What You Need to Know About the Federal Retirement Systems

Do you work for the federal government as a civilian? If that’s the case, depending on when you started working, you’ll be eligible for one of two federal retirement systems:

• Federal Employees Retirement System (FERS)

• Civil Service Retirement System (CSRS)

If you started working after January 1, 1987, you are certainly a member of the Federal Employees Retirement System (FERS). If not, you will qualify for the Civil Service Retirement System (CSRS).

What is the Federal Employees Retirement System (FERS)?

FERS is a retirement plan for federal civilian workers, including those in the executive, judicial, and legislative government departments. However, it does not apply to military members or workers of municipal and state governments.

If FERS insures you, you will be eligible for three types of benefits:

Basic Benefit Plan: This plan lets you and your employer put a percentage of your paycheck into it. After retirement, you will earn a monthly pension if you do so. Resultantly, the Basic Benefit Plan is often known as the monthly annuity.

Social Security: You must contribute 6.2% of your salary to Social Security, which the government matches.

Thrift Savings Plan (TSP): A Thrift Savings Plan (TSP) allows you to save and invest for your retirement. It is similar to a 401(k) plan in that it provides government workers with the same types of savings and tax advantages. A regular TSP allows you to make tax-deferred contributions. Hence, you will have to pay taxes when withdrawing money in retirement.

You may also contribute to a Roth TSP if you don’t have a 401(k) plan. You will contribute to the plan from your after-tax earnings. As a result, you will not have to pay any taxes while you are retired.

You can invest your TSP in the following funds:

• Common Stock Index Investment Fund

• Fixed Income Index Investment Fund

• Government Securities Investment Fund

• International Stock Index Investment Fund

If you quit your Federal government employment before retiring, keep in mind that you may take your Social Security and FERS TSP with you to your future job.

What is the Civil Service Retirement System (CSRS)?

In 1920, the Civil Service Retirement System (CSRS) was established as a defined benefit, contributing retirement system. Until 1984, when the Federal Employees Retirement System (FERS) took effect, it was the sole retirement system accessible to federal employees.

Most workers contribute roughly 7% of their base wage, and their employers match it. You must have worked for the federal government for at least five years to be eligible for the CSRS. You must also work in a CSRS coverage job for at least one of the past two years before retiring.

Your retirement benefits can be computed by taking your average highest 36 months’ salary from the last 120 months of employment and multiplying it by 1.5%. You will also receive a federal annuity based on five years of service credit.

You may choose to do a Voluntary Contributions Program to contribute 10% of your base pay into a CSRS subaccount.

If you are not eligible for CSRS, you may still participate in the FERS program if hired after 1987. You will have to choose between the two programs when making your payroll deductions. If you opt to join the FERS plan, it is possible for you also to fund a TSP account.

If you are unsure which retirement plan is right for you, visit the official Retirement System website.

Under the CSRS, you are eligible for an immediate retirement benefit if you fulfill one of the following criteria:

Optional benefits, such as a disability pension or a deferred annuity, will only be available to those who have fulfilled the five years of service requirement.

To become eligible for benefits under CSRS, you must be able to provide your employer with at least 31 days’ notice before leaving your government job. If you fail to do so, you will be barred from receiving any annuity.

You are also not allowed to receive your full CSRS annuity if you return to federal government employment before you turn 62.

If you have served for less than five years in the public sector or have contributed less than 5% in taxes, you may purchase up to three months of service credit for each year you have served.

Interest rates will determine the purchasing cost for this when your request was made. The average cost of buying three months’ worth of Service Credit is about 0.07% of the price of your annuity, or slightly more than $200 for each year covered.

If you are eligible to buy three months’ credit based on this formula, you can still purchase additional service credit if it is less expensive.

Contact Information:
Email: [email protected]
Phone: 6232511574

Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.

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