[quote=ltsdd][quote=bearishgurl]
I stand by my assertion that a FERS employee CAN approach 100% if they contribute the maximum for Agency Match (5%).
[/quote]
BG,
It’s basic math. Assuming someone who had worked for 30 years and is qualified for retirement. That individual, under FERS, would get about 30% (1% for each year of service) in replacement income from the “pension”. Do you really believe that an individual’s 401K/TSP account could replace or generate the other 70% of the “loss” income when someone retired? For how long?[/quote]
It’s NOT “basic math,” ltsdd. We would have to know what the employee made each and every year to learn what the agency contribution for that year was and how much a 5% withholding for TSP represented (assuming they always had 5% withheld). We would also need to know what year they started working in, learn if they may have had “broken service” and if so and for how long, learn if they ever paid FERS back for that broken service, learn how much sick leave they left on the books at the time of retirement, learn if they ever paid back any loans they may have taken out on their TSP account and learn how they allocated their TSP over the years and studied that performance.
It would not be uncommon for a GS-9/step 10 today for have started their Federal “career” out in 1983 as a GS-5 (making just under $20K annually).
Transferred to the Federal Employees Retirement System (FERS)
At time of transfer, had at least 5 years of creditable civilian service covered by either:
Civil Service Retirement System (CSRS)
Social Security
(but not both-excludes service during which partial CSRS deductions were withheld)
Annuity will have 2 components:
FERS Component
CSRS Component
Computation of FERS Component Age Formula
Under Age 62 at Separation for Retirement, OR–
Age 62 or Older With Less Than 20 Years of Service 1 percent of your high-3 average salary for each year of service
Age 62 or Older at Separation With 20 or More Years of Service 1.1 percent of your high-3 average salary for each year of service
Here is how the CSRS annuity formula is calculated:
CSRS Annuity Formula
Years of Service
What You Receive
First 5 years of service 1.5 percent of your high-3 average salary for each year
Second 5 years of service Plus
1.75 percent of your high-3 average salary for each year
For all years of service over 10 Plus
2 percent of your high-3 average salary for each year.
…
Maximum Payable
The maximum benefit you can receive from CSRS is 80 percent of your high-3 average salary, plus credit for your sick leave. This limit generally affects only those who have more than 41 years 11 months of service when they retire.
An employee with 41 years of creditable service could feasibly be as young as 62 years old today.
If an employee with 30+ years service retired today, they could still be covered until CSRS or a combination of CSRS/FERS. CSRS retirees did not receive an Agency Funds match from TSP as this was part of the incentive in ’86/’87 to convert to FERS. But they still contributed to TSP.
If you’re a CSRS employee or a member of the uniformed services, you have to make a TSP contribution election through your agency or service to establish a TSP account. You do not receive agency contributions.
See numbered page 2 of this publication (wait to load):
So, yes, it is entirely possible today with the combination of CSRS/TSP, CSRS/FERS/TSP (w/partial agency match) or FERS/TSP (w/full agency match) to retire at or close to 100% of one’s full highest of average 3 years salary.
