The Maximum Annuity of CSRS
Many federal workers still have CSRS coverage, and most of these workers want to continue working so they can earn all the annuities that are possible.
A great number of these workers have maxed out their annuities, getting 80% of a high-3. This is usually obtained after they’ve served with CSRS for 41 years and 11 months. There are some workers who can get this earlier, if their jobs accumulate benefits a lot faster, by choosing to contribute higher amounts.
If you’ve already gotten to the target and choose not to retire, then your pay could continue to have retirement contributions deducted from it. It doesn’t matter how many years you continue working after getting the 80% maximum. When you finally do retire, the United States Office of Personnel Management will inform you regarding the amounts of the extra contributions that were made. Any interest accumulated will also be reported to you. At this point, you can choose to get the money refunded to you or purchase extra annuity with it. The latter won’t be subjected to the 80% maximum limit on annuity earned.
If you choose the refund option, you shouldn’t be taxed on the extra deductions because they were taxed already while you were on the job. The only thing taxable is the accumulated interest.
To purchase extra annuity, your age will determine the amount. If you’re 60 years of age, you should get $8.00 extra each year in annuity for every $100 you made in extra contributions. Every full year after that, there will be a 20-cent increase for each of those years. If you’re 62 years of age, you will get $8.40 extra. If you’re 65 years of age, you will get $9.00 extra. Yearly cost-of-living adjustments will not cause this annuity to increase like your regular annuity would.
If you retire with unused sick leave, those hours will get added onto your CSRS annuity. The increase you get won’t have the 80% max on earned annuity applied to it. If you have saved up a lot of sick leave hours, you could have higher annuity. If you have 174 sick leave hours, your annuity will increase by 1/6 of 1%.
If you’re like many people who have rarely used sick leave throughout their careers, this can become a real benefit to you. If you retire with 2,087 sick leave hours, you will see a 2% increase in your annuity.
Remember that FERS doesn’t have a maximum %. You wouldn’t be able to get to an 80% of high-3 if the benefit accumulation rate is lower.