The federal employee retirement system, often abbreviated as FERS, is a retirement system that rewards federal employees for their years of public service. Federal employees who are reaching retirement age sometimes wonder what they can expect from the system and how they can better prepare to leave the workforce. With this information, individuals will be more informed and can better prepare to enjoy their retirement to the fullest. 

What Is the Federal Employee Retirement System?

Most non-government employees are unaware of what FERS is or how it works. Those who work in the government or public sector need to be aware of this system and how it will affect their retirement. This plan is all-encompassing and covers federal employees in the judicial, executive, and legislative branches of government. It is important to note that this retirement system does not cover any members of the military or those working for local or state governments. 

Types of Federal Retirement

In the federal system, there are multiple types of retirement employees can seek, based on their personal situations and age. It is important to be aware of the eligibility requirements of these programs so they can be met. The following offers information on the different types of retirement available to federal employees. 

Disability Retirement

When a federal employee has worked for at least eighteen months before becoming disabled, they can typically collect 60% of their pay in year 2 and 40% of pay in years 3+.  The condition must make their current role untenable and must be backed up with medical proof. Federal employees must apply for Social Security Disability even though those programs have different eligibility standards.

Early Retirement

Early retirement is also available to certain federal employees. Early retirement may include retiring at the age of 57 or later but with less than the required years of service.  Early retirement may be involuntary because of a reduction in force (RIF), involuntary separation, or mandatory retirement. Individuals need to be aware of the requirements of early retirement, to understand if they qualify. 

Voluntary Retirement

Voluntary retirement is a special category in the federal retirement system. This is considered a traditional federal retirement. It offers full benefits to the recipient. 

Deferred Retirement

Deferred retirement is offered to former federal employees who have not met all the qualifications for an immediate unreduced FERS annuity and would rather defer their pension over take a permanent 5% reduction to their pension for each year shy of eligibility that they are at separation. Not every former government employee qualifies. Those who do, are eligible to begin participating in the FEGLI and FEHB benefits again once they have begun receiving their unreduced retirement pension. 

Federal Retirement & The “FERS Three Legged Stool”

There are three components of the FERS retirement plan. Federal employees need to educate themselves on how these components work with one another so they will be able to effectively coordinate them in order to maximize what is offered. Learn more about each “leg” below. 

  • The basic benefit plan includes a pension federal employees receive based on their salary and years of service. The amount they receive depends on the length of service and not the investment performance of their contributions to FERS. The basic benefit plan is also based on the high-3. High-3 means the last three years the employee worked and earned the highest income. Generally, FERS retirees receive 1% of their High-3 for each year of service (1.1% for eligible retirees separating at age 62 or later).
  • Social security is the same for federal employees as it is for private employees. Social security is based on the percentage paid over the years and the rate of inflation. Social security payments can be different for each employee but will be paid, like the pension, for as long as the retiree lives.
  • There is also a thrift savings plan available to federal employees. This is a type of 401(k) plan a federal employee can utilize. It offers the same tax incentives as a traditional 401(k). Federal employees have the option of making additional contributions that are matched by the agency up to 5%. It has extremely low costs and even offers a Roth TSP option for creating tax-free retirement distributions!

How to Receive Federal Retirement Benefits

The Office of Personnel Management oversees federal employee retirement. It is important to begin retirement planning as soon as possible. Even with these great benefits providing a solid foundation for retirement, federal retirees are not guaranteed the retirement income they need, unless they have planned well in advance. Federal employees should really emphasize retirement planning at least five years prior to their projected retirement age or planned separation. Once they are within two months of retirement, they need to fill out the OPM website application. 

Get Professional Help

Federal employees who are nearing retirement age and want to get the most benefits possible should meet with professionals. FERS offers one of the best retirement packages available, but it is still important to prepare for retirement and have a plan for maximizing your benefits and assets. Getting help from a retirement planner can offer welcome relief from stress and help individuals navigate the federal requirements of FERS. 

Although FERS has increased the price of participation for those hired after 2013, the government is still trying to rein in spending after our national debt exploded due to COVID-19, which could affect the program in the future. Being wise will help federal employees to be prepared. Meet with a professional retirement planner to learn more. 

Walker Capital Preservation Group helps guide federal employees to take the right steps towards retirement. The founder, Tom Walker, has been providing these services to federal employees for over eight years and continues to be a well-respected expert on federal retirement benefits.