The Fed15 Podcast: Navigating the Federal Job Landscape and Advanced Charitable Giving
FERS
The Federal Employee Retirement System (FERS) is a defined benefit plan that provides a guaranteed income stream for life to eligible federal employees, when they retire. Any federal employee hired after January 1, 1984 is covered by FERS. The annuity received upon retirement is an incentive for workers to continue their service until eligible. The employee, their agency, and the Federal Government all make contributions to the retirement system. If a fed leaves government service before they’re eligible for retirement benefits, the contributed money is refunded (with interest), but the matching contributions from the agency and federal government are not.
Unlike the TSP (thrift savings plan), which is a defined contribution plan for feds, employees are required to make contributions to FERS. For those hired before 2013, 0.8% of their salary is contributed each paycheck, and that is after taxes have been deducted, unlike the optional traditional TSP contributions, which are made pre-tax. If hired in 2013, the contribution amount for FERS is 3.1% (known as FERS-RAE employees) and for employees hired from 2014 to the present, the individual worker’s contribution amount is 4.4% (FERS-FRAE). The amount of matching contributions by the agency and government differ by job title and agency.
FERS replaced the old Civil Service Retirement System (CSRS), a public pension fund established in 1920.
Use the following calculation to figure out your pension:
“High-three salary” x years of service x 1%
With 20 years of service or more and retiring at the age of 62 or later
“High-three salary” x years of service x 1.1%
The “high-three” is just the average of your 3 highest-paid 12-month (consecutive) spans, which for most feds equates to their last 36 months of working but it is not required to be the last 36 months of an employee’s career. This number, multiplied by the years of service, and then multiplied by 1% (or 1.1%) gives the federal retiree their GROSS annual pension amount. (Note the 10% increase for the second formula, .1% may seem like a small increment that but it can dramatically change the outlook of one’s retirement.)
To be eligible for an immediate FERS annuity, you will need to meet an age and service requirement. To be eligible for a full, unreduced pension, the requirements are as follows:
Besides the .1% increase at 62, the other age-centric fact to keep in mind is the Minimum Retirement Age (MRA) – which is between ages 55 and 57 depending on when you were born.
For those who have reached the MRA and have at least 10 years of service, a deferred retirement also becomes an option, albeit with reduced benefits.
The “years of service” factor in the computation is the total time of creditable service an employee has accrued, but the total is tabulated monthly – Certain retirement dates may provide administrative or financial advantages depending on an employee’s individual circumstances.
Disclosures
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Be sure to contact a qualified professional regarding your situation before making any investment or withdrawal decision. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
The FedLife Podcast is your in-depth, biweekly deep dive into the world of federal benefits and retirement planning. Hosted by federal benefits expert Ed Zurndorfer and Dan Sipe of Serving Those Who Serve, each 30-minute episode unpacks the complexities of FERS and CSRS retirement, FEHB and Medicare, survivor benefits, tax planning, and more. Designed for federal employees and retirees who want more than just the basics, FedLife goes beyond the headlines to explore the rules, nuances, and strategies that can make a meaningful difference in your retirement. Remember: it’s your Fed life, make it a great one.
The Fed15 Podcast is your weekly 15(ish)-minute briefing on federal benefits and financial planning, built specifically for federal employees and retirees. Hosted by Dan Sipe and Katelyn Murray of Serving Those Who Serve, each episode delivers clear, actionable guidance on topics like FERS and CSRS retirement, TSP strategies, FEHB, survivor benefits, tax planning, and more! Whether you’re five years from retirement or already there, The Fed15 helps you cut through the noise, avoid costly mistakes, and make confident decisions about your federal benefits.
