How To Calculate Your Federal Employee FERS Annuity (With Example!)

what if you went into retirement and just before you retired you found out your pension your retirement check was going to be half of what you were planning on hi i'm micah shilanski and this is the fers federal fact check [Applause] today we have a question that comes in from tonya about her husband's retirement and this is so important because this is something we see time and time again when people are planning their retirement so let's pay attention to the questions and pull out some great information so you can plan your retirement my husband wants to retire and he has been with the usps and always told he gets 60 of his base pay and the more we look into this the more it'll look like he'll only get 1400 a month with furs he has 70 has been there for 24 years tonya thank you very much for submitting this question i can only imagine how frustrating this is going to be to plan on something to find out your pension retirement check is going to be tremendously less and there's a lot of things that are going to go in here and we're going to have to make some guesses on kind of what your situation is but let's think about some planning points that are going to be here one of the biggest misconceptions that i hear working with federal employees is one is years of service right they think they have x amount of years of service but they actually don't and the second one is understanding our high three especially if we're in any type of union if there's any type of overtime work or hourly work or anything like that this can now greatly affect our high three and we need to understand how all of those things come together so let's take a quick look at it first on just how the first pension works then let's dive into some things that we need to pay attention to all right your first system retirement system is a pretty good defined benefit system right there's a lot of really good information out there on how the system works on our website plan your photoretirement.com and really walks you through but let's go through it real fast so in order to calculate your first retirement you're going to take your years of service times a percent times your high three your high three is your highest 36 consecutive months of service this is how the pension works right so years of service we have 24 years of service in this case and we've got to times it by a percent most of the time under fers retirement it's going to be one percent however in this situation tony's husband tanya's husband excuse me has uh over 20 years of service and is over 62. that means he is eligible for a one point a 10 raise 1.1 percent times his years of service so 24 years of service times 1.1 percent times his high three i don't have his height three i'm going to go with the number of 65 000 a year uh as a high three again this is just a bit of a swag trying to put some stuff together so if we run through this math real quick 24 times 1.1 ooh what's that 26.4 percent times his high 3 of 65 000 a year so that's going to equal 17 160 oh i'm going to be slightly off all right there's there's the concept right there so pretty close that 17 000 a change is the annual pension an annual pension divided by 12 and round down this is going to give us a number around 1460 a month in that oops you'd be 14 16 forgive me this is mental math i should have done this a little bit earlier but it's pretty close to this so what you're going to notice is that you know his percent he's getting 26 of his base pay that he's going to be there now one of the things that comes in again especially with some postal service workers other agencies that are out there do you have overtime do you have any other type of pay that's gonna mourn your paycheck but what doesn't increase your high three so it's something to watch so he's gonna get 26 percent of that now in addition to this he is still going to get his social security check which is going to come in which is really going to help but this is what his pension's going to be that other number of 60 that probably came from the csrs retirement system if you had 26 years of service under csrs you are closer to that 60 number not quite there but that may have been where it comes from now keep in mind that this is a gross number what does that mean that's not how much goes in your retirement account right this is the gross we care about the net so they're going to start taking out of this fehb they're going to start taking out of this oops taxes survivor benefits all deductions that are going to come out of this especially for my union covered employees you really got to keep in mind with the postal service they help subsidize while you're employed part of your fehb premium which is phenomenal until you stop working because then you have to pay a hundred percent of that premium so you really the government in retirement still is going to match their 72 percent you have to pay that 28 that's there and under union you generally have to pay less than that 28 so your health insurance premium is really going to go up so i encourage you to look to say all right that's the gross number figure out what that net number is going to be because this is really what we care about how much gets deposited in your bank account so some really good learning lessons that we need to take out of this scenario number one it's water cooler talk right be really careful about getting information from the water cooler a lot of great ideas maybe not all based on solid facts and everyone's situation is absolutely going to be different he could have been talking to someone that would have would have been getting 60 at retirement maybe they were under a different retirement system like csrs right there's so many things we don't know that's going to be there so understand how your benefits work understand how you can get information how many years of service do you have that's credible for retirement what percentage are you going to get times your years of service and what is your high 3-4 retirement purposes really really important to pay attention to this now if you have questions like this about your personal situation how it's really going to apply and what you can do you're welcome to do an initial consultation that's something that we do in our office to work one-on-one with federal employees and sometimes they don't need a full financial plan they just need help with one particular thing and that's why we offer the one-time consultation you can click the link below to get more access to it and basically you're going to talk to myself or one of my colleagues and we're going to help guide you through these questions we're going to spend time on your retirement to make sure you're prepared and at least being able to ask the right questions so you understand your benefits if you have a question feel free to click that link and you're going to get scheduled on our calendar or you're always welcome to submit it on the first federal fact check until next time happy planning you

Channel: Plan Your Federal Retirement

Views: 15,711

Keywords: Plan Your Federal Retirement, Micah Shilanski, Certified Financial Planner, Federal Employee Retirement Planning, Federal Financial Planner, Federal Employee, Federal Employee Retirement System, FERS, Federal Employee Health Benefits, FEHB, Federal Employee Group Life Insurance, FEGLI, Thrift Savings Plan, TSP, Roth TSP, Federal Employee Financial Independence, Federal Employee Early Retirement, MRA, Minimum Retirement Age, Military Service Buy Back, FERS Supplement

Id: ld5QWXLM8xo

Length: 6min 54sec (414 seconds)

Published: Fri Jun 11 2021