Return to Article: CSRS vs. FERS
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89963
When your comparing CERS to FERS. CERS is a much better retirement. You have assumed that wages are $68,000. However at 3% increase per year your wages would have been around $28,000.00 when you were first hired. So bottom line CERS you get the retirement at the wage you retire. FERS you get the TSP at the wage you worked at.
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66353
I read all of your articles on retirement calculators for TSP and SSA. Is there a FERS retirement calculator available?
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60809
I served 6 years in the military prior to 1957. Twenty one months during WW II. According to what I have read my SCD of hire should have been adjusted 21 months early then the actual, after 1984, date of hire. I started drawing SS at 65. Possible also given the option of CSRS. I am in FERS and need this information prior to retiring.
Thank you,
Dave
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58886
One major "assumption" in the CSRS vs.FERS debate is that your TSP contributions grow at an 8% annual rate and you NEVER LOSE ANY $'s in the TSP funds.RIGHT!!! (I have lost over $20,000 over the past six months because of the turmoil in the stock market. I have to "gain back those LOST $'s just to get even. !!!) When the FERS program was rolled out and we herded into HR to hear "the pitch" to switch, I asked 3 simple questions:
1. If FERS is so great, why are you not allowed to "switch back" into CSRS system.
2. Asked the OPM pitchman was he switching?
3. The " assumption" of the "annual 8% return" in the TSP accounts that also assumed you NEVER lost $'s in your TSP account!
I felt if they wanted us to switch, it was better for THEM, NOT US!!
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56107
For Janet posted Oct 07; I don't know if you're still checking in but I know there are thousands like you out there. And so I say :Please accept my condolences, one and all." As the saying goes: Been there, done that, got the t-shirt (and it didn't fit). Okay, not myself, but rather it was my mom who went there and I was the one eating that lunch you discussed.
Concerning your own circumstances, even though being a sole parent is never easy, you have much to be proud of. Ending up a GS-11; congratulations, you just beat the average of GS-9, step 8. As of 2005, the average base salary was $64,175, hence the figures used, and that is fairly close to the figures Tammy used in the table if you consider the end of a long career.
But as far as your request on a more average model, I think Tammy realized that even though this newsletter is nominally directed towards Government Executives, it has also found a significant niche with the average workers. I don't know if you missed it, but about at the same time you commented to this story, Tammy published "A Little Lower", A look at retirement options for those who aren't earning executive-level pay (12 Oct 07). It had a similar chart with significantly lower income estimates with more elaboration on the deductions we are likely to see; thus making it imminently more functional for me.
As much as I appreciate her articles, I must say I had a couple of major problems with that one. Tammy (and the government) consistently includes information on or predicates the notion that the retiree will, should, could, or might get another job. I've often wondered about this as IMHO when one retires, one should not HAVE to work. That is a TRUE retirement. If one DOES seek additional employment, it is hopefully to be a labor of love working at something you like to do rather than need to do. If you still HAVE to work, then you didn't retire; you only secured part of your income necessary to survive. The second problem I saw was that no accounting was made for the impact of different COLA treatments, and the losing value of the FERS retirement.
Good luck out there!
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51142
I am under FERS retirement, special 6c coverage (LEO's & Firefighters), I have over 20 years under this retirement plan but i'm not yet 50. I believe under CSRS one could leave 6c after 20 years of service and still collect once they turned 50 years old. Does anyone know if I left my covered possition of 6C before I turn fifty if I would lose my retirement under special coverage? any imput would be appreciated.
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44487
How can you say that FERS is comperable to CSRS when those under FERS is paying for their own retirement through TSP. Under the CSRS retirement plan employees did not have to save a dime for their retirement. Under the FERS plan every two weeks a portion of your paycheck has to go towards retirement if you plan to have a good financial base after you retire. Which means you are actually living on less money now due to your contribution. (UNLIKE CSRS) Heaven forbid if you do not contribute to the FERS plan. And on top of all that CSRS get to keep their earned sick leave. FERS employees earned their sick leave but loose it. What is so fair about this retirement plan.
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40224
I have an offer to switch from fers to csrs offset but required to withdraw agency contribution and earnings on TSP account of $100,000. Difference in annuity pay between fers and csrs offset is about $13,000 per year. Which is better?
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34475
I agree, pv/fv computations need attention. For those of you don't know, these are present value of a dollar versus future value of a dollar. To compute your conversion, get a financial calculator, or have the bank do it for you. Pay attention to your deposit periods (the frequency of deposits (bi-weekly) and the compounding period (bi-weekly, monthly, annual). If you are fortunate to have a daily compounding rate (credit card companies)and your fequency of deposits is fairly close together (bi-weekly versus monthly), you will have money. Even a small annual interest rate will provide a good investment if the frequency of deposits and compounding periods are good.
Then go over to the OPM and SSA sites and compute your retirement. You will be at least better informed. You should be able to tell how much you actually need to save. Also, pay attention to what tax bracket you will have. Find someone who can provide you with a break-even analysis.
CSRS has a better retirement plan as far as I am concerned. Still even at that, income taxes are the same as working wages. The taxes will reduce your income as much as $100 or more a month. for SSA, you may be lucky to recoup your contributions without interst and without matching contributions. Unless you have survivors, those contributions are not returned to any unqualified person in your estate.
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34474
I just looked at your chart. A high 3 of $65,000 is not a good starting point for most employees. I started as a GS-2 and retired as a GS-11. I had 2 degrees and I never saw an average of $65 k--at least not based on government earnings.
I know how many low wage employees there are in relation to the 12's, 13's and 14's. I also know how much that education cost (still have a $300 a month obligation)
Offset employees at that wage would have their CSRS reduced to nothing.
TSP was a great thing--until this last 8 years. I think it is redundant to state what happened to retirees' nest eggs.
Please put up a CSRS Offset forum so we can compare information. And please put this retirement in perspective to an "average" worker. I spent enough time in those lower grades to know how hard it is to provide for the future. Even at an 11 salary, I would still find it hard to live on the inflated dollars.
It can be done. However basic needs often hold one back. And at the 3 and 4 levels, I am surprised they aren't paying to work for the government with just the cost of owning a car and the gas it takes to get to work. I know I can remember when they cut out overtime I had to take $200 in savings money (1970's and each month) in just transportation, gas car payment, parking, insurance, etc.
I asked my supervisor to fire me because I could not afford to work for him. Due to my government salary, I was not entitled to food stamps. I paid for my son's school lunch but that isn't to say we had much to eat at home those months.
Yes, please put things in perspective for those that cannot pay the $84,000 (repayment) it cost for my education and that will probably only have a 1 in 200 chance to see that average $65,000.
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34473
Go to the OPM and SSA sites and use their calculations. Since offset employees are considered to have earnings tied to the same years, there is an inverse formula for gainful retirement.
FICA only pays the wage earner less than 1/2 the actual "family" benefit amount. Some at age 62 have spouses and children, but not the majority--and without a spouse's potential SSA income (offset). At $2100 for family, the wage earner may only receive $800 in benefits. And that is for how long? Big figures for the actual reality.
My monthly FICA (government only) withholdings were nearly 3 times the net $73 I will receive from both retirements. I would have to live to 102 in order to recoup my contributions and agency contributions.
My CSRS was reduced for this and that reason. I thought it was a secure annuity, and with the RIF, I expected this. If I didn't have FICA earnings outside of the government, I wouldn't have any SSA benefit. Those "high" govenement earnings are offset almost $1 for $1.
I hardly receive the 70% the government says is the goal of replacement earnings of previous employment. It is closer to 1/2 of that amount. Add the $73 net and I am still at 1/2. Less than 1/3 if all outside earnings counted. I have a 1984 income.
We are required to take SSA at age 62. Another 25% reduction.
I ask this site again, who is going to buy a car with a $400 payment or other goods and services??? As it is, I cannot afford heat. I live in one room with a fireplace 2-3 months of the year in order to afford cold weather when it gets below 40 degress.
If I were to receive the family benefit, plus my reduced CSRS, I would be in the 70% story the government brags about. As it is, I am in the poverty borderline position, too much money to receive government handouts, not enough bypass the choice between basic needs and shopping.
SSA is not an insurance policy with a choice. You pay for family protection without the family.
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32323
Because of the FERCCA, I had a choice to switch from FERS to CSRS Offset after 23 years of service, and 12 more to go. Considering I didn't put much into TSP in the beginning, I switched to CSRS Offset... I hope I made the right choice!
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21350
I switched from CSRS to FERS in 1987. In 1995 I took forced retirement because of a Depot closure. I was 51 years old with 21 years of service. I received the Offset, CSRS plus a SS supplement for 12 years, then at age 62, I lost my Social Security Supplement with no explanation. I truly believed that FERS offset worked like CSRS. After begging for an explanation I was told "sorry" by OPM. My Social Security contact said "come see us when you make at least $4000 and work 4 quarters which you lack under Social Security." Human Resources never explained this little quirk in the system. I am so mad. I feel I have been had.
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19288
I was given a choice (due to an error) to keep CSRS which I currently have or transfer to FERS. I have only six years of government time and I am 50 years old. Which is best for me?
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18866
You have failed to do present value/future value calculations. CSRS starts collecting pensions at 55. FERS starts collecting pensions later and does not collect Social Security until around 67. We are forced to work longer to end up with less. Do the math!
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16654
I just have to add a comment here. It could that no one ever reads it but ... I am losing my job because of BRAC, so I had HRO figure out my FERS retirement. What a joke. After 18 years I will receive $47.00 a month. If it were not for TSP I would be in deep doo-doo. Take heed put all you can into TSP.
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15997
The column was very interesting, but didn't mention anything about CSRS Offset and how it works in comparison to CSRS and FERS. I would like to see more information on the CSRS offset in one of your columns.
Thanks.
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15990
I was one of those who switched from CSRS to FERS when the option was first offered. At the time, on paper, it made sense since I already had 12 years of "substantial" service under social security before I joined government service and expected to work at least 18 more years to attain the 30 years needed under social security to obtain full benefits. I also planned to always contribute the maximum amount possible to my TSP account --and have done so. At the time, however, those staying in CSRS had no option to contribute to the TSP and fears about Social Security solvency either didn't exist or weren't as great as they are now. In retrospect, due to these two changes in conditions, if I had to make the choice all over again I might not choose to switch to FERS. I believe I would have been better off with CSRS plus a maximal CSRS allowed contribution to the TSP plus a reduced Social Security benefit than where I am at now.
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15988
No hostility toward the author here. The article was fair and accurate based upon the assumptions that were used. My only comment is that, while the two systems may, under the appropriate facts, generate similar income for retirees, there is one major difference: The vast majority of the TSP income for FERS employees comes out of the employees' payroll deductions. The argument that the government has created a better "portable" system that looks out for today's federal employee is nothing more than a 20-year-old spin. Say it long enough and everyone will believe it. The bottom line is, has, and always will be about cutting federal employee benefits and blowing the money on something else that we overpay for or don't really need.
If I were, say, a GS-13 and a "true saver" (i.e. being fortunate enough to "max out" on TSP savings) -- which is what our government wants us all to be -- then my TSP contributions and earnings would be more than three times the government's contribution and earnings). Thus, the bulk of the "retirement income" from the TSP piece was my money in the first place, not the government's. Furthermore, the government will actually do more than just save money regarding my retirement because they will also reap the tax benefit of my investments when I cash out as it is all treated as "ordinary income" and not "investment income," which is taxed at a much lower rate for most Americans.
So, do the two systems each have advantages over the other? Yes, depending on one's personal circumstances. But there is no way that I believe the system was converted to benefit employees -- it was done to shift a major piece of the retirement funding directly to the employees.
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15927
I believe one group of employees who may have benefited from switching to FERS was law enforcement officers who already had 20 years under CSRS. They were able to keep their 2.5 percent credits for the first 20 years plus get the full COLA on that portion and earn 1.7 percent on remaining years, plus earn the supplement plus get the 5 percent TSP match. The supplement begins at retirement for law enforcement officers. If they earn 40 quarters they will get Social Security at age 62, or half their spouses' social security, without penalty of government pension offset if it is more. I did this as well as maxing out my Voluntary Contribution account prior to the switch. I have been contributing the max to TSP. I plan to retire with an annuity 110 percent of my highest salary.
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15897
Back in 1984, when those of us in CSRS were first offered the opportunity to switch to FERS, and later, when we had the chance to switch again, many of us thought that if the government wanted us to go over, it was because doing so would be in the best interests of the government, and not our best interests. I stayed in CSRS, and am glad that I did. Reading these posts on GovExec.com only reinforces that belief. FERS costs the government less that CSRS, and that's the only reason it came into existence -- not out of concern for federal workers and their retirement. Case closed.
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15881
Part III
Also, unlike just about every other annuity with which I am acquainted, the survivorship benefit of TSP annuities contains a dirty little feature that most are not aware of: If either spouse dies, the annuity is reduced to the survivorship amount for the remaining spouse. Contrast this with the CSRS pension where if the pensioner survives the spouse, the pension can actually be increased to reflect the elimination of the survivorship feature.
Gary, DOD
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15876
Is anyone ever going to explain exactly what the CSRS Offset is really about?
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15861
A loophole for CSRS employees to draw full (no offsets) Social Security is for them to simply remain working and not retire. Once they reach "full retirement age" for Social Security, they can draw Social Security without offset or penalty as long as they do not retire from federal service. A person who may not have their own Social Security entitlements, may qualify to draw off a spousal benefit until their own retirement from CSRS. This "bonus" income while still on the payroll makes it easier to pay off bills before that transition to retirement income.
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15860
The CSRS versus FERS appears to be slanted toward the "party line." Yes, most of what was presented was true enough, but what about the "rest of the story"?
Part II
4) CSRS retirees receive full COLA on a much larger base amount while FERS receive "diet-COLA" on a smaller base. The divergence of benefits over 20 to 30 years becomes substantial. (The article mentions the difference in COLAs but does not really mention that the difference in the base causes significant divergence over the future years.)
5) The sick leave add-on to CSRS retirement increases the base benefit even more, which again becomes a substantial benefit over the future years. (The article touches on the increased benefit at the time of retirement, but not on its potential growth benefit.)
6) And it was mentioned in passing that low paid employees, or those with larger families (higher expenses), must "manage consistent investing habits," but they are the very ones who cannot find the resources to invest after month-to-month existence, especially on the further reduced income as mentioned in the first item above.
In some sense of fairness, FERS is still better than many non-government retirement programs. But it does not really compare favorably to CSRS or the Postal System Retirement Programs.
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15859
The CSRS versus FERS appears to be slanted toward the "party line." Yes, most of what was presented was true enough, but what about the "rest of the story"?
Part I
1) The withholdings required by the FERS employee during the time of employment far exceed the withholdings of the CSRS employee to get what is presented in the article as "comparable" retirements. FERS have pension and Social Security mandatory, and are expected to contribute to TSP for a retirement (upward over 20 percent) that cost CSRS about what the FERS people pay (7.5 percent) for Social Security alone. FERS employees live on far less now to get less later.
2) If CSRS employees took advantage of their Voluntary Contributions Program for the entire time of their employment, they would have far more in retirement benefits than illustrated with still less than FERS employees must contribute to their retirement.
3) FERS employees receive the Supplement only until age 62 at which time they are forced into the Social Security program to maintain that rate of income despite it means reduced benefits for the rest of their lives. Those employees over age 62 receive no added benefit from this "benefit." (As an employee now over 62 with only a few years, my own retirement would not be supplemented at all despite the low benefit of only 1 percent of my high-three. Then I am forced to start withdrawals of my TSP in only a few years and cannot let it "remain invested" as indicated in the article.)
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15845
Couldn't an individual who left early but had 20 years of government service also begin collecting FERS at the age of 60 under a deferred annuity? You show 62 in your example.
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15843
I stayed with CSRS because of its provisions for health insurance for disabled children. When my wife (who will also retire under CSRS) and I are no longer around, our disabled son can continue with my health insurance (Blue Cross) until he dies as long as the premium is paid. We have instructed our other two sons that it is extremely important that they make sure every year that the health insurance premiums are paid. It is my understanding that this health insurance benefit for disabled dependents is not available in FERS.
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15841
I also notice that employees' TSP contributions are counted, but since they come from the employees' salaries, shouldn't you deduct employees' contributions from your formula? Sure you can add the investment returns and the TSP matching funds, but the original contribution was already counted in the salary.
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15839
I'll keep my CSRS, and thank you very much! I was given the opportunity to switch over to FERS many years ago. The problem was I had around 10 years of service back then and I knew this switch was good for the government but not good for me. FERS was created to save the government money, plain and simple.
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15837
The methodology is clearly flawed. What about the cost of paying into Social Security for 30 years. You forgot to include that in your analysis for the FERS employee. There is truly no comparison between the CSRS and FERS.
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15833
On Jan. 6, 1991 I returned to competitive federal civil service after a 5-year break in service. My employing agency asked if I wanted to be covered under FERS or return to CSRS (offset), I chose the later. The federal government basically eliminated a defined benefit retirement system, CSRS in 1985, to go to FERS. Why? To save money. The FERS employee has to pay more (self-directed) to achieve any reasonable retirement income after 25 or 30 years by putting money in the TSP. You better be aggressive by investing in the S, I and C funds or your pot of gold at the end of the tunnel will be minimal. In my 25 years-plus of Federal service 6C law enforcement, I've never seen the OPM do anything to benefit the government employee, going to FERS was no exception. The big joke in 1985 was who would be dumb enough to want to work for the feds under FERS. I wish there was a study as to how many candidates chose not to pursue federal careers when the retirement system was changed.
The author of this article did not discuss CSRS (offset) employees like myself. Quite frankly, I feel I have the best of both worlds, social security at 62 and CSRS also at age 62 with the social security offsetting the CSRS annuity.
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15824
If you can get out of FERS do it now. CSRS is superior to FERS.
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15813
My wife returned to the work force in the period there she was placed in the CSRS offset. Given the opportunity to change, we elected for her to remain in the "offset." As a retired GS-12/10, she draws a nice CSRS check and also a Social Security check of right at $1,000.00. Offset is definitely the best retirement program the government has ever offered -- even though it appears it was designed by accident!
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15810
Your example is misleading, as is the conclusion you draw from the example. It is much better to receive $43,537 with $36,562 guaranteed (with a beneficial cost of living increase) than $44,255 with $19,500 guaranteed at a smaller COLA plus $10,800 with a full COLA.
Unless the retiree has an immediate need for the $718 difference -- highly unlikely -- there are few, if any, circumstances where FERS is the best choice at the time of retirement. And the longer the retiree lives, the better the CSRS.
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15809
I am just amazed at how these comparisons always assume that CSRS and FERS employees are paying a similar amount for their retirement benefits -- but they are not. In order to get a comparable benefit, the FERS employees are paying much more: the FERS payroll deduction, plus the Social Security deduction, plus TSP contributions. In order to make the example in the article even close to comparable in cost, the FERS employee should be putting close to zero into the TSP -- otherwise, the employee is giving up 15 percent of his or her take-home pay. The CSRS payroll deduction is much less than that.
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15807
Your example does not address the age requirements. Assuming they have the required years of service, CSRS retirees can retire at age 55 with their full retirement benefits, and will continue to receive that benefit forever. In comparison, FERS employees can retire at age 56 but can only collect their much smaller annuity. They must wait several more years to tap the TSP money, and many more years before they are eligible to collect Social Security (if it is still there). There is no comparison between CSRS and FERS.
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15805
The TSP is not factual. I was CSRS was moved to FERS in 1985 by a break in service. I contributed my match into TSP ever since and I did it in the G Fund, which is the only fund an example can legitimately use. My TSP is less then a third of your example. I am a woman and thus make less then most men do. I do think FERS is a good retirement for women who are married because they can take half of their husbands' Social Security rather then their own as the man puts in more working years, usually, at a higher rate of pay. This fact helps bring FERS closer to CSRS for married women.
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15804
Tammy, How is the Social Security Supplement calculated? Also, how is Social Security calculated? Specifically, for the gentleman that retired at age 56, with thirty years of service are the years from 56 thru 62 counted as zero earning years? If so, that would drag down the Social Security benefit ... is that worked into your estimate? Thanks, you really are a good sport for taking on this tar baby system.
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15801
Assuming Social Security is still there for FERS employees (yeah right!), the salary used in the example is very high. I have given up a lot for federal service and moved my family around and did an 18-month tour without them and I still don't make $65,000 a year. Plus I have other family members with over 20 years and they don't make $65,000 either. By looking at this example thank God they are CSRS. I have the chance to get to that $65,000 they don't ...
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15799
But, the assumption that FERS employees will receive the Social Security supplement is flawed, as we all have read the reports that Social Security will be bankrupted before most FERS employees retire. Therefore, a drop of $11,000 in benefits leaves the CSRS option much better!
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15797
The effort to make those covered under FERS feel better is quite noble, but it is well known that only in extraordinary circumstances would FERS be equal, much less superior, to CSRS. There is truly no comparison between the CSRS and FERS.
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15787
You left out the CSRS Offset retiree. I know of several who made this choice, and they may be even better off.
Army Analyst
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