FERS Isn’t Just a Pension—Here’s the Full Picture Most Employees Miss

Key Takeaways

• The Federal Employees Retirement System (FERS) includes more than just a basic pension—you also get Social Security, a Thrift Savings Plan, and survivor benefits, each playing a critical role in your retirement income.

• Understanding how FERS components work together in 2025 can help you make smarter financial choices before and after retirement.

Understanding the Foundation of FERS

The Federal Employees Retirement System (FERS) was created in 1987 to replace the Civil Service Retirement System (CSRS) for new federal employees. If you were hired after 1983, you’re most likely covered by FERS. But here in 2025, many employees still only associate FERS with the basic pension.

That perspective leaves a lot of essential benefits unexplored.

• Also Read: 4 Reasons Why Medicare Could Be a Smarter Choice Than FEHB for Some Federal Retirees
• Also Read: Leaving Your TSP Alone Can Be Risky—Especially If You’re Already Retired
• Also Read: FERS Pension Gone? Here’s What Really Happens If You Resign Tomorrow

• FERS Basic Annuity (Pension)

• Social Security Benefits

• Thrift Savings Plan (TSP)

These elements work in tandem to provide a more comprehensive retirement income.

The Basic Annuity: What It Really Covers

You earn a pension under FERS after working for at least 5 years in a covered position. But the amount you get depends on more than just your service.

The Formula

Your pension is based on this formula:

• 1% x High-3 Salary x Years of Creditable Service

• If you retire at age 62 or older with at least 20 years of service, the multiplier increases to 1.1%

What is High-3?

Your “High-3” is the average of your highest-paid consecutive 36 months of federal service. For many employees, this happens near the end of your career.

Retirement Eligibility

As of 2025, here’s when you can retire with an immediate annuity:

• Minimum Retirement Age (MRA) + 30 years

• Age 60 + 20 years

• Age 62 + 5 years

Your MRA varies between 55 and 57 depending on your birth year.

Social Security: A Critical Piece of the Equation

Unlike CSRS retirees, FERS employees contribute to Social Security through payroll taxes. That means you’re eligible to collect Social Security benefits when the time comes.

Timing Matters

You can claim Social Security as early as age 62, but waiting until your Full Retirement Age (67 for those born in 1960 or later) increases your monthly benefit. Delaying until age 70 maximizes it.

Earnings Limit

If you claim benefits before Full Retirement Age and still work, you’ll face an earnings limit. In 2025, the earnings cap is $23,480. If you exceed this amount, your benefits may be reduced.

Thrift Savings Plan (TSP): Your Investment Powerhouse

The TSP is the third pillar of FERS and functions much like a 401(k) plan. You contribute pre-tax (or Roth) dollars, and the government offers matching contributions up to 5%.

Contribution Limits in 2025

• Elective Deferral Limit: $23,500

• Catch-Up Contributions (age 50+): Additional $7,500

• Special Catch-Up (ages 60–63): $11,250

This allows you to save up to $34,750 annually if you’re within that special age window.

Investment Choices

You can select from target date funds, individual index funds, or lifecycle funds. TSP is known for low fees and simple options, but it’s up to you to manage your allocations effectively.

FERS Special Retirement Supplement (SRS)

If you retire before age 62 with eligibility for an immediate pension, you may qualify for the Special Retirement Supplement. It’s designed to bridge the gap between your retirement and the time you start receiving Social Security.

When It Applies

• Available from MRA until age 62

• Only for those eligible for immediate retirement

• Ends at age 62 regardless of whether you start Social Security

This benefit mimics your estimated Social Security amount but excludes earnings from non-federal work.

Survivor and Death Benefits

FERS also provides benefits for your family in the event of your death.

Survivor Annuity

Your spouse can receive a portion of your annuity if you elect survivor benefits at retirement. The default survivor benefit is 50%, which reduces your annuity but ensures ongoing income for your spouse.

Death-in-Service

If you pass away while still an employee:

• Your spouse may receive a basic death benefit

• They may also be eligible for a survivor annuity if you had at least 18 months of creditable service

Disability Retirement

If you become disabled and can no longer perform your job, FERS offers a form of disability retirement.

Qualifications

• Must have completed at least 18 months of service

• Disability must be expected to last at least one year

• You must apply before separation or within one year after

Disability benefits are calculated differently and often coordinate with Social Security Disability Insurance (SSDI).

Cost-of-Living Adjustments (COLAs)

FERS retirees are eligible for COLAs, but they work a bit differently than CSRS:

• If inflation is 2% or less: FERS COLA = full rate

• If inflation is between 2% and 3%: FERS COLA = 2%

• If inflation is over 3%: FERS COLA = CPI minus 1%

This means your annuity may not fully keep up with inflation during high-CPI years. In 2024, for example, COLA was 3.2%. In 2025, it is 2.5%.

Understanding the Role of Creditable Service

Creditable service isn’t just your time on the clock. It includes:

• Military service (if bought back)

• Unused sick leave (converted into service credit)

• Part-time or temporary work (varies based on rules)

Buying back prior military service can significantly boost your annuity. However, you must complete the deposit before retirement.

Health and Life Insurance in Retirement

You can carry your FEHB and FEGLI coverage into retirement, but there are rules.

FEHB (Health Insurance)

• Must be covered for the 5 years before retirement

• Government continues paying about 70% of the premium

• Retirees can coordinate with Medicare to reduce costs once eligible

FEGLI (Life Insurance)

• Must be enrolled for the 5 years before retirement

• Premiums increase with age, especially after 65

• You can choose to reduce coverage or drop it to manage costs

Retirement Planning in 2025 and Beyond

The retirement landscape continues to shift. TSP contribution limits have increased, and legislative changes may alter FERS rules in the future. You must plan proactively.

Questions to consider:

• Are you saving enough in your TSP to replace your income?

• Do you understand how survivor benefits affect your annuity?

• Should you claim Social Security at 62, 67, or later?

• Have you reviewed your military buyback options?

Regularly updating your retirement strategy ensures you take full advantage of everything FERS has to offer.

FERS Is More Than Just a Pension—Use It Wisely

When you think of retirement, don’t stop at the word “pension.” FERS offers multiple income streams, protections for your family, and investment opportunities. As a government employee in 2025, you have more tools than ever to prepare for a secure retirement.

If you’re unsure about how all these pieces fit together, speak with a licensed agent listed on this website for professional guidance tailored to your situation.