Maxing Out Your CSRS Retirement

What happens when you max out your CSRS Retirement at 42 years of service? Can your CSRS retirement pension exceed the 80% rule?

The 80% Rule for CSRS

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. (Due to different pension rules, Special Provisions CSRS reach that 80% limit sooner - typically around 35 years of service.)

So what happens after 41 years and 11 months?

The Government will continue take 7% out of your pay - even after you've reached your 80% limit. But - when you retire, you will receive a refund of any excess contributions. That refund takes a couple months to be processed, but you do get the money back.

But is 80% really the highest your CSRS pension can go?

Exceptions to the 80% Rule

Despite the 80% Rule, your pension can actually exceed 80% of your High-3 Salary. How? You can increase your pension above the 80% mark in three ways...

Returning the Excess Contributions after Retirement
Unused Sick Leave
In-Service Contributions to the Voluntary Contributions Program (VCP).

Returning the Excess Contributions Check

When the check for your excess contributions arrives a few months after you retire, it comes with a letter. This letter gives you a chance to return the check, in exchange for a slightly higher retirement pension.

If you return the check, the money is treated as if you had put money in the Voluntary Contributions Program - and your pension will be increased by the amount advised in the letter.

Unused Sick Leave

Another way your retirement pension could exceed the 80% rule involves Unused Sick Leave.

I want to note here that your Unused Sick Leave doesn't count towards eligibility for retirement, but it does count in your Pension Calculation for CSRS.

Let's say you had 2 full years of Unused Sick Leave, your pension would be increased by 4% (2% for each year). So if your pension had reached the 80% limit, and you had 2 years of Unused Sick Leave, your pension would be 84% of your High-3 Salary.

In-Service Contributions to the Voluntary Contributions Program (VCP)

The VCP is a unique part of your CSRS benefits. The VCP allows you to put extra money, after-tax money, aside in a special account.

Once the money is in the VCP, you can trade it in for a higher retirement pension. So if you maxed out your CSRS pension at 80%, and you had enough money in your VCP to buy an extra 1% - you could have a pension of 81%.

BUT - I happen to think there is a much better way to use the Voluntary Contributions Program. Click here to find out more about what I call the Best Kept Secret in CSRS.

Maxing Out Your CSRS Retirement

If you have more than 40 years of creditable service in CSRS - you'll want to make sure you understand how to get the most out of your Federal Retirement benefits.

Does your financial planner understand your CSRS benefits? Or how to take advantage of the exceptions to the 80% Rule? Have they even heard of the Voluntary Contributions Program?

Your federal retirement benefits are an important part of your financial picture.

If you spend more time explaining your federal benefits to your planner than they do to you - you should find out how a financial planner for federal employees can help you. (Especially one who understands how to get the most out of your CSRS benefits.) Learn more about how a Federal Retirement Planner can help you.

Click here to return from Maxing Out Your CSRS Retirement to CSRS Retirement Page

Micah Shilanski, Financial Planner for Federal Employees

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