In my travels to various federal agencies, I've found that employees are trying desperately to understand their retirement benefits and would love to be able to project their retirement income. Often, they are very dependent on the assistance of retirement specialists at their agencies to explain the intricacies of various retirement benefits and prepare an estimate. It can be very confusing. Witness the following e-mail I recently received from an employee covered under the Federal Employees Retirement System who participates in the Thrift Savings Plan:
I'm not exactly clear about the retirement pay I will receive under the FERS program and that which I will receive from the TSP. Are they totally separate or are they combined? I am 60 years old and recently completed five years of civilian service. I am looking at retirement at age 62. Will I receive a separate FERS retirement check and still be able to draw an annuity from my TSP, or are they combined for a total package? My personnel office is supposed to be sending me information regarding my retirement options, but it seems to be taking forever to receive anything.
Retirement under FERS includes three elements: the FERS Basic Benefit, payouts from the Thrift Savings Plan and Social Security benefits. It's a little simpler for folks under the older Civil Service Retirement System. They are eligible to participate in the Thrift Savings Plan and some of them qualify for Social Security benefits, but CSRS is designed as a single, stand-alone retirement package.Estimation Tools
Whether you're in CSRS or FERS, though, it can be a bit tricky to estimate just how much income you'll have in retirement. I encourage employees who are planning to retire within the next year or two to request an estimate from their human resources office. Most likely, it will be prepared using one of two software programs:
- The Federal Retirement Benefits Web Calculator from Economic Systems Inc.
- GRB Assist from Government Retirement and Benefits Inc.
These programs are designed to be used by trained retirement specialists who usually will review the employee's service history before using the software, to provide a more accurate estimate of an employee's CSRS or FERS basic retirement benefit. This can be a time-consuming process, especially if the review shows inconsistencies or indications that the worker has missing retirement contributions or a lack of evidence of previous service.
These days, retirement specialists are being inundated with requests for estimates, along with actual retirement applications. The applications obviously take priority, so be prepared to wait a few weeks after your initial request.
To ease the burden on their personnel offices, some agencies have begun using systems that employees can access themselves. Economic Systems, for example, offers a product called the FRB Web Integrated Solution, which allows employees to analyze their own retirement scenarios. Likewise, the Employee Benefits Information System allows employees to view a statement of their benefits, use calculators to evaluate various "what-if" scenarios and conduct benefits-related transactions online.
These do-it-yourself programs provide projections of Thrift Savings Plan and Social Security income in addition to CSRS or FERS basic retirement benefits. But employees should be aware that they do not include a review of existing personnel documentation or take into consideration unpaid deposits or unusual situations such as time worked under a part-time appointment. They may not be as accurate as needed for an employee who is close to retirement.
Another aid for employees is the fact that personnel records that have traditionally been maintained on onionskin papers in cardboard folders are being digitized and stored in a computer database. The electronic system will allow employees to gain access to deposit records, their part-time service history and other information that until now had to be manually retrieved from paper records.What You Can Do
So what can you do right now to estimate your retirement income? Here are a few suggestions:
- Do it yourself. The FERS basic benefit and the CSRS retirement benefit are simple calculations that you can figure out with a basic understanding of the concept of "high-three average salary" and "creditable service." The other thing you will need is the computation formula and an understanding of deposits and eligibility. If you've attended a mid-career or pre-retirement seminar, you should already know about these things. If not, consider signing up for one at your agency if it's offered.
- Request an estimate of your basic CSRS or FERS retirement benefit from your benefits office. Even if you know how to do it yourself, this allows the person at your agency who will most likely have to prepare your records for retirement to take a look at them before you actually set a date. But remember that this is only an estimate based on information the specialist will put into the software program from your records. Be sure to review all the information that is shown and ask questions about anything that looks unusual or doesn't reflect the career that you've had.
- Go to the Social Security Web site and use one of their calculators to compute your future Social Security benefits. One of the calculators is easy and quick, the other allows you to put in more detailed data.
- Use the calculators at the Thrift Savings Plan Web site to compare scenarios for future TSP withdrawals and project your future account balance using different contribution and interest assumptions.
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.