Key Takeaways
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Your CSRS pension provides a generous retirement benefit, but it comes with specific rules regarding survivor benefits, inflation adjustments, and federal taxes.
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While Social Security benefits are limited under CSRS, your healthcare costs and options will significantly impact your financial stability in retirement.
Understanding Your CSRS Pension: How It Works and What to Expect
The Civil Service Retirement System (CSRS) provides a defined benefit pension, meaning your annuity is based on your years of service
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Your pension is calculated using your High-3 average salary, which is the average of your three consecutive highest-earning years in federal service. The formula is:
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1.5% of your High-3 for the first five years of service
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1.75% for years 6-10
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2% for each additional year beyond 10
For instance, if you worked 30 years with a High-3 salary of $100,000, your pension would be roughly 56.25% of that salary, or $56,250 annually. However, deductions such as survivor benefits, federal taxes, and health insurance may lower your take-home amount.
Survivor Benefits: Planning for Your Spouse’s Future
If you are married, you must make critical decisions about survivor benefits. CSRS requires you to elect a survivor benefit if you want your spouse to receive a portion of your pension after your passing.
What Are Your Survivor Benefit Options?
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Full Survivor Benefit – Your spouse receives 55% of your pension after your death, but this reduces your annuity by around 10% during retirement.
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Partial Survivor Benefit – Your spouse receives a lower amount, typically 25%, with a smaller reduction to your annuity.
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No Survivor Benefit – Your annuity remains intact, but your spouse will receive nothing after your passing.
A survivor benefit ensures your spouse has a steady income, but it comes at the cost of a reduced monthly pension. Consider your spouse’s financial needs, potential Social Security benefits, and other retirement income sources before making your election.
Social Security: How WEP and GPO Impact Your Benefits
Unlike FERS employees, CSRS retirees do not receive Social Security benefits for their federal service since they did not contribute to Social Security while working. However, if you worked outside the federal government and earned enough credits, you may qualify for Social Security—but two rules may reduce your benefit:
Windfall Elimination Provision (WEP)
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If you qualify for Social Security from non-CSRS work, WEP reduces your monthly benefit.
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The maximum WEP reduction in 2025 was projected to be $613 per month, but WEP was repealed in January 2025 under the Social Security Fairness Act, meaning CSRS retirees now receive their full earned benefits.
Government Pension Offset (GPO)
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If you are eligible for Social Security spousal or survivor benefits, GPO reduces the amount you receive by two-thirds of your CSRS pension.
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Unlike WEP, GPO remains in effect in 2025, limiting Social Security benefits for many CSRS retirees with a federal pension.
Understanding these provisions is essential in planning your retirement income. If Social Security will play a role in your retirement, be sure to check how GPO affects your eligibility.
Healthcare Costs in Retirement: Managing Your FEHB and Medicare
One of the biggest retirement concerns is healthcare. As a CSRS retiree, you remain eligible for the Federal Employees Health Benefits (FEHB) program, which provides comprehensive coverage. However, costs change in retirement, and coordination with Medicare is important.
FEHB Premiums and Coverage
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FEHB plans continue into retirement if you were enrolled for the five years before retiring.
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Premiums are deducted from your pension, but there are no government contributions once you retire.
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In 2025, FEHB premiums increased by an average of 13.5% for enrollees.
Should You Enroll in Medicare?
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Medicare Part A (hospital insurance) is free if you have 40 quarters of covered work and pairs well with FEHB.
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Medicare Part B (medical insurance) has a premium of $185 per month in 2025 and covers doctor visits, outpatient care, and preventive services.
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If you enroll in Part B, some FEHB plans offer incentives such as lower copays, deductibles, or premium rebates.
Your decision depends on your healthcare needs, costs, and the coverage your FEHB plan provides. Many retirees keep FEHB as primary coverage and add Medicare later to reduce out-of-pocket costs.
Tax Considerations: How Federal and State Taxes Affect Your CSRS Pension
Your CSRS pension is fully taxable at the federal level, except for a small portion based on your after-tax contributions. However, state taxes vary, and some states exempt federal pensions.
Federal Taxes on Your CSRS Pension
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You must pay federal income tax on the taxable portion of your pension.
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The IRS uses the Simplified Method to determine how much of your pension is taxable.
State Taxes: Will Your Pension Be Taxed?
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Some states fully exempt CSRS pensions, including Florida, Texas, and Nevada.
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Others partially tax federal pensions or offer exemptions based on age or income.
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A few states fully tax CSRS pensions, which may impact where you choose to retire.
Check your state’s tax policies and consider relocating if you want to minimize your tax burden in retirement.
Make the Most of Your CSRS Retirement Benefits
Your CSRS retirement is a valuable financial asset, but managing it effectively requires careful planning. Understanding how your pension works, choosing the right survivor benefit, planning for healthcare costs, and navigating tax rules can ensure you make the most of your retirement income.
If you need guidance tailored to your situation, reach out to a licensed agent listed on this website. They can help you explore your benefits, healthcare options, and retirement strategies to secure your financial future.
