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Maximizing the 2024 Federal Employee Pay Raise

In a recent development, President Biden signed into law the largest federal employee pay raise in over 40 years. The 2024 average federal pay raise has been set at 5.2% (with 4.7% raise across the board), marking a boost in income for government workers across various agencies. Federal pay raises often reflect changes in the economic landscape and government priorities. This increase is credited to recent inflation as well as the widening gap between public and private sector compensation.

In this blog post, we will mention some prudent things to do with this benefit increase – nothing fancy, just smart ways to make the most out of what you’ve got (at least what’s left after inflation and taxes).

But first – we are financial advisors for Federal employees and defense contractors. Here are some blogs that these folks tend to find useful:

FERS Federal Retirement – the basics

Northrop Grumman 401k

Northrop Grumman stock

And now onto the blog!

The 2024 Fed Pay Raise – actionable ideas!

Rather than succumbing to the temptation of immediate spending, to the highest extent possible, I encourage federal employees to leverage the pay raise to achieve long-term financial goals. Here are some actionable ideas:

#1 Refill Cash Reserve

Establish or fortify an emergency fund to cover the unexpected. For example, I recently found out my parents, in one week, had the following financial obligations come up unexpected:

  • Two car registrations came up for renewal,
  • A washing machine broke,
  • The dishwasher started to leak,
  • They had to move a family member’s wedding venue to a more expensive location (due to previous owner dying – also unexpected),


When it rains – it pours.

A reserve (emergency fund or “cookie jar”) can keep you from putting these unplanned expenses on a credit card with 23% interest or paying additional tax on distributions from a pre-tax retirement account.

Use the Federal employees pay raise as an opportunity to build your reserve fund up to a logical amount – this is often three months of expenses if a dual-income household and six months if a single-income household. Get to that point, and then assess if you need more based on comfort level. 

#2 Tackle Debt

I find most of the federal employees I work with are quite “debt-averse,” but if you have some loans on your personal balance sheet, get to work on paying them off. Consider allocating a portion of the Fed pay raise to paying off high-interest debts such as credit cards or personal loans.

If you are lucky enough to be a homeowner with a sub-3.5% interest rate, congrats! Do you pay it off early? Any spreadsheet that says you can earn more than the interest rate will say you’re better off with payments. I think a better approach is to decide how important it is to you to own your home outright. Some people prioritize this more than others. Whether or not you decide to pay off your mortgage in full, just be careful about making sure you’re still saving at least enough to your TSP to get the full employer match (currently 5%).

#3 Boost Retirement Savings

If you’ve got a comfortable/reasonable cash reserve and little-to-no debt outside of housing, consider increasing the % of pay you save to  your Thrift Savings Plan (TSP). If you have your contribution rate set to a % of pay, then you automatically will be saving more. If you save a dollar amount, consider changing to a % of pay to ensure you’re always saving at least 5% of pay to get the full 5% FERS matching contribution – this is free money you don’t want to miss. While you do have your FERS Pensions and Social Security in retirement, the third “leg” of TSP savings is still important , particularly if you want to secure a retirement in which you can spend more, retire earlier, or both!

Here’s an idea for those over 50: explore catch-up contributions.

Quick plug for FEHB and FEGLI: As income increases, so do premiums for FEGLI Basic and Option B. Premiums for FEHB are unrelated to income, but many have increased for 2024, likely eating into the raise, depending on your selected plan.

As you shore up your retirement savings, consider the type of contribution you are making. While it’s nice to get a tax deduction from pre-tax contributions, it can also be a great idea to pay the tax now and build up a retirement bucket of tax-free Roth money. While “tax-free” sounds better, it depends! If you switch to Roth, be aware that your net paycheck will likely go down (due to paying taxes now). This is a personal decision that is highly dependent upon your personal circumstances. Consult your financial advisor or CPA and check out future blogs. I tend to publish on this topic, if you’d like to know more.

#4 Save for other goals

Personal finance isn’t only about debt management, retirement savings, emergency funds, and taxes. Let’s not forget the pleasures of life to be enjoyed now and in the near future. Putting some money aside for goals such as college, wedding, vehicle, remodel, vacation, hobbies, etc. can help make the “journey” more enjoyable.

These ancillary goals can often be the niceties of a financial plan but also the first to go if things get tight. Act wisely and have a plan.

Did that shed some light on what to do with the Fed pay increase in 2024?

We hope our blog on the increase in Fed pay in 2024 has been useful to you. It’s likely there are still many questions to tackle.

As a financial advisor for Federal employees, I can help you figure out what is most important to do, and to create a strategy to work towards getting there. If any questions, reach out and let’s talk through what you are trying to accomplish and how we can help.

Rhett Sorensen CFP® is a financial advisor focused on Federal employees and defense contractors.


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The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of author, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated.