Federal Employee’s Retirement System

Presented by:Tammy Flanagan

Tammy@nitpinc.com

Understanding the Three Parts of FERS

Resources for YOU

www.narfe.org

Paris, Texas?

Planning for your federal retirement can make a world of difference when you retire.

Paris, France?

Planning for your federal retirement can make a world of difference when you retire.

Your Federal

Retirement

FERS Basic Retirement and FERS Supplement

Social Security

Thrift Savings Plan

30+ Years of Service: 30 %

or moreFull Career

(LEO): 34% or more

Low Wages: 50%+

Medium Wages: 35 –

40%High Wages: 25% or less

$200,000: $8,000 /year

$500,000: $20,000/year$1,000,000:

$40,000/year

Income Replacement

Type of Retirement Benefit Age Service

FERS Immediate / Optional Retirement

MRA6062

30205

Special Provisions for Law Enforcement Officers (and other special groups)

50Any Age

2025

FERS Eligibility Rules

Type of Retirement Benefit Age Service

Reduced Immediate or Postponed Optional Retirement

MRA 10

FERS Eligibility Rules

5Penalty = 5% / year under age 62!

Type of Retirement Benefit Age Service

Voluntary Early Retirement Authority (VERA) or Discontinued Service Retirement (DSR)

50Any Age

2025

FERS Eligibility Rules

Buyout? VSIP

Voluntary Separation Incentive Payment

Type of Retirement Benefit Age ServiceDisability Retirement Any Age 18 months

FERS Eligibility Rules

• Must also apply for Social Security

• Recalculated at 12 months and again at age 62

• No FERS Supplement• General formula used if

retirement eligible

Type of Retirement Benefit Age Service

Deferred Retirement (Based on service at the time of separation)

MRA6062

30205

Deferred / Reduced MRA 10

FERS Eligibility Rules

• Cannot reinstate FEHB or FEGLI• No COLA on high-three• Cannot credit sick leave hours• General formula (1%)• Resign from agency and apply

later at www.opm.gov

FERS Basic Retirement Benefit =

High-Three

Length of

Service1%*

*1.1% if age 62+ with at least 20 years of service or 1.7% for first 20 years of Law Enforcement calculation

High Three

Average Salary Three Consecutive Years

• Last three years?

Basic Pay• Includes Locality Pay and• Law Enforcement Availability Pay

Daily Average• today’s salary eliminates a day three

years ago – every day

What is Basic Pay?

Biweekly Salary

(Basic Pay)

FERS Contributio

n.8% or 1.3%

FERS Retirement

Withholding

Example: $3,000 x 1.3% = $39 $3,000 x .8% = $24

If it is subject to retirement deductions, it is basic pay

All Federal and Military Service• Must be documented• Might not be the same as “Leave” SCD• Unused Sick Leave

Deposits and Redeposits• Temporary Service• Refunded Retirement Contributions• Military Deposit

It all adds up!• Be sure you understand what counts… and what doesn’t• 1 month = 1/12 of 1% of your high-three• Example: 1/12 x 1% x $75,000 = $62.50 / year or $5.20 / month• 1 year = 1% of high-three• Example: 1% x $75,000 = $750 / year or $62.50 / month

Length of

Service

General FERS • 1% x high-three x length of service• 1.1% x high-three x length of service• Age 62+ with 20+ years of service

Law Enforcement FERS• 1.7% x high-three x 20 years• 1.0% x high-three x remainder of

service

Formula

General FERS • 1% x $75,000 x 35 = $26,250• 1.1% x $75,000 x 35 = $28,875

Law Enforcement FERS• 1.7% x $75,000 x 20 = $25,500• 1.0% x $75,000 x 5 = $3,750

Example

Apply the formula

1% / 1.1% / 1.7% $_______________

In today’s dollar value, estimate your high-three:Grade / Step:_______ $_______________

Years and Months of ServiceRetirement Date:______ Years____ months____

Your Turn!

Wait…there might be reductions:

• Survivor benefit electiono 10% to provide 50% to spouseo 5% to provide 25% to spouse

o Former Spouseo Court Order

o Less than full-time scheduleo MRA + 10 age reduction

Retirement Withholdings:

• Taxeso Federal Income Taxo State Income Tax

• Insuranceo FEHBPo FEGLIo FEDVIPo FLTCIP

The Most Important Thing To Know About Social Security

It is TILTED! • More to those who earn less.

• Less to those who earn more.

How Do Benefits Compare to Earnings?

Source: Annual Trustees' Report, Social Security Administration, 2013; Table V.C7

Women with Dual Entitlement 1960-2012

Not married or benefit is higher than spousal

Married, not working outside home

Married and working outside home

Both live to age 87: $1,071,264

He lives to 79 and she lives to 87: $843,168

Both live to age 79: $589,728

Example:

Jan • Age 62: $1,500• Age 66: $2,000• File and Suspend• Delays application to age

70: $2,640

Jean• Age 62: $1,350• Age 66: $1,800• Restricted application: 50%

of his: $1,000• Delays application to age

70: $2,376

Both file at 62 and live to 79: $581,400

Both file at 62 and live to 87: $855,000

Social Security Estimatewww.socialsecurity.gov

FERS Supplement =FERS

Service

40

Age 62 Social

Security Benefit

Example: 30/40 x $1,500 = $1,125 / month

Bottom Line

FERS + Social Security = Enough?Then, TSP will provide more income!

While Working After Retirement

Salary $

FERS Retirement $

Supplement or Social Security

$

Expenses (up or down?)

ClothingTransportationConveniences (eating out, cleaning service, etc.)Children

TravelVolunteeringEducationFamily / CaregivingHealthcare

Questions?