Your Federal Retirement: It Gets Complicated!

Your Federal Retirement: It Gets Complicated!

Traditional retirement-planning advice for the private sector doesn’t automatically apply to federal employees and, in some cases, not at all. Let’s look at a few of the reasons why.

Two Different Retirement Systems

There’s the Federal Employees Retirement System (FERS) if you were hired in 1984 or after, and there’s the Civil Service Retirement System if you were hired before January 1, 1984. And the rules governing retirement eligibility under each system can differ.

The Thrift Savings Plan (TSP)

The TSP is a program similar to a 401k in the private sector. While both CSRS and FERS participants can contribute to a TSP account, only FERS employees get a matching contribution from their government agency. Meanwhile, various rules and laws governing the TSP continue to change over time. Not long ago, TSP withdrawal rules changed and, as of January 1, 2021, catch-up contributions became automatic for those age 50 and older.

Social Security

If you’re a CSRS participant, you’re not eligible for Social Security because Social Security taxes are not deducted from your pay. However, if you’re eligible through a previous private sector job, or if you qualify through your spouse, it may reduce your CSRS pension.

Since FERS employees have paid into Social Security, they’re eligible for the benefit. However, there are other factors to consider that can impact the amount of their Social Security benefit or create unexpected income taxes in retirement.

This Is Only The Beginning

There are rules governing creditable service, unused leave and sick leave, eligibility for health and life insurance in retirement – the list goes on. That’s why it’s a good idea to work with a FRC℠ certified professional who fully understands the ins and out of your federal benefits.