In Case You’re Wondering What You’d Make in Retirement

It’s fairly easy to calculate your own estimate of your benefit.

In last week’s column, I referenced an email I received from a concerned employee wondering about the status of her retirement application given current circumstances. One thing stuck out to me from the message:

It is my understanding that all of my paperwork has been reviewed and approved; however, I still haven’t received the estimate of my annuity due to the software that our agency uses for computing our retirement being down, so I don’t even know how much I will be receiving monthly.

Everyone who works for the government should know how to calculate a basic Civil Service Retirement System or Federal Employees Retirement Benefit estimate. The formula can be found on the Office of Personnel Management website. It requires only two pieces of data that most federal employees can estimate with a reasonable level of accuracy: high-three average salary and length of creditable service.

Once you estimate your average salary over the highest three years of basic pay of your career (generally the last three years) and your total length of service through your date of retirement, the formula is nothing more than a second grade math problem.

Of course, actually attempting to compute an estimate does raise certain questions:

  • How exactly is the high-three average salary determined? Is locality pay included? Are calendar years used or the exact retirement dates?
  • What service is used? Is all of my service creditable? Do I have to pay a deposit for my service to count? What happens if I had a break in service?
  • What is the formula? (In simple terms, it’s a percentage that differs depending on several factors, such as whether you’re covered by CSRS or FERS and whether you’re retiring under special provisions for law enforcement, firefighters, air traffic controllers and other specific categories.)

To get a more definitive sense of how these and other factors affect your retirement benefit, you should get a retirement estimate from your agency to validate your own calculation.

I understand, however, that the policy of some federal agencies has been to only provide estimates once an employee has submitted an application to retire. At the very least, an employee should have access to an experienced retirement specialist to help them understand what may affect the value of their CSRS or FERS benefit so they can assess their financial readiness for retirement prior to making the commitment to leave. 

If you are able to get an agency estimate, it’s important to ask questions about the parts you don’t understand. Retirement counselors should be available to explain anything that may not be clear to you. Some estimates do not include enough information to provide a true picture of the amount of retirement income.

Sometimes, federal employees also can find an estimate of their retirement benefit on annual benefit summary reports generated from their payroll office. Beware that such estimates may not fully reflect an accurate picture of your federal service history.

A retirement estimate provided by your agency should be used to validate your own calculations and to show the effect of particular details about your service that may have an effect on your benefit. 

Be sure to maintain records of your federal service history so you can compare it to the official retirement benefit that you will ultimately receive from OPM. And keep your agency retirement estimate for comparison purposes, too. If there is a substantial difference, it’s important to find out why.

And if you’re wondering why a simple concept such as estimating a retirement benefit can get complicated, keep in mind that many, many changes have been made to the laws governing federal retirement since the system was created 100 years ago.