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FEDERAL EMPLOYEE'S
RETIREMENT ANNUITY CALCULATIONS
CSRS / FERS Retirement Planning and Guidance
Your annuity is determined
by the system you are in –
CSRS or FERS,
number of years service, unused sick leave for CSRS employees, survivor
annuity election, and the
benefits you elect to carry over to retirement. FERS retirees are also
eligible to collect a social security benefit. Review the
Benefits page for detailed Social Security and
benefits information. Thrift Plan participants can also add additional
income through various withdrawal options.
TABLE OF CONTENTS
Your first retirement
check should arrive on or about the first of the month following your
separation. For example, if you retire by no later than the 3rd of
January your first check should arrive on or about the first of February. You
will receive approximately 70 to 80% of what your actual monthly
annuity will be for several months until OPM verifies your retirement
calculations. Typically, the leave that you sell back will be paid within 6
to 8 weeks in a separate check. When you start receiving your regular retirement check OPM will
send you a highly informative pamphlet that outlines your personal retirement
plan including benefit elections, general guidance, contact information, your
personal
"CSA" or "CSF"
retirement account number, and survivors information. OPM sends out
updates to this pamphlet as changes occur. Keep this booklet with your estate
plan and make sure it is easily accessible for your spouse and/or loved ones.
Your retirement number is very important. You MUST use your retirement
number for all correspondence with OPM.
Direct
Deposit of your annuity check
I often get questions about
Direct Deposit.
If your employer sends your retirement
records to OPM by magnetic tape, your account information for direct deposit will be
sent to them automatically. In this case you would not need to do anything.
Otherwise, you should include your request to receive your payments by direct
deposit with your retirement package. You can do this by submitting a letter
or a Standard Form (SF) 1199A with your application. You must get the SF
1199A, Direct Deposit Sign-Up Form, from your financial institution.
Direct deposit is
available to retirees residing in Canada but, generally, it is not available
to those whose permanent address for receiving payments is outside the United
States. However, retirees living outside the U.S. can arrange to have their
payments electronically deposited in a U.S. bank.
On-Line retiree services
You can access the
following list of services on-line at
http://www.servicesonline.opm.gov/mainris.asp
if you receive benefits
under the Civil Service Retirement System (CSRS), Federal Employees Retirement
System (FERS) or FERS Special, or the Organization Retirement and Disability
System (ORDS). To use it, you need your "CSA" or "CSF" claim number and your
Personal Identification Number (PIN). Your PIN is the random number issued to
you by the Office of Personnel Management (OPM). It is the same number you use
for our automated self-service telephone system. If you do not have a PIN,
call OPM at 1
(888) 767-6738 to request one.
Available
Services:
- Start, change, or stop federal and state income tax withholdings;
- Buy, change, or stop savings bonds;
- Request a duplicate tax-filing statement (1099R);
- Change your Personal Identification Number (PIN) for accessing our automated
systems;
- Establish, change, or stop an allotment to an organization; Change your
mailing address;
- Start direct deposit of your payment or change the account or financial
institution to which your payment is sent; and,
- Establish, change, or stop a checking or savings allotment.
View a statement describing your annuity payment.
Taxable portion of your annuity
IRS Publication 721, Tax Guide to U.S. Civil
Service Retirement Benefits, walks you through the process. You will receive a
tax-free recovery of your contributions to both CSRS and FERS. If your annuity
started after November 18, 1996, you must use the Simplified Method to figure
the taxable and tax-free parts of your annuity. Use the convenient Tax
Calculator listed below to determine how much federal tax you will pay
each month.
RELATED LINKS
Federal Tax Calculator -
http://apps.opm.gov/tax_calc/withhold_calc/index.cfm
IRS Publication 721 -
http://www.irs.gov/pub/irs-pdf/p721.pdf
Your basic annuity is computed based on your length
of service (which includes unused sick leave if you retire on an immediate
annuity) and "high-3" average pay. The high-3 average pay
includes locality pay and annual premiums for standby duty and
availability if applicable. Other pay such as differentials, overtime,
allowances and others are not included.
To determine your length of service for
computation, add all your periods of creditable service, and the period
represented by your unused sick leave, then
eliminate from the total any fractional part of a month. Your "high-3"
average pay is the highest average basic pay you earned during any 3
consecutive years of service. Generally, your basic annuity cannot be more
than 80 percent of your "high-3" average pay, unless the amount over 80
percent is due to crediting your unused sick leave.
Your yearly basic annuity is computed by adding:
(a) 1 1/2 percent of your "high-3" average
pay times service up to 5 years;
(b) 1 3/4 percent of your "high-3" pay times years of service over
5 and up to 10; and
(c) 2 percent of your "high-3" pay times years of service over 10.
Your basic annuity will be reduced if:
(a) you retire before age 55 (unless you
retire for disability or under the special provisions for law enforcement
officers, air traffic controllers, and firefighters);
(b) you didn't make a deposit for service performed prior to
October 1, 1982, during which no deductions were taken from your pay
(non-deduction service after that date is not used in the computation of
benefits if the deposit is not paid);
(c) you didn't make a redeposit of a refund for a period of service
that ended before October 1, 1990; or (d) you provide for a survivor
annuitant.
If you are married, your annuity will be reduced
automatically to provide the maximum survivor annuity for your spouse,
unless you and your spouse jointly agree to provide a lesser amount or
none at all. Your spouse's survivor annuity would be 55 percent of your
basic annuity or any lesser amount you and your spouse agree to. Your
annuity would be reduced by 2 1/2 percent of the first $3,600 in basic
annuity and 10 percent of the remainder of your basic annuity.
Your annuity will be increased periodically by cost-of-living increases
that occur after you retire. Your initial cost-of-living increase will be
prorated based on how long you have been retired when that cost-of-living
increase is granted.
FEDCALC ANNUITY
CALCULATOR (CSRS & FERS)
 Visit
http://fedcalc.com/
to estimate your annuity. Fedcalc has a number of helpful calculators
tailored to the federal retiree including, annuity estimates, full retirement
analysis, Thrift Savings Plan, military deposit, social security, and retirement
GAP savings. All are worth trying out. They are easy to use and very helpful.
These calculators will get you in the
ballpark. To determine your actual annuity payout contact your Human
Resource Department and request an official readout. I suggest
requesting several estimates, one for the 3rd of the month following your
55th birthday or eligibility date and several others for dates that you find
attractive. Most ask for an estimate for the end of the year, December 31 or
January 3rd, because you are able to sell back you accumulated annual leave
when you retire. You can carry over 240 hours of leave each year and your
final year you can add another 208 hours if you are in he highest annual
leave category earning 8 hours a pay. This way you would leave with 448
hours to sell back to Uncle Sam, a nice payout.
You can also download this
Retirement Calculator EXCEL
spreadsheet to determine your
approximate annuity for CSRS. FERS, LAW and MIXED retirements. This
spreadsheet is from http://Firstgov.gov
and made available here for your convenience.
Redeposits of CSRS
contributions
For those who left federal service earlier in their career, cashed out their
retirement account, and then returned your time still count towards years
in service but your annuity will be reduced if you don't redeposit what you
withdrew earlier in your career.
To estimate the interest charges for deposits covering employment on or after
10/1/1982 and redeposits of refunds applied for on or after that date, are
subject to an interest rate of 3 percent per year through December 31, 1984.
After that date, annual interest is based on market rates.
To redeposit your contributions with interest you will need to complete a
SF 2803 form. Download this form and complete Part
A. Your agency must complete Part B using your official personnel (OPF) data.
Print out the form and the instructions will explain what the interest charges
are and how they are calculated.
You can explore all of your retirement options and benefits on my this site
and I suggest signing up for my free monthly retirement planning email
newsletter. In additional to redepositing this amount visit our
FAQ page for a list of what you need to do starting one
year before you leave and a summary of what to expect from OPM the first three
months after you leave. You will also find helpful articles on how to
emotionally, physically, and financially
prepare for retirement.
FERS CALCULATIONS
Your basic annuity is computed based on your length
of service and "high-3" average pay. The high-3 average pay
includes locality pay and annual premiums for standby duty and
availability if applicable. Other pay such as differentials, overtime,
allowances and others are not included.
Generally, your benefit is calculated
according to this formula:
1% of your high-3 average pay
times
years of creditable service
If you retire at age 62 or later with at
least 20 years of service, a factor of 1.1% is used rather than 1%.
To determine your length of service for
computation, add all of your periods of creditable service, then eliminate
from the total any fractional part of a month (less than 30 days).
Depending on the category of retirement
benefits you receive, your benefit may be reduced as described in the
Retirement Options section. For example, the total could be reduced if you
elect to retire at the minimum retirement age before completing 30 years
of service.
Special Retirement Supplement
If you meet certain requirements, you will
receive a Special Retirement Supplement which is paid as an annuity until
you reach age 62. This supplement approximates the Social Security benefit
earned while you were employed by the Federal government. You may be
eligible for a Special Retirement Supplement if you retire:
- After the
Minimum Retirement Age (MRA)
with 30 years of service;
- At age 60 with 20 years of service; or
- Upon involuntary or early voluntary
retirement (age 50 with 20 years of service, or at any age with 25 years
of service) after the U.S. Office of Personnel Management determines
that your agency is undergoing a major reorganization,
reduction-in-force (RIF) or transfer of function. You will not receive
the Special Retirement Supplement until you reach your MRA.
If you transfer to the Federal Employees
Retirement System (FERS) from the Civil Service Retirement System (CSRS),
you must have at least one full calendar year of FERS-covered service to
qualify for the supplement.
If you have earnings from wages or
self-employment that exceed the Social Security annual exempt amount
($9,120 in 1998), your Special Retirement Supplement will be reduced or
stopped.
FERS ANNUITY
CALCULATOR
(RECOMMENDED) Use the FERS annuity
calculator that is available online at
http://fedcalc.com/
to estimate your annuity.
To
determine your actual annuity payout contact your Human Resource Department
and request an official readout. Click
here
for additional information. FERS retirement consists of three components,
your basic annuity benefit, social security, and your Thrift Savings Plan.
Annuity Tax Considerations
Taxes can be significant and
you can calculate what your tax burden will be before you leave.
For federal taxes use the
tax calculator
that we list above. Use our
Cost Analysis Spread
Sheet to help you determine all of your expenses
including taxes that you will owe in retirement. Ten states
exempt annuities from tax and nine states don't have income
taxes and they are listed below. You may wish to relocate to a
state that offers retirees a better break, however you have to
check on what other taxes are assessed in those states to make a
truly informed decision.
I retired in
Pennsylvania and pay no state or local income tax on my annuity.
That is a savings of over 4% a year.
States that Exempt Tax on
Annuities
Ten States
exempt your entire annuity including Alabama, Kansas, Hawaii,
Illinois, Louisiana, Massachusetts, Michigan, Mississippi, New
York, and Pennsylvania. Four other States may exempt parts of
your annuity. For example, North Carolina started exempting
federal annuitants in 1998 as long as they had a total of five
years creditable service as of August 12, 1989. Kentucky only
exempts pre 1998 retiree’s annuities. Oregon taxes apply only on
the portion of annuity contribution earned after October 1,
1991, and Wisconsin exempts annuities established prior to 1964.
States that
Don't Have Income Taxes
Nine States
don’t have personal income taxes including Alaska, Florida,
Nevada, New Hampshire, South Dakota, Tennessee, Texas,
Washington, and Wyoming.
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