What’s Happening with Retirement

There’s something happening here/what it is ain’t exactly clear.

If you know the origin of that couplet—and especially if it evokes a strong memory—chances are good that you’re already in retirement or are close to it.

There is something happening with federal retirement, which has the reputation of a never-changing program. And while the reason for some of it is clear, the reason for the rest isn’t so much, and bears watching.

OPM recently compiled a thorough statistical overview of federal retirement, covering both CSRS and FERS and both retirement benefits and benefits that can be carried into retirement, such as insurance. Its page after page of numbers tells a story of change.

One clear message is the continuing shift of dominance from CSRS to FERS. This is the natural result of the decision in the early 1980s to close off the former to all newly hired employees after 1983. Over time, that resulted in the withering of CSRS in the active workforce as CSRS-covered people resigned or retired and as they were replaced by FERS-covered people. FERS now covers more than nine-tenths of active employees.

The impact on retirement has been slower in coming, but the trend is clear. In 2012, for the first time more new federal retirees went out under FERS than under CSRS, a ratio of about 54 to 46 percent that year. By 2015, that split had risen to 69 to 31 percent, and it will only increase.

Among those on the retirement rolls, CSRS still dominates, by coincidence by that same ratio, 69 to 31 percent. But that’s down from a 77-23 split in 2012 and CSRS share will only continue to decrease over time.

What does that mean? Well, in the active workforce CSRS people are seen as kind of a favored sub-category, with a civil service annuity formula producing a benefit roughly double what FERS people earn, for the same years of service and the same high-3 salary level. (The Social Security component of FERS and the employer contributions to the TSP there were designed to make up the difference. Whether they do is another question, one that you can get answered by asking any FERS person whether he or she would rather have CSRS.)

In the retired contingent, at the current rate of shift, it will be about another decade before FERS people outnumber CSRS people, but then CSRS will be seen as a favored minority there, too—with a superior COLA benefit each year in addition to the superior initial benefit.

Maybe that seems like a long time away, but if you’re a CSRS employee or retiree, ask yourself: Do you expect to be retired and alive a decade from now and will you therefore have a stake in any political decisions resulting from that shift?

Other trends are less self-explanatory, notably the increasing age and years of service at retirement under both systems. Under CSRS, the average retirement age is now 61.5, up from 60.4 in 2012, while under FERS it has risen from 59.5 to 60.8. Similarly, years of service at retirement also are creeping up, from 35 to 36.1 in that time under CSRS and from 20.4 to 22 under FERS.

In other words, the average employee sticks around a year longer before retiring now than just four years ago. And that’s substantially higher than earlier cadres of new retirees: among those already retired, the average years of service at retirement was just 30.8 under CSRS and just 19.3 under FERS.

This delaying of retirement was all happening, mind you, at exactly the time the government was supposed to be in the middle of a retirement wave—or tsunami, for those who were especially dire in their assessment.

The fact is, federal employees rarely retire on hitting their first age and service combination. The most recent OPM look at this dates to 2008, but at that time, it found that even four years after retirement eligibility, more than half are still on the job and even after nine years, a quarter are still working. The latest numbers show that delays are growing even beyond that.

One likely reason is that due to years of either frozen salaries or minimal raises, employees are remaining on the job longer to build up their retirement benefits to the level they want to have a secure retirement.

When you hear co-workers talking about how they’ll jump ship at the first opportunity—“just give me a buyout or early-out, and I’m gone”—take it with a grain of salt, because that’s not what’s happening here.


And bear that in mind the next time you hear yourself saying it.