When you’re 10 years away from retirement, it’s time to buckle down and make sure you’ll have enough income to cover your needs plus a little extra to enjoy the retirement you deserve. As a federal worker covered under FERS, you should be in good shape with three sources of retirement income: your FERS annuity (pension), your Thrift Savings Plan (TSP), and Social Security. However, there are a few steps you can take to increase your retirement income for greater financial security.
Work Till Age 62 To Get The FERS 10% Bonus
As a FERS participant, your Minimum Retirement Age (MRA) ranges from 55 to 57, depending on the year you were born. But if you push your retirement to age 62, you qualify for the FERS 10% Bonus. Here’s how it works: when you apply for retirement, your FERS annuity (pension) is calculated using the standard 1% formula. For regular workers, your High-3 salary would be multiplied by 1% and then multiplied by your years of creditable service. However, if you wait until age 62, your annuity is calculated with the 1.1% formula. When you do the math, it works out to a 10% increase to your monthly pension for the rest of your life.
Take Advantage Of Catch-Up Contributions At Age 50
In 2024, the IRS limit for retirement accounts like the TSP has been increased to $23,000 while the Catch-Up Contribution limit is $7,500. You can make TSP Catch-Up Contributions in addition to your regular contributions if you’re 50 or older, or turning 50 during the calendar year – even if you turn 50 on December 31st, 2024. It’s important to understand thatCatch-Up Contributions can only be made from your basic pay. Bonuses, special pay, or incentive pay, cannot be applied toward Catch-Up Contributions.
“Under FERS, each year of unused sick leave increases your annuity by 1%.”
Consider The Value Of Unused Sick Leave
Although unused sick leave is never added to your years of creditable service to determine your eligibility for retirement, it can increase the amount of your monthly pension (annuity). Here’s how it works: for full-time workers, a half-day of sick leave is accrued each pay period. This works out to four hours every two weeks for a total of 13 days (104 hours) every year. Under FERS, each year of unused sick leave increases your annuity by 1%. If you retire at age 62 or later, and you’re eligible for the FERS 10% Bonus, then the multiplier is increased to 1.1%.
To learn more about increasing your retirement income, connect with an FRC® trained advisor.
