Since we specialize in helping federal employees plan their retirements, it’s no surprise that many of our blogs focus on the Federal Employee Retirement System (FERS). For those of you who have been federal employees for years, most of the language used on these pages probably makes perfect sense.
On the other hand, you would be surprised at how many federal employees aren’t as familiar with their retirement systems. That’s often because young, new hires aren’t quite thinking about retirement yet. They know they will have some type of retirement benefits, and might have heard that FERS is a terrific system by comparison with most private industries, but snoozed through the details during their new-employee orientation sessions.
Of course, sometimes federal employees are actually those pursuing a second career after working in the private sector for many years. If you’re in your 40s or beyond, and just began working for the federal government, you have a lot to learn about the retirement system.
Whatever the reason, some of you might be interested in a refresher course on FERS.
The main thing to remember is that FERS is built upon three separate retirement benefits. Combined, these three separate benefits will comprise your retirement income someday.
The first is the pension program. A portion of each paycheck (usually 0.8 percent) is withheld to fund the pension program. When you retire, you will receive a fixed amount of money from this program each month.
Your Social Security benefits make up the second “leg” of the FERS program. Like everyone else who works and pays Social Security taxes, you will someday claim your own benefits based upon your earnings record and the age at which you file your claim.
Those first two benefits are pretty much automated for you. The value of the third, your Thrift Savings Plan, will be directly determined by your decisions. The TSP works in a similar fashion to the private sector’s 401k plans; you contribute money to the fund each year, the money grows over time, and someday you will take distributions in retirement.
Hopefully this little refresher course has cleared up any confusion you have over the structure of the Federal Employee Retirement System. But of course, there will be many other decisions along the road to retirement, that will ultimately affect your income. So remember to consult with us regularly, and we can help you plan for a successful retirement.