You can use any number of free online calculators to get an estimate of your monthly FERS annuity. In fact, one that’s highly recommended is The Federal Ballpark E$timate® on the OPM website. Once you get a number, don’t get too excited. The result is your gross monthly pension payment before any deductions have been taken. If you miscalculate your deductions while planning your retirement, you may find yourself with an income gap once you’re no longer working.
Don’t Underestimate Income Taxes Owed On Your FERS Annuity
There may be a tendency to assume a good portion of your annuity will be income tax free because your contributions were made with after-tax earnings. In reality your FERS contributions make up a small amount of your total pension and as much as 95% or more of your annuity is taxable as income.
When You Elect A Survivor Benefit It Reduces Your Annuity
As a FERS participant you have two options for electing a survivor benefit. Your spouse can receive either 50% of your basic annuity or 25% of your basic annuity. However, the survivor benefit reduces the net amount of your monthly annuity throughout your retirement: a 10% reduction for the 50% spousal annuity or a 5% reduction for the 25% annuity.
FEHB Premiums Are Deducted From Your Annuity
If you choose to keep your Federal Employee Health Benefits Plan (FEHB), your portion of the premium comes out of your monthly payment. Keep in mind, your portion of the premium is the same as when you were working. The only difference is you’re paying with after-tax income instead of pre-tax income.
What Happens With Your FEDVIP & FLTCIP Premiums?
Your Federal Employees Dental and Vision Insurance Program (FEDVIP) premiums will be withheld from your annuity. However, since the Federal Long Term Care Insurance Program (FLTCIP) is a John Hancock insurance product, you can choose to pay your premium out of pocket or elect to have it automatically taken out of your pension.
FEGLI Premiums Are Deducted From Your Annuity
Federal Employee Life Insurance (FEGLI) coverage can become cost-prohibitive as you age. That’s why many federal retirees drop FEGLI and opt for life insurance in the private sector that may offer a better value. If you choose to keep FEGLI in retirement, premiums will be taken from your pension payments.
Consider working with an FRC® trained advisor who understands your benefits and can help you get an accurate estimate of your FERS annuity after deductions.
