How Does FERS Work? Pension, TSP, and Social Security

The Federal Employees Retirement System, known as FERS, works by combining three separate streams of retirement income: a monthly pension called the Basic Benefit, Social Security, and a tax-advantaged savings account called the Thrift Savings Plan. It has been the default retirement system for civilian federal employees hired after December 31, 1983, and what you eventually collect depends on your age at retirement, your years of service, your highest three years of salary, and how much you put into the TSP along the way.

The Three Parts That Make Up Your Retirement

The Basic Benefit is a traditional defined-benefit pension paid monthly for life. You and your agency both contribute to it while you work, and the payment amount is set by a formula rather than by market performance.

Social Security operates the same way it does for private-sector workers. You and your agency each pay in throughout your career, and you claim benefits under the standard Social Security rules.

The Thrift Savings Plan is similar to a 401(k). Your agency automatically deposits 1% of your basic pay into the account each pay period and matches additional contributions you make on a tiered schedule. The TSP is where most FERS employees build the largest share of their retirement wealth, and employees who contribute nothing beyond the automatic 1% often find a painful gap when they stop working.

When You Can Retire With a Full Pension

To collect a full, unreduced FERS annuity the day you separate, you need to hit one of three combinations of age and service:

Your Minimum Retirement Age with at least 30 years of creditable service.
Age 60 with at least 20 years of creditable service.
Age 62 with at least 5 years of creditable service.

Your Minimum Retirement Age depends on when you were born. For anyone born in 1970 or later, the MRA is 57. Those born before 1948 have an MRA of 55, with a sliding scale for birth years in between.¹

If you reach your MRA with at least 10 years of service but fewer than 30, you can retire immediately under the MRA+10 provision, but your annuity is permanently reduced by 5% for every year you are under age 62 when you retire.² A 57-year-old with 15 years of service would face a 25% permanent cut. You can avoid the reduction by postponing your annuity start date until you turn 62, though you won’t receive the Special Retirement Supplement or any COLAs during the delay.

How the Pension Is Calculated

The pension formula starts with your high-3 average salary, meaning the highest average annual basic pay you earned over any three consecutive years of service.³ Locality pay counts toward this average. Overtime, bonuses, and performance awards do not.

For most retirees, the annual pension equals 1% of the high-3 average multiplied by total years of creditable service. If you retire at age 62 or later with at least 20 years of service, the multiplier rises to 1.1%.⁴ That extra tenth of a percent adds up quickly over a long career.

Two examples make the difference clear. With a $100,000 high-3 average and 25 years of service, retiring at 57 under MRA+30 produces $25,000 per year. Waiting until 62 with the same service produces $27,500. A $150,000 high-3 with 30 years yields $45,000 at the 1% rate and $49,500 at 1.1%.

Unused sick leave gets added to your total service for purposes of computing the annuity, but it does not help you meet the minimum years needed to qualify for retirement in the first place. Verify your service computation date with your HR office well before you plan to retire, because errors in personnel records are common and can take months to correct.

What You Contribute While You Work

FERS is not free. Employees contribute a percentage of basic pay each pay period toward the pension, and the rate depends on when you were hired:

Employees hired before 2013 contribute 0.8% of basic pay.
Employees hired in 2013 (FERS-RAE) contribute 3.1%.
Employees hired in 2014 or later (FERS-FRAE) contribute 4.4%.

The deductions are automatic. Newer hires pay substantially more for the same pension, and that is one of the most significant changes Congress has made to FERS in recent years.

The TSP Match and Why 5% Is the Number to Remember

Your agency deposits an automatic 1% of your basic pay into your TSP account every pay period whether or not you contribute anything yourself.⁵ On top of that, the agency matches your own contributions on a tiered formula:

The first 3% of pay you contribute is matched dollar for dollar.
The next 2% of pay you contribute is matched at 50 cents on the dollar.

Contributing 5% of your salary gets you the full 5% in total government contributions: 1% automatic plus 4% match. An employee earning $80,000 who puts in 5% would see $4,000 of their own money go into the account, $800 from the automatic 1%, and $3,200 in matching, for $8,000 per year before investment returns.⁵ Contributing less than 5% leaves free money on the table.

Your own contributions and their earnings are always yours. The automatic 1% requires vesting, which most FERS employees complete after three years of federal civilian service. Employees in congressional and certain noncareer positions vest after two years.⁶ Leave federal service before then and you forfeit the automatic 1% and its earnings. Matching contributions vest immediately.

The Special Retirement Supplement

Retire before 62 with a full, immediate annuity (MRA+30 or age 60 with 20 years) and you receive a temporary monthly payment called the Special Retirement Supplement. It estimates the portion of your future Social Security benefit you earned during federal service and bridges the gap until you turn 62.⁷

An earnings test applies. If you work after retiring and earn more than $24,480 in 2026, the supplement is reduced by $1 for every $2 you earn above that cap. The supplement stops entirely the month before you turn 62, whether or not you file for Social Security at that point.⁷ Retirees who take MRA+10 with the reduced annuity are not eligible.

Cost-of-Living Adjustments

FERS pensions receive annual cost-of-living adjustments, but with a catch: most retirees do not receive a COLA until they turn 62.⁸ Disability retirees and survivors are exceptions. If you retire at 57 under MRA+30, your pension stays flat for five years while inflation eats at its purchasing power.

Even after 62, FERS COLAs are capped:

If the CPI increase is 2% or less, you get the full increase.
If it lands between 2% and 3%, you get 2%.
If it exceeds 3%, you get the CPI increase minus one percentage point.

For 2026, FERS retirees received a 2.0% COLA.⁹ In high-inflation years, the capped adjustment means your pension loses ground against prices, which is why financial planners emphasize the TSP as a supplement to the fixed pension.

Keeping Health Insurance Into Retirement

Most federal employees want to keep their Federal Employees Health Benefits coverage after they retire. You can do that if you retire on an immediate annuity and have been continuously enrolled in an FEHB plan, or covered as a family member, for the five years of service immediately before your annuity starts. If you had less than five years of total service, you need continuous enrollment for your entire period of service since your first opportunity to enroll.¹⁰

In retirement, the government continues paying roughly the same share of FEHB premiums it paid while you were working, and your share is deducted from your monthly annuity. If your annuity is too small to cover the premium, you can switch to a cheaper plan or pay OPM directly. Losing FEHB eligibility because of a gap in enrollment is one of the most expensive mistakes a federal employee can make. Check your enrollment history carefully before you separate.

The Survivor Election at Retirement

When you retire, you choose whether to provide a continuing monthly payment to your spouse after your death. A full survivor annuity pays your spouse 50% of your unreduced basic annuity and reduces your own monthly pension by 10% for life. A partial survivor annuity pays 25% and reduces your pension by 5%. You can elect no survivor benefit at all, but your spouse must consent to that choice in writing.

This is one of the most consequential financial decisions in the retirement process. Many retirees underestimate how much the 10% reduction costs over a long retirement, and just as many underestimate how much a surviving spouse would lose without the election. Run the numbers before you sign.

1
Office of the Law Revision Counsel. 5 USC 8412 – Immediate Retirement
2
U.S. Office of Personnel Management. What Is a Minimum Retirement Age (MRA) Plus 10 Annuity Under the Federal Employees Retirement System (FERS)?
3
Office of the Law Revision Counsel. 5 USC 8401 – Definitions
4
U.S. Office of Personnel Management. Computation
5
Office of the Law Revision Counsel. 5 USC 8432 – Contributions
6
Thrift Savings Plan. Summary of the Thrift Savings Plan
7
Office of the Law Revision Counsel. 5 USC 8421 – Annuity Supplement
8
U.S. Office of Personnel Management. Learn More About Cost-of-Living Adjustments (COLA)
9
OPM.gov. How Is the Cost-of-Living Adjustment (COLA) Determined
10
U.S. Office of Personnel Management. Annuitants – FEHB Program Handbook