The FERS is Flying
Most federal and postal workers are covered by the Federal Employees Retirement System. But FERS is very different from the old civil service pension program.
Senior Correspondent Mike Causey is back in the office today, but to give him time to catch up on his e-mail, FederalNewsRadio presents the final installment of the Six Most Popular Federal Reports of the Year. This is his most popular column of 2008 which originally appeared on August 6th, 2008. sk
Three of every four federal workers are under the “new” Federal Employees Retirement System and that’s the subject of today’s guest column by benefits expert John Elliott. MC
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If you’re covered under the old Civil Service Retirement System (CSRS), you can stop reading; this is for our FERS friends who have never been covered under CSRS. It is about three things you can do to plan for retirement under the Federal Employees’ Retirement System (FERS) so that you won’t be caught financially short at retirement.
What we want is no surprises in retirement, at least about the money.
Your FERS retirement is made up of three parts:
- Your FERS Basic Benefit, or annuity, or pension. You will get one percent for each year of service, prorated monthly, of your high-three average salary. Your hi-3 is the highest three consecutive years of total pay, divided by three. So a FERS person with 30 years and six months of service will get 30.5% of their hi-3 average salary. If you manage to hang on until age 62 you’ll get 1.1% for each year of service, if you have at least 20 years of service at retirement. If you’re a law enforcement officer, firefighter (in the literal sense) or air traffic controller, you’ll get 1.7% for each of 20 years of service, and 1.0% for all years above 20. So, it should be easy for most of you to come up with a ballpark estimate of your FERS Basic Benefit. You may also get an additional amount of money, called an annuity supplement, if you retire before 62, to bridge the gap until you reach Social Security eligibility. This can be a significant amount of extra money above and beyond the FERS Basic Benefit. Take the number of full years you have under FERS, divide by 40, and multiply by your estimated Social Security Benefit at age 62. You can also visit your HR office where they typically have software to calculate this for you.
- Your Social Security Benefit. You can collect your Social Security retirement benefit as early as 62. Each year, three months before your birthday, you get a statement from the Social Security Administration giving you an estimate of your Social Security Benefit at age 62, and your full retirement age, which varies depending upon your year of birth. Or, you can go to www.ssa.gov and use their calculator to compute an estimate of your benefit.
- Your Thrift Savings Plan. This is where most of your money should come from, that is, if you’ve faithfully contributed the maximum under the law. There is a great tool at www.tsp.gov to help you gauge how much of a TSP account you’ll have at retirement. Go to the website and click on calculator.
The calculator can perform the following functions in helping you plan for retirement, and I quote from the calculator page:
Estimate the growth of your TSP account by calculating the growth of your future contributions and/or the growth of the money already in your account. Estimate what your account balance would provide in monthly annuity payments under a variety of TSP annuity options. Estimate how many monthly payments you can receive from your account when you choose a specific dollar amount, or estimate how much you can receive each month if you choose monthly payments based on life expectancy. Link to the Ballpark Estimate calculator to estimate how much you will need to save each year to meet your retirement goals.
Use these tools, and your retirement planning will be a little easier. J.E.
John Elliott presents retirement seminars for the National Institute of Transition Planning. Tune in to For Your Benefit each Saturday morning, from 10-11. Listen live at 1050 AM, or www.federalnewsradio.com
Nearly Useless Factoid
From Disgusting Flavors We Never Got a Chance to Love on MentalFloss, “one of the biggest flavor offenders seems to be Jell-O, who tried and failed with Coffee, Chocolate and Cola flavors. Their most behated flavor, however, has to be Celery, which was apparently created for use in salads.”
To reach me: mcausey@federalnewsradio.com
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