Top 3 Things to Know About FERS Retirement BenefitsRetirement Planning
The Federal Retirement System (FERS) is a retirement plan that covers all U.S. Federal Civilian Employees, including those in the executive, legislative, and judicial branches of the federal government. This plan does not cover employees of state or local government, or military personnel. FERS provides benefits to eligible employees from three distinct sources: A Basic Benefit Plan, the Thrift Savings Plan (TSP), and Social Security.
Basic Benefit Plan
Also known as a Defined Benefit Plan, the basic benefit plan is a pension plan in which an employee gets a defined or fixed amount of benefits. It doesn’t matter how much one has contributed. The monthly income from your pension depends on the length of your service and the highest three consecutive years of service, known as “High-3.” Only your basic salary will be included in the calculation, which means bonuses, overtime, and other extra payments don’t count.
The basic benefit plan is calculated by taking your years of creditable service and multiplying them by your “High-3 Salary”, multiplied by 1%. The 1% is known as the pension multiplier. However, a 1.1% multiplier is applied for employees who are 62 or older with at least 20 years of service.
There’s no difference in what employees covered under FERS and private employees contribute to the social security fund. Your social security benefit depends on how long you’ve been working in a job, and the amount of money you’ve earned over the years. Each pay period, 6.2% of your basic pay will be put towards Social Security. If, for instance, you were born in 1975, annual basic pay is $50,000, and you plan to retire at age 65, you’ll receive an estimated benefit of $4,200 per month.
Thrift Savings Plan
TSP was established in 1986 and offers the same types of savings and tax benefits as a 401(k). With the Thrift Savings Plan, federal employees– including those hired before it was created- can save pre-tax dollars in a special account. Each pay period, 1% of your basic pay will be deposited into your TSP. In addition, you can make extra contributions, which the agency you work for may match (up to 5% of your income). The additional contributions are tax-deferred, and you choose how the funds are invested. Unlike the case with basic benefit plan and Social Security, the amount you receive after your years of service will be based on market conditions, the funds you choose, and the extra amount you contribute above what your employer deposits.
If you’re a Civilian Federal Employee, WAEPA can help you navigate for federal retirement and beyond. One of our goals at WAEPA is to provide our members with a better understanding of the resources available to support your federal career and financial wellness. We encourage you to explore our website for a full picture of the membership benefits we offer exclusively to Civilian Federal Employees.
4 Reasons to Consider WAEPA for your Group Term Life Insurance Coverage
- Up to 1.5 Million in coverage of Group Term Life Insurance*: For eligible members, plus coverage for your spouse and dependent children. WAEPA also offers an enhancement to your policy with our Chronic Illness Rider option.
- FREE resources tailored specifically to Civilian Federal Employees: We give our members free access to online resources; guides provide a comprehensive overview of topics relevant to your Federal benefits, Webinars advise you on benefits, retirement, financial and estate planning, and our blog promotes topics that help the health, welfare, and financial well-being of our members.
- Financial Wellness Planning, powered by Ernst & Young, LLP: We give our members exclusive, FREE access to financial planners, who help you create a custom financial plan that fits your needs.
- Premium Refunds: Despite fluctuations, WAEPA has awarded a refund 25 of the past 26 years. When was the last time FEGLI gave you money back?
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