off + job stability + less stress is the way to go.

Are my numbers right? If so, I'm going to start looking for fed jobs asap....

Note: i saw that my agency is still under FERS-RAE. Is that a typo? Their job ads specify the following:

"New employees are automatically covered by the Federal Employees Retirement System-Revised Annuity Employees (FERS-RAE)."
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
mrc
Posts: 1908
Joined: Sun Jan 10, 2016 5:39 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by mrc »

Unless this has changed too, at 20 years of service, your multiplier increases from 1.0% to 1.1%.

The agency may be FERS-RAE, but new hires? http://www.fedsmith.com/2014/04/07/fers ... this-mean/
FERS-FRAE Employees first hired on/after 1/1/2014 (Or rehired after that date with less than 5 years creditable or potentially creditable service under FERS)
By the time you know enough to choose a good financial adviser, you don't need one. | bogleheads.org is my advisor: The ER is 0.0% and the advice always solid.
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

mrc wrote:
The agency may be FERS-RAE, but new hires? http://www.fedsmith.com/2014/04/07/fers ... this-mean/
FERS-FRAE Employees first hired on/after 1/1/2014 (Or rehired after that date with less than 5 years creditable or potentially creditable service under FERS)
I wonder if it's possible for some agencies to keep the older FERS for new hires (FERS-RAE)? The job ads for my agency all say FERS-RAE, but I am going to ask HD tomorrow to be sure. What if I sign a job offer with this version of FERS and then find out they were wrong? Do I have any leverage in getting the older version of FERs ?
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
mrc
Posts: 1908
Joined: Sun Jan 10, 2016 5:39 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by mrc »

doss wrote: I wonder if it's possible for some agencies to keep the older FERS for new hires (FERS-RAE)? The job ads for my agency all say FERS-RAE, but I am going to ask HD tomorrow to be sure.
You should ask to be sure. But I doubt it.
doss wrote: What if I sign a job offer with this version of FERS and then find out they were wrong? Do I have any leverage in getting the older version of FERs ?
I really doubt that. I wouldn't accept an offer unless I could live with 4.4% contribution.
By the time you know enough to choose a good financial adviser, you don't need one. | bogleheads.org is my advisor: The ER is 0.0% and the advice always solid.
LuigiLikesPizza
Posts: 512
Joined: Tue Jan 05, 2016 6:54 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by LuigiLikesPizza »

The Federal medical benefits in retirement just mean you can keep your same (subsidized) insurance until you are 65 and under Medicare? A good deal but you are still responsible for paying 25%, which I think can still be a lot depending on the plan. Just how much that is worth depends on what the insurance landscape looks like when you retire and how healthy you are, right? (If you are healthy until 65 then there is not much benefit?) So you need to check if the salary difference is big enough that you can easily pay for your own high quality private medical insurance at retirement.
So, the subsidization is 75% of cost?

I'd be curious to see how the value of that federal employee retiree health insurance compares to the alternatives. May have to get quotes.
Slacker
Posts: 1032
Joined: Thu May 26, 2016 8:40 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Slacker »

mrc wrote:Unless this has changed too, at 20 years of service, your multiplier increases from 1.0% to 1.1%.

The agency may be FERS-RAE, but new hires? http://www.fedsmith.com/2014/04/07/fers ... this-mean/
FERS-FRAE Employees first hired on/after 1/1/2014 (Or rehired after that date with less than 5 years creditable or potentially creditable service under FERS)

Just remember, you must wait until 62 to retire and have at least 20 years to get the 1.1% per year of your high 3 rate.
Topic Author
doss
Posts: 554
Joined: Tue Nov 01, 2011 9:52 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by doss »

mrc wrote:
doss wrote: I wonder if it's possible for some agencies to keep the older FERS for new hires (FERS-RAE)? The job ads for my agency all say FERS-RAE, but I am going to ask HD tomorrow to be sure.
You should ask to be sure. But I doubt it.
doss wrote: What if I sign a job offer with this version of FERS and then find out they were wrong? Do I have any leverage in getting the older version of FERs ?
I really doubt that. I wouldn't accept an offer unless I could live with 4.4% contribution.
Yea, I asked HD and it turned out to be a typo:( Oh well, still a good deal.
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
HP-12Cing
Posts: 30
Joined: Sun Nov 23, 2014 2:25 pm

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by HP-12Cing »

The biggest risk in making the jump from contracting to working for the government for the benefits is that the benefits at subject to change. In the examples of the most recent FERS pension contribution percentage changes referred to above, existing employees were grandfathered in. It is my hope that this would continue to be the status quo for future changes, as there is less political blowback from reducing future employees' benefits than there is riling up the entire federal workforce, but there are no guarantees.
Paul78
Posts: 436
Joined: Sat Dec 12, 2009 10:17 am

Re: US Gov vs federal contractor - medical benefits in retirement?

Post by Paul78 »

HP-12Cing wrote:The biggest risk in making the jump from contracting to working for the government for the benefits is that the benefits at subject to change. In the examples of the most recent FERS pension contribution percentage changes referred to above, existing employees were grandfathered in. It is my hope that this would continue to be the status quo for future changes, as there is less political blowback from reducing future employees' benefits than there is riling up the entire federal workforce, but there are no guarantees.
I honestly doubt the pension changes will be retro active. Yes the pension is great compare to what most people (ie private sector) get but is it is not like a California state pension (my dad will be getting around 80% of his base base with just over 20 years of service). Heck even if you work 50 years under fers you would only get 55% of your base salary as a pension. It seems as though they just have to make changes on new employees (either keep increasing the percentage employees contribute or change the formula- ie using an average of 5 years instead of 3, cutting the percent from 1 to .8...) and it should be fine. Personally I am more concerned they will change the health care premiums and put more of the burden on the employee.
Post Reply