How much is FERS retirement?

If you work in the public sector, you may be familiar with the Federal Employees Retirement System (FERS). FERS is a retirement plan for federal civilian employees, and it covers employees working in the executive, judicial, and legislative arms of government. Employees are automatically enrolled in the FERS program, and they will be eligible to receive benefits when they retire.

FERS retirement annuity is calculated as 1% of your high-3 average salary multiplied by years of credible service. If you are retiring at 62 and you have at least 20 years of service, a factor of 1.1% is used rather than 1%. If you have less than 20 years of service and you are below age 60 when you retire, there will be a reduction of your annuities by 5% for each year you are under 62.

How FERS retirement is calculated

Typically, the FERS benefit is determined by taking 1% of your high-3 average salary multiplied by the years of credible service in the public sector. If you retire at 62 or later, a 1.1% multiplier is used instead of 1%.

If you are retiring before age 60 and you have 20 years of federal service, your FERS annuities will be reduced by 5% for each year you are below age 62. However, if the employer provides an early retirement option, these reductions will be waived.

For example, assume that you meet the minimum age requirement, and your high-3 average salary is $50,000. If you have 30 years of service, your federal annuity will be calculated as follows:

=0.01% x $50,000 x 30

=$15,000

In comparison, if you decide to retire at age 55, and you have 15 years of service, and the high-3 average salary is $50,000, your annuity will be calculated as follows:

= 0.01 x 15 x $50,000

=$7,500

Since you retired before 60 and you had less than 20 years of service, your FERS annuity will be reduced by 5% for each year you were below 62. The resulting annuity is calculated as follows:

=$7,500 – [(7 x 5%) x $7,500]

=$7,500 – [$2625]

=$4,875

Therefore, your annuity will decrease from $7,500 to $4,875.

How FERS Retirement Works

Similar to a 401(k) and IRA that US workers use to save for retirement, federal government employees save for retirement through FERS retirement. This retirement program was introduced in 1987 to replace the Civil Service Retirement System (CSRS). FERS is structured as a defined-benefit plan, and the benefits paid out to retired employees are based on their age, salary, and years of service.

If you want to start receiving benefits from a FERS retirement plan, you must have attained a certain age and accumulated enough years of credible service. Typically, you must have reached the minimum retirement age for FERS retirement, and have at least 30 years of service. You may also be eligible to receive these benefits if you retire at 60, and you have 20 years of service or 62 with at least five years of service.

Components of a FERS Retirement Plan

FERS Basic Benefit

The FERS basic benefit plan is a pension that is paid out to retired federal employees, regardless of the amount they contributed.

The basic benefit is based on the length of credible service and the high-3 average salary. Mostly, your high-3 months are the last three years of service, but it could be a different period if you held a higher-paying role during your federal service career.

When calculating the basic benefit, the agency you work for only considers the basic salary. Other incomes such as bonuses, overtime, and other additional payments are excluded. The high-3 salary is then multiplied by the years of service and a 1% multiplier. If you are 62 or older, or you have accumulated at least 20 years of service, a 1.1% multiplier is used.

Social security benefit

When you retire from the federal service, you are eligible to receive social security benefits. Typically, federal employees pay 6.2% of their earnings into social security, with the agency matching these contributions. The amount you receive as social security benefits depends on how long you have worked in a job that pays into social security and the total earnings over the years.

Thrift savings plan

A thrift savings plan (TSP) is similar to 401(k), but it is only available to federal employees and uniformed services personnel. The employer automatically contributes 1% of your basic pay to the TSP account, and you can elect to make additional contributions, while your employer can match your contributions up to 5% of your basic pay. The amount you receive from your TSP depends on your total contributions to the plan and how you invested the money.

Categories of FERS retirement benefits

Immediate

You can access immediate retirement benefits at least 30 days after you leave employment. You can take this benefit if you have attained age 62 and you have completed 5 years of service, or you have attained age 60 with at least 20 years of service. If you attained the minimum retirement age, and you have 10 to 30 years of service, your FERS annuities will reduce by 5% for each year you are below 62.

Early

Early retirement is available when there is an involuntary or voluntary separation such as layoff, termination, or resignation. You can be eligible to take early retirement benefits if you are age 50 or older with at least 20 years of service, or any age with 25 years of service.

Deferred

This benefit is available to former federal employees who left the service before meeting the requirements for immediate benefits. You can receive delayed benefits if you are age 62, and you have completed at least 5 years of civilian service. If you retire with at least 10 years of service but below 30 years of service, your benefits will reduce by 5% for each year you are below 62.

Disability

If you become disabled while working in a FERS-eligible position due to a disease or injury, you can receive disability benefits. The disability must last at least one year, and the agency you work for must certify that it cannot accommodate your disability condition in any vacant position in your agency.