You’re Earning a FERS Pension—But Keeping It Is All About Smart Retirement Math

Key Takeaways

• Earning a FERS pension is just the starting point. Keeping it effective in retirement requires calculating how it interacts with Social Security, TSP, taxes, and your actual retirement timeline.

• Smart retirement math involves knowing how to reduce penalties, optimize your TSP withdrawals, and balance income streams across retirement phases.

Understanding What You’ve Earned Under FERS

The Federal Employees Retirement System (FERS) gives you a three-part retirement package:

• FERS Basic Annuity (pension)

• Social Security

• Thrift Savings Plan (TSP)

Each of these plays a different role in your income, and they become available at different times. If you’re assuming that your pension alone will carry you through retirement, it’s time to do the math.

Timing Your Retirement Correctly

The age at which you retire affects your pension, TSP strategy, and Social Security options. Under FERS, your Minimum Retirement Age (MRA) ranges from 55 to 57 depending on your birth year. But that doesn’t mean you’ll receive full benefits at that age.

Here’s how it breaks down:

• With 30 years of service: You can retire at MRA with no reduction.

• At age 60 with 20 years of service: No reduction.

• At age 62 with at least 5 years: Also full pension.

• MRA +10 (at least 10 years): You can retire, but your pension will be reduced by 5% for each year you’re under 62 unless you postpone receiving it.

Planning your retirement date carefully helps preserve more of your pension over time.

Calculating Your FERS Basic Annuity

Your FERS pension is based on your “High-3” average salary — the highest average basic pay you earned over any three consecutive years of service — and your years of creditable service.

Here’s the formula:

• 1% of High-3 x years of service

• If retiring at 62 or later with at least 20 years: 1.1% of High-3 x years of service

In 2025, the average monthly FERS pension is around $1,810, but this can vary based on salary history and service length. That number may not fully cover your retirement expenses unless paired with TSP and Social Security.

The FERS Supplement Isn’t Forever

If you retire before age 62 and meet the eligibility rules, you may receive the FERS Annuity Supplement. This benefit approximates what you would get from Social Security at 62. However, it:

• Ends the month you turn 62, whether or not you claim Social Security

• Is subject to the earnings test; you could lose some or all of it if you work and earn too much

In 2025, the earnings limit is $23,480. If you exceed it, your Supplement is reduced by $1 for every $2 above the limit.

You need to account for this drop in income when the Supplement ends. That’s a math problem worth solving before you file retirement papers.

Using the TSP to Fill the Gaps

Your TSP is the most flexible part of your retirement plan, but it’s also the part most affected by poor planning. Once you separate from service, you can begin withdrawals, but doing so too early or too aggressively can backfire.

Here’s what you need to factor in:

• The Rule of 55: If you retire in the calendar year you turn 55 (or 50 for special provision employees), you can take penalty-free TSP withdrawals.

• If you separate earlier: You’ll generally need to wait until age 59½ to avoid the 10% early withdrawal penalty, unless using substantially equal periodic payments (SEPP).

• Required Minimum Distributions (RMDs): Begin at age 73 in 2025, or 75 if you were born in 1960 or later.

Timing is everything. TSP withdrawals too early may trigger penalties, and waiting too long may result in forced distributions and tax issues.

Coordinating With Social Security

Social Security becomes available at age 62, but claiming it early reduces your monthly benefit permanently. Your Full Retirement Age (FRA) is 67 if you were born in 1963, which is true for many nearing retirement now.

Waiting to claim until FRA or later increases your benefit. In fact, every year you delay past FRA up to age 70 adds about 8% to your monthly payment.

Your Social Security benefit interacts with:

• The FERS Supplement, which ends at 62

• Your TSP withdrawal strategy

• Your federal taxes, since up to 85% of Social Security benefits can be taxable depending on total income

Claiming Social Security requires smart income coordination. Too much income from other sources could cause your Social Security to be taxed at the highest possible rate.

The Tax Equation You Can’t Ignore

FERS pensions, traditional TSP withdrawals, and Social Security can all be taxable. That means your “gross” retirement income often differs from what you actually take home.

In 2025, the standard deduction for retirees 65 and older is $15,700 for individuals and $31,400 for married couples filing jointly. Any income above that may be taxed based on federal brackets.

If your retirement income streams are all taxable, you might find yourself in a higher bracket than expected. One solution is to:

• Convert some of your TSP to a Roth IRA over time

• Use the lower-income years between retirement and age 73 to execute partial Roth conversions

• Withdraw from TSP strategically to minimize spikes in taxable income

Tax planning should begin before you retire, not after.

Survivor Benefits and What They’ll Cost You

If you want your spouse to continue receiving part of your pension after you die, you’ll need to elect a survivor benefit. That reduces your pension but provides:

• 50% or 25% of your unreduced annuity to your surviving spouse

• Continued access to FEHB coverage for the survivor

The cost is significant:

• 50% survivor benefit: Reduces your annuity by 10%

• 25% survivor benefit: Reduces it by 5%

This choice is irreversible after retirement. While it reduces your monthly income, the trade-off could be critical for a surviving spouse’s healthcare access and financial stability.

Health Coverage and Medicare Coordination

Keeping your FEHB coverage into retirement is a major benefit, but it works best when paired with Medicare.

At age 65, you become eligible for Medicare. If you’re retired and enrolled in FEHB, here’s what to consider:

• Enrolling in Medicare Part B can reduce your out-of-pocket costs under many FEHB plans

• Most retirees do not drop FEHB but coordinate it with Medicare

• In 2025, the standard Medicare Part B premium is $185 per month

If you decline Part B, some FEHB plans may reduce benefits or cost-sharing, which can increase your out-of-pocket costs.

Planning when to enroll and how to coordinate benefits is part of your long-term math, not a last-minute decision.

Inflation and COLAs: Not Always in Your Favor

Your FERS pension includes cost-of-living adjustments (COLAs), but they are not the same as full inflation protection. In 2025:

• FERS retirees receive a COLA of 2.5%, based on the actual 2025 COLA

• If inflation exceeds 2%, your COLA may be less than the full increase

Only CSRS retirees receive full inflation-matching COLAs. You need to plan for purchasing power erosion over time, especially if you retire early.

Building an income strategy that accounts for long-term inflation is just as important as reaching your initial retirement date.

Don’t Let the FERS Math Surprise You

Many government employees retire expecting the system to carry them through. But retirement under FERS requires:

• Careful calculation of when to retire

• Awareness of income gaps and how to fill them

• Coordination across pension, TSP, Social Security, and healthcare

• Tax strategies that stretch your retirement income further

There’s no one-size-fits-all answer. But there is a math problem behind every retirement decision.

Make Retirement Math Work for You

You’ve spent your career earning a FERS pension. Keeping it efficient and sustaining your lifestyle in retirement depends on the decisions you make today. Whether you’re five years out or five months, it’s time to model your income, stress-test your withdrawal plan, and evaluate your tax picture.

A licensed professional listed on this website can help you do the math and make it work in your favor.