From army veterans to postal workers, federal employees who’ve been working tirelessly are able to enjoy their pension under the Federal Employees Retirement System (FERS). However, before you can even start to enjoy all those benefits, you must first educate yourself about the many facets of FERS retirement, so you know exactly what you’ll be getting when the time comes. This guide will give you an overview of some of the key benefits you can expect from your federal retirement package.
Thrift Savings Plan
Also known as TSP, your thrift savings plan is an essential part of every government employees’ retirement package. This is because it allows the recipients to fund their retirement outside of the usual pension and social security. Out of all your benefits, this is perhaps the one you have the most control over and where you’ll benefit the most if you remain consistent and smart while investing in it.
All workers enrolled in FERS are also covered by Social Security. Retirees are only able to receive this benefit when they reach the age of 62. While there are supplemental benefits you can get even before reaching that age, there are special conditions for attaining that. However, it is advisable to start your benefits only after your full retirement age as it will increase by at least 8% every year up until you reach the age of 70.
Now, in case you decide to still work despite claiming your Social Security benefits before you’ve reached your full retirement age, it’s crucial to remember a few things. One is that your benefits will be reduced for every dollar you make in your job over certain limits. That means your benefits would be reduced for taking it before full retirement age and reduced even further since you still have a job. Next is that this deduction will only stop once you’ve reached the retirement age of 62.
Now, this is when things can become complicated. Your pension is basically one of the benefits you get, but you have very little control over it, and there are a lot of factors involved when calculating just how much you’ll get from it. Some of those factors include:
- Survivor Benefits – You have the option to make your spouse receive a portion of your pension in the event of your death. This is a good arrangement. However, it will cost you 10% of your pension now to leave your spouse with 50% of your pension or 5% of your pension to leave 25%
- Taxes – This is another important factor to consider. Most of your pension is actually taxable income, which is why many retired employees still pay between 10%-25% in taxes between federal and state taxes.
- Insurance Premiums – Now, if you’re enrolled in any federal insurance like FEHB, FEGLI, and others, the premium you pay for those insurance policies will come directly out of your pension.
Those are just some of the things to consider when discussing your FERS retirement. While it indeed is a great benefit to have, you need to be smart about it and know exactly how much you’ll be able to spend once your retirement age comes.
Making sure you get the possible retirement benefits is essential, especially if you’re a federal employee. My Federal Plan is here to help you get your finances in order in preparation for your retirement. Whether it’s about your FERS, your private life insurance, or even debt management, our financial advisors will do everything they can to help you maximize your benefits and retire with peace of mind. For questions about retirement planning for federal employees, schedule a free review and consultation today.