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There are three things you can do to plan for retirement under the Federal Employees' Retirement System (FERS) so that you won't be caught financially short at retirement. What we
want is no surprises in retirement, at least about the money.
Your FERS retirement is made up of three parts:
1. Your FERS Basic Benefit, or annuity, or pension. You will get one percent for each year of service, prorated monthly, of your high-three
average salary. Your hi-3 is the highest three consecutive years of total pay, divided by three. So a FERS person with 30 years and six months of service will get 30.5% of their hi-3
average salary. If you manage to hang on until age 62 you'll get 1.1% for each year of service, if you have at least 20 years of service at retirement. If you're a law enforcement
officer, firefighter (in the
literal sense) or air traffic controller, you'll get 1.7% for each of 20 years of service, and 1.0% for all years above 20. So, it should be easy for most of you to come up with a
ballpark estimate of your FERS Basic Benefit. You may also get an additional amount of money, called an annuity supplement, if you retire before 62, to bridge the gap until you reach
Social Security eligibility. This can be a significant amount of extra money above and beyond the FERS Basic Benefit. Take the number of full years you have under FERS, divide by 40, and
multiply by your estimated Social Security Benefit at age 62. You can also visit your HR office where they typically have software to calculate this for you.
2. Your Social Security Benefit. You can collect your Social Security retirement benefit as early as 62. Each year, three months before your
birthday, you get a statement from the Social Security Administration giving you an estimate of your Social Security Benefit at age 62, and your full retirement age, which varies
depending upon your year of birth. Or, you can go to www.ssa.gov and use their calculator to compute an estimate of your benefit.
3. Your Thrift Savings Plan. This is where most of your money should come from, that is, if you've faithfully contributed the maximum under the
law. There is a great tool at www.tsp.gov to help you gauge how much of a TSP account you'll have at retirement. Go to the website and click on calculator. The calculator can
perform the following functions in helping you plan for retirement, and I quote from the calculator page:
Estimate the growth of your TSP account by calculating the growth of your future contributions and/or the growth of the money already in your
account.
Estimate what your account balance would provide in monthly annuity payments under a variety of TSP annuity options.
Estimate how many monthly payments you can receive from your account when you choose a specific dollar amount, or estimate how much you can
receive each month if you choose monthly payments based on life expectancy.
Link to the Ballpark Estimate calculator to estimate how much you will need to save each year to meet your retirement goals.
Use these tools, and your retirement planning will be a little easier.
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