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Buying a Bigger Retirement Benefit

Last week, we looked at the importance of service credit in the federal retirement planning process. This week, let’s dig deeper into the issue of service credit deposits and redeposits.

In general, such deposits come into play in cases where you have performed federal service without having retirement deductions withheld from your pay, or have received a refund of your retirement deductions. You can pay the money back into the Civil Service Retirement System or the Federal Employees Retirement System. But there is some federal service that is not creditable and a deposit cannot be paid.

To learn more, you can start by reviewing the following resources:

If you determine that you are eligible to pay a military or civilian service credit deposit or redeposit, it is important to determine if it will be worth your while to do so. All deposits are optional; some are clearly worth paying while others might be a “six of one or half a dozen of the other” situation.

Here are some...

Are You Getting the Credit You Deserve?

In my experience, among the most confusing topics for federal employees planning for retirement is the issue of service credit and service credit deposits.

This is an important topic because service credit plays a very important role under both the Civil Service Retirement System and the Federal Employees Retirement System. The dollar amount of your basic retirement benefit is determined by the total years and months of creditable service (and unused sick leave) that you have on the date of your retirement from federal service. This, along with your high-three average salary, is used to calculate your basic retirement annuity.

Some employees are not aware that they haven’t received credit for certain periods of service until they are about to retire. Since your creditable service determines when you are eligible to retire as well as the amount of your benefit, you can quickly see why it is important to understand if you have any issues early on in your career.

Here are some of the most common service credit situations that can interfere with the calculation (and sometimes the eligibility requirements) for CSRS and FERS:

  • Civilian federal service that was not subject to CSRS or FERS retirement withholding. This...

Are Your Retirement Dreams Realistic?

The history of federal employee retirement systems dates back less than 100 years. The Civil Service Retirement System was created in 1920, the Social Security system was signed into law in 1935 and the Federal Employees Retirement System, with its Thrift Savings Plan, came along in 1986. For decades, employees could count on a 30 to 40 year career followed by a retirement filled with leisure activities and time with family.

Is this a realistic vision of retirement 10, 20 or 30 years from now?

The federal retirement system has evolved from the single benefit CSRS to the three-legged stool that is FERS. It puts more of the responsibility on the employee to save for a comfortable retirement. And this approach has yet to be tested on a wide scale over a long period of time.

More than 500,000 FERS retirees are now receiving benefits, a number that is growing significantly every year. In fiscal 2014, more than 65,000 FERS employees were added to the retirement rolls. By comparison, fewer than 40,000 CSRS employees retired that year.

It’s clear that federal employees have embraced the Thrift Savings Plan as a personal savings vehicle. More than 88...

Winning the Three-Legged Race to Financial Security

Financial planners have long used the term “three-legged stool” to characterize retirement income, which traditionally has been based on a pension, Social Security benefits and personal savings. For many private-sector employees, the first leg of that stool is a thing of the past. But many current and future federal retirees have a genuine three-legged stool based on:

  • A retirement benefit under the Federal Employees Retirement System or the old Civil Service Retirement System
  • Social Security benefits
  • Thrift Savings Plan retirement savings

The percentage of replacement income from each of these three sources depends on such factors as length of federal service, wages, coverage under CSRS or FERS and the ability to invest in and manage a TSP account.

Leg One: Annuity

According to the Office of Personnel Management, the average monthly annuity for the more than 100,000 annuitants added to the federal retirement rolls in fiscal 2014 was $1,639 for FERS and $4,634 for CSRS. The benefit is calculated based on highest three years of average salary, length of federal service (including unused sick leave) and a formula that depends on retirement coverage under CSRS or FERS.

For those who retire with the minimum of five years...

Tips and Tricks for a Smoother Retirement

According to the Office of Personnel Management, as of fiscal 2014, 2.7 million federal employees were covered under one of the government’s two main retirement systems -- the Civil Service Retirement System and the Federal Employees Retirement System. At this point, more than 90 percent of them are in FERS.

There also were more than 2 million employee annuitants as of fiscal 2014 (the most recent year for which data are available) and more than 550,000 survivor annuitants.

Where’s the most popular federal retirement destination? California, followed by Florida, Texas, Maryland and Virginia The average CSRS annuity is $3,400 per month, compared to $1,300 for FERS.

Are you ready to join the ranks of the annuitants? If so, it’s helpful to look at how the process plays out in the real world.

The Timeline

Here’s how the timeline unfolded for two recent retirees under FERS:

Susan retired from the Food and Drug Administration on Nov. 30, 2015. She received a regular paycheck following her separation (federal employees are paid two weeks behind), and her annual leave payout came on Dec. 18. She received her first interim payment from OPM on Jan. 12, 2016...

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