In this video, Jose Armenta, CFP®, reviews how to calculate the FERS annuity and why it’s important to know.

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Calculating your Federal Employee Retirement System (FERS) pension may seem daunting at first, but with the right tools and understanding, you can easily estimate your future benefits in just under four minutes. Your FERS pension is a vital aspect of your retirement planning as a federal employee, so let’s dive into the calculation process step by step.

1. Determine your High-3 Salary:
The first step towards calculating your FERS pension is to identify your High-3 salary. This refers to the average of your highest three consecutive years of basic pay. Check your paystubs or consult your agency’s human resources department to obtain this information.

2. Calculate your Years of Creditable Service:
Next, establish the total number of years you have worked under the FERS system. This includes your actual years of federal service, any unused sick leave hours converted to months, as well as any military service that may be eligible for credit.

3. Understand the FERS Pension Formula:
The FERS pension formula consists of three components, which are multiplied together to determine your annual pension benefit. These components include the FERS Basic Benefit, the Social Security Supplement (if applicable), and the FERS Annuity Supplement (if applicable).

4. Determine the FERS Basic Benefit:
The FERS Basic Benefit component is calculated as 1% of your High-3 Salary multiplied by your Years of Creditable Service. For example, if your High-3 Salary is $60,000 and you have 20 years of creditable service, your FERS Basic Benefit would be $60,000 x 1% x 20 = $12,000 per year.

5. Calculate the Social Security Supplement (if applicable):
If you are eligible for Social Security at the time of your retirement, your FERS pension may include a Social Security Supplement. This supplement is aimed at bridging the gap between your FERS retirement and Social Security eligibility age. The actual calculation of this component can be complex, so it’s advisable to use online tools or consult with a retirement specialist to obtain an accurate estimate.

6. Determine the FERS Annuity Supplement (if applicable):
The FERS Annuity Supplement is a special benefit available to FERS employees who retire before reaching Social Security eligibility age (typically between 62-67 years old). This supplement represents an estimate of what your Social Security benefit would be at age 62 and is subject to an earnings test. Similar to the Social Security Supplement, this calculation can be intricate, so it’s best to utilize online calculators or consult an expert for an accurate assessment.

7. Sum up your FERS Pension:
To estimate your total FERS pension, sum up the FERS Basic Benefit, the Social Security Supplement, and the FERS Annuity Supplement (if applicable). Remember that these amounts represent annual benefits, so if you desire a monthly estimation, divide the sum by 12.

By following these steps, you can quickly estimate your FERS pension in just under four minutes. However, for a more precise calculation, considering individual variables, it’s recommended to use official FERS calculators or seek assistance from professionals specializing in federal retirement. Ensure you’re well-informed about your retirement benefits to make confident retirement planning decisions.