Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Maxing Out

In the federal sector, people often talk about earning a "full" retirement. But what exactly does this mean? Is it when you've met the age and service requirements to be eligible to retire? Or is it when you've worked long enough to earn the maximum benefit under the Civil Service Retirement System? If so, then what about the Federal Employees Retirement System? There is no maximum benefit under FERS.

Maybe the definition of full retirement simply should be when the earned benefit is enough to live comfortably in your retirement years.

Any way you slice it, issues about maxing out retirement can get complicated. Take, for example, the following question I recently received from a reader:

If you are under CSRS, can an employee with 41 years of service and 11 months of sick leave receive 80 percent of the high-three in retirement? Can the 11 months of sick leave be counted as creditable service?

This is from an employee who has maxed out under CSRS -- or has come close to doing so. Under CSRS, the basic retirement benefit cannot exceed 80 percent of the employee's high-three average salary based on the actual years and months of federal service. For most employees this is achieved after working 41 years and 11 months. But unused sick leave is always creditable under CSRS -- and in the case of an employee who already has worked more than 41 years and 11 months, the sick leave credit allows the computation to exceed 80 percent.

Case Studies

Let's look at a couple of examples of how this plays out in the real world.

Suppose Millie has worked 62 years for the federal government under CSRS. Her retirement will be computed at 80 percent of her high-three average salary regardless of how much longer she plans to continue working. By that measure, she maxed out 20 years ago. But when she retires, her unused sick leave will be converted to service credit and will allow her retirement to exceed 80 percent. If she has 4,174 hours of unused sick leave, her retirement benefit would be computed at 84 percent of her high-three average salary (2,087 hours of unused sick leave hours are equivalent to one year of service credit).

By the way, Millie actually exists. She retired a few years ago, and I'm sure there are others like her still working today. That's dedication!

Now suppose John plans to work until he is 65 years old and will have 45 years of service under FERS when he retires. Because he is older than 62 with more than 20 years of service, his basic retirement benefit will be computed as follows: 1.1 percent x high-three salary x years and months of service. Since he plans to work 45 years, his retirement will be worth 49.5 percent (45 x 1.1 percent) of his high-three average salary. There is no limit on the amount of service used to compute a FERS basic retirement benefit. But under FERS rules, John will not receive any credit in this computation for his unused sick leave.

Different retirement formulas are used for employees who are covered by special provisions, such as law enforcement officers, firefighters and air traffic controllers. Under CSRS, there is still a maximum of 80 percent (plus unused sick leave) for these groups. But since the formula is different, the amount of service necessary to earn the maximum is less. There is no maximum benefit for employees covered by the special provisions of FERS.

Excess Contributions

Here's another question I recently received:

I hit the CSRS 41 + 11 magic number on Christmas Day. As I understand it, any CSRS retirement deductions from my pay starting with the first payday in January 2008 eventually will be refunded, but that is supposed to be together with any accrued interest on such excess deductions. Is the interest rate used for this purpose the same as the one that changes annually -- for example, that applied to contributions made to the CSRS Voluntary Contributions program? Or is it based on something else?

Here's how it works: Retirement deductions withheld from the first of the month after an employee has performed enough service to earn the maximum CSRS annuity, plus 3 percent interest compounded annually to the date of retirement, first are automatically applied toward any deposit or redeposit the employee owes. Then the Office of Personnel Management refunds any balance with the employee's first full CSRS retirement payment.

The retired employee can choose to use these excess contributions to "purchase" a larger retirement benefit through the voluntary contributions program or can simply take the refund. The contributions have already been subject to income tax, so the taxable portion of the refund only would be the interest accrued. The payment is eligible to be transferred to an Individual Retirement Account.

Under FERS, the situation of excess retirement contributions does not occur since there is no maximum benefit.


The concept of maxing out can be further complicated if you've switched from CSRS to FERS. For such employees, years and months of service (plus any unused sick leave accrued) under CSRS are computed under CSRS rules, and all service after transferring to FERS is computed under FERS rules (with no sick leave credit, but also no 80 percent limit).

An employee who already had 41 years and 11 months of service who transferred to FERS and worked another 10 years could have a FERS retirement computed at 90 percent of his or her high-three average salary. The CSRS component of the benefit would be computed as 80 percent of the high-three for the 41 years, 11 months under CSRS, and the FERS component would be figured as 10 percent of the high-three for the 10 years under FERS.

Now that I've clarified -- at least a little -- the topic of maxing out, have you changed your mind about retiring soon? Do you maybe want to work another 10 or 20 years? I didn't think so.

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.


Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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