Return to Article: CSRS vs. FERS: 2008 Edition
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87743
Many interesting replies, and most of them are right on during this market down-turn. Now what really grates me is the new limitation on how many transfers a TSP client can make each month. It would seem if big brother wants up to play the market with our retirements, then let us play. I suspect the real reason behind the "number of transfers" limitations are based in calming the economy, because we sure know the smoke screen they threw up about it cost money was pure hog-wash. So if the FERS system of gambling with your future is the way to go, well then, let me gamble!
How about an article exposing that particular decision - I'm sure it will be a great read..
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76553
A relevant item for all eligible for social security; viz, there is a valuable, little-known feature of social security that the government does not advertise. In fact it is difficult in some places to find a SSA employee who can even discuss it. And this feature is the opportunity to start you social security annuity at the earliest age possible, but to repay the amount withdrwan (interest free) at age 65, 70 or whatever, and then have your social security annuity be recomputed on this higher age. WARNING: This program is not for everybody; only those who do not rely on their social security for living expenses and can afford to salt it away in a saving account or CDs. Or alternatively one could float a loan with their bank or credit union to redeposit the funds. Another bonus of this program is when you payback what you have drawn for 3,5, whatever years, you will receive a refund of the income taxes which you paid on those funds. Do not rely on your local social security office to know all the details of this program.
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71864
I am a CSRS employee who supervises other federal employees under FERS and have supervised other CSRS employees now retired. It's my experience that few employees have a good understanding of making long term investments via TSPs, IRAs, 401K or other investment tools. FERS is a good system IF you are a dedicated saver and make good choices when investing your funds and understand the risks. The challenge is to educate all workers that retirement planning starts when you enter the workforce -- not later. And part of the training should be basic personal finance management. The days of single benefit pension plans are ending. The next generation will need to be more diligent and knowledgeable about handling their finances for the long terms. And they'll be smart if they don't count on Social Security benefits.
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71664
FERS is a big farce. My wife is under CSRS and is going to fair a lot better than I in retirement.
When FERS was first sold to Congress they assumed a 5% gain on the investment. I was told that if you contributed up to 5% and put it in the G fund you would see a 5% yearly gain on your investment. Has not happened and never will.
I have invested at least 5% in the TSP for the last 24 years and I have less than a 80k in my account, with the current financial mess. The TSP is junk.
I am within 10 years of retirement. How am I going to survive on my TSP, Social Security, and the small basic 34% annuity.
FERS was only good for those who had no plans to be a lifelong Fed. The rest of us who intended from day one to stay in Federal service got screwed from day one. I would switch to CSRS in a minute.
I have a acronym for FERS, but you would not want me to post it.
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66171
I don't think the volitility of the market presents a pretty picture for a retirement plan. It would benefit everyone if FERS would be re-evaluated to insure that employees can retire with a little piece of mind some day. Perhaps a mix of the two plans.
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61087
I have a friend whose TSP balance has dropped by more than $ 80,000 lately. Given what recent events on Wall Street have done to many federal employees' TSP balances, the advantages of CSRS over FERS are even more striking today.
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59926
ICEd has it right on....when the Government comes up with a new and improved system, it is better for THEM not US ...always about saving money...(ie, switching from CSRS to FERS, NSPS)
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59631
I agree fers can work, you just have more in put. What about FERS sick leave when you retire? I have a lot of my sick leave at retirement that will be lost. What choices do I have?
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59541
I'm not a Finance major either. But I am an American in the land of the free and the home of brave. I am in charge of my future, which makes the most sense, because I (and my family) are the only ones who will benefit from my future. I have worked in the private sector for several companies with typical retirement plans, and the FERS system is more generous than any of those plans. New employees should be informed and encouraged to at LEAST contribute enough (5%) to receive the maximum matching benefit, and shown what happens if they contribute up to the maximum cap. But aren't they told this during orientation? TSP also has some of the lowest fees of any 401K plan in the industry. The employees that are nervous now (and I'm one of them) feel that way right now because they're not in the G-fund - but they got greater returns in the past and will do so again in the future. My colleague who is GLAD he didnt ever contribute to TSP makes me far more nervous - what did he do instead with that money (the after-tax, take-home portion of the 5% income that he didnt have withheld)? It was maybe $20/week extra that he had to spend, instead of $50/week invested into a retirement account that was at least earning 5%. And this example is for someone near the beginning end of the pay scales. This saving picture is the one that new employees need to have. Was CSRS better than FERS? It doesn't matter, because it's gone, and FERS is still better than what most people get in the private sector - so claim your freedom and make the most of it.
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59531
There is a deeper story about Thrift Savings after retirement. An article on the procedure for getting your funds out of the system, and particularly the form which must be completed EXACTLY like the Thrift Savings board wants it.
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59404
I must admit to mixed feels about the response from "Made FERS employee".
First, "Any system that places the burden of financial planning on the employee is a disservice, because it assumes that we all majored in Finance when we went to college."
Forgive me but... this is a totally wrong statement. The fact that it is incumbent upon us to plan our own future is inherently the result of living in a near-free market society, which we so fondly tout without any real meaning. I must state that while we live in neither a free-market society nor a democracy, we are still closer to that condition than the alternative.
Today, almost every country in the world is a hybrid of some idealistic form of government and economic system and swings back and forth within their particular comfort zone. While our system carries MANY socialistic characteristics, we still lean toward the free-market and self determination in both the political and economic realms; for which I am very grateful.
Second, "But what really upsets me is that retirement seminars are NOT offered to people with 10 or fewer years of service."
Amen Brother or Sister (whatever you may be)!! I've NEVER heard of any restriction on attending these but several times I've been asked "Why?" when I showed up. These SHOULD be pushed up-front in the career timeline with handouts, FAQ, and POC's given out regularly. While ownership must be seized for success whether financially or career-wise, management can foster such an environment. If the government is trying to hard to look like Big Brother, they can start in educating their own family. At least it would be a good start.
I know a LOT of the mil-to-civ crowd and few but the upper echelon have received more that a pamphlet and a cursory spoken paragraph of their benefits during inprocessing. Unfortunately, they believe the same trash that Skeeter spews, the urban legend that the government employees retirement program is SOOoo generous that TSP participation is entirely optional.
Folks better wake up or there will be a new poor class in town; us.
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59286
Retirement planning should be a part of the orientation training program for every newly hired federal employee. Judging from some of the previous responses to this column, apparently it isn't, at least not at all federal agencies!
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59183
Any system that places the burden of financial planning on the employee is a disservice, because it assumes that we all majored in Finance when we went to college. In my 10 years of service, nobody ever told me that FERS required my "active" participation. And I do not contribute to TSP precisely because I do not understand how it works, and I don't want to gamble with my money -- the very same reasons I'm against privatizing social security. And now that I see my colleagues' panic during this financial meltdown, I'm ever more thankful I never contributed to TSP. But what really upsets me is that retirement seminars are NOT offered to people with 10 or fewer years of service. You have to be on the doorstep to retirement before anyone will think of telling you how to plan. By then, it is too late. I wouldn't understand anyway. I'm not a Finance major.
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59106
Many agencies only support retirement training during the last 5 years of an employees career. Classic to little to late approach. Quality FERS training should be provided during the first year of employeement and every five years thereafter to help maximize an employees retirement from the FERS system.
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59102
A friend of mine who switched from CSRS to FERS has lost over $50,000 in the TSP so far this year. I'm glad that I didn't switch, because I figure that if the government wanted us to convert, it was because it benefited the government, not federal employees.
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58948
I know COLA for next year is 6%. What is the last day you can be in a retirement status to have the 6% added to your retirement. The last day of a Fed. year is 9/30 but is it based on a calendar year and therefore would be 12/31.
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58933
I read that if you take an annuity with the TSP annuity provider; the annuity is life long. At least that is the way it is described in one of the TSP publications. Did I misunderstand. If this is correct, you cannot out live your income from annuity as long as the anniuty is with the TSP provider. Please let me know.
Thank you
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58883
Excellent article as always, Tammy. Still, I must mention one aspect that has me very concerned.
With the recent Mil-to-Civ conversion, there is an entirely new class of personnel who are looking at a basic 20 year retirement. And its not just the Mil-to-Civ crowd; with the recent revelation that OPM recommended recruitment of older civilians, etc... the problem of a less than 30 year career raises its ugly head.
Taking your advice, and reaching within five years of a retirement-event, I request a retirement estimate. For an MRA+10 retirement at my eariliest eligibility of 14 years T-I-S, the basic monthly component was only $265; not even a decent car payment. Six years later at my first true full retirement eligibility, and the time 'm most likely to leave, the grand total was only double the original; now I can get that car.
While this amount is better than nothing, its no great shakes either. I'm above the average GS grade but not quite to management. Still, I'm very much afraid that all too many CS are totally unaware of what their facing after retirement.
To compound the problem, in my own immediate area it appears that those who will be most dependent on their retirements (the middle and lower grades) are those who can least afford to contribute; or at least so they think.
Even before the inequities of NSPS came around, I've been concerned about a new class of poor; the retired civil servant.
Thank you, as always, for spreading the news and helping inform those who need it most. For my part, I'll continue passing around your valuable information.
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58867
To Karen C, When you reach age 62 you will recive a reduced benfit because you did not retire at 65,66 or 67 whichever applies to you. However FERS will not be reduced by SS nor the reverse at any age. Social Security is reduced by earned income only.
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58865
I believe that under CSRS, if an employee dies before retirement, there is a (small) set amount monthly survivor benefit for children.
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58864
I have worked under CSRS for 40 years and also worked outside and paid social security for 32 years over the limit for substantial numbers given in the social security table given on their web site.Will I be able to receive both retirement benefits without the government pension offset? Always look forward to your columns.
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58863
"More Control: Some people are very good at managing their investments, knowing the importance of diversification and the value of compound interest."
The TSP gives investors virtually NO CONTROL in managing their investments. Your choices are C fund (S& P 500); S fund (Wilshire 4500) [which if you invest in C & S you are really investing in the total market Wilshire 5000 index]; I fund (international index fund); G fund (fixed income fund); F fund (bond index fund).
so you can invest in a mix of the total domestic market, the total international market, the total bond market, and the equivalent of a CD. I would give almost anything for the TSP to be turned over to any major fund company--Vanguard, T Rowe Price, Fidelity, etc etc--and have a real range of investments and choices for my retirement.
Heck, if the TSP allowed you to roll your TSP balance into a rollover IRA of your choice once every 5 years I'd kill for that!
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58857
Yes, FERS is still better than most private pensions out there with the basic annuity, no question. However CSRS is still the sweatest. The sad thing I see in the Federal workforce today is the number of CSRS people who have 38 plus years in and just can't walk away. I'm talking GS 13's - 15, who have plenty of money yet cry poor mouth or say it's not enough. Some have no life but others just don't inderstand that life does not last forever. It's very sad but then again the job is so easy why walk away.
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58843
I have 39 yrs under CSRS. Will I ever be eligible for SS under my husband or myself. At one time I had SS (40 quarters) but Soc Sec. reduces that over time looks like it was all for nought. Any insight for me? thx.I am60. Also can I work after retirement and make how much $.
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58838
With FERS do you get a Social Security retirment payment in addition to your FERS benefit payment at age 62? If so, will your FERS (or Social Security payment) be reduced?
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58831
Tammy the real question here is why should the taxpayers pay for such a gold plated program?? I constantly hear that CS what to be treated like the private sector so it would make sense that their benefits reflect what the private sector offers
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58830
I understand that FERS is cheaper to the government. That was the only reason for its implementation. One of the main attractions for government service for me with the CSRS benefit. With that gone, I'll recommend to my son when he is old enough to work in the private sector. With NSPS rolling in, the benefits of working for the federal government keep disappearing at a rapid rate.
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58820
My situation is unique in the fact that I worked at the Railroad (also federal pension)from 1966 to 1982. I am under FERS. I took a mid-career planning class while with USACOE. I asked asked about my situation and was told I needed "not" to contribute my own funds to TSP since I had both railroad and federal. Guess what - not good advice. I am 60 now and should have contributed. Seems to me I should have the option to received CSRS since I was under federal pension at railroad, would have been much better for me now. At 62 I will have 25 years Federal Sevice, plus about 15 railroad which if combined under CSRS would be very comfortable, but under FERS tighter. Don't always pay attention training advice with the Gov't.
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58812
I believe there is no need to continue the arguments over which is better. You have no choice. FERS is the system in place. Lets inform the employees how it works and how to get the most benefit from it. Obviously, the personal investment into TSP is a must in order to insure any hope of a comfortable retirement. You have to start right away, even if it is just 1%, and increase the contribution every year. With proper planning and investment, FERS can generate a much greater annuity than CSRS.
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58809
Tammy,
While you touched on this aspect near the end of your article, I think it is worth repeating, "Compared to most private sector retirement plans, FERS has the advantage of a basic benefit. Most companies are no longer offering their workers such pension plans.
While your readership is probably federal workers, the people we serve are the tax-paying public. The federal retirement systems contribute substantially to the nation's tax burden. And to make things worse, the federal government can hide its unfunded liabilities unlike private sector employers.
It might not be popular for a journalist writing on federal entitlements to say such a thing, but its a message that people need to hear.
Glad to see you at least scratched the surface of that issue.
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58799
Thankyou for another great article Tammy, and don't worry I didn't question your mental state on the other article nor will I on this one. I agree csrs is more generous, however if one plans early under fers you can live even more confortable than when you were working which will be me in 3 years. Keep em coming Tammy.
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58791
Very informative like all of your articles. Either choice is excellent and superior to most private plans. I'm CSRS and vividly recall having the choice in the 1980's. When your mind is overwhelmed, just flip a coin, or choose CSRS because you can retire comfortably without saving big bucks. No regrets.
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