For FERS participants, your monthly annuity (pension) is a source of income you can count on in retirement. When you consider your federal retirement may run 20 to 30 years or more, it’s wise to consider strategies for maximizing your benefit.
Work Longer To Increase Your High-3 Salary
As you likely know, the amount of your basic FERS annuity (pension) is determined by a formula that includes your years of creditable service and your High-3 average salary. If you’re like most federal workers, your High-3 is usually the last 36 consecutive months of your career.
Considering the High-3 is weighted by years of creditable service, working an extra year or two can boost the amount of your monthly annuity. Keep in mind, when calculating your High-3, the OPM only includes your base salary, shift rates and locality pay.
” When you do the math, the FERS Bonus works out to a 10% bump in your monthly benefit for the rest of your life.“
Take Advantage Of The FERS 10% Bonus
If you retire at age 62 (or older) with at least 20 years of creditable service, your annuity (pension) is calculated at a higher 1.1% formula. When you do the math, the FERS Bonus works out to a 10% bump in your monthly benefit for the rest of your life. Add to this, age 62 is when you become eligible for Cost-of-Living Adjustments (COLAs) under FERS.
Save Up Your Unused Sick Leave
Although unused sick leave cannot make you eligible for an immediate retirement, it can be used to calculate the amount of your pension when you retire. After a law was passed in 2009, 100% of unused sick leave is counted as creditable service to increase your pension after you meet the age and service requirements for an immediate FERS annuity.
Reduce Deductions From Your Monthly Annuity (Pension)
Before you submit your FERS retirement application, you may want to consider ways to lower the cost of deductions for some of your retirement benefits. For example, a 50% spousal annuity results in a 10% deduction from your monthly annuity. However, if your spouse can count on other income when you pass away, a 25% spousal annuity will lower the deduction to 5%. Also consider ways to reduce or eliminate deductions for FEGLI and FLTCIP premiums in retirement.
Other Strategies To Consider
Once you turn age 50, start taking advantage of Thrift Savings Plan (TSP) Catch-Up Contributions to grow your nest egg. It also pays to delay your Social Security beyond your Full Retirement Age (FRA) to increase your benefit by 8% each year. To learn more, meet with an FRC® trained advisor who can help you crunch all the numbers and make informed decisions.
