FERS Retirement Benefits Explained: What You Need to Know
Are you a federal employee who is covered by the Federal Employees Retirement System (FERS)? Do you want to learn more about the benefits that you can receive from FERS when you retire? Do you want to plan ahead and make the most of your retirement savings and income?
If you answered yes to any of these questions, then this blog post is for you. In this post, we will explain the basics of FERS retirement benefits, and how they can help you achieve your retirement goals. We will also share some tips and resources on how to prepare and apply for your FERS retirement.
What is FERS?
FERS is a retirement plan that provides benefits from three different sources: a Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP). Each of these sources has its own rules and requirements, and together they form a comprehensive and flexible retirement package for federal employees.
The Basic Benefit Plan is a pension that pays you a monthly annuity for the rest of your life, based on your years of service and your high-3 average salary. The Social Security is a federal program that pays you a monthly benefit for the rest of your life, based on your earnings and your age. The TSP is a retirement savings account that allows you to invest your own and your agency’s contributions in various funds, and withdraw them as a lump sum or a monthly income.
Two of the three parts of FERS (Social Security and the TSP) can go with you to your next job if you leave the federal government before retirement. The Basic Benefit Plan, however, is only available to federal employees who meet certain eligibility criteria.
Who is eligible for FERS retirement benefits?
To be eligible for FERS retirement benefits, you must have at least five years of creditable civilian service, and you must have reached a certain age and service combination. There are different types of FERS retirement, each with its own eligibility rules. The most common types are:
- Immediate retirement: You can retire with an immediate annuity if you have reached your minimum retirement age (MRA), which ranges from 55 to 57 depending on your year of birth, and have at least 30 years of service; or if you are at least 60 years old and have at least 20 years of service; or if you are at least 62 years old and have at least five years of service.
- Early retirement: You can retire with an immediate reduced annuity if you have reached your MRA and have at least 10 years of service, but you will face a 5% reduction for every year you are under age 62; or if you are involuntarily separated from your agency due to a reduction in force or a reorganization, and you have at least 25 years of service or are at least 50 years old and have at least 20 years of service.
- Deferred retirement: You can retire with a deferred annuity if you leave the federal government before reaching your MRA, but have at least five years of service. You can start receiving your annuity when you reach your MRA, or at age 62 if you have less than 10 years of service.
How are FERS retirement benefits calculated?
The amount of your FERS retirement benefits depends on several factors, such as your age, your years of service, your high-3 average salary, and your retirement type. Here are the basic formulas for calculating your FERS retirement benefits:
- Basic Benefit Plan: Your monthly annuity is equal to 1% of your high-3 average salary multiplied by your years of service. If you retire at age 62 or later with at least 20 years of service, the multiplier is increased to 1.1%. If you retire early, your annuity is reduced by 5% for every year you are under age 62.
- Social Security: Your monthly benefit is based on your earnings history and your age at retirement. You can use the Social Security online calculator to estimate your benefit amount.
- TSP: Your monthly income from your TSP account depends on how much you and your agency contributed, how well your investments performed, and how you choose to withdraw your money.
How to make the most of your FERS retirement benefits?
FERS retirement benefits can provide you with a comfortable and secure income for your retirement, but you need to make the most of them. Here are some tips and best practices for maximizing your FERS retirement benefits:
- Plan ahead and start saving early: The sooner you start saving and investing for your retirement, the more money you will have and the less you will need to rely on your FERS benefits. You should try to contribute as much as you can to your TSP account, and take advantage of the agency matching contributions and the catch-up contributions if you are 50 or older. You should also diversify your portfolio and choose the funds that suit your risk tolerance and time horizon.
- Choose the right retirement date and type: The timing and type of your retirement can affect the amount and availability of your FERS benefits. You should choose a retirement date and type that matches your personal and financial goals, and that maximizes your benefits. You should also consider the impact of your retirement on your taxes, your health insurance, and your survivor benefits.
- Claim your Social Security benefits wisely: The age and manner of your Social Security claim can affect the amount and duration of your benefits. You should claim your Social Security benefits when it makes the most sense for you and your spouse, and that optimizes your benefits. You should also coordinate your Social Security benefits with your FERS pension and your TSP withdrawals, and create a comprehensive income plan for your retirement.
- Use your leave smartly: Your leave can provide you with time and money for your retirement. You should use your leave wisely and strategically, and balance your current and future needs. You should use your annual leave for your personal and professional needs, such as taking vacations, taking care of your health, taking care of your family, taking care of your education, etc. You should save your sick leave for your retirement, as it can increase your FERS pension and your health insurance coverage. You should also cash out your unused annual leave when you retire, as it can provide you with a lump sum payment.
Conclusion
FERS retirement benefits are a valuable and generous retirement package for federal employees and annuitants. You need to understand how they work, how they are calculated, and how to make the most of them. You can consult The Benefit Coordinators and we can help you with all your retirement needs and goals. We can provide you with the best tools and solutions that can help you plan and prepare for your retirement. Don’t wait, get in touch with us now and let us help you take your retirement to the next level.
