Believe it or not, the control you have over your retirement income from FERS annuity (pension), Social Security, and Thrift Savings Plan (TSP) can be significantly increased by implementing strategic approaches.
3 Strategies to Enhance Your FERS Pension
- Extend Your Work Years for a Higher High-3 Salary: Given that your High-3 salary is influenced by the years of creditable service, extending your employment by a year or two can result in a substantial boost to your monthly pension amount.
- Unlock the Benefits of the FERS 10% Bonus: Embracing a prolonged working period can also leverage the FERS 10% bonus, contributing to a higher pension. Upon retirement at 62 or later, with a minimum of 20 years of creditable service, your annuity is computed using a 1.1% formula, resulting in a remarkable 10% increase in your monthly benefit for the entirety of your life. Additionally, turning 62 marks your eligibility for Cost-of-Living Adjustments (COLAs) under FERS.
- Accumulate Unused Sick Leave: While unused sick leave doesn’t qualify for immediate retirement, it plays a role in calculating your pension. The inclusion of unused sick leave as creditable service can elevate your pension once you fulfill the age and service prerequisites for an immediate FERS annuity.
“The TSP 5% agency match is essentially free money when you factor in compound interest”
2 Strategies for Growing Your TSP Nest Egg
- Secure the TSP 5% Agency Match: As a FERS employee, your agency matches up to 5% of your TSP contribution each pay period. The initial 3% is matched dollar-for-dollar, and the subsequent 2% at 50 cents on the dollar. This is in addition to the automatic 1% of your pay contributed by your agency to your TSP. The TSP 5% agency match is essentially free money when you factor in compound interest.
- Embrace TSP Catch-Up Contributions: Individuals aged 50 or older, or those turning 50 within the calendar year (even if on December 31st), can make TSP Catch-Up Contributions in addition to regular contributions. For 2024, the limit for standard TSP contributions is $23,000, while the Catch-Up Contribution limit is $7,500.
Optimizing Your Social Security Benefit
Delay Filing for Increased Credits: By postponing your filing beyond your Full Retirement Age (FRA), you accumulate credits that boost your benefit by 8% annually until the age of 70. Moreover, your benefit is indexed for cost-of-living adjustments (COLA) for each year of delay.
Take a proactive approach – consult with an FRC® trained advisor to explore additional strategies for planning a financially secure federal retirement.
