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Old 08-21-2019, 06:47 PM
 
Location: Eastern N.C.
204 posts, read 146,970 times
Reputation: 294

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Don't need specifics for your particular situation - examples are fine.

I hear about huge pensions, several 100Ks for some sort of government service. Just wondering how those are computed.

I'll start it off in the next post with how mine was done (Federal CSRS).

And I guess as a secondary question, how did the pension promise influence how long you stayed in your job.
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Old 08-21-2019, 06:59 PM
 
Location: Eastern N.C.
204 posts, read 146,970 times
Reputation: 294
Federal CSRS - only available to federal employees hired prior to 1984 (or so). Employed since then are part of FERS.

First off - excluded from Social Security unless had enough quarters either before or after federal service. And then SS reduced due to the Windfall Elimination Provision (WIP).

First compute time in service - Years, Months and Days
Add in accumulated sick leave - Years, Months and Days

Round to the next lowest Year/Month

For years 1-5 you get 1.5% per year of your high 3 salary
For years 6-10 you get 1.75% per year of your high 3 salary
For years 11 - whatever you get 2% of your high 3 salary

Assuming you end up with more than 10 years, it is basically 2% per year less 2.75%

High 3 is your highest annual salary for 36 consecutive months. This is normally your last 3 years but not always the case. Some approaching retirement accept a lower paying job in an area they want to retire to wind down. Others move to a high COL area the last few years to bump up their high 3.

So if I was to retire with 33 years 4 months with 6 months of sick leave and my high 3 was 65,000 my pension would be (ignoring days)

33 years, 10 months x 2% = 67.67% - 2.75% = 64.9% of $65,000 = $42,185 per year.

BTW - congress retirement is computed the same way although most are now under FERS. Maybe a FERS person could explain their computation.

And 'YES', the retirement package kept me in federal service when I could have made more in the private sector.
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Old 08-21-2019, 09:45 PM
 
26,312 posts, read 33,320,350 times
Reputation: 32858
Lots of people have no idea how their pension is calculated. Hell I would have to go look mine up. I know what my numbers will be - that's all that matters.

I'm sure there are "huge pensions" out there, but I don't think those are common. Of course pensions keep people in gov't service - that's the whole point.
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Old 08-21-2019, 10:10 PM
 
Location: Noth Caccalacca
5,696 posts, read 6,750,131 times
Reputation: 5027
mgdriver74 - Like you, I'm a CSRS retiree. I took an "early out" with 25 years in at age 51 in 2004. They penalize you 2% for each year you are under the age of 55. But to me, it was well worth the sacrifice!

I've often wondered about those state pensioners in California who receive 90% of their (final year salary?) as their pension. It must be sweet to be a retired School Superintendent who made $300,000 in his last year and is retired on $270,000. I'm sure they must have modified that one by now! I'd sure like to know the details on that system. It makes our Federal Pension terms seem downright stingy!

I too, am a bit foggy on the details of the FERS system. I know you get a supplement to live on after your retirement at MRA (minimum retirement age) or greater, but does one have to start taking Social Security at 62 and do you keep the supplement and collect SS, or does the supplement decrease or disappear and your SS now your "pension"? 'Tis a mystery to me!
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Old 08-21-2019, 10:26 PM
 
173 posts, read 97,994 times
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1% times years of service times high three pay average
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Old Yesterday, 12:28 AM
 
Location: RVA
2,186 posts, read 1,291,170 times
Reputation: 4540
Private pension, max years of service counted stops at 30. Complex formula that basically multiplies years of service in months, times the monthly average base pay-(no OT, bonuses or awards counted) of the highest 60 months out of the last 120 months times a percentage that is roughly 2% and then subtract a smaller percentage times years of service times their estimated age 65 SS PIA! (There is also a COLA applied to about 25% based on some arcane parameters.)

So what happens is that as you become more successful the first part increases significantly while the subtracted part ALSO increases as your PIA increases. So basically as your SS increases, your pension growth decreases. However, this formula flips around at a certain point and GREATLY favors the very highly paid because the amount of maximum SS is capped, while the salary is not.

So someone making basically $80-$120k/yr last 5 years, has the same amount subtracted as someone that made $300k/yr, but their salary based component is much smaller. The real sad partis that when they gave you examples of lensions based on expected raises back in the ‘80s, they never applied the PIA growth to the subtraction part, so it appeared the pensions would be far higher than they turned out. In 1985, no one ever really thought that their SS could be $46k/yr, when you were only making $30k. It seemed far fetched.

In my case, my pension ended up being about 38% of my last years peak salary, which is about what I was making in 1995-7. And while my SS will start lower than my pension, in a few years it will eventually surpass it. So the reality is with SS, I still have about 64% of my last years salary to start, with a COLA component, but only will pay about 40% of the taxes.

And since I have LBYM for so long, I am quite used to my income being only 70% of my salary, so my retirement income is basically the same plus whatever I generate and use from my portfolio.

Last edited by Perryinva; Yesterday at 12:37 AM..
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Old Yesterday, 02:58 AM
 
Location: Las Vegas & San Diego
334 posts, read 56,262 times
Reputation: 333
Quote:
Originally Posted by flashlight View Post
1% times years of service times high three pay average
FERS increases to 1.1%/yr if retire with 20+ years at 62 or later, also increases to 1.7%/yr for first 20 years if work federal law enforcement or ATC. In addition get regular SS (no WEP).
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Old Yesterday, 03:46 AM
 
Location: Australia
1,031 posts, read 377,690 times
Reputation: 1895
All I can remember is that my husband's was calculated to a very complicated formula. But the good thing is that since he retired, his net pay is higher than when he was working. He does not have to make contributions towards it and under Australian legislation it is entirely tax free. So he does not even have to pay a Medicare levy (which I actually think is not very fair to younger working people) And it is CPI indexed every year.

Ha ha it is why I have put up with him all these years.
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Old Yesterday, 04:41 AM
 
Location: R.I.
1,041 posts, read 633,428 times
Reputation: 4484
Quote:
Originally Posted by mgdriver74 View Post
Maybe a FERS person could explain their computation.

I will be a FERS retiree and plan to retire at the end of 2023 which is 4 months after my Social Security FRA of 66.6. I am doing this because for my last year's salary to count in my high 3 calculation you have to receive that salary for a year. So at the end of 2023 I will have 23.4 years of service. So my calculation will be:

Average of high 3 salary x 23.4 years of service x 1.1 = 25% of my average high 3 salary. My FRA Social Security which is considered part of the 3 legged FERS retirement my amount will also equal to 25% of my average high 3 salary. Having max contributed to the TSP most of my service years that will deliver me at 4% withdrawal another 22% of my average high 3 salary, so these income streams combined would deliver me 72% income replacement. Since I have the ability to 1st claim a widow's SS survivor benefit which I will from FRA-70, when my age 70 benefit kicks in that will bring me up to 80% gross income replacement but a good amount higher net income replacement and that is the one that counts.
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Old Yesterday, 04:59 AM
 
655 posts, read 560,665 times
Reputation: 1895
Military has changed a lot since I retired, mine is 50 percent at 20 years and then 2.5 percent per year after up to 75 percent of your final salary.

State is complicated as well, multiple types/categories. Mine is age 65 with 28 years of service, 12 highest consecutive quarters, roughly 50 percent. You can retire at 60 but it is reduced by 5 percent for every year under 65.
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