The FERS basic benefit is a retirement source that benefits federal government employees. FERS (Federal Employees Retirement System) covers employees working in federal government branches such as executive, judicial, and legislative. Understanding how the FERS retirement pension calculator works matters since familiarizing yourself with the calculation can help you settle on the right retirement age. Learn more about the essentials of FERS calculation by reading the rest of this article.
What Is FERS Exactly?
To fully understand how a FERS retirement pension calculator works, you have to know the basics first. FERS is a type of retirement plan that is made up of Social Security, pension, and the retiree’s savings.
The pension is composed of the FERS basic benefit and the FERS supplement for certain retirees along with individual savings. The TSP (Thrift Savings Plan) is where individual savings go while contributions are also made to Social Security. Retirees with sufficient creditable service can have retirement income that is enough specifically when weighed against employees who worked in the private sector.
To be eligible for the FERS retirement plan, you have to consider your age and your period of creditable service. Age is a major factor through MRA (Minimum Requirement Age). The MRA varies between 55 and 57 years of age. For federal employees who want to retire before their MRA, they will not be eligible to start FERS in general.
FERS eligibility will also involve a service requirement and this service requirement differs if you want to retire following 30 years of employment at a younger age, or if you want to retire at 63 years of age. In case you do not want to follow the service or age requirement, you can take up deferred retirement as an option. Deferred retirement refers to retired federal employees who delay taking benefits until they finally meet FERS requirements.
In addition, the government might offer early retirement wherein those requirements may be put aside. FERS requirements might also be relinquished if the employee is disabled. In this case, disabled employees can take disability retirement as long as they rendered at least 18 months of service in the federal government.
How Do I Apply for a FERS Retirement Plan?
To apply for a FERS retirement plan, the employee needs to submit the SF-3107 form first. This is the Application for Immediate Retirement. As soon as they send the form, the personnel office will start managing the procedure of gathering paperwork that is pertinent to their retirement. The paperwork will include a form that the personnel office will send to the employee to authenticate their federal service.
The number of years that an employee has to do to be considered eligible for the FERS basic benefit differs, with the absolute minimum number of years being five. However, this only applies to employees who want to retire at 62 years of age and over. If you want to retire early and are qualified for the FERS basic benefit, you must have at least 30 years of service to acquire your pension.
How Do You Calculate Your FERS Benefit?
You can calculate your FERS benefit on your own using the Federal Ballpark Estimator, which is provided by the U.S. Office of Personnel Management. It provides federal government employees a basic idea of what they can expect from their FERS benefits. However, this type of FERS retirement pension calculator might not give employees precise numbers. It is also limited to whatever financial assets that the employee can include, thus it might deliver inadequate results.
So, how do you personally calculate your FERS benefit to get clues about your pension amount? Here are the procedures that you need to follow.
Calculating Your High-3
To calculate your High-3, keep in mind that not all payout types are qualified. The pay that’s qualified for a High-3 calculation is basic pay. Basic pay includes the employee’s base salary, shift rates, and locality pay. Basic pay does not include overtime pay, overseas cost of living adjustments, travel allowances, cash rewards, and bonuses. If you want to know more information about your salary, you can refer to your SF-50s.
How Do You Determine the Length of Creditable Service?
Another factor that you need to take into consideration for a correct FERS retirement pension calculator procedure is the appropriate duration of creditable service. This will take effort since the OPM (Office of Personnel Management) calculates an employee’s creditable service from their SP-50s.
The OPM’s calculation is always final. That is why every federal government employee should ensure that all data included in their SF-50s is correct and contained in their file.
Employees throughout their working life acquire many SF-50s since this type of form gets issued each time changes are made in their occupation or pay. Employees receive at least one SF-50 annually.
The most feasible way to calculate one’s creditable service years is by rounding up their SF-50s and guaranteeing that they correspond with what they believe they possess. This will guarantee that you agree with the OPM’s decision when the time comes for you to retire. Keep in mind that mistakes often happen on SF-50 forms so make it a point to retain your SF-50s and check if all data contained there is correct and accurate.
About SCDs (Service Computation Date)
People who often check their SF-50s notice their Service Computation Date, or SCDs. Because it’s listed there, many people believe that it can be utilized for creditable service calculations. Bear in mind, though, that this one is only meant for leave purposes.
The most crucial date for your creditable service and FERS retirement pension calculator is your RSCD or Retirement Service Computation Date. This is typically the date that OPM utilizes to calculate an employee’s retirement. However, there are no official documents that display one’s RSCD before retirement. The Personal Statement of Benefits that you will get is but a mere estimate.
While you can utilize the SCD as an estimate, remember that this might not be similar to the RSCD. The OPM will calculate an employee’s RSCD from their SF-50s. Thus, they can calculate it by assessing all of the SF-50s they have saved and determining the period of time that they were paying on the record into the system for FERS retirement.
As soon as the employee acquires their RSCD, they can then calculate the number of complete years and months between their planned date of retirement. Full months are only considered adequate for creditable service, thus the employee needs to decrease extra days.
For instance, say the time between your RSCD and retirement date is 25 years, 8 months, and 23 days. In cases like this, your creditable service would be 25 years and 8 months. The 23 days will be eliminated since a full month is composed of 30 days.
FERS Benefit Calculation
Your benefit will be based on your High-3 Average Pay. This is estimated by averaging an employee’s highest basic pay over any 3 uninterrupted creditable service years.
The benefit is calculated using this formula:
1% of the employee’s High-3 Average Pay X years of creditable service.
For employees retiring at 62 years of age or older with 20 years or more of service, 1.1% is often used instead of just 1%.
If you want to determine the length of service required for the computation, you have to add all of your creditable service years and then remove any incomplete part of the month (less than 30 days) from the total.
Based on the employee’s category of retirement benefits they acquire, the benefit might be decreased. For instance, the total could be decreased if the employee chooses to retire at the MRA before fulfilling 30 years of service.
How To Increase FERS Benefits
There are options in which you can boost your FERS benefits, and they are as follows.
Work for an Extended Period
The years of service you render in your occupation are a major factor in accruing better FERS benefits. Prolonging your retirement can result in a sufficient pension. It will also allow you to build up your Thrift Saving Plan account.
Wait Until You Are Older
To get the best benefits, you have to settle on the most feasible age: 62 years and above, at the least. Put both factors, which are age and years of service, into the equation for a more profitable pay.
Strive for Promotions
A position that pays higher or getting a raise means an increase in your High-3 year salary. With earning more comes higher pension payouts.
FERS is one of the best retirement packages being offered in the country today. Calculating your benefits can be done on your own through a FERS retirement pension calculator. However, it can be a complicated task. There’s another trusted method, though. If you want a more comprehensive, accurate calculation, consider professional assistance. Professionals can provide FERS benefits calculations that are clearer, succinct, and more understandable to clients.