Retiring Under FERS or CSRS: The Federal Retirement, Modeled

Federal employees retire under a system that works like almost nobody else’s. The good news: it is one of the most generous defined-benefit packages left in America. The hard part: its rules are specific enough that a generic retirement calculator quietly gets the important numbers wrong. This release adds a Federal Employee setup to RetIQ that models the parts that actually matter.

The two systems

If you were hired in 1984 or later, you’re under FERS — a three-part retirement: a defined-benefit annuity, Social Security (you pay full FICA), and the Thrift Savings Plan. Earlier hires may be under CSRS — a larger single pension, with no Social Security from federal service. CSRS annuitants remain a large planning audience even though the system is closed to new hires.

The annuity itself is formulaic but has sharp edges:

• FERS: 1.0% of your high-3 average salary per year of service — which jumps to 1.1% if you retire at 62 or later with 20+ years. Retire at 61 with 25 years and you get the lower 1.0% for life. That cliff is one of the highest-value insights in federal planning: one extra year can raise your annuity by 10%.
• CSRS: a tiered 1.5% / 1.75% / 2.0% formula capped at 80% of high-3.
• MRA + 10: retire at your Minimum Retirement Age with at least 10 years and the annuity is reduced 5% per year (5/12 of 1% per month) for each year you start before 62.

The supplement that ends at 62

FERS retirees on an immediate, unreduced retirement get the Special Retirement Supplement — a bridge payment approximating the Social Security their federal service earned, paid from retirement until age 62. The estimate is simple: years of FERS service ÷ 40, times your age-62 Social Security benefit.

Two facts about the supplement surprise people. First, it receives no COLA — it is flat for its entire life while everything around it inflates. Second, it stops cold at 62, even if you plan to delay Social Security to 67 or 70. A federal retiree who retires at 57 and waits on Social Security faces a real income cliff at 62 — precisely the kind of thing a year-by-year projection should show coming, not discover the year it happens.

Survivor elections, on the unreduced annuity

Married FERS retirees default to the full survivor election: the spouse later receives 50% of the unreduced annuity, and the retiree’s own benefit is reduced 10% to pay for it (25% survivor, at a 5% cost, is the partial option). The subtlety is that 50% applies to the unreduced amount — a $40,000 annuity elected to full survivor pays the retiree $36,000 and later pays the spouse $20,000, which is 55.6% of what the retiree was receiving. RetIQ handles the election cost on your own annuity today; computing the survivor share against the unreduced base is on the roadmap.

Everything else slots into place

The Thrift Savings Plan maps straight onto the account types RetIQ already models — traditional TSP as a pre-tax account subject to RMDs, Roth TSP as a Roth account (RMD-free since 2024). Government-source pensions are handled correctly by the states that exempt them (New York, Hawaii, Massachusetts, and Oregon’s cap). And because the Windfall Elimination Provision and Government Pension Offset were repealed in 2025, CSRS retirees’ Social Security from other work is now modeled unreduced — no special adjustment needed.

What the new setup does

On the Income tab, the Federal Employee card walks you through it: enter your system, high-3, creditable service, retirement type, survivor election, after-tax contributions (which drive your Simplified-Method taxable percentage under IRC §72(d)), and an estimated age-62 Social Security benefit. RetIQ computes the annuity, the supplement, your survivor cost, and your taxable percentage, checks your eligibility paths against your Minimum Retirement Age, and writes it all into the standard pension, income, and one-time-event structures — which remain fully editable. It will also schedule your unused annual-leave lump sum, routinely a five-figure tax spike in the first retirement year.

Federal retirement is a great deal, and it’s a complicated one. The point of modeling it properly is to make the 1.1% cliff, the 62-year supplement cliff, and the survivor election visible before they decide your retirement for you.