When Is It Time to Leave Your Federal Job for the Private Sector?

Are you thinking of leaving federal service for a job in the private sector? Here are some factors with respect to benefits to help weigh the decision.

Working for the federal government has a ton of great perks with great benefits and job security being at the top of the list. With that being said, is there a time that it would make sense to leave federal service for the contracting side in the private sector?

Many federal employees ponder this question as they plan out their long-term career plans.

Here are a few things to think about if you are considering leaving federal service for a job on the other side.

Salary

A higher salary is generally the #1 reason that a federal employee would consider leaving federal service. Oftentimes, ex-federal employees are highly sought after for their security clearances and skills and are compensated accordingly. 

The hard part is knowing if the higher salary is worth the potentially lower amount of benefits. 

Health Insurance

Health insurance is often a huge contributor to why feds decide to not leave the government. With health costs rising significantly every year, it is more important than ever to have an affordable health plan that you can count on. 

Many contracting companies offer health insurance to their employees and sometimes for lower prices than the Federal Employees Health Benefits Program (FEHB). That being said, one of the biggest differences is that it is much more rare for contractors to be allowed to remain on their employer’s health insurance plan once they transition into retirement. 

In contrast, Federal employees who retire with an immediate retirement are often eligible to continue their FEHB plan after they stop working and for the rest of their lives.

For those that will want to have more than just Medicare in retirement or are planning to retire before age 65 (earliest you can enroll in Medicare), you will want to make sure that you have a plan to have continuous coverage.

Military retirees who are covered by Tricare often do not have to worry about this issue. 

Life Insurance

FEGLI is far from the perfect life insurance program, but it does allow basically any federal employee to get coverage regardless of health issues. This can be a great benefit for those that are not able to get the coverage that they need on the private side. 

If you are in good health, (especially as you get into your 50’s and 60’s) it may be cheaper for you to get life insurance from a private company anyway. 

Pension

One huge perk of the federal government is the retirement package. While many contracting companies will have a plan similar to the Thrift Savings Plan (TSP), much fewer will have a pension plan. 

For a FERS federal employee (Federal Employees Retirement System) to receive a full and immediate pension, they’ll have to meet one of the following criteria:

  • Meet their Minimum Retirement Age (MRA) and have at least 30 years of service.
  • Reach age 60 with at least 20 years of service.
  • Reach age 62 with at least 5 years of service.

Note: The rules for special provision FERS will be different.

If you are close to reaching one of these milestones, it is often worth it to continue working until you do. It will allow you to get an immediate pension and keep your health insurance into retirement.

If you leave the government before one of these milestones, you may still be eligible for a pension, but it will be smaller and/or delayed. 

Conclusion

Just like most things, this is not a one-size-fits-all sort of decision. I have talked to many ex-feds who are very glad that they moved to the contracting world and others who wish they could be a government employee. 

The most important thing is to understand the ramifications of whatever decision you decide to make and to make the most of it. 

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.

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