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FER Retirement

Federal Employees Retirement System (FERS)

Overview

The Federal Employees Retirement System (FERS) is the retirement program for U.S. federal civilian employees, established by Congress in 1986 and effective since January 1, 1987 (FERS Information). It was created to replace the older Civil Service Retirement System (CSRS) for new employees and to integrate federal retirement with Social Security (Federal Employee Retirement System (FERS) – Federal Benefits Information Center). FERS is designed as a three-tiered retirement plan, providing benefits from three sources: a Basic Benefit Plan (pension), Social Security, and the Thrift Savings Plan (TSP) (FERS Information). This structure was intended to be more flexible and portable than CSRS – for example, the Social Security and TSP components can move with employees who leave federal service, reflecting a more modern workforce that may not spend an entire career in government (FERS Information) (). Overall, FERS’s purpose is to ensure federal employees have a secure retirement through a combination of a government-funded pension, Social Security benefits, and personal retirement savings.

Eligibility Requirements

Who is covered by FERS: Nearly all federal civilian employees hired after 1983 are automatically covered by FERS (). (Employees hired before that were covered under CSRS unless they switched during special open seasons.) By FY2022, about 98% of federal workers were under FERS (). FERS employees contribute to Social Security and to the FERS pension each pay period, with matching contributions from their agencies (FERS Information).

Retirement eligibility under FERS: To qualify for a FERS immediate retirement (an annuity beginning within 30 days of leaving service), an employee must meet certain combinations of age and years of creditable service (Eligibility):

  • Age 62 with at least 5 years of service (Eligibility)
  • Age 60 with at least 20 years of service (Eligibility)
  • Minimum Retirement Age (MRA) with at least 30 years of service (Eligibility)
  • MRA with at least 10 years of service (known as “MRA+10” retirement) (Eligibility) – however, note that if retiring under MRA+10 with fewer than 30 years, the pension is permanently reduced by 5% for each year the retiree is under age 62 (unless they have 20 years and delay the annuity until age 60) (Eligibility).

The Minimum Retirement Age varies by birth year, ranging from 55 for those born before 1948 up to 57 for those born in 1970 or later (Eligibility) (). (For example, an employee born in 1970 or after has an MRA of 57.) There are also provisions for early retirement in certain involuntary separation situations (like major reorganization or reduction in force) where employees can retire younger than the above ages, typically age 50 with 20 years or at any age with 25 years, but those are usually management-initiated and come with reductions (). Employees who separate before meeting the immediate retirement criteria may be eligible for a deferred retirement – for instance, someone with at least 5 years of FERS service can leave government and claim a deferred FERS annuity at age 62 (or at the MRA with 10+ years, with reduction) (FERS Information). Finally, FERS has a Disability Retirement provision: an employee who becomes disabled for federal service with at least 18 months of civilian service can qualify for a FERS disability annuity at any age (see “Survivor and Disability Benefits” below) (Eligibility).

FERS Components

FERS benefits come from three main components (FERS Information):

Basic Benefit Plan (FERS Pension)

This is a defined-benefit pension funded by both employee and government contributions. Each pay period, a FERS employee pays a portion of their salary toward the FERS Basic Benefit, and the agency contributes as well (FERS Information). Upon retirement, the employee receives a monthly annuity payment for life. The pension’s value is determined by a formula (based on salary and years of service – explained in the “Annuity Calculation” section) rather than the balance of contributions. FERS pensions are generally smaller than the old CSRS pensions because FERS works in tandem with Social Security; however, FERS pensions do receive periodic cost-of-living adjustments (COLAs) in retirement (though typically less generous or delayed compared to CSRS COLAs) (Equal COLA Act Needed as Federal Retirees Continue to Get …).

Social Security

FERS employees are covered by Social Security. They pay Social Security payroll taxes (6.2% of wages) like private sector workers and earn credits toward Social Security retirement benefits (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). At age 62 or later, a FERS retiree can receive Social Security benefits based on their federal (and any other) earnings, just like any other Social Security participant. This is a major change from CSRS, under which federal workers generally did not pay into Social Security and thus were not eligible for Social Security retirement benefits (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). The inclusion of Social Security in FERS provides a portable benefit – if an employee leaves federal service, their accumulated Social Security credits stay with them for retirement or disability benefits in the broader Social Security system. (Note: FERS retirees who retire before 62 with the needed years of service may receive a FERS Annuity Supplement – a temporary payment from OPM that approximates the Social Security benefit earned from federal service, paid until age 62 (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). This supplement is discussed more under “Planning for Retirement” because it factors into early retirement considerations.)

Thrift Savings Plan (TSP)

The Thrift Savings Plan is a defined contribution retirement savings plan for federal employees, similar to a private-sector 401(k) (Thrift Savings Plan). Each FERS employee has an individual TSP account. Employees can contribute a portion of their salary to the TSP (either pre-tax Traditional contributions, or after-tax Roth contributions), and those contributions — along with investment earnings — accumulate in the account. Importantly, FERS agencies automatically contribute 1% of the employee’s basic pay each pay period into the employee’s TSP account, whether the employee contributes or not (FERS Information) (). Additionally, agencies match employee contributions dollar-for-dollar on the first 3% of pay contributed and 50 cents on the dollar for the next 2% of pay, up to a total of 5% match (). In other words, by contributing at least 5% of salary to TSP, a FERS employee gets the maximum agency contribution (which is 5%: 1% automatic + 4% matching) added to their TSP account (). The TSP offers several investment funds (see the “Thrift Savings Plan (TSP)” section below for details on investment options). Over a career, these TSP savings (plus earnings) become a significant part of a FERS employee’s retirement income. Notably, TSP accounts are portable — if an employee leaves federal service, they can keep their TSP invested or roll it into another qualified plan or IRA, and if they join another employer (even some public employers), they cannot continue contributing to TSP but can transfer the balance or roll it over (FERS Information).

Annuity Calculation

How the FERS pension is calculated: The FERS Basic Benefit annuity is determined by a formula based on three factors: the employee’s high-3 average salary, their years of creditable service, and a pension multiplier (a percentage per year of service). The “high-3” salary is the average of the highest three consecutive years of basic pay – typically the last three years of service, or any three-year period where earnings were highest (). Generally, for regular FERS employees, the pension multiplier is 1% of the high-3 average pay for each year of service (). Thus, the formula is:

∗∗AnnualFERSAnnuity∗∗=High−3AverageSalary×YearsofService×1**Annual FERS Annuity** = High-3 Average Salary × Years of Service × 1%

For example, 30 years of service would yield 30% of the high-3 salary as the base annual pension (before any reductions or COLAs). However, FERS rewards longer service for those who work until or beyond age 62: if a FERS employee retires at age 62 or later with at least 20 years of service, the multiplier increases to 1.1% per year () (). In that case, 30 years at age 62 would yield 33% of the high-3 (since 30 years × 1.1% = 33%) instead of 30%. This 10% increase in the pension formula is an incentive for FERS employees to stay in service to age 62 if they can (). (By contrast, retiring earlier than 62 or with fewer than 20 years uses the 1% factor.)

Other factors in the annuity calculation include credit for unused sick leave (FERS now credits unused sick leave toward service time at retirement, adding it to total years of service) and any applicable reductions (for example, if the retiree elects a survivor annuity for a spouse, or if they retire under MRA+10 with the aforementioned age penalty) (Computation) (Computation). FERS annuities are generally fully indexed to inflation only starting at age 62 (via COLAs). FERS retirees under age 62 typically do not receive COLA increases on their pension (except disability retirees and special category employees) until they turn 62 (Equal COLA Act Needed as Federal Retirees Continue to Get …). After 62, FERS COLAs are provided annually but may be slightly reduced in high-inflation years (the FERS COLA is equal to the Consumer Price Index increase minus 1% when inflation exceeds 2%) (Equal COLA Act Needed as Federal Retirees Continue to Get …). This is another difference from CSRS, where COLAs are received at any age and match the full CPI increase.

Special cases: Certain categories of employees (like law enforcement officers, firefighters, air traffic controllers) have enhanced pension formulas under FERS. For example, law enforcement officers/firefighters accrue benefits at 1.7% per year for the first 20 years, then 1% for additional years (). Members of Congress and congressional staff had a higher formula (2.5% for certain years) under older rules (Computation). These special computations apply only to those specific groups. The vast majority of FERS employees use the standard 1% (or 1.1%) formula described above.

Thrift Savings Plan (TSP)

The Thrift Savings Plan is a crucial component of FERS, often providing a large portion of a federal retiree’s total retirement savings. The TSP is a defined contribution plan administered by the Federal Retirement Thrift Investment Board. It offers federal employees similar savings and tax benefits as private-sector 401(k) plans (Thrift Savings Plan). Key features of the TSP include:

  • Contributions: FERS employees can contribute up to the annual IRS limit each year to the TSP ($22,500 in 2023; $23,000 in 2024, with additional “catch-up” contributions for those age 50+ allowed) (). Contributions can be either Traditional (pre-tax) or Roth (after-tax), or a combination. Traditional contributions reduce current taxable income and grow tax-deferred (taxed upon withdrawal), whereas Roth contributions are made after tax and can be withdrawn tax-free at retirement (if conditions are met) ().
  • Agency Contributions: As noted earlier, FERS agencies automatically deposit an amount equal to 1% of the employee’s basic pay each pay period into the employee’s TSP account, even if the employee contributes nothing (). In addition, agencies match employee contributions up to 5% of pay: generally dollar-for-dollar on the first 3% and 50% on the next 2% (). This means a FERS employee contributing 5% of salary will receive an additional 5% in agency contributions. (CSRS participants can also contribute to TSP but do not receive any agency contributions or matching ().) Employees are immediately vested in their own contributions and the match; the 1% automatic contribution vests after 3 years of service (2 years for congressional and certain other employees).
  • Investment Options: The TSP offers a menu of low-cost investment funds where participants allocate their contributions. The five core funds are:
    • G Fund (Government Securities Investment Fund): invests in special U.S. Treasury securities that guarantee principal and interest; provides a stable but low rate of return (no market risk) (G Fund | The Thrift Savings Plan (TSP)).
    • F Fund (Fixed Income Index): a bond index fund that tracks the Bloomberg U.S. Aggregate Bond Index (broad U.S. bond market).
    • C Fund (Common Stock Index): a stock fund that tracks the S&P 500 index (large U.S. companies).
    • S Fund (Small Cap Stock Index): a stock fund tracking the Dow Jones U.S. Completion Total Stock Market Index (mid-size and small U.S. companies not in the S&P 500).
    • I Fund (International Stock Index): a stock fund tracking the MSCI EAFE index (large companies in Europe, Australasia, Far East developed markets).
      In addition, the TSP offers Lifecycle (L) Funds, which are target-date portfolios composed of the five core funds in varying proportions. Each L Fund corresponds to a time horizon (e.g., L 2040, L 2050) and automatically adjusts the mix of stocks, bonds, and government securities over time — more aggressive when retirement is far off, and more conservative as the target date approaches (). Participants can choose an L Fund for “autopilot” asset allocation or manage their own mix of the five individual funds.
  • Withdrawals: After leaving federal service (or reaching age 59½ if still employed, in some cases), TSP participants can withdraw their money through various options: life annuities, lump-sum withdrawals, or installment payments. The TSP allows transfers/rollovers to IRAs or other employer plans upon separation, and also accepts roll-ins from other plans. There are restrictions and potential penalties for early withdrawal (generally, distributions before age 59½ may incur a 10% IRS penalty unless an exception applies).
  • Low Fees: A notable advantage of the TSP is its exceptionally low administrative and investment fees, which means more of the investment return goes to the participant. Over a career, these low fees can significantly increase net earnings compared to higher-cost retirement plans.

Overall, the TSP is a powerful savings vehicle. Government matching makes it essentially a “5% pay raise” in retirement savings that employees don’t want to leave on the table (). FERS employees are encouraged to contribute at least 5% of their salary to get the full match (and more if possible, up to the IRS limits). The growth of the TSP account, combined with the FERS pension and Social Security, forms the “three-legged stool” of FERS retirement income.

(For more information on the TSP, visit the official TSP website (Thrift Savings Plan) (Thrift Savings Plan) or call the TSP ThriftLine at 1-877-968-3778 for assistance.)

Survivor and Disability Benefits

Survivor Benefits

FERS provides for survivor benefits to protect the family of an employee or retiree who dies. There are two broad situations: death while an active employee and death after retirement.

  • Death of an Employee: If a federal employee covered by FERS dies while still in federal service, their surviving spouse and/or dependents may be eligible for certain benefits. A Basic Employee Death Benefit can be paid to the surviving spouse (or former spouse with a court order) if the employee had at least 18 months of FERS service (Survivors) and was married for at least 9 months (this requirement is waived if the death is accidental or there is a child from the marriage) (Survivors). The Basic Death Benefit is a one-time lump sum payment equal to 50% of the employee’s final salary (or high-3 average salary, if higher) plus a fixed amount which is indexed to inflation (Survivors). (The fixed amount was originally $15,000 in 1987, and has grown to over $42,000 for deaths after Dec 2024 due to COLAs (Survivors).) In addition to the lump sum, monthly survivor annuity payments may be paid to the spouse if the employee had at least 10 years of creditable service (Survivors). A survivor spouse’s FERS annuity is generally 50% of the employee’s earned pension (based on the employee’s years of service and salary at time of death),** (Computation) minus any age reductions that would have applied. Unmarried children of the deceased employee can also receive monthly benefits up to age 18 (or 22 if full-time students), and disabled children may receive benefits for life, with amounts set by formula and reduced by any Social Security benefits payable to them (Survivors) (Survivors). If no survivor annuity is payable, the employee’s FERS retirement contributions are refunded to the designated beneficiary or estate (Survivors).
  • Death of a FERS Retiree: When a FERS employee retires, they have the option to elect a survivor annuity for their spouse (or another survivor). By default, if married, a retiree’s pension is reduced to provide a survivor benefit (unless the spouse consents to not having one) (Computation). The standard survivor annuity for a spouse is 50% of the retiree’s annuity after the retiree’s death; to provide this, the retiree’s own pension is reduced by 10% for life (Computation). (There is also an option for a smaller survivor benefit, 25% of the annuity, which costs a 5% reduction to the retiree’s pension (Computation).) If the retiree dies, the surviving spouse would then receive the chosen percentage of the annuity (with continued COLAs) for the rest of their life. These elections are made at retirement. Additionally, any unpaid annuity due for the days of the last month the retiree lived, or remaining retirement contributions that were not paid out, would be paid in a lump sum to the designated beneficiary or estate. It’s worth noting that Survivor benefits in FERS are coordinated with Social Security – surviving spouses and children may also qualify for Social Security survivor benefits which can supplement the FERS survivor annuity.

In summary, FERS provides a safety net for survivors: a lump sum death benefit for early-career deaths, continuing lifetime income for surviving spouses, and support for dependent children. Employees should keep beneficiary designations updated and consider electing survivor coverage at retirement to protect their loved ones.

Disability Retirement

FERS offers a disability retirement benefit for employees who become unable to work due to illness or injury. This benefit is available to federal employees covered by FERS who: (a) have completed at least 18 months of civilian federal service, and (b) become disabled (while in federal service) to the point that they cannot perform the duties of their position (and the agency is unable to accommodate the disability or reassign them to a job at the same pay grade in the commuting area) (Eligibility) (Eligibility). The disability must be expected to last at least one year. Unlike regular retirement, there is no age requirement – one can be any age and qualify for FERS disability retirement, as long as the service length and medical criteria are met (Eligibility). To obtain a disability retirement, the employee (or their agency) must apply to OPM with medical documentation before separating from service or within one year thereafter.

Disability Annuity Calculation: FERS disability benefits have a unique calculation that integrates with Social Security. By law, a FERS employee must also apply for Social Security Disability Insurance (SSDI) when applying for FERS disability; the FERS benefit is computed in tiers:

  • For the first 12 months of disability retirement, the annuity is 60% of the high-3 average salary minus 100% of any Social Security disability benefit received (Computation). (If the Social Security claim is denied or still pending, FERS still pays the 60% in the interim.)
  • After the first 12 months, until age 62, the disability annuity is reduced to 40% of the high-3 average salary minus 60% of any Social Security disability benefit (Computation).
    However, there is a guaranty that a disabled retiree will receive at least their “earned” retirement benefit: if the regular earned annuity (1% × high-3 × years worked) is higher than the above percentages, they will receive the higher amount (Computation). At age 62, the FERS disability retirement is recomputed as if the person had continued working until age 62. In this recomputation, the years on disability are added to actual service, and the high-3 salary is increased by FERS COLAs during the disability period (Computation) (Computation). The resulting annuity is essentially the regular retirement annuity one would have earned by age 62 (using the 1% or 1.1% multiplier as applicable). After age 62, the individual is treated like a regular retiree (and any Social Security benefits are no longer offset against the FERS benefit).

In practical terms, a FERS disability retiree will receive 60% of their salary (minus any SSDI) for the first year, 40% (minus SSDI) thereafter, until 62, and then switch to an earned annuity based on their total deemed service (Computation) (Computation). If the person is not approved for Social Security, they simply get the stated 60% or 40% of high-3 amounts. These disability annuity payments are subject to COLAs after the first year. Also, FERS disability retirees under 62 have an earnings cap: if their income from other employment exceeds a certain limit (similar to Social Security’s earnings test), the disability benefit can be discontinued.

Survivor and health benefits: A FERS disability retiree can also provide a survivor annuity election like a regular retiree, and they can continue their federal health insurance (FEHB) into retirement as long as they were enrolled for the requisite period (5 years or since first opportunity).

In summary, FERS disability retirement is a protection for those who cannot continue working. It ensures a base level of income for disabled employees, with a structure that provides a higher benefit initially (when the disability likely has the biggest financial impact) and transitions to a normal retirement benefit at 62. Employees should be aware of this option, and agencies often assist disabled employees in applying for it if no accommodation or reassignment is possible.

Recent Updates and Changes

FERS has seen some updates and adjustments since its inception. Below are recent legislative or policy changes affecting FERS (and proposals under consideration):

  • Higher Employee Contributions for New Hires: Originally, FERS employees contributed 0.8% of salary to the pension. Laws in 2012 and 2013 raised this rate for later hires. Federal employees hired (or with less than 5 years of service) in 2013 pay 3.1% (known as “FERS-RAE” under the Middle Class Tax Relief and Job Creation Act of 2012) (Federal employee retirement system (FERS) | U.S. Department of Commerce). Those hired in 2014 or later pay 4.4% of salary (“FERS-FRAE” under the Bipartisan Budget Act of 2013) (Federal employee retirement system (FERS) | U.S. Department of Commerce). Although these employees contribute more, they receive the same FERS pension formula; the change was made to reduce government costs. Agencies still contribute their share as before. This means currently there are three FERS contribution tiers (0.8%, 3.1%, 4.4%) depending on hire date, but all are part of FERS and the pension benefits are calculated the same way (Federal employee retirement system (FERS) | U.S. Department of Commerce) (Federal employee retirement system (FERS) | U.S. Department of Commerce).
  • FERS Coverage Expanded to Certain Non-Federal Employers (Proposed): In 2023, Congress considered the Parity for Tribal Educators Act, which if passed would allow certain employees of tribally controlled schools (who are not federal employees) to join FERS and the TSP (3 Recently Introduced Bills that Would Impact Federal Employees). This would mark the first time non-federal workers participate in FERS. The Bureau of Indian Affairs would fund the government’s share of FERS and matching TSP contributions for those teachers (3 Recently Introduced Bills that Would Impact Federal Employees). As of late 2023, this was a proposal under discussion.
  • Credit for Temporary Service (Proposed): Currently, federal temporary or seasonal service after 1989 is not creditable for retirement (unless one was later allowed to pay a deposit for service in 1988 or earlier). A bill known as the Federal Retirement Fairness Act has been introduced (reintroduced in 2023) to allow FERS employees to buy back their non-deduction temporary service after 1989 and count it toward their retirement eligibility and pension (3 Recently Introduced Bills that Would Impact Federal Employees). If enacted, this would benefit FERS employees who had time-limited appointments early in their careers, by letting them make a contribution to cover that service period and increase their total years of service for retirement. This change would effectively remove the 1989 cutoff for creditable temp service.
  • Increased Death Benefit (Proposed): Bipartisan legislation (the Honoring Civil Servants Killed in the Line of Duty Act) was introduced in 2023 to significantly raise the FERS basic death benefit for employees who die in service. The proposal would increase the current lump-sum death benefit from $10,000 to $100,000 (which hasn’t changed since 1997) (3 Recently Introduced Bills that Would Impact Federal Employees) (3 Recently Introduced Bills that Would Impact Federal Employees). It would also increase the allowance for funeral expenses from $800 to $8,000 (3 Recently Introduced Bills that Would Impact Federal Employees). These changes aim to better support the families of federal workers who die in the line of duty, aligning benefits closer to those provided to military families. As of 2024, this change is not yet law.
  • Cost-of-Living Adjustments: There have been discussions in Congress about COLAs for FERS retirees. For instance, the Equal COLA Act was proposed to eliminate the reduced COLA formula for FERS (so FERS retirees would get the full CPI adjustment like CSRS) ([PDF] The FERS Cost-of-Living-Adjustment (COLA) and the … – CRS Reports). While no major COLA formula changes have been enacted, it’s notable that in high-inflation years FERS retirees see smaller increases. (For example, in 2023, CSRS pensions rose 8.7% while FERS pensions rose 7.7% (Equal COLA Act Needed as Federal Retirees Continue to Get …), due to the FERS COLA being CPI minus 1%. This disparity has drawn attention and calls for change.)
  • TSP Enhancements: The TSP, as part of the FERS package, has undergone some updates. The 2017 TSP Modernization Act expanded withdrawal options (effective 2019), giving retirees more flexibility in how they take money out of TSP. More recently, the SECURE Act 2.0 (enacted in 2022) will allow higher “catch-up” contributions for participants ages 60-63 starting in 2025 (raising the additional amount they can contribute in those years) (). Also, in 2022, the TSP underwent a transition to a new record-keeping system with a revised online interface and features. While these changes are TSP-specific, they affect FERS participants’ experience with managing their retirement savings.
  • Phased Retirement: A new option called Phased Retirement was implemented in 2014 for eligible federal employees. Under phased retirement, an employee near retirement can retire part-time, continue working part-time, and receive a partial annuity during that period (FERS Information) (FERS Information). This program allows a transition to full retirement, enabling knowledge transfer while the person is still working part-time. After the phased period, the individual fully retires and the pension is recalculated accounting for the additional part-time service. This is a voluntary program requiring agency approval and is an example of policy changes to provide flexibility in the FERS framework. (Not all agencies offer phased retirement.)

Keep in mind that legislative proposals may or may not become law. It’s wise for federal employees to stay informed through OPM updates or reputable federal employee news sources (OPM’s “Special Notices” or sites like FEDweek, GovExec, etc.) about changes that could affect their retirement. (FERS Information) (FERS Information)

Comparison with CSRS (Civil Service Retirement System)

FERS and CSRS are distinct federal retirement systems. CSRS was the primary retirement system for federal employees hired before 1984, and FERS covers those hired from 1984/1987 onward (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). Here are key differences between the two:

  • Coverage Dates: CSRS was established in 1920 and generally covers employees who entered federal service prior to January 1, 1984 (with a final absolute cutoff of Jan 1, 1987 after which all new hires are FERS) (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). FERS covers employees hired 1984 and later (FERS formally began in 1987, but interim systems were in place 1984–86) (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection) (). Employees had opportunities in 1987 and 1998 to switch from CSRS to FERS ().
  • Retirement Plan Structure: CSRS is a single-component, defined-benefit plan – essentially a stand-alone pension. FERS is a three-tier plan – a smaller pension plus Social Security and the TSP (FERS Information). Under CSRS, the retirement benefit comes almost entirely from the CSRS pension (with an option to contribute to a voluntary savings account or TSP without match). Under FERS, the pension is designed to be supplemented by Social Security benefits and the TSP account.
  • Employee Contributions: CSRS employees contribute a significant portion of their salary to the pension (generally 7% of pay, and up to 7.5% or 8% for special classes) (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection), and in return do not pay Social Security Old-Age, Survivors, and Disability Insurance (OASDI) tax on their federal salary (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). FERS employees contribute much less to the pension (0.8% for most, or 3.1%/4.4% for newer hires as noted) but do pay Social Security tax (6.2%) on their earnings (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection) (Federal employee retirement system (FERS) | U.S. Department of Commerce). In effect, FERS split the retirement contributions between pension and Social Security, whereas CSRS put it all into the pension. (Both CSRS and FERS employees pay the Medicare payroll tax 1.45%.) Agencies similarly contribute around 7% of pay toward CSRS or an equivalent amount (normal cost) to FERS.
  • Pension Formula and Benefits: CSRS pensions are significantly more generous per year of service. Under CSRS, the annual annuity accrues at 1.5% of high-3 pay for the first 5 years, 1.75% for the next 5, and 2% for each year after 10 (). This yields ~56% of high-3 salary for 30 years of service (and 80% at 41½ years, the maximum) (). FERS accrual is a flat 1% of high-3 per year (or 1.1% for 62+ with 20+ years) (), yielding ~30% of high-3 for 30 years (or 33% with the higher multiplier) (). Thus, a career worker’s pension is much larger under CSRS. However, FERS retirees also receive Social Security, which CSRS retirees (in pure CSRS) generally do not. When Social Security is added and the TSP is considered, a FERS retiree’s total income can approach a CSRS retiree’s. CSRS had some unique provisions like the “CSRS Offset” (for those with Social Security coverage due to breaks in service (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection)) and a voluntary contributions program to purchase additional annuity, but fundamentally it’s a bigger pension in lieu of Social Security.
  • Thrift Savings Plan: CSRS employees may contribute to the TSP (this option was made available starting in 1987) up to the IRS limits, but receive no government matching on their contributions (Civil Service Retirement System (CSRS) | U.S. Customs and Border Protection). FERS employees not only can contribute, but get automatic and matching contributions from the government (as detailed earlier) (). This means FERS has a built-in government-subsidized savings component, whereas CSRS was primarily the pension alone (CSRS employees had to rely on their own savings for additional retirement funds, whether in TSP or elsewhere). Many long-time CSRS employees did contribute to TSP for the tax benefits, but the account balances for CSRS tend to be smaller since they had no match and often started mid-career.
  • Social Security: CSRS is often described as a “ Social Security replacement” for federal workers hired before 1984. CSRS employees do not earn Social Security benefit credits for their federal service (unless they fall under CSRS Offset) and generally draw no Social Security (or a greatly reduced one) based on that employment. FERS employees are fully integrated with Social Security – they pay into it and will receive benefits. FERS retirees will typically draw Social Security (often a significant portion of their total retirement income), whereas a pure CSRS retiree might only get a small Social Security benefit if they had substantial non-federal employment. (CSRS retirees with some Social Security coverage often face the Windfall Elimination Provision (WEP), which can reduce their Social Security benefit due to also having a government pension.) In short: CSRS = big pension, no Social Security; FERS = smaller pension + Social Security.
  • Cost-of-Living Adjustments (COLA): CSRS retirees enjoy full COLAs on their annuities every year regardless of age – their pension increases by the percentage increase in the Consumer Price Index (CPI) each year (e.g., 8.7% for 2023) (Equal COLA Act Needed as Federal Retirees Continue to Get …). FERS retirees only get COLAs starting at age 62 (with exceptions for disability and special category early retirees), and the FERS COLA is capped or reduced in certain cases (if CPI increase > 2%, FERS COLA is CPI minus 1%) (Equal COLA Act Needed as Federal Retirees Continue to Get …). For example, in an 8.7% inflation year, FERS pensions rose 7.7% (Equal COLA Act Needed as Federal Retirees Continue to Get …). Thus CSRS pensions maintain purchasing power more fully. This is a trade-off for FERS having Social Security (which has its own COLA) and TSP (which is subject to market gains/inflation).
  • Retirement Eligibility: CSRS and FERS have similar age/service requirements for unreduced retirement: CSRS required age 55 with 30 years, 60 with 20, or 62 with 5 (55/30, 60/20, 62/5) (); FERS requires MRA (~57) with 30, 60 with 20, or 62 with 5 (57/30, 60/20, 62/5) (). However, FERS uniquely allows the MRA+10 early retirement option (retire at MRA with 10+ years but with reduced benefit) (). CSRS had no equivalent early-retirement with reduced benefit; a CSRS employee retiring young would need a special early-out authority (which required age 50 with 20 or any age with 25, and came with a 2% per year reduction if under 55) (). In practice, FERS offers more flexibility for those who cannot or choose not to complete a full career. Additionally, FERS provides the Retiree Annuity Supplement (bridge to 62) for those who retire younger – CSRS had no such supplement since its retirees weren’t waiting for Social Security.
  • Portability: If a federal employee leaves government mid-career, under FERS they can at least get Social Security benefits for their time and keep any TSP savings (and even eventually withdraw a deferred FERS pension if they had >5 years service) (FERS Information). Under CSRS, leaving government meant possibly only a deferred CSRS annuity (if vested with >5 years) payable at 62, but no Social Security benefit from that time. FERS is generally considered more portable for a mobile workforce ().

In summary, CSRS was a “pure” pension system with generous benefits for career federal employees, but it required high contributions and isolated employees from Social Security. FERS spreads retirement income across three sources – it relies on personal savings and Social Security in addition to a smaller pension. For those with long federal careers, CSRS provided higher government-paid income, whereas FERS requires more employee savings effort (via TSP) to reach the same retirement income. Today, CSRS is a closed system (no new entrants since 1984/1987), but about 4% of current federal retirees are CSRS or CSRS/FERS mixed coverage. Anyone entering federal service now will be FERS.

Planning for Retirement Under FERS

Federal employees under FERS should plan proactively to ensure a comfortable retirement. Here are some important considerations and strategies for FERS employees:

  • Maximize Thrift Savings Plan Contributions: Savings is critical under FERS. The TSP is a major source of retirement funds, so contributing enough to get the full agency match (5%) is considered the minimum – ideally, employees should save as much as they can, up to the IRS limits, especially as they get closer to retirement (). The power of compound interest and the government match make the TSP extremely valuable. If you start late, consider “catch-up” contributions (for age 50+). Invest in a diversified mix of funds or an appropriate Lifecycle fund to grow your nest egg. Remember, the FERS pension and Social Security alone may replace only around 30-50% of your salary; your TSP can fill the gap. Bottom line: Contribute at least 5% (to get the full match) and aim for more if possible (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income).
  • Understand Your Retirement Eligibility and Pick the Optimal Time: Map out when you will be eligible to retire under FERS (your MRA and required years). If you retire early (at MRA with <30 years), know the reduction in your pension (5% per year under 62) and consider whether it’s worth working a bit longer to avoid that penalty (Eligibility). If feasible, many FERS experts suggest aiming for age 62 with 20+ years of service, because of the 10% higher pension multiplier (1.1% instead of 1%) (). For example, retiring at 61 vs 62 can make a noticeable difference in your lifetime annuity (). If you are contemplating leaving federal service mid-career, research deferred retirement options (with >5 years, you can leave and still get a pension at 62 or MRA later (FERS Information)). Also, be aware of the FERS Annuity Supplement: if you retire before 62 with the right combination (MRA+30 or 60+20), you’ll get a temporary supplement approximating Social Security until age 62 (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). This can help financially bridge early retirement, but it stops at 62 regardless of whether you claim Social Security then. Plan for what your income will be from then on (e.g., will you start Social Security at 62, or use TSP withdrawals to delay Social Security to get a larger benefit later?).
  • Consider the 1.1% Multiplier vs. the Annuity Supplement: If you’re in your late 50s or early 60s, weigh the pros and cons of retiring before 62 with the supplement versus at 62 with the higher pension. In many cases, retiring at 62 (even if it means working a couple more years) is financially advantageous because the higher pension (for life) can outweigh the short-term supplement you’d get by leaving earlier (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). For example, a FERS employee with 20+ years at 62 gets a 10% higher pension for life than one who left at 60 – that permanent increase can be more valuable over time (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). Of course, health, personal reasons, or job factors also play a role in timing your retirement, but from a purely financial perspective, later often yields greater benefits.
  • Boost Your “High-3” Salary: Since your pension is based on your high-3 average, anything you can do to maximize your salary during your three highest-earning consecutive years will directly increase your annuity. This could mean timing your retirement after a promotion or within a few years of a locality pay increase or raise (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). Some employees choose to work a little longer to include a recent promotion in their high-3 calculation. Strategies include seeking promotions or higher-graded opportunities in the last phase of your career, or even planning your retirement date to fall after an annual pay adjustment. It’s also wise to avoid significant leave-without-pay or part-time periods during your high-3 years if possible, as those could lower the average. In short, your salary in the final years matters – plan your career moves and retirement date with that in mind (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income).
  • Accumulate Sufficient Years of Service: The more years of service, the bigger your pension. Beyond just working longer, there are ways to increase creditable service:
    • If you have prior military service, consider making a deposit to “buy back” that time into FERS. A military buy-back can add those years to your federal service credit (which boosts both eligibility and pension amount) (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income). This is especially valuable if you served a full military career – buying back 20 years of military time could drastically increase your FERS pension (note: you generally must waive military retirement pay to use the time in FERS). Even a few years of military service can be worth buying back for the small fee (typically 3% of pay earned during service, plus interest).
    • If you left federal service and took a refund of your retirement contributions, you might be able to re-deposit that refund if you return to federal work. Paying back the refund (with interest) restores the service credit for the earlier period (Maximizing Your FERS Annuity: Strategies for Higher Retirement Income).
    • Sick Leave: As of 2014, FERS retirees get full credit for unused sick leave in the pension calculation (1 year of sick leave = 1 additional year of service for pension). Thus, try to preserve sick leave toward the end of your career – it can meaningfully increase your annuity. Avoid the mentality of burning off sick leave before retirement; those hours are more valuable if converted to service credit (there’s no payout for sick leave, unlike annual leave).
    • If near eligibility, delaying retirement by even a few months can sometimes push you into a new leave year or add an extra service year for annuity calculation. For example, retiring at the end of the calendar year often maximizes annual leave payout and high-3, whereas waiting until your service anniversary might notch another year of service credit.
  • Plan Your Financial Picture (Pension + TSP + Social Security): It’s important to estimate your retirement income from all three sources. Use OPM’s online tools or the Federal Ballpark Estimator (FERS Information) to project your pension. Check your Social Security Statement (available on SSA’s website) to see your benefit at various claiming ages. And monitor your TSP balance – consider how much monthly income it can provide (for instance, using the 4% withdrawal rule as a rough guide, or looking into TSP annuity options). Many FERS retirees find their FERS pension roughly replaces ~30% of final salary, Social Security might replace another 20-30% (if claimed at Full Retirement Age), and the rest may need to come from TSP withdrawals and other savings. The exact mix varies, but knowing your numbers will tell you if you’re on track. If there’s a shortfall, you might decide to work a bit longer, save more aggressively, or adjust post-retirement plans.
  • Healthcare and Insurance: Maintain your FEHB (Federal Employees Health Benefits) enrollment if you want to carry health insurance into retirement – you must be enrolled for 5 years before retirement (or since your earliest opportunity) to keep it in retirement. The government continues to pay the same share of premiums for retirees, which is a huge benefit. Also consider options like FEDVIP (for dental/vision) and FLTCIP (long-term care insurance) as you plan. These aren’t direct FERS components, but they significantly affect retirement well-being. Make sure you account for FEHB premiums in your retirement budget (you’ll pay them via annuity deduction). Similarly, decide if you will keep or adjust your FEGLI life insurance in retirement; some choose to reduce coverage to avoid higher premiums.
  • Survivor Benefit Election: If you’re married, discuss and decide on the survivor annuity at retirement. Providing a survivor pension (50% or 25%) will reduce your own benefit (by 10% or 5% respectively) (Computation), but it ensures your spouse has a continuing income if you predecease them. If you have other life insurance or assets, you might choose a smaller survivor benefit, but be cautious – waiving survivor benefits entirely means your spouse would lose the option to continue FEHB coverage after your death. This is a critical estate planning decision for FERS retirees.
  • Tax and Relocation Considerations: Remember that your FERS pension (and Traditional TSP withdrawals, and part of Social Security depending on total income) will be taxable. Plan for federal taxes, and if you move to a different state, check how that state taxes federal pensions. Some states exempt federal retirement income, others partially, others fully tax it. This could influence where you retire or how you withdraw from TSP (Roth vs Traditional balance).
  • Stay Informed and Seek Guidance: Federal retirement rules can change, and personal situations differ. Take advantage of pre-retirement counseling offered by your agency, and read OPM’s FERS handbook or guides. Attend retirement planning seminars/webinars if available. As retirement nears, review your Official Personnel Folder (OPF) or electronic records to ensure all your service (especially any military service or earlier civilian service) is properly documented and credited. Also, factor in Social Security strategies (for example, maybe plan to delay Social Security to 67 or 70 to get a higher benefit, using TSP funds in the interim). Tools like the TSP calculator and SSA’s calculators can help with these decisions. And once retired, manage your TSP withdrawals and investments to sustain your savings throughout your retirement years.

In essence, planning for retirement under FERS means taking an active role: maximize your savings, be strategic about when and how you retire, and use the resources available to federal employees. With the three components of FERS, you have multiple levers to pull. The earlier you start planning, the more prepared you will be to retire on your own terms with financial security.

Resources and References

For further information and assistance regarding FERS and retirement planning, the following resources are highly useful:

  • U.S. Office of Personnel Management (OPM) – FERS Information: OPM’s official website has detailed guidance on FERS benefits, eligibility, calculators, and forms. Key sections include the FERS Handbook and FAQs. Start at the FERS Retirement Information page on OPM’s site (FERS Information). OPM’s Retirement Services offices can be contacted for personalized assistance – you can call OPM Retirement at 1-888-767-6738 (TTY: 711) Monday–Friday, or email retirement@opm.gov (Contact OPM Retirement Services).
  • OPM FERS Handbook and Publications: OPM publishes a CSRS/FERS Handbook for HR professionals (Eligibility), which is available online, and various pamphlets for employees (such as the FERS brochure RI 90-1 ()). These provide in-depth coverage of rules and are useful for specific questions (e.g., creditable service, survivor elections). Check the OPM Publications page for titles like “Retirement Facts” series.
  • Thrift Savings Plan (TSP): The official TSP website (Thrift Savings Plan) (http://www.tsp.gov) has information on contribution options, fund details, calculators for projecting account growth or retirement income, and forms for withdrawals or beneficiary designations. For questions about your TSP account, you can contact the TSP via the ThriftLine at 1-877-968-3778 (Thrift Savings Plan). The site also provides fund performance and information on managing your TSP (loans, rollovers, etc.). TSP’s Summary of the Thrift Savings Plan booklet is a great overview.
  • Social Security Administration (SSA): Since Social Security is a pillar of FERS, use the SSA resources to your advantage. You can view your Social Security Statement online at http://www.ssa.gov to see your projected benefits. The SSA website also explains how federal retirees are affected by things like the Windfall Elimination Provision or Government Pension Offset if you have CSRS components. For personalized help, call SSA at 1-800-772-1213 or visit a local SSA office. The SSA site (FERS Information) has calculators for estimating retirement benefits and information on survivor and disability benefits that coordinate with FERS.
  • Federal Ballpark E$timator: OPM offers the Federal Ballpark Estimator, an online tool that helps federal employees estimate their total retirement income (combining pension, TSP, Social Security) (FERS Information). It’s available on OPM’s planning tools webpage. This is a handy way to plug in your numbers and get a sense of whether you’re on track to meet your retirement goals.
  • Agency Benefits/Retirement Counselors: Don’t forget your own agency’s Human Resources office. Most agencies have retirement counselors or benefits specialists who can provide you with estimates of your FERS annuity, guide you through the application process, and answer questions specific to your situation (like how to make a service deposit for military time, or how your FEHB will carry over). Engage with them early, especially as you get within 5 years of retirement.
  • NARFE (National Active and Retired Federal Employees Association): NARFE is an organization that supports federal retirees and employees. They offer webinars, magazines, and expert Q&A on federal benefits. Their resources (like the NARFE magazine’s retirement Q&A column) can be very insightful for tricky questions. Membership is required for some services, but many guides and webinars are available to help plan your FERS retirement.
  • FedWeek, GovExec, and Other Publications: Websites such as FedSmith, FedWeek, Government Executive, and federal news outlets often publish updates on retirement policies, COLA projections, and practical guidance. While not official, they can interpret OPM rules in plain language and keep you informed of pending legislation (e.g., changes to FERS, TSP updates, etc.). Always cross-check significant decisions with official sources, but these can be good for staying current.
  • OPM Contact Information for Retirement Services:
    • Website: OPM Retirement Services portal – https://www.opm.gov/retirement-center/ (for general info, services online, and FAQs)
    • Phone: 1-888-767-6738 (for OPM’s Retirement Information line) (Contact OPM Retirement Services)
    • Email: retire@opm.gov (or use the secure messaging on OPM’s Services Online if you’re already retired)
    • Mail: OPM Retirement Operations Center, P.O. Box 45, Boyers, PA 16017 (for submitting paperwork)
  • TSP Contact Information:
    • Website: Thrift Savings Plan – http://www.tsp.gov (Thrift Savings Plan)
    • Phone: TSP ThriftLine 1-877-968-3778 (international: 404-233-4400) (Thrift Savings Plan)
    • TSP has online account access for managing contributions and investments, as well as publications like the TSP Highlights, and calculators for loans and annuities.

By leveraging these resources – reading up on official guidance, using calculators, and asking questions – federal employees can navigate FERS retirement rules and make well-informed decisions. Retirement from federal service is a major life event, but with the solid structure of FERS and the support available, employees can approach it with confidence and clarity. (Refer to the sources cited in this report for detailed information: OPM FERS Handbook (FERS Information) (Eligibility), CRS Reports () (), OPM and agency guidelines, and recent federal workforce news (3 Recently Introduced Bills that Would Impact Federal Employees) (Federal employee retirement system (FERS) | U.S. Department of Commerce).)