Breaking Down the FERS Retirement System for Federal Employees, #255

On this week’s episode, I’m discussing the Federal Employees Retirement System, or FERS, a program that covers nearly all civilian federal workers. If you’re a federal employee curious about when you’re eligible to retire, how your pension is calculated, what the Thrift Savings Plan offers, or how special early retirement and survivor benefits work, this episode is your go-to resource. 

We’re breaking down the three key components of FERS: your  Basic Benefit Plan (a pension), Social Security, and the Thrift Savings Plan, as well as important details like cost-of-living adjustments and tax considerations. Whether you’re just starting your federal career or planning your retirement right now, you’ll get practical insights to help you make the most of your retirement benefits.

You will want to hear this episode if you are interested in...

• [00:00] I share an overview of how FERS provides federal employees' retirement benefits.
• [05:02] Your basic benefit plan is calculated using the highest average salary over three consecutive years, often the final service years.
• [09:52] Federal employees retiring at 55-57 receive a FERS supplement until age 62, calculated by years of service/40 times the estimated Social Security benefit.
• [11:41] Benefits include cost-of-living adjustments for those 62+ or in special roles, aligned with consumer price index increases.
• [14:52] FERS survivor benefits are available if the deceased had at least 10 years of service.

What is FERS, and Who Does It Cover?

As one of the most significant employment sectors in the United States, the federal government supports over 3 million workers, the majority of whom participate in the Federal Employees Retirement System (FERS). If you're a federal employee, understanding FERS is vital to planning a comfortable and financially secure retirement.

The Federal Employees Retirement System (FERS) is the primary retirement plan for U.S. civilian federal employees hired after 1983. According to the Office of Personnel Management, FERS provides retirement income from three sources:  

• 1. The Basic Benefit Plan (a pension).
• 2. Social Security.
• 3. The Thrift Savings Plan (TSP), similar to a private sector 401(k).

FERS covers different federal professionals, from law enforcement and firefighters to engineers, analysts, and other administrative roles. Special provisions exist for high-risk positions such as air traffic controllers and certain law enforcement officers, which affect their benefit calculations and retirement age.

When Can You Retire Under FERS?

Retirement eligibility under FERS primarily depends on age and years of credible service. The key term here is Minimum Retirement Age (MRA), which varies based on birth year, from 55 for those born before 1948 to 57 for workers born in 1970 or later.

Retirement options include:  

• Age 62 with 5 years of service.
• Age 60 with 20 years of service. 
• MRA with 30 years of service.
• MRA with 10 years of service (MRA+10), though benefits are reduced by 5% for each year under age 62.

Early retirement is available in some situations, such as involuntary separations or major agency reorganizations. In those cases, eligibility can be as early as age 50 with 20 years of service or at any age with 25 years of service.

Calculating Your Basic Pension Benefit

The FERS pension is calculated using your “high-3” average salary, the highest three consecutive years of basic pay, usually your last three years. The formula generally provides 1% of your high-3 salary for each year of government service (increases to 1.1% if you retire at 62 or older with 20+ years). Special categories, like federal law enforcement or air traffic controllers, receive 1.7% for the first 20 years and 1% thereafter.

For example:

If you retire at 57 with 30 years of service and your high-3 average is $165,000:  

- 30 years x 1% = 30%  

- $165,000 x 30% = $49,500 annual pension

The FERS Supplement

Since some federal employees retire before they’re eligible for Social Security (age 62), FERS includes a Special Retirement Supplement. This bridges the income gap until you can claim Social Security, calculated as:  

Years of service ÷ 40 x age-62 Social Security benefit

For example, with 30 years of service and a projected Social Security benefit of $2,500 per month, the supplement would be $1,875 per month from retirement until age 62.

Understanding FERS is essential for federal workers considering retirement. Regularly reviewing your retirement strategy, estimating future benefits, and taking advantage of financial planning resources can help you maximize your retirement security. 

Resources Mentioned

• Retirement Readiness Review
• Subscribe to the Retire with Ryan YouTube Channel
• Download my entire book for FREE 
• US Office of Personnel Management (OPM) FERS Information 

Connect With Morrissey Wealth Management 

www.MorrisseyWealthManagement.com/contact

 

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