How To Calculate Creditable Service*
A good general rule of thumb is that if you worked in a position in which you contributed to FERS, that counts as creditable service. If youre a long-time employee and worked prior to 1989, no deduction was taken for FERS, but you can elect to pay a deposit typically 1.3% of your salary to have that time counted as well towards your pension. Unused sick leave can also be used to increase creditable service.
If you leave Federal service and withdraw your FERS deposits, you also have the option to redeposit those funds if you return to service and want those prior service years to be creditable for FERS. This page at OPM offers more detail on creditable service and the rules for less common situtations.
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What Is Included In Average Pay
Average pay includes your basic pay, plus any other salary from which you contribute to FERS. Salary in this case includes locality pay and shift rates, but it does not include overtime or bonuses (you can find a more comprehensive list of what counts toward your High-3 here. Most Federal employees contribute 0.8% of their salary towards FERS, although relatively recent changes increased the rate to 3.1% of salary for those hired in 2013, and the contributes increased again to 4.4% for those hired in 2014 or afterwards.
Note that the calculation is based on the highest average pay for any 3 consecutive years. For most, these years will occur at the end of their career, but this isnt always the case.
Examples Of Fers Pension Calculation:
So your FERS retirement pension is determined by three factors, your High-3 Salary, your Years of Creditable Service and your Pension Multiplier.
For most FERS, their pension multiplier is 1%. So their FERS Retirement pension formula comes together as
Lets take an example. For easy numbers, lets say your High-3 Salary is $100,000. You have 25 years of creditable service. If you are younger than age 62, your pension multiplier would be 1%.
In this example, your pension would be calculated as
$100,000 x 25 Years x 1% = $25,000/year.or $2,083/month
But now lets say you were at least age 62 with 25 years of service.
In this case, your pension multiplier would be 1.1% and your pension formula would come together as
In this case if you were age 62, with 25 years of service and a High-3 Salary of $100,000 your pension would be calculated as
$100,000 x 25 Years x 1.1% = $27,500/yearor $2,291/month
If youre thinking about working until age 62, with 20 or more years of service check out our page on the FERS Age 62+20 Retirement Bonus.
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How Do I Find My Average High
As you will recall, your High-3 salary is the average basic pay salary of the highest 3 consecutive years of creditable service as a federal employee. If you are about to retire, OPM will calculate this number for you. For federal employees who are a few years away from retirement or longer, the easiest way to project your High-3 will be to take your current salary and plug it into the formula above. It might be tempting to try and factor in pay raises due to promotions or cost of living adjustments, but this can lead to an over-confidence of what the future FERS pension will be. Its always better to error on the side of caution and make adjustments to the number over time as your salary increases.
Other Factors Impacting Your Fers Benefit
Retirement age
There are two eligibility options that affect the size of your basic benefit.
- Unreduced Benefits – To be eligible for unreduced benefits you must meet one of the following criteria:
It is possible to retire earlier than your MRA, but that requires circumstances outside of your control such as involuntary separation without cause, reorganization, retirement offers, or disability.
- Early Retirement: Federal workers can be eligible for early retirement if they have reached their MRA and have 10 years of service. Those that elect early retirement will have their basic benefit permanently reduced by 5% for each year they retire before age 62.
Survivor annuity
There are a couple options available for married retirees that can extend a portion of FERS annuity payments to their surviving spouse. Here are the options:
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How To Calculate Your Fers Retirement Pension
Do you know how to calculate your FERS retirement pension? Here is a basic overview.
Planning for retirement can be scary. After all, most people only do it once so everyone is a newbie.
However, retirement planning doesnt have to be complicated, and knowing what your FERS Pension is will be a great first step.
And fortunately, the calculation is really simple.
What Is The Average Pension Of A Federal Employee
Median pension benefit The median private pension benefit for individuals 65 years of age and older was $ 9,827 per year. The median pension benefit from the local or state government was $ 22,546 per year.
Employment under the FERS system is covered by Social Security, so when you retire you will receive both a federal pension and a Social Security benefit. Pay into the system via payroll taxes, just like the rest of us.
The upper limit for pension is 50% of the highest salary in the Government of India per month. The pension is payable until the date of death included. A Central Government employee has an option to transfer a portion of the pension, which does not exceed 40%, into a lump sum payment.
To be invested , you must have at least 5 years of credible civil service. Survival and disability benefits are available after 18 months of civil service.
What is a good pension amount?
What is a good amount of pension? Some counselors recommend saving you 10 times your average working life salary at the time of your retirement. So, if your average salary is £ 30,000, you should aim for a pension of around £ 300,000. Another first tip is that you should save 12.5 percent of your monthly salary.
Take the age to start your retirement and halve it. Then put that% of your salary before tax into your pension each year until your retirement. So someone who is 32 years old should contribute 16% of their salary for the rest of their working life.
Is 80 000 A good retirement income?
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But What About My Scd
When many people look at their LES and SF-50s, the find their SCD . Most people assume that can be used to calculate their years of creditable service. Unfortunately, your SCD is for leave purposes ONLY.
The date that matters for your creditable service and pension calculation is your RSCD . This date matters because this is the date that OPM will use to calculate your retirement.
Unfortunately, there is no official document that shows your RSCD before you retire. Your Personal Statement of Benefits will have an estimate but that is just an estimate. You can use your SCD as an estimate as well but just know that it may be the same as your RSCD.
But again, OPM will calculate your RSCD from your SF-50s. So youd be able to calculate it by reviewing all your SF-50s and finding the amount of time that you were official paying into the FERS retirement system.
Once you have your RSCD, calculate the amount of full years and months between that and your desired retirement date. Only full months count toward your creditable service so youll have to drop any extra days. 30 days is treated as a full month and OPM never rounds up.
For example, lets say that the time between your RSCD and your planned retirement date is 22 years, 6 months, and 29 days. In this case, your creditable service would be 22 years and 6 months because the 29 extra days would drop off.
Fers Annuity Calculator For Retirement
Since your Thrift Savings Plan goes with you before or when you retire from the government, you need to figure out how to spend it efficiently in retirement. Annuities are the only retirement plan in the United States that guarantees you never run out of money in retirement. Annuities can also show you how much savings you need to generate your desired retirement income in the future.
Our TSP annuity calculator illustrates how much annual income you can withdraw for the rest of your life if you rolled your FERS annuity into an annuity with a guaranteed lifetime withdrawal benefit, now or in the future.
Note: You can purchase an annuity with your TSP, 401, IRAs, retirement accounts, investments, savings accounts, and cash.
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How Much Does Fers Retirement Pay
The amount FERS retirement pays is based on the factors listed above. While it will be substantially less than the highest annual salary you earned while working, youll also very likely have Social Security for income in retirement along with any savings you were able to put away in the Thrift Savings Plan.
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What Is My Fers Minimum Retirement Age
Although there is no mandatory retirement age for most federal jobs many people law enforcement officers, air traffic controllers, firefighters and others have been away for some time.
FERS announcements are based on a high-3 average salary. Generally, the benefit is calculated as 1 percent of the average high-3 salary multiplied by years of credible service. For those retiring at age 62 or later with at least 20 years of service, a factor of 1.1 percent is used instead of 1 percent.
Age 66-67 years: Social Security full retirement age, depending on when you were born . Age 70: The last age to start receiving Social Security benefits. Age 72: You must start the minimum required distribution from your pension plans.
55 may not be too early to retire, but it is too early for Social Security. As you work to navigate the income equation in hopes of retiring at age 55, drag Social Security benefits off your list of potential sources of income in the short term. Eligibility for Social Security benefits starts at 62 for retirees.
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Calculating Your High 3 For Federal Retirement
As you can see above, your average high 3-year salary is multiplied by a certain multiplier based on your retirement age.
Under age 62 at Separation for Retirement, or age 62 or older with less than 20 Years of Service: 1% of your average high 3-year salary for each year of service.
Age 62 or older with at least 20 Years of Service at the date of your Separation for Retirement: your benefit is increased to 1.1% of your average high 3-year salary for each year of service. This bonus is not available for younger retirees regardless of service time and will not switch over at age 62.
As an example, a federal worker who retires at age 60 with 25 YOS and a High 3 of $65,000 would receive a benefit of $16,250 per year. Retiring at age 62 with the same YOS and
High 3 , the federal worker would receive an increased benefit of $17,875 per year a permanent 10% increase!
Therefore, a higher-paying position or a raise boosts your average high 3-year salary. This will help you in the near term, as you earn more, and in retirement with a higher benefit payout.
The Simple Math Of Fers Retirement
I hope this has been helpful in showing that the basic math behind the FERS retirement calculation is not that hard. But there are a lot of factors to take into account.
If you are seriously looking into retiring from the federal government, this is a good starting point to estimate your pension. But I must stress that I am not an expert on the FERS retirement system! Like with any retirement plan, its great to start with a ballpark estimate, then begin working through the details with your HR department or another professional.
If you read through this whole article and are NOT a federal employee, then you are either a math nerd or are seeing the light to one of the major benefits of government employment the pension system.
For anyone looking to secure their retirement, I think working for the government for some portion of your career could be a good fit if you have the right skills. I know Im looking into it now!
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What Is The Maximum Fers Annuity
FERS announcements are based on a high-3 average salary. Generally, the benefit is calculated as 1 percent of the average high-3 salary multiplied by years of credible service. For those retiring at age 62 or later with at least 20 years of service, a factor of 1.1 percent is used instead of 1 percent.
After retirement you are entitled to a monthly income for life. If you leave federal service before reaching full retirement age and have a minimum of 5 years of FERS service you may choose to take a deferred pension.
FERS is a retirement plan that provides benefits from three different sources: a Basic Benefit Plan, Social Security and a Social Security Benefit Plan . Then, after your retirement, you will receive annuity payments every month for the rest of your life.
For new Federal employees covered in this requirement, the contribution rate is generally 4.4 percent .
Can You Collect A Pension And Social Security At The Same Time
Yes. There is nothing stopping you from receiving both pension and Social Security benefits. But there are certain types of pensions that can reduce Social Security payments.
What types of pensions affect Social Security benefits? Your Government Pension Can Affect Social Security Benefits The Government Pension Offset, or GPO, affects spouses, widows and widowers with pensions from federal, state or local government work. It reduces their Social Security benefits in some cases.
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What About Military Time
As many people transition out of the military, they often find positions with the government on the civilian side. Military time can be bought back and added to your creditable service. For pension purposes, bought back military time will act as civilian service.
However, if you are currently drawings military retirement from your military time, you can not add that time to your civilian service without discontinuing your military pension. In a nutshell, you cant double dip. Your military time can count towards a military retirement or a civilian one but not both.
How To Calculate Your High 3 For Federal Retirement
Upon retirement, the Federal Employees Retirement System will pay federal workers a monthly benefit based on their years of service worked under FERS, average high 3-year salary and age. This FERS basic benefit is often known as the monthly annuity. It is a major source of retirement income for federal workers. Knowing how it is calculated can help you decide when its the right time to retire.
So, lets break down how to calculate your high 3 for federal retirement.
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Can I Collect Fers And Social Security At The Same Time
Yes, when you retire you will receive both a federal pension benefit AND a Social Security benefit. Prior to 1984, federal employees participated in the Civil Service Retirement System that replaced their Social Security benefit. But after FERS was introduced in 1984, federal employees were part of the Social Security system and paid into it via payroll taxes like everyone else.
Fers Employees Who Retire At Age 62 Or Older With 20 Or More Years Of Service
The FERS basic annuity computation formula for a FERS employee who retires at age 62 or late, with a minimum 20 years of creditable service is:
1.1 percent times high-three average salary times the total years and months of creditable service
The following example illustrates:
Example 5. Joy, age 63, retires from federal service with 22 years of creditable FERS and 6 months of unused sick leave. Her high-three average salary is $150,000.
Joys starting FERS gross annuity is: 1.1 percent times $150,000 times 22.5 equals $37,125
Note the following with respect to the 1.1 percent accrual factor:
- A retiring FERS employee must fulfill two requirements in order for the 1.1 percent accrual factor be used in the calculation of his or her starting basic FERS gross annuity, namely: Be age 62 or older on the day he or she retires and Have a minimum 20 years of creditable FERS service.
- With the 20-year minimum creditable service requirement, OPM has ruled that unused sick leave hours when converted to months and days of service can be added to a retiring FERS employees creditable service time for the purpose of meeting the minimum 20-year service requirement. The following example illustrates:
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Types Of Pay Not Included In High
The following types of pay are not included in the calculation of the high-three average salary: Lump-sum payment for accrued and accumulated annual leave bonuses and overtime, holiday pay, Sunday premium pay and military pay General Schedule night differential pay and foreign or non-foreign post differential pay travel allowances and recruiting or retention bonuses.
