FERS vs CSRS: When is the Right Time to Retire?

If you or a loved one is a lifelong federal employee, deciding on the best time to retire (year, month, date) used to be pretty simple. The longer amount of time one worked under the old Civil Service Retirement System and more one made financially, the more there is to receive when it comes time to retire.  

As a bit of a history lesson, a federal employee under the old CSRS had their starting annuity indexed for inflation, for life. Differing majorly from most private sector pension plans, federal employees attributed a significant amount of their salary to their retirement. For the time, and for the majority of participants, it was worth it to do so.  

That was a time of the past however, and now it is a simple reminder of history that once was. CSRS ended in the 1980s, replaced by the more complex Federal Employee Retirement System (FERS).  

FERS is in a number of ways, better than CSRS, but it is not as simple. Federal employees need to know what to do and how to work with it. 

The old CSRS program participants are almost all entirely retired.  This means that around 99% of the current workforce is under the FERS retirement plan, a plan consisting of many moving parts, many options and generally speaking, gives autonomy to its participants. 

FERS retirees get a government contribution to their TSP account of up to 5%. This is massive when considering a lifetime of investing. Additionally, and because of its combined federal annuity, Social Security and the TSP, the “new” system has many working pieces.  

For federal employees who choose to plan ahead, there are amazing, major improvements of opportunity that can benefit them once they are retired. Typically, this revolves around the number of “best dates” each year to retire. 

Perhaps even more crucial is deciding on the actual year of retirement. The best year for one federal employee may not work for a colleague with the same service time and salary level.  

So, the million-dollar question is, how do you determine that perfect time to retire? 

Here at Federal Benefits Service, our job is to help federal employees solve this exact problem. Through a number of services including individualized retirement advice, we can help you optimize your retirement date. Whether it is the earliest moment possible, or the patient sweet spot to ensure potential decades of stable income during retirement, we will walk you through your options.  

Getting this timing right is what we are all about, picking the best age and time is absolutely critical for federal or postal workers because of the diversity amongst time sensitive benefit packages.  

Overall, the rule is the longer a federal employee works, the more they will get. However, it is important to remember, for most federal employees, the Federal Employees Retirement System is the key. It coordinates with the Thrift Savings Plan and Social Security parts of the system.  

Even though this provides inflation protection for retirees, the diet-COLA component restricts the annual adjustments during periods of high inflation. In time, this could slice into the monthly benefits buying power.  

It is important to remember the vital MRA +10 component. It converts to Minimum Retirement Age plus 10 years, and obtaining knowledge on this subject can significantly boost your annuity.  

To learn more, contact us at Federal Benefits Service to speak to a trained and licensed financial advisor. Also, consider becoming a member at our website in order to access all of our exclusive resources, including but not limited to our TSP Market Watch, Online Courses, and Federal Tips Videos. We look forward to hearing from you to help with your retirement today 

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