Last week, I laid out the formulas for computing CSRS annuities. This time, I’ll do the same for FERS annuities.
As a regular FERS employee, you can retire on an immediate unreduced annuity with one of the following age and service combinations: age 62 with 5 years of service, age 60 with 20 or at your minimum retirement age (MRA) with 30. (MRAs range between 55 and 57, depending on your year of birth.) If offered an opportunity to retire early by your agency, you can do that at age 50 with 20 years of service or at any age with 25. Note: Unlike employees, who retire under the MRA+10 provision, there wouldn’t be any 5 percent per year penalty for retiring before you reach age 62.
FERS – Regular Employees
Unlike CSRS, the FERS calculation for regular employees is simple. Here it is:
.01 x your high-3 x all years and full months of service
So, for example, if you met the age and service requirements to retire – say 56 and 30 – and had a high-3 of $80,000, here’s how your annuity would be calculated:
.01 x $80,000 x 30 = $24, 000 or 30 percent of your high-3
However, there’s an incentive if you have at least 20 years of service and retire at age 62 or later. Here’s that formula:
.011 x your high-3 x all years and full months of service
In this case, you annuity would be calculated as follows:
.011 x $80,000 x 30 = $26,400 or 33 percent of your high-3
Note: Although only full months of service are used in your annuity computation, any leftover hours of actual service can be combined with any unused sick leave hours to create additional months, which will be used in your annuity computation. Because a work year, by law, is 2,087 hours long and your annuity is made up of 12 equal payments, 174 hours equals 1 month.
Alert: Regular FERS retirees aren’t entitled to a cost-of-living adjustment on their annuities until they reach age 62.
FERS – Special Category Employees
If you are a law enforcement officer, firefighter or air traffic controller, you can retire at age 50 with 20 years of service or at any age with 25. In either case, your annuity would be calculated using the following formula:
.017 x your high-3 x 20 years of service, plus
.01 x your high-3 x all additional years and full months of service, including sick leave, as noted above.
Assuming that you retire with 20 years of covered service, your annuity would look like this:
.017 x $80,000 x 20 = $27,200 or 34 percent of your high-3
All additional years of service would be calculated using the standard multiplier. For example, if you worked 5 years longer, your annuity calculation would look like this:
.017 x $80,000 x 20 = $27,200, plus
.01 x $80,000 x 5 = $4,000
So, your final annuity would be $31,200 or 39 percent of your high-3.
Alert: Special category employees are eligible for cost-of-living adjustments on their annuities regardless of the age at which they retire
Next week, I’ll explain how your FERS annuity will be increased by the special retirement supplement.