Answering listener questions about Medicare Advantage and retirement. Listen to the Full Episode: Enjoy the show? Use the Links Below to Subscribe:Read More
In order to calculate your FERS pension, you will need to know your creditable years of service as well as your “High-3” average salary. Your creditable years of service includes the years, months, and days rounded down to the nearest month of how long you’ve been working as a federal employee. This time does not have to be consecutive, and often has breaks in between. Your High-3 average salary is, however, based on years of consecutive service. Your High-3 is the average basic pay salary of the highest 3 consecutive years of creditable service as a federal employee.
The formula for the FERS Basic pension is shown below:
|Under Age 62 at Retirement, OR,|
Age 62 or older with less than 20 years of creditable service
|1% x High-3 x Years of Creditable Service|
|Age 62 or older with 20 or more years of creditable service||1.1% x High-3 x Years of Creditable Service|
There’s a 10% increase in the FERS pension amount if you retire at age 62 or older with 20 or more years of creditable service.
[There are special formulas that aren’t shown on this article for Air Traffic Controllers, Firefighters, LEOs, Capital Police, Supreme Court Police, Nuclear Materials Couriers, Members of Congress, and Congressional Employees.]
As you will recall, your High-3 salary is the average basic pay salary of the highest 3 consecutive years of creditable service as a federal employee. If you are about to retire, OPM will calculate this number for you. For federal employees who are a few years away from retirement or longer, the easiest way to project your High-3 will be to take your current salary and plug it into the formula above. It might be tempting to try and factor in pay raises due to promotions or cost of living adjustments, but this can lead to an over-confidence of what the future FERS pension will be. It’s always better to error on the side of caution and make adjustments to the number over time as your salary increases.
In order to calculate the amount of time of creditable service, you need to find your Retirement Service Computation Date (RSCD). This is not to get confused with the Service Computation Date (SCD) found on a leave an earnings statement. An SCD simply calculates creditable service for Leave purposes, and sometimes this date is different than the RSCD.
By subtracting the current date by the RSCD, you will find how many years, months, and days of creditable service you have. The RSCD can be found on the annual Personal Benefits Statement. Please note that the RSCD found on the Personal Benefits Statement is an estimate, and that OPM will calculate your official RSCD only AFTER you have retired. The annual Personal Benefits Statement can be found electronically through the Employee Personal Page (EPP), as well as being available in the Reporting Center (RPCT).
You will also want to add the years, months, and days of military time that was bought back to the number you calculated based on your RSCD. The same is true for any remaining sick leave that you have accrued, which OPM has chart on their website to convert hours into years, months, and days.
It is never too soon to start planning your retirement. You can always run through your own calculations, but it’s also a good idea to get a pension estimate done for you. That said, OPM has different calculators on their website you can use to plan how much your pension will be as well as figuring out how much in taxes will be taken out [https://www.opm.gov/retirement-services/calculators/]
These calculations are great for estimating your pension, but aren’t so great at telling you what to do with this information. There are so many layers involved when it comes to retirement, that only knowing what your FERS pension will be is just the tip of the iceberg. We might be biased, but we always recommend consulting with licensed financial planners to help with the rest.
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I am aware that after I put in ten years’ federal civilian creditable service and then retire, my FERS annuity will be reduced monthly by 10% for the surviving spouse
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Get the most out of your federal retirement benefits by taking advantage of the FERS resources created by Micah Shilanski, CFP®, and the team of independent financial advisors at Shilanski & Associates, Inc. Join the thousands of federal employees who trust us to guide them in their retirement planning journey because of our unique perspective of how your FERS benefits contribute to your comprehensive financial plan.
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