FERS Retirement: Calculating Your Federal Pension Is Not As Complicated As It Looks

Federal employees under the Federal Employees Retirement System (FERS) have a three-legged retirement stool: the FERS basic annuity (pension), the Thrift Savings Plan (TSP), and Social Security. The pension component alone involves a formula that most federal employees do not calculate until they are a few years from retirement. Knowing it early changes contribution decisions. The FERS annuity formula The basic annuity is: Under 62 or 62+ with less than 20 years : 1% x High-3 average salary x Years of creditable service 62 or older with 20+ years : 1.1% x High-3 average salary x Years of creditable service The "High-3" is the average of your highest three consecutive years of basic pay. For most employees, this is their last three years before retirement. Example: You retire at 60 with 30 years of service. Your High-3 average salary is $120,000. Annuity = 1% x $120,000 x 30 = $36,000 per year = $3,000 per month If you wait until 62 with those same 30 years: Annuity = 1.1% x $120,000 x