Federal employees under the Federal Employees Retirement System (FERS) enjoy a rare and relatively unknown benefit called the FERS Retirement Supplement. Even the Civil Service Retirement System (CSRS) has nothing compared to it. The FERS supplement is also known as the Social Security supplement or Special Retirement Supplement.
Since the earliest age for Social Security eligibility is 62, the FERS supplement was designed to bridge the retirement income gap for employees who retire before age 62. For instance, let’s say Dave retired at age 56, and although he receives pension income, it isn’t enough to cover his living expenses. And the earliest Dave can start withdrawing from Social Security is in six years. If Dave qualifies, he will receive this supplement for those six years to cover the income gap.
Not everyone qualifies for the FERS Retirement Supplement. To qualify, you need to meet the following requirements.
- You must be a FERS employee
- You must be younger than age 62
- You must retire with an immediate annuity
The two groups of persons who would qualify for the supplement program are those with thirty years of service at minimum retirement age (MRA) and twenty years of service at age 60. Typically you’ll become eligible for an immediate annuity at age 62 if you have at least five years of service. However, you won’t be eligible for the supplement since it ends at age 62.
The next question is how much the payout will be for the supplement. The calculation to get the payout is quite complex; however, you can follow this formula to estimate.
(Years of Creditable Service/ 40) x (Your Social Security Benefits at age 62)
To calculate the payout, you’ll need an estimate of your years of service as well as your estimated Social Security benefits at age 62. The amount you have at the top of your Social Security statement is the benefit you’ll get if you attain full retirement age (65-67) before filing. The monthly benefit amount will be lower and can be found on Page 2 of your statement. So if your retirement age is 62, then your Social Security benefit would be around $1,200. If you have thirty years of creditable service, for instance, the formula would look like this:
(30/40) x $1,200 = $900
So, as you can see, the amount you’ll get from the FERS Retirement Supplement may not completely replace your Social Security benefits unless you have at least forty years of service. You must have other income sources, like a Thrift Savings Plan, to cover any income gaps left after the supplement.
Also, note that using a supplement doesn’t necessarily mean that you must retire at age 62. You can still wait until the full retirement age and further up to age 70. You should also note that the FERS Retirement Supplement is treated in every way like Social Security benefits, which implies that the payouts may be subject to taxes and reductions. Your supplement payout may be reduced if your income exceeds specific amounts.