The Civil Service Retirement System benefit and the Federal Employees Retirement System basic benefit are influenced by salary and length of service. Both retirement systems compute benefits based on your highest three years of basic pay during your career (usually that's the last three years). Do you understand what "basic pay" means? It includes basic annual pay adjustments, locality rates, promotions and step increases. But it does not include most overtime pay, bonuses or cash awards. (For the official definition of basic pay, see Chapter 30, Civil Service and FERS Handbook, Employee Deductions and Agency Contributions.)
To find out how basic pay influences your retirement benefits, multiply your biweekly salary by the amount of retirement contributions you make (for CSRS, that's 7 percent; for FERS, it's 0.8 percent). This should equal the amount of retirement contributions being withheld. If you have received additional pay as a bonus, or other pay that is not considered part of your basic pay, you will notice that retirement contributions are not withheld since this pay is not included in computing your retirement.
Document Your Service
Length of service is one of the most important concepts for which you must take responsibility. Your agency has maintained your personnel records throughout your career, but you will need to verify that those records are complete and that they accurately reflect your federal service. Remember that every month of service is worth 1/12 of 2 percent (CSRS) or 1/12 of 1 percent (FERS) of your high-three average salary for the rest of your life.
You need to maintain clear records that document the history of your entire federal career. This means having the employee copy of all of the SF-50 forms that show beginning and ending dates of federal service, military service records and even records of that temporary summer job that you performed for the National Park Service in 1972. If you haven't done this, then schedule an appointment to review your official personnel file to be sure that this documentation exists. And ask for copies of any documents not in your own files at home.
Understand Service Credit Deposits
It's also critical to understand the benefit of paying a deposit into the retirement fund for service where no retirement deductions were withheld or where the deductions were withheld and later refunded. The rules relating to paying these service credit deposits can be complicated and vary greatly between CSRS and FERS.
Generally, if you request an estimated retirement computation from your agency's personnel office, you will be informed about unpaid deposits and their effect on your retirement benefit. Some deposits can be expensive due to the accumulated interest that is due. If you are more than a year or two from retirement, you may request information specifically about the service that is subject to a deposit. Here are some resources that can help:
- Standard Form 2803, Application to Make Deposit or Redeposit (CSRS)
- Standard Form 3108, Application to Make Service Credit Deposit (FERS).
Have you considered whether to provide a survivor's benefit? If you are married, you really need to. There are survivor benefit considerations for your basic retirement benefit, Social Security and Thrift Savings Plan account. And make sure you keep your beneficiary designations up to date -- even after you retire. For more information, see my March 10, 2006, column.
Ask About Life and Health Insurance Options
Do you know the benefit of maintaining federal health and life insurance in retirement? Is your spouse dependent on you for health insurance? Do you understand what is required to make sure they can continue this valuable benefit in the event you die first? It is your responsibility to find answers to these questions -- before you retire. For help getting started, see the Office of Personnel Management's Frequently Asked Questions about the Federal Employees Health Benefits Program. Prepare a Personal Savings Strategy
Many government retirees rely on personal savings to supplement their federal retirement benefits and Social Security payments. There are many ways to use retirement savings to add income. These include receiving a series of monthly payments over your life expectancy, electing to receive a specific dollar amount each month, purchasing a life annuity from an insurance company, or reinvesting the money to be used as needed for major purchases or unforeseen expenses. Each of these options involves estate planning and tax considerations. There is a risk that the decision you elect may not provide adequate retirement security over the remainder of your lifetime.
Have you begun to plan for the use of your retirement savings? The Thrift Savings Plan offers a handy calculator to estimate your monthly income from your retirement savings.
Review Your Social Security Statements
Do you review the list of your past earnings when you receive your annual Social Security statement? If there is a discrepancy, it is your responsibility to report and provide proof to correct it. Making these corrections can affect the amount of your future benefit. Are you entitled to more than one benefit? Social Security pays benefits to workers and their dependents. This can include a current spouse, a former spouse, dependent children and in some cases, dependent parents.
Have you considered when you will apply for Social Security benefits and the affect your age has on the amount of the benefit you will receive? If you're retiring under CSRS, do you understand the Windfall Elimination Provision and the Government Pension Offset? The Social Security Administration has many publications to explain the various programs and rules. Click here to see them.
How did you do? Do you have a long "to-do" list or have you checked off most of the things listed above?
I know that many of you would like to just go to your personnel office and simply say, "I want to retire" and let nature take its course. But the reality is that a comfortable and satisfying retirement takes planning and preparation. Your federal career will provide you with retirement benefits that truly are among the best in the world. Understanding your options will allow you to take full advantage of them.
Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.