Picking the best date to retire on the basis of one’s finances is not an easy task. A common mistake people make when calculating the retirement benefits is to include FERS Supplement into the benefits when they are not eligible for it or they fail to include it when they are actually eligible for it. It is a benefit of which every person has heard of at least once in a lifetime but many of them are not clear about whether they can get it or not. Here we try to clear the air on this vital retirement benefit that’s not available to any CSRS retirees.
What is FERS Supplement?
FERS Supplement is a special retirement supplement that applies to only specific FERS retirees who retire involuntarily before attaining minimum retirement age (at least 56 years), who retire on an immediate annuity not reduced for age or who retire voluntarily. It applies to retirees who retire voluntarily because of reduction in workforce, a major reorganization or an early retirement. Except for people who retire on an immediate annuity not reduced for age, the payment is not made until one reaches the minimum retirement age.
In summation, this special retirement FERS supplement represents what a person would receive for his or her FERS service from the Social Security Administration. It is calculated as if a person were eligible to receive SSA benefits on the day the person retired. This eligibility continues until the earlier of the last day of the month before the first month for which a person would be entitled to actual social security benefits or the last day of the month in which a person reaches the age of 62.
The Office of Personnel Management will first estimate a person’s full career social security benefit. It must be noted that 40 years is considered as the full career here. After that, the amount of a person’s civilian service under FERS is calculated and there is a reduction in the estimated full career social security benefit accordingly.
Let’s assume that the estimated full career social security benefit of subject A would be USD 1,000 and A has worked 30 years under FERS. So, 30 will be divided by 40 and the result (.75) will be multiplied by A’s estimated full career social security benefit. Hence, USD 1,000 X .75 = USD 750). This result is A’s special retirement supplement. It is prior to any reductions.
The supplement is dependent on a social security earnings test. This test is quite important as it has the power to reduce or even completely eliminate the benefit. This test has a look at a person’s outside earnings and if they are too much, the person will not receive any FERS Supplement. It must be noted here that the basic FERS benefit is not counted among the earnings and any reductions that occur due to the earnings test so if a person has high FERS benefits, the FERS Supplement will not be affected by it.
It is hoped that you now have a fair idea about whether you are eligible for FERS Supplement or not. If you are eligible, you have something to cheer about as it can increase your retirement benefits and help you to choose the best date to retire wisely. It can also ensure that your finances get a bit stronger and you don’t have to depend on other people in your golden years. Just remember that people under CSRS do not have an access to this extraordinary benefit at all.