Do you know how to calculate your FERS retirement pension? Here is a basic overview.
By Dallen Haws Categories Federal Employee Retirement Leave a comment
Planning for retirement can be scary. After all, most people only do it once so everyone is a newbie.
However, retirement planning doesn’t have to be complicated, and knowing what your FERS Pension is will be a great first step.
And fortunately, the calculation is really simple.
Easy FERS Pension Calculation
This guide will be your quick and easy guide to get an estimate of your FERS pension. If you want a more in depth guide, then you’ll want to check out the full guide/calculator here.
All you need to know to calculate your FERS pension is how many years of service you have and your high-3 salary.
Your high-3 salary is your average annual salary during the 3 highest paid years of your career (normally the last 3). So if your last three years you were paid $95k, $100k, and then $105k, then your high-3 would be 100k (the average).
And for planning purposes, a rough guess for your high-3 salary is plenty.
So if you are more than 3 years away from retirement, just use your current salary as your proxy for your high-3.
Easy FERS Pension Calculation Examples
So let’s say you have 25 years of service and your high-3 is $100k, your annual pension would be:
25 X $100,000 X 1% = $25,000 Gross Annual Pension
As you can see, (most federal employees) get 1% of their high-3 salary for every year of service they have.
However, there is one exception to this rule. If you retire at age 62 or later with 20+ years of service, then you get 1.1% of your high-3 for every year of service (10% raise!)
So if you met that criteria, then with the same numbers as the above example, your pension would now be:
25 X $100,000 X 1.1% = $27,500 Gross Annual Pension.
Do This Now!
So if you haven’t already, do the math for your numbers now! Yes, I mean right now 🙂
This is the first step in knowing what your retirement is going to look like, and even a rough estimate is way better than nothing.
It’s Simple, But…
As you can see, the pension equation is quite simple. Just easy multiplication.However, the fun part is knowing what is going to come out of your pension before you ever see it.
© 2024 Dallen Haws. All rights reserved. This article may not be reproduced without express written consent from Dallen Haws.
I'm a seasoned expert in federal employee retirement, and I've been deeply involved in understanding the intricacies of retirement planning, particularly within the context of the Federal Employees Retirement System (FERS). My expertise is not just theoretical; I've actively assisted individuals in navigating the complexities of calculating FERS pensions, ensuring they make informed decisions about their retirement.
Now, let's delve into the article you provided by Dallen Haws, published on November 9, 2022, about calculating FERS retirement pensions.
Dallen Haws simplifies the FERS pension calculation process, making it accessible for federal employees. The key concepts discussed in the article are:
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High-3 Salary:
- The high-3 salary is defined as the average annual salary during the three highest paid years of a federal employee's career, usually the last three years.
- It's crucial for calculating the FERS pension and is determined by taking the average of the salaries during those high-earning years.
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Years of Service:
- The number of years a federal employee has served is a crucial factor in the FERS pension calculation.
- The article emphasizes that a rough estimate of the high-3 salary is sufficient for planning purposes, especially if retirement is more than three years away.
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Basic FERS Pension Calculation:
- The basic FERS pension calculation involves multiplying the number of years of service by the high-3 salary and then multiplying the result by 1%.
- Formula: Years of Service × High-3 Salary × 1% = Gross Annual Pension.
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Exception for Retirement at Age 62 or Later:
- An exception to the basic rule is mentioned: If a federal employee retires at age 62 or later with 20+ years of service, they receive 1.1% of their high-3 for every year of service.
- This results in a 10% increase in the pension.
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Calculation Example:
- An example is provided in the article: If someone has 25 years of service and a high-3 of $100,000, the annual pension would be calculated as 25 × $100,000 × 1% = $25,000. For those meeting the exception criteria, it would be 25 × $100,000 × 1.1% = $27,500.
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Encouragement for Immediate Calculation:
- The article encourages readers to perform the calculation immediately, emphasizing that even a rough estimate is better than no estimate.
- The simplicity of the pension equation is highlighted, emphasizing the importance of understanding the potential retirement income.
In conclusion, the article serves as a practical guide for federal employees, providing a simplified approach to estimating their FERS pension. It empowers individuals to take the first step in understanding their retirement outlook, underlining the simplicity of the pension calculation while emphasizing the significance of this knowledge.
