Posted by: Richard Eller Tags: CSRS Eligibility, FERS, HIGH-3 | Categories: Eligibility
Many Federal employees we meet have questions about their pension eligibility and how this is calculated. We believe it is important to plan early for your federal retirement. Call (844) 533-3372 for more information.
What is your pension eligibility and how is it calculated?
These are the qualifying ages and corresponding number of years of service at retirement that are necessary for federal retirement benefits to be paid with “no strings attached” or reductions in payments.
For Civil Service Retirement System (CSRS)
Age 55 and 30 years of service at retirement
Age 60 and 20 Years of service at Retirement
Age 62 and 5 Years of service at Retirement
For Federal Employees Retirement System (FERS)
MRA (minimum retirement age) and 30 years of service at retirement
Age 60 and 20 Years of service at retirement
Age 62 and 5 Years of service at retirement
MRA Plus 10
If you are under the FERS system and have met your MRA, you can receive your pension with just 10 years of service at retirement. However, there may be a catch: For every year that you are under age 62, your pension will be reduced by 5%.
However, if you retire but do not start collecting your pension until age 62, there is no reduction. Note, this is not an “all or none” rule--if you take your pension at age 60, the reduction will be 10% not the 25% that exists if you started taking your pension at age 57.
Your Pension Calculation
If you are 62 years of age and have 20 or more years of service, the formula is:
High Three salary x 1.1% X the number of years of federal service
(If you don’t meet both criteria above, the 1.1% drops down to 1.0%)
FERS federal employee with 20-years federal service and age 62 at retirement with a High Three of $100,000:
$100,000 x 1.1% X 20 = $1100 ($100,000 x 1.1%) x 20 years = $22,000 Annual Pension
If this 62-year old federal employee retired at age 61 instead of age 62:
$100,000 x 1.0 % x 19 = $1000 ($100,000 X 1.0%) x 19 years = $19,000 Annual Pension
For CSRS Employees
1.5% of your High Three for your first 5 years of federal service
1.75% of your High Three for your next 5 years of federal service
2.0% of your High Three for every year of federal service thereafter
CSRS Federal Employee age 62 with 20 years of Federal Service at Retirement and a High Three of $100,000
$100,000 X 1.5% = $1500 X five = $7,500
$100,000 X 1.75% = $1750 X five = $8,750.00
$100,000 X 2.0% = $2000 X ten = $20,000
$7500 + $8750 + $20,000 = Annual Pension of $36,250
Remember that these figures are approximate due to your own specific SCD (Service Comp Date) used for retirement calculations. This SCD may be different than your LSCD that OPM is using. Check with HR or log onto your account at www.OPM.gov
Note, this pension figure is a gross income figure. Federal taxes are generally withheld, and you may have other deductions such as health care coverage, vision, dental or FEGLI coverage that you elect to continue. All will reduce your gross pension amount that is deposited to your bank each month.
This can be critical to your monthly retirement cash flow. Contact me for a more in-depth review to better calibrate your total retirement income.
DISCLAIMER: This content is for informational purposes only. The views and opinions expressed here are of the author and do not necessarily reflect the opinion of Spire Wealth Management, LLC and its affiliates. There can be no assurance that any investment products or strategy will achieve its investment objective. There are risks associated with investing, including the entire loss of principal invested. Past performance is no guarantee of future results. Investment Advisory Services offered through Spire Wealth Management, LLC. Richard Eller is an Investment Advisor Representative of Spire Wealth Management, LLC operating under Blueprint Financial Group an independent firm.