Many articles about retirement planning focus on 401(k)s, but federal employees and members of the military save for retirement with a different kind of account: the “401k” Federal Savings Plan , or “401k” Federal Savings Plan .

In some ways, “401k” Federal Savings Plan s function similarly to 401(k)s. You make contributions, and your employer may offer a match. The annual contribution limit is also $18,500, with a $6,000 additional catch-up contribution for anyone 50 or older.

Also like many 401(k)s, “401k” Federal Savings Plan s offer both traditional and Roth options. In a traditional “401k” Federal Savings Plan , you make pre-tax contributions and pay tax on withdrawals of your money in retirement. If you elect the Roth option, you would contribute post-tax income and would not pay tax on withdrawals.

You can have both a traditional and Roth “401k” Federal Savings Plan at the same time, and there’s an interesting caveat: the government’s matching contributions can only be made into a traditional “401k” Federal Savings Plan , so even if you only contribute to a Roth “401k” Federal Savings Plan , you will still have both types of accounts (and the added benefit of some tax diversification).

How “401k” Federal Savings Plan s Work For Different Kinds Of Employees

Your “401k” Federal Savings Plan account may have some slight differences, depending on if you’re in the military or a civilian government worker:

Federal Workers

-Federal Employees’ Retirement System (FERS): Federal civilian employees who were hired on or after January 1, 1984, are FERS employees. FERS employees hired after July 31, 2010, are automatically enrolled in a traditional “401k” Federal Savings Plan , and 3% of their basic pay is deducted and deposited into the account unless you elect to change or stop your contributions. FERS employees hired before August, 1, 2010, have “401k” Federal Savings Plan s that get a 1% contribution from their agency, and they can choose to contribute more as well.

-Civil Service Retirement System (CSRS): This is the retirement system for federal civilian employees who were hired before January 1, 1984. CSRS employees’ accounts are established by your agency after you make a contribution election.


Because 80% of uniformed military members don’t remain in the military for the 20 years needed to be eligible for a pension, many were walking away from their service with nothing for retirement. The Blended Retirement System (BRS) was enacted to change that. It allows you to choose a pension, a “401k” Federal Savings Plan , or both, and the best option for you depends on your current years of service.

Anyone entering the military now is automatically in the BRS. You automatically get 1% of your base pay contributed to a “401k” Federal Savings Plan , and you can contribute another 4% to get a 5% total match. You’d still get a pension if you complete 20 years of service, but it’ll be a reduced one.

If you have more than 12 years of service, the pension alone may be the better bet, as the 5% match on a “401k” Federal Savings Plan won’t offset the higher pension you’d get for having no “401k” Federal Savings Plan at all.

The gray area is service members with 8 to 12 years of service. Whether or not you stay in the old system or switch to the BRS depends on your personal situation.

Investment Choices For Your “401k” Federal Savings Plan

You have a selection of five index funds, or several lifecycle funds that are made up of combinations of those five index funds. While these are far fewer investment options than many employers offer in their 401(k)s, choosing between a smaller number of options is often less confusing!

      • G Fund: The Government Securities Fund is invested in, as its name states, U.S. government securities. This offers the lowest volatility, and you can earn interest income without fear of losing your principal investment.
      • F Fund: The Fixed Income Fund is invested in government, corporate, and mortgage-backed bonds and aims to match the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. This fund offers low to moderate risk.
      • C Fund: The Common Stock Index Fund matches the S&P 500, which is comprised of medium and large U.S. companies. This fund offers moderate risk.
      • S Fund: The Small Capitalization Stock Index Fund is slightly riskier because it invests in small and medium U.S. companies that aren’t in the C Fund. This fund matches the Dow Jones U.S. Completion Total Stock Market Index.
      • I Fund: The International Stock Index Fund matches the performance of the MSCI EAFE (Europe, Australasia, Far East) Index, comprised of stocks of more than 20 developed countries. This fund is more volatile than the C Fund.
      • L Funds: Similar to target-date or lifecycle funds, you can select an L Fund based on your retirement time horizon, and the fund will gradually shift from aggressive to moderate to conservative as you get closer to retirement. If you have a retirement age in mind, select the fund that targets the year closest to when you turn that age.
    • A big benefit of “401k” Federal Savings Plan fund options? They all have some of the lowest expense ratios around — less than 40 cents for every $1,000 you invest. This is huge because even a fraction of a percent increase to a fund’s expense ratio can mean significantly lower retirement savings in 20 or 30 years.
    • If you don’t opt for an L Fund, you can create your own combination of the five other funds. It’s important to consider your investment options carefully and make the elections that are right for you. The default fund allocations may not match your particular goals.If you enrolled in a “401k” Federal Savings Plan on or after September 5, 2015, your contributions are automatically deposited into the L Fund targeted toward the year you turn 62. If you enrolled before that date, your contributions are deposited into the G Fund, which may not be aggressive enough if you have a long time horizon.

      Matching Contributions

      BRS members and FERS employees receive an automatic contribution of 1% of their base pay to their “401k” Federal Savings Plan , whether or not they contribute. From there, you’d get a match on your additional contributions up to 5% of your salary.

      The 1% automatic contribution vests after three years for most FERS employees, and after two years for BRS and some FERS employees. The match on your contributions does not have a vesting requirement.

      Picking Beneficiaries

      It’s essential to select beneficiaries for your “401k” Federal Savings Plan , and to keep that list of beneficiaries updated in the event you have children, get a divorce, etc.

    • If there’s less than $200 in your “401k” Federal Savings Plan when you pass away, your beneficiary will receive that money. Over $200, the money remains invested and a beneficiary participant account will be established in their name.Where Should You Begin?

      If you’re eligible to participate in a “401k” Federal Savings Plan , I highly recommend you contribute at least enough to get the 5% match.

      You can also contribute up to $5,500 per year to a Roth IRA if you qualify. After that, continue to take advantage of the ability to lower your taxable income by contributing up to the annual maximum of $18,500 to your “401k” Federal Savings Plan .

      If you have money available for further investing, you can set up a separate after-tax brokerage account.