Have you retired from the federal government and wondered how to calculate your FERS annuity? How much will it be each month, and when can you start getting payments? This guide will tell you everything that you need to know about your annuity. After reading this guide, there should not be any unanswered questions on how to calculate a FERS annuity.
What is a FERS Annuity?
Congress created the Federal Employees Retirement System (FERS) in 1986, specifically for federal civilian employees.
FERS retirement plan provides benefits from three different sources:
- Basic Benefit Plan
- Social Security
- Thrift Savings Plan (TSP)
If you leave the Federal Government before you retire, two of three benefits in FERS will go with you. Social Security and your TSP.
How To Calculate A FERS Annuity
Step 1: Determine Your High-3
FERS annuities are based on high-3 average pay, which is the highest average basic pay you’ve earned during any three consecutive years of employment. Generally, a federal employee’s high-3 salary is the amount they’ve earned in their three most recent years of work.
Step 2: Multiply Your High-3 By Years Of Service
Multiply your high-3 average annual income by your total creditable years of service; then multiply that by 1%.
FERS Annuity Calculation
- Less than 20 years of service (at least age 62): Years of service x High-3 x 1% = Annuity Payment
- 20 years or more of service (at least age 62): Years of service x High-3 x 1.1% = Annuity Payment
Retiring Early
A FERS employee can retire early if they have less than 20 years of service and are under 62, but their annuity will be reduced by 5% each year under age 62. If the agency lets them retire early, this reduction can be waived.
FERS Minimum Retirement Age
- Born before 1948: Age 55
- 1948: Age 55 and 2 months
- 1949: Age 55 and 4 months
- 1950: Age 55 and 6 months
- 1951: Age 55 and 8 months
- 1952: Age 55 and 10 months
- 1953–1964: Age 56
- 1965: Age 56 and 2 months
- 1966: Age 56 and 4 months
- 1967: Age 56 and 6 months
- 1968: Age 56 and 8 months
- 1969: Age 56 and 10 months
- Born 1970 and after: Age 57
The CSRS formula is used if you had five years of service in the Civil Service Retirement System (CSRS) before transferring to FERS.
FERS Annuity Supplement
What is the FERS annuity supplement? If you work for FERS and meet certain requirements, you can get a Special Retirement Supplement. This is money paid to you every month until age 62. It is the equivalent of the Social Security benefit you earned while a federal government employee.
Special Retirement Supplements Requirements
- After Minimum Retirement Age (MRA) with 30 years of service
- At age 60 with 20 years of service
- Voluntarily Early Retirement: If you are 50 years old with 20 years of service or any age with 25 years of service, you can receive beginning your MRA through age 62.
- Involuntarily Retirement: Your MRA through age 62.
- Anyone who transfers from CSRS/CSRS Offset to FERS must work for a year before getting this supplement.
- If you have earnings from wages or self-employment, your retirement benefit may be reduced or stopped by the Social Security earnings test.
How To Withdraw Your FERS Annuity Efficiently
Both FERS annuity and FERS survivor annuity will provide a retired federal employee a series of annuitized annuity payments that is irrevocable and irreversible. This means you are giving up control over your retirement savings. Additionally, the payments will earn little to no interest and may not provide an inheritance for their beneficiaries.
Luckily other annuities offer a similar feature called a Guaranteed Lifetime Withdrawal Benefit (GLWB) or income rider. By utilizing a GLWB, you can receive income for the rest of your life, even if the annuity runs out of money. The retiree will also have more control over the savings and can earn interest and leave an inheritance for their beneficiaries.
You can open an individual retirement account(IRA) or IRA annuity to receive a direct rollover. First, however, you must contact the individual retirement account sponsor to determine how to have your payment made to your account.
FERS Annuity Rollover Directly To You
If you choose to have the FERS annuity payment made to you over $200, then the taxable part will be subject to a withholding of 20% for federal income tax. This means if the payment is made to you, FERS will hold 20% of the annuity’s value to pay federal taxes.
The payment is taxed in the year it is received unless it is rolled into an IRA within 60 days after receiving it.
FERS Annuity Rollover Directly To The Insurance Company
You can roll over up to 100% of the eligible distribution if the FERS is transferred directly to the financial institution or insurance company within 60 days.
You will be taxed on any amount that you do not roll over.
FERS Annuity Calculator For Retirement
Since your Thrift Savings Plan (TSP) goes with you before or when you retire from the government, you need to figure out how to spend it efficiently in retirement. Annuities are the only retirement plan in the United States that guarantees you never run out of money in retirement. Annuities can also show you how much savings you need to generate your desired retirement income in the future.
Our TSP annuity calculator illustrates how much annual income you can withdraw for the rest of your life if you rolled your FERS annuity into an annuity with a guaranteed lifetime withdrawal benefit, now or in the future.
Note: You can purchase an annuity (with no tax penalties) with your TSP, 401(k), IRAs, retirement accounts, investments, savings accounts, and cash.
Next Steps
You can request a quote to compare a FERS annuity with other annuities. Check out our TSP annuity rates. This will help you determine the best option for you and your family. Thanks for reading!
