Annuity Calculation for Federal Workers

Is it possible for federal employees to retire on full salary even after only working for 20 years? It seems that this has become an especially persistent urban myth.

The basis of civil service annuities relies on the high-3 (or the average of that employees three highest consecutive salary years) as well as a multiplier that reflects their years of federal employment.

Covering about 95 percent of feds, The Federal Employees Retirement System (FERS), permits retirement when an employee reaches the age of 56 with 30 years of service (or 60 with 20, or 62 with five). These retirees can receive 1 percent of their “high-3” average per year of service, rising to 1.1 percent for employees who retire at age 62 (or later) with at least 20 years under their belts. To further explain, an example of this could be an employee who has 20 years of federal service as well as a high-3 average of $80,000. If retiring at age 60 they could receive an annual annuity of $16,000, or if retiring at 62 (or later), they could receive $17,600.

The federal employees beneath the Civil Service Retirement System (CSRS), which is a much smaller number compared to FERS, don’t get those same benefits. However, their annuity multiplier is around 2 percent per year of service. Looking back at FERS, those employees do receive Social Security benefits as well as up to 5 percent of employer contributions that go into their Thrift Savings Plan (TSP).

These are the basics of annuity calculations for federal employees, but there are various special provisions that can apply to either FERS or CSRS. If you have additional questions on your own annuity calculations, then it’s best to reach out to a financial advisor who can help you by providing additional information specific to your own unique situation.

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