FERS 4.4% payroll deduction

[Anonymous]

For anyone who joined Fed in approx 2014 or after, we have a 4.4% FERS payroll deduction. Pardon my ignorance, but how does this work? Is it ours to claim back if we leave the government before retiring? Does it go into a joint pool to support pensions for retirees (disconnected to our own retirement and therefore not ours)? Any way to opt out of this payroll deduction?

[Anonymous]

No, you cannot opt out of FERS, and if you think you can get a better return on that biweekly deduction by investing it yourself, there’s a bridge I’d like to sell you. Your TSP deduction is the portion of your money that gets invested on your behalf. The pension deduction is a pay-in for an eventual payout. If you leave you can ask for a lump sum payout, but if you stay more than five years, you can get a pension benefit for life when you finally retire. It will be really small if you only stay a short time.

[Anonymous]

When you receive your FERS pension in retirement, you'll be able to claim your after tax contributions and not pay taxes on them again.

[Anonymous]

I think yiu can get your 4.4% contributions back with interest when you leave, if you give up your pension. I don’t think many people do it and not sure about the mechanics.

[Anonymous]

Anonymous wrote:No, you cannot opt out of FERS, and if you think you can get a better return on that biweekly deduction by investing it yourself, there’s a bridge I’d like to sell you. Your TSP deduction is the portion of your money that gets invested on your behalf. The pension deduction is a pay-in for an eventual payout. If you leave you can ask for a lump sum payout, but if you stay more than five years, you can get a pension benefit for life when you finally retire. It will be really small if you only stay a short time.

How can you calculate the pension you can get if you leave at 5, 10, 20 or 30 years?

[Anonymous]

https://www.opm.gov/retirement-center/fers-information/computation/

[Anonymous]

The FERS pension is worth the same as approximately a 4% employee contribution plus a 19% agency contribution. It's much more significant than the TSP match in terms of fully loaded total comp.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No, you cannot opt out of FERS, and if you think you can get a better return on that biweekly deduction by investing it yourself, there’s a bridge I’d like to sell you. Your TSP deduction is the portion of your money that gets invested on your behalf. The pension deduction is a pay-in for an eventual payout. If you leave you can ask for a lump sum payout, but if you stay more than five years, you can get a pension benefit for life when you finally retire. It will be really small if you only stay a short time.

How can you calculate the pension you can get if you leave at 5, 10, 20 or 30 years?

With excel and a solid understanding of the impact of assumptions of salary increases, but especially inflation, in the intervening time between retirement and collection.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No, you cannot opt out of FERS, and if you think you can get a better return on that biweekly deduction by investing it yourself, there’s a bridge I’d like to sell you. Your TSP deduction is the portion of your money that gets invested on your behalf. The pension deduction is a pay-in for an eventual payout. If you leave you can ask for a lump sum payout, but if you stay more than five years, you can get a pension benefit for life when you finally retire. It will be really small if you only stay a short time.

How can you calculate the pension you can get if you leave at 5, 10, 20 or 30 years?

With excel and a solid understanding of the impact of assumptions of salary increases, but especially inflation, in the intervening time between retirement and collection.

OPM also has a calculator: https://www.opm.gov/retirement-center/calculators/federal-ball-park-estimator/

[Anonymous]

Everyone hired after 2014 also constantly whine about 4.4%.

[Anonymous]

Anonymous wrote:Everyone hired after 2014 also constantly whine about 4.4%.

Wait, do people hired after 2014 have a different plan?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Everyone hired after 2014 also constantly whine about 4.4%.

Wait, do people hired after 2014 have a different plan?

4.4 is much higher than pre 2014

[Anonymous]

Anonymous wrote:

Anonymous wrote:Everyone hired after 2014 also constantly whine about 4.4%.

Wait, do people hired after 2014 have a different plan?

0.8% for “regular” FERS, hired before 12/31/2012.
3.1% for FERS-RAE, hired during 2013.
4.4% for FERS-FRAE, hired after 01/01/2014.

In regards to OP’s question, FERS-FRAE 4.4% feds who separate from service in their 30s & 40s now have a real decision to make about getting their pension contributions refunded (thus losing their rights to a pension at 62). At the old 0.8% contribution rate, it was a no-brainer to leave contributions in place if departing early and collect the pension once eligible.

[Anonymous]

Does having a small federal pension reduce your social security payments in retirement? If so, would it be better to cash out in advance?

[Anonymous]

Anonymous wrote:Does having a small federal pension reduce your social security payments in retirement? If so, would it be better to cash out in advance?

No a pension under FERs doesn’t affect your social security payment. (There are plenty of Feds on DCUM, and it’s also easy to google. Not sure why people who are clueless about the system routinely seem to feel the need to weigh in to speculate on these topics.)