The Civil Service Retirement System (CSRS) offers Federal Employees one of the best retirement packages around today.
As a CSRS, there are several factors you must take into consideration before retiring.
Are you sure you know about ALL of your Civil Service Retirement benefits?
While your pension makes up the biggest part of your government retirement benefits, the Civil Service Retirement System has three main components:
Basic Civil Service Pension
CSRS Voluntary Contribution Plan
Thrift Savings Plan (TSP)
Let’s take a look at some important things you should know about each part of your CSRS retirement...
Basic Civil Service Pension
Your Civil Service Retirement System pension will probably make up the biggest part of your retirement income.
Each pay period, the government will take out 7% of your pay to put towards your annuity (more if you are Special Provisions). But your pension is not based on these contributions.
Your Civil Service Retirement System Pension is a defined benefit program. It doesn't matter how much money you contributed. The amount you receive from your CSRS pension in retirement will depend on how long you've worked for the Federal Government and the salary you earned.
Once you retire, you can receive a basic CSRS pension every month for the rest of your life.
CSRS Pension vs. CSRS Annuity?
You've probably heard some people call your CSRS Pension a CSRS annuity. OPM even refers to your pension as an annuity.
But, technically, it's not an annuity. I bring up the difference because when I talk with CSRS employees about annuities, they get confused.
An annuity is something you purchase from an insurance company to pay you a specific amount of money for a period of time. A pension is something that you receive from your employer when you retire.
So, when people talk about a CSRS Annuity or a CSRS Pension - they're really talking about the same thing.
When Can I Retire with CSRS?
To retire under the Civil Service Retirement System, you need to meet a combination of years in service and age requirements. And in most cases, you must also have been a CSRS for one of the last two years before your retirement.
There are basically six different ways you can retire under the CSRS program:
Discontinued Service CSRS Retirement - If you agency is undergoing a Reduction in Force (RIF) or your position is relocated - you may be qualify for Involuntary Separation or Discontinued Service Retirement.
You may have heard of Early Retirement under the FERS program. With Early FERS Retirement, FERS employees can retire with 10 years of service at your Minimum Retirement Age (MRA). Unfortunately, CSRS does not have an early retirement option like FERS.
However - if you're ready to leave Federal Service, but don't qualify for retirement - you may qualify for
in the Civil Service Retirement System.
Calculating Your CSRS Pension
With the Civil Service Retirement System - once you are eligible to retire - you can receive a pension for the rest of your life.
How much money will you get? Let's walk through how to calculate your CSRS retirement pension.
In order to calculate your basic CSRS pension, you will need to know three things…
Your High 3 Salary
Your Years of Creditable Service
Your Pension Multiplier
Let’s look closer at each part of the equation:
#1) Your High 3 Salary
Your High Three Salary is an average of the your salary for the 3 highest paying consecutive years of your service.
Your basic pay is the basic salary you earn for your position. It includes shift rates and locality pay; but does not include COLA, overtime or bonuses.
You will want to get help calculating your RSCD if you...
Had temporary time (many Feds start with temp time)
Took leave without pay
Had a break in service
Are planning on retiring with just enough time to qualify for CSRS retirement
Federal Employees have been called back to work 6 months after they retired (or thought they retired) because when OPM calculated their RSCD – they didn’t have enough years in service to be eligible for retirement. Don’t let this happen to you!
How Does Military Time Affect Your Creditable Service?
Lots of Federal Employees have had prior military service.
If you have active honorable military service that isn’t already being ‘used’ towards a military retirement - there is a very good chance that you can ‘buy’ that time back and have it count towards your federal retirement.
Basically - your Civil Service Retirement System pension is calculated by taking...
Your High-3 Salary x First 5 Years of Service x 1.50% .... plus Your High-3 Salary x Next 5 Years of Service x 1.75% .... plus Your High-3 Salary x More than 10 Years in Service x 2.00%
= Your Annual CSRS Pension
Example of CSRS Pension Calculation
Let's say you had a High-3 Salary of $55,000 and 25 years of creditable service. Your CSRS pension formula would be...
$55,000 x 5 years x 1.5% = $4,125.00 $55,000 x 5 years x 1.75% = $4,812.50 $55,000 x 15 years x 2.0% = $16,500.00
$4,125.00 + $4,812.50 + $16,500.00 = $25,437.50 per year $25,437.50 / 12 = $2,120 per month
There is a rule in the Civil Service Retirement System that you can only receive 80% of your High-3 Salary in your pension. This is typically only a concern when you have more than 41 years in service.
Maxing Out Your CSRS Pension
Under the Civil Service Retirement System (CSRS) - you max out your pension at 80% of your High-3 Salary. Most CSRS reach that 80% after 41 years and 11 months in service.
What happens after you reach 41 years and 11 months of service? Is 80% really the highest your CSRS pension can go?
The Thrift Savings Plan (TSP) is a special retirement account for Federal Employees.
The TSP allows you to save pre-tax dollars in a special personal retirement account. You get to choose how to invest those dollars - but your choices are limited.
While you will receive a fixed amount from your CSRS pension - the money you get from your TSP in retirement will depend on how much money you put in and how well you managed it.
Federal agencies will match a portion of TSP contribution for FERS - but not for CSRS. Even so - CSRS should consider participating in the TSP. Even without the match, the TSP is a great investment option that allows you to save and invest pre-tax dollars for retirement.
Most Federal Employees are concerned that they will outlive their money. With the rate of inflation today, your CSRS pension will not be able to keep up with the rising costs of daily life.
The TSP is designed to help you save extra money for your future.
Most employees in the Civil Service Retirement System do not pay into Social Security. The exception is CSRS Offset. CSRS Offset employees do pay into Social Security.
Although CSRS do not pay into Social Security – you may still be eligible to receive Social Security if you had another civilian job or if your spouse is eligible.
Can CSRS get Social Security?
Your CSRS Benefits
The Civil Service Retirement System offers you many choices in retirement. I hope you've learned more about your Civil Service benefits here today.
As a CSRS - you have one of the best retirement benefit programs out there. But - you also need to make sure that you understand all of your benefits under the Civil Service Retirement System.
I want to encourage you to learn as much as you can about your CSRS retirement. You need to know that *you* are responsible for your retirement. And you want to make sure that you get all the CSRS retirement benefits you have earned.
Could you be making a mistake in your retirement planning - and not even know it?
What if you’ve forgotten to consider an important aspect of your federal retirement benefits? Could it really ruin your retirement?
When I talk to Federal Employees about their retirement, I’ve seen seven particular mistakes that seem to come up again and again.
In addition to teaching federal retirement classes, I’m also a Financial Planner for Federal Employees. I’ve helped many Federal Employees retire successfully – so I’ve seen the problems that come up, but I also know how to fix them.
While I can still help Federal Employees get out of these mistakes – I’d rather help you avoid these mistakes all together. I’ve created a special report just for you, because I want to help Federal Employees avoid costly retirement mistakes.
What are the most common retirement mistakes that federal employees make?
Register to get access to my FREE Special Report on The 7 Classic Retirement Mistakes Federal Employees Make… and How to Avoid Them. I will also send you my monthly Newsletter (e-zine) Federal Retirement Planning.
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