Retirement benefits for federal workers explained
If you have worked for the federal government for at least five years, you qualify for a retirement benefit. In addition, you can get retirement credit for any years of military service after 1956 if you pay a premium based on the amount of military pay. However, that is only applicable if you are not receiving a military retirement pension. You can receive retirement annuities from your work under either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). You have the option of an immediate annuity or a deferred annuity.
Minimum retirement age (MRA): The minimum retirement age depends on your date of birth. If your birth date is before 1948, the MRA is 55. For a birth date in 1970 or later, the MRA is 57. Between those two dates the MRA is greater than 55 and less than 57.
Immediate annuity: You can retire at age 62 and start receiving an annuity if you worked for the federal government a total of five years. The work does not have to be consecutive or within the same federal agency. If you have at least 20 years of service, you can initiate your pension at age 60. If you are covered by CSRS, with 30 years of service, you can retire with a pension at 55. If you are covered by FERS, with 30 years of service, you can retire with a pension at your minimum retirement age (MRA).
Retirement eligibility for those laid off:
If you were laid off prior to your MRA, there are other regulations. Under CSRS, if you were employed for at least one year in the two years immediately before you were laid off, and are 50, with 20 years of service, or any age with 25 years of service, you are eligible for an immediate annuity. Under FERS, the eligibility is the same as CSRS rules; you would not have to be employed within the two prior years.
Prior to your MRA, your annuity will be reduced from the full annuity by 2% for each year you are under 55.
Deferred annuity: If you terminate your federal employment prior to your MRA, you have the option of leaving your payroll contributions in the system or withdrawing them as a lump-sum distribution. If you leave the funds in the system, you can claim a retirement annuity at age 62. You are allowed to take the lump-sum contribution any time until 62. In this situation, you may want to review your options with a financial planner or other advisor prior to make your decision.
Naturally, if you choose the lump-sum distribution, you should withdraw your contributions immediately after you terminate employment. If you worked for a long time, waiting until 62 for the annuity is likely the best option.
Calculating benefits: Two factors are relevant. One item is the number of years of your employment. If you served in the military for at least five years and are not receiving a military pension, you can count those years of service. The second item is the highest average salary for three consecutive years of service; this is also known as your “high three-year average salary.” Both CSRS and FERS use these factors, but they are computed differently.
Online estimate: You can obtain an estimate of your benefits at www.opm.gov. Go to “retirement” and specify “calculations.”
Social Security issues with CSRS: CSRS workers are not covered by the Social Security (SS) system. However, if you also worked for other jobs covered by SS — if you worked long enough under SS (40 credits) — you would be eligible for both a CSRS annuity and SS retirement benefits. SS retirement benefits would be subject to pension offsets associated with the Windfall Elimination Provision.
Social Security and FERS: If all of your work with civil service was with FERS, you will also receive retirement benefits from SS without any offsets, because you will incur SS taxes with FERS the same way as all other workers covered by Social Security.
Survivor and disability benefits, and the Thrift Savings Plan: You can obtain information about these benefits from the U.S. Office of Personnel Management (202-606-0400). See www.opm.gov/ retirement-services. Another good source is NOLO’s “Social Security, Medicare & Government Pensions.”