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Understanding Your FERS Retirement

When we talk about your FERS Retirement, we're really talking about several different benefits. FERS (Federal Employees Retirement System) has three main components:

Basic FERS Pension
Social Security
Thrift Savings Plan (TSP)

Your FERS pension and Social Security will be fixed dollar amounts. But the money you get from your TSP will depend on how much you contributed and how well you managed the money.

As a FERS, you have a chance to take a more active role in managing your own retirement than CSRS do. But, that means you need to stay up-to-date on your benefits.

Here are some important things you need to know about each part of your FERS retirement...

Your Basic FERS Pension

Sometimes people will call your FERS pension a FERS annuity. Even OPM calls it an annuity. But, technically, it's not an annuity. I mention the difference because when I talk with FERS and CSRS about annuities, they get confused.

An annuity is something you buy from an insurance company to pay you a certain amount of money for a certain amount of time. A pension is something that you receive from your employer when you retire.

For our purposes, we'll use the term pension when we talk about your FERS retirement.

Every pay period, the government takes out a small portion of your pay to put towards your FERS pension. For most FERS, it is 0.8% of your basic pay. But your pension is not based on this amount.

Your FERS pension is a defined benefit program. "Defined Benefit" means the amount you *get* is defined or fixed. It doesn't matter how much money you contributed - the monthly income from your pension will be a fixed amount based on certain factors.

Once you retire, you can receive a basic monthly pension for the rest of your life.

When Can I Retire Under FERS?

When you can retire depends on...

Your Age
Your Years in Service
What Type of Retirement You Choose

There are several different types of FERS retirement options. Each has its own requirements for age and years in service. You will need to know your Minimum Retirement Age(MRA).

Here are the most common types of retirement under the FERS program:

Immediate FERS Retirement - Sounds exciting doesn’t it! :) Immediate retirement means that you are eligible to start receiving your pension/annuity within 30 days. Am I eligible for Immediate FERS Retirement?

Early FERS Retirement - This one sounds great too – If you have at least 10 years in service, you may be eligible to retire. Do I qualify for Early Retirement?

Early Out FERS Retirement - If your agency is going through a Reduction in Force (RIF), you may be offered an Early Out Retirement. How Do I Get Early Out Retirement?

Deferred FERS Retirement - If you separate from service before becoming eligible for an immediate or early retirement, you may be eligible for a deferred retirement if you have at least 5 years of creditable service. Am I eligible for Deferred Retirement?

Disability FERS Retirement - If you have worked at least 18 months in Federal service and become disabled while working for the Federal Government, you may be able to retire (no matter your age) under a Disability Retirement. Tell me more about Disability Retirement.

How Much Will My FERS Pension Be?

In order to calculate your basic FERS retirement pension, you will need to know three things…

Your High-3 Salary
Your Years of Creditable Service
Your Pension Multiplier

Your pension is calculated by taking..

Your High-3 Salary x Your Years in Service x Your Pension Multiplier = Your Annual FERS Retirement Pension

Let’s look closer at each part of the equation...

#1) Your High-3 Salary

Your High-3 is the highest average basic pay you earned during any 3 consecutive years of 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.

Want help calculating your High-3 Salary? Click Here.

#2) Your Years of Creditable Service

Once you have your High-3 Salary, the next step is to calculate your Years of Creditable Service.

But when do you start counting?

Your Service Computation Date (SCD)? Not so fast. Your SCD is used to calculate your annual leave – but your pension is based on another date.

Technically, OPM uses your Retirement Service Computation Date (RSCD) to determine the beginning of your Years in Service for the pension calculation.

You can find your *Estimated* RSCD on your Personal Statement of Benefits. But, this is just an estimate.

When does OPM calculate your official RSCD? Approximately 6 months *after* you retire, OPM will review your file and calculate your RSCD.

So where do we start? For many people, their Service Computation Date (SCD) will be the same as their RSCD – so we’ll start with your SCD. You can find your SCD on one of your SF50s.

Count the number of whole years, months and days of creditable service from your SCD to your planned retirement date. Then convert those years, months and days into years using the Time Factor Table.

***If you had temporary time, took leave without pay, or had a break in service, it would be important to seek assistance in calculating your RSCD. You should also seek assistance if you are planning on retiring very close to your required years in service. 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!***

I need help with my RSCD - who can help me?

#3) Your Pension Multiplier

For most FERS, their pension multiplier is 1%.

However if you are age 62 or older at separation, with 20 or more years of service, your multiplier will be 1.1%

Calculating Your FERS Pension

So your FERS retirement pension is determined by three factors, your High-3 Salary, your Years of Creditable Service and your Pension Multiplier:

High-3 Salary x Years of Creditable Service x Pension Multiplier = Your Annual Pension

Let's take an example and say you had a High-3 Salary of $55,000, 25 years of creditable service, and your pension multiplier was 1%, you would receive…

$55,000 x 25 x 1% = $13,750 a year, or approximately $1,145 per month

Let’s take that same example, but say you were over age 62 when you retired. Since you will be older than age 62 when you retire and have at least 20 years of creditable service, your pension multiplier will be 1.1%. In this example, this means your basic pension would be…

$55,000 x 25 x 1.1% = $15,125 a year, or approximately $1,260 per month

Reductions to Your FERS Pension

There are some choices you can make that will reduce the amount of your FERS pension:

Retiring Before Age 62
If you retire before age 62 with less than 30 years of service, your pension will be reduced. Your FERS pension will be PERMANENTLY reduced by 5% for every year you are under age 62. Click here to see an example of this reduction and how it might affect you

Survivor Benefits
Your FERS Pension could also be reduced if you choose survivor benefits. Will my survivor still get my pension when I die?

Social Security for FERS

Employees covered under the Federal Employee Retirement System (FERS) are typically eligible to receive Social Security benefits when they retire.

Every pay period, the Federal Government takes out 6.2% of your basic pay to put towards Social Security. But just like your FERS pension, your Social Security benefit is not based on your contributions - it is based on other factors.

How Much Social Security Will I Get?

The amount of Social Security you receive depends on the amount of money you’ve earned over the years and how long you have been working in a job that contributes to Social Security (most do).

The easiest place to find out how much you can expect to receive in Social Security is to look at your Social Security Statement. This statement will be mailed to you every year, a few months before your birthday. It contains information about the income you’ve earned over the years and it will tell you how much your benefits are currently estimated to be.

Be sure to review your Social Security statement before you file it away. If there is an error on the statement, you only have three years to fix it. If you discover an error that was made more than three years ago, you are out of luck

Special Benefit for FERS Retiring Before Age 62

Have you dreamt of retiring before age 62, but you’re not sure if you could make ends meet before you can start drawing your Social Security benefits?

You need to know about the FERS Supplement – a big benefit that is so unknown, it’s practically a secret.

The FERS Supplement is designed to help bridge the money gap for certain FERS who retire before age 62. It will supplement your missing Social Security income until you reach age 62.

But not all FERS are eligible to receive the Supplement.

Click here to learn more about the FERS Supplement

Special Provisions FERS (ATC, LEO or FF) have some different rules for the Supplement.

If you are Special Provisions - click here to learn more about the FERS Supplement for Special Provisions

Thrift Savings Plan for FERS

The Thrift Savings Plan (TSP) is a special account for Federal Employees. The TSP was created as part of the Federal Employees Retirement System in 1986. Most government employees (FERS and CSRS) are eligible for the TSP - even those hired before it was created.

The TSP allows you to save pre-tax dollars in a special personal account. You can choose how to invest those dollars - although your choices are limited.

With your FERS retirement pension and Social Security, you will receive fixed amounts. But with your TSP, the amount you receive depends on how much you put in and how well you managed the money.

Your TSP contributions are optional and separate from your FERS pension.

You may also be able to get your Federal Agency to contribute money to your TSP. Click here to learn more about the match the government gives FERS employees.

Click here to learn more about the Thrift Savings Plan.

Learn More about Your FERS Retirement

Want to learn more? We offer live in-person FERS Classes in Anchorage, Alaska.

Not in Anchorage? We’re developing a special training course to help Federal Employees understand their benefits.

Click here to tell us *how* you want to learn about your retirement benefits.

"Who Can Help Me?"

Wondering how your FERS benefits apply to your personal situation?

OPM and your HR department can give you information - but they simply aren't equipped to help you determine what benefit choices are the best for your personal situation.

Are you looking for someone to help you get the most out of your Federal benefits and help you manage your personal and retirement finances?

Consider finding a financial planner who is also experienced in Federal benefits.

Learn more about how a Federal Retirement Planner can help you.

What Happens If You Make a Mistake on Your Retirement Paperwork?

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 Mistake… and How to Avoid Them. I will also send you my monthly Newsletter (e-zine) Federal Retirement Planning.

I am providing this Special Report totally free to subscribers of Federal Retirement Planning. Just complete the form below, and click on the “Subscribe” button. You will then receive a confirmation email asking you to confirm your request.

Don’t let these 7 classic mistakes ruin your federal retirement. Register for my monthly Newsletter (e-zine) Federal Retirement Planning and get your copy of my FREE Special Report today.

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