Please explain federal pensions

[cannotWAIT]

I know we have a lot of federal employees and retirees here. I am ready for a job change and intend to look exclusively for jobs that provide a pension, so probably state or federal government. Due to my age, it won't ever be very much, but it would still make a big difference to my standard of living.

So anyway--the federal pension system. So complicated! Would anyone be able to tell me what my pension would be if I am 56 now, retire at 62, and earn (for the sake of simplicity) $75,000 for each of those years?

[charis]

~$4,500 per the calculator

https://retireinstitute.com/fers-calculator/

[wenchsenior]

The calculator is years of service x average of 3 high salary x 1.1% multiplier.

[cannotWAIT]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

[charis]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

You wouldn't even qualify for a pension after 4 years. That's a 6 year of service calculation. Vesting is 5.

The state vesting could be longer depending on the state, but I haven't seen less than 5.

[wenchsenior]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

You wouldn't even qualify for a pension after 4 years. That's a 6 year of service calculation. Vesting is 5.

The state vesting could be longer depending on the state, but I haven't seen less than 5.

Yes, that's true.

[wenchsenior]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

Yes, the federal bennies are nice, but not NEARLY as nice as the laypublic seems to believe.

Like 'free' healthcare, LOL.

[cannotWAIT]

I know your example was for six years of service. I was talking about service in state government work (some do vest after four years).

[Michael in ABQ]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

Yes, the federal bennies are nice, but not NEARLY as nice as the laypublic seems to believe.

Like 'free' healthcare, LOL.

There's also a 5% match for the TSP (federal 401k). I worked for the federal government for a few years but I cashed in my pension as it would have been maybe $350/month if I bought back some military service - but I wouldn't start collecting it for 20+ years. A few thousand dollars today is far more valuable.

[charis]

I know your example was for six years of service. I was talking about service in state government work (some do vest after four years).

So get a state job if you can find a better payout in less time if you can find such a gig. Not sure why you had higher expectations of a federal pension.

[Runrooster]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

[mistymoney]

~$4,500 per the calculator

https://retireinstitute.com/fers-calculator/

less than 5k/year? That doesn't seem like very much at all.

OP - is this really enough to make the move payoff? Given everything about your situation?

I left one job, non gov, non profit, just about 10 months before vesting and I think my pension would have been something like 3-400/month. I was moving to a job that was going to pay about 15-20k more and that seemed the better move to me at the time. Hindsight, maybe not! I went from 4 weeks vacay to 2, and ended up at a level where evenings and weekends were a required part of the job. Some benefits lower too. But the 401k match went from a flat 500 at the non profit (due to pension of course, which I never got anything) to 4% match which at that time for me was about 3k/year.

In the current economic environment, pensions seem extremely attractive. Surity, and if they are indexed to inflation, that is fantastic.

But when inflation is low and the stock market is surging, a smaller pension value doesn't seem quite so attractive. At least it didn't to me back in the day!

[wenchsenior]

Is it that simple? I was boggled by all the information on the sites I checked! Well this is very interesting, because that's a lot less than I would get after working only four years in state government.

Yes, the federal bennies are nice, but not NEARLY as nice as the laypublic seems to believe.

Like 'free' healthcare, LOL.

There's also a 5% match for the TSP (federal 401k). I worked for the federal government for a few years but I cashed in my pension as it would have been maybe $350/month if I bought back some military service - but I wouldn't start collecting it for 20+ years. A few thousand dollars today is far more valuable.

The TSP is far and away the best benefit of working for feds. Decent investment options, staggeringly low fees.

[charis]

The OP is looking to work 6 years of service into a system that's geared for 30 years of service in combination with TSP, which includes a 5% match.  This should not be surprising.

[JJ-]

The other added benefit of retiring at 62 or MRA with the federal government is to keep the health plans which eliminates a source of stress for those relying on ACA and the politics surrounding it. Check out OPMs health insurance page for the range of health plans and premiums.

[Fomerly known as something]

In the Federal system most people who are looking for end of working career jobs aren’t in it for the pension, they are in it for Federal Employee Health benefits which could be a great deal if one has a much younger spouse.

[cannotWAIT]

~$4,500 per the calculator

https://retireinstitute.com/fers-calculator/

less than 5k/year? That doesn't seem like very much at all.

OP - is this really enough to make the move payoff? Given everything about your situation?

I'm looking to change jobs anyway, and assuming I would be earning at least as much as I am now, it does seem worthwhile to me, because it's going to be a fairly lean retirement regardless.

[Fomerly known as something]

I know your example was for six years of service. I was talking about service in state government work (some do vest after four years).

I was a former state (Calif) government employee and in many cases state pensions are similar to Fed pensions which is the amount you get after vesting (usually 5 years) is based on your years of service and highest pay. However even in Calif many agencies have different pensions with different pay percent (2% at 55, 2.5% at 62, 3% at 50, etc), different ages you can start to collect to get full benefits, different retiree medical benefits, different  vesting times, etc. So you'll need to see what the pension benefits for the agency you would work at would be. For instance I had a CalPERS public safety pension rather then a regular state pension and could retire at age 50 and receive a 2% at 50 benefit after 5 years to vest. Where as the normal CalPERS was 2% at 55 (now 2% at 62 I believe) with different vesting times. And while I could get my pension at 50 after only working 5 years (it would be a tiny amount) I would have had to work a full 20 years to receive retiree medical.

Most CalPERS pensions require the employee to pay a percent into their pension (mine was 7%) and now most also require you to pay into the SS system as well. If you have a pension that doesn't pay into SS but have had other jobs that did, when you collect your SS benefits you'll be likely be subject to the Windfall Elimination Penalty (WEP) on you SS benefits which will reduce them by a few hundred bucks per month.

ETA: Also like the Fed's, many state pensions allow you "buy back" time (service credits) to add years to your pension for military time (max is usually 4 years buy back) and other public service job times. I worked approx 10 years at my state job and bought back 4 years of my 12 years of military time (tax deferred) to add to the pension. I pulled the plug on the state job about a decade before I was old enough to collect a pension and choose to leave it in the system where it continued to earn interest.

FERS federal pension lets you buy back military time.

[tj]

The calculator is years of service x average of 3 high salary x 1.1% multiplier.

It should be a 1% multiplier. You only get the 1.1 if you work for 20 years and hang around until after 62.

The big perk is working for 5 or more years and retiring at 62 is that you get subsidized FEHB for life.

[Villanelle]

~$4,500 per the calculator

https://retireinstitute.com/fers-calculator/

less than 5k/year? That doesn't seem like very much at all.

OP - is this really enough to make the move payoff? Given everything about your situation?

I'm looking to change jobs anyway, and assuming I would be earning at least as much as I am now, it does seem worthwhile to me, because it's going to be a fairly lean retirement regardless.

In most cases, civilian jobs pay more, so it seems worth exploring civilian options.  Even if they have no pension, if the compensation is significantly higher, you may end up better off. 

[Archipelago]

Posting to follow. My wife is a new federal VA employee and considering staying 20+ more years. She's a doctoral level psychologist and will be making about $75k salary next year. They also have a program to forgive all her student loans after 10 years of service (120 loan minimum payments). Her loan balance is something to the tune of $180k so that's sizable.

Her health insurance plan is the kicker. For her and me, it costs $294/month for a HDHP with annual deductible $3000. The plan also contributes an extra $150/month to an HSA and gives you bonuses for getting basic vaccinations and health checkups. When I read the plan details this insurance honestly felt like it was too good to be true. We're effectively paying $144/month for amazing insurance.

Pension is another thing they're offering starting next year when she's a full staff member in her discipline. It takes 20 years to vest and would give her 40-50% of her top 3 average highest earning years.

I think any non-salary benefits should be heavily considered for OP and any other people considering government jobs, especially because they happen to be tax effective as well.

Another thing to include in that is time and holidays off because they're worth quite a lot.

[Michael in ABQ]

The main downside I found working for the federal government was a significant number of my coworkers specifically choose that as a job they could just coast in. There were some hard workers and people who could have done well in the private sector. But there were also a lot of lazy worthless people who could basically never be fired as long as they didn't do anything egregious.

A good friend of mine went to work for Tesla several years ago and he described it as being surrounded by the top talent - everyone around him was in the top 10-20%. I feel like government jobs attract the opposite end of the spectrum - albeit the initial hiring process does tend to weed out most people who are truly incompetent.

Also, computer/technology systems and business processes are going to be a decade or two behind the private sector. It's like anyone who has ever built software for government use made sure no one with any ounce of UX (user experience) knowledge was let anywhere near the interface. Nothing was ever straightforward or intuitive. Everything was made to be overly complicated - probably so they could then sell training to the government as an ongoing service.

[wenchsenior]

The main downside I found working for the federal government was a significant number of my coworkers specifically choose that as a job they could just coast in. There were some hard workers and people who could have done well in the private sector. But there were also a lot of lazy worthless people who could basically never be fired as long as they didn't do anything egregious.

A good friend of mine went to work for Tesla several years ago and he described it as being surrounded by the top talent - everyone around him was in the top 10-20%. I feel like government jobs attract the opposite end of the spectrum - albeit the initial hiring process does tend to weed out most people who are truly incompetent.

Also, computer/technology systems and business processes are going to be a decade or two behind the private sector. It's like anyone who has ever built software for government use made sure no one with any ounce of UX (user experience) knowledge was let anywhere near the interface. Nothing was ever straightforward or intuitive. Everything was made to be overly complicated - probably so they could then sell training to the government as an ongoing service.

This is so radically different from the group of feds that I know (but they are all scientists and mostly intensely intrinsically driven people). My husband has months of leave built up every year, but is such a workaholic he rarely takes more than week or two around the holidays. He's working right this minute (7 pm on a Saturday night), in fact, and will likely up to the minute I call him for dinner.

Most of the federal cohort I know is like that.  Also, at least in the science divisions, the barriers to entry are quite high, so it really does weed out the less talented. My husband needed a doctorate to even apply for his job, and wouldn't have been seriously considered without a post doc.

I suspect the work ethic differs pretty dramatically among subsectors of the feds. I could totally see 'coasting' being pretty common among admin and support staff.

ETA: I 100% agree a lot of the infrastructure and training requirements and so on are super burdensome and outdated.

[Michael in ABQ]

The main downside I found working for the federal government was a significant number of my coworkers specifically choose that as a job they could just coast in. There were some hard workers and people who could have done well in the private sector. But there were also a lot of lazy worthless people who could basically never be fired as long as they didn't do anything egregious.

A good friend of mine went to work for Tesla several years ago and he described it as being surrounded by the top talent - everyone around him was in the top 10-20%. I feel like government jobs attract the opposite end of the spectrum - albeit the initial hiring process does tend to weed out most people who are truly incompetent.

Also, computer/technology systems and business processes are going to be a decade or two behind the private sector. It's like anyone who has ever built software for government use made sure no one with any ounce of UX (user experience) knowledge was let anywhere near the interface. Nothing was ever straightforward or intuitive. Everything was made to be overly complicated - probably so they could then sell training to the government as an ongoing service.

This is so radically different from the group of feds that I know (but they are all scientists and mostly intensely intrinsically driven people). My husband has months of leave built up every year, but is such a workaholic he rarely takes more than week or two around the holidays. He's working right this minute (7 pm on a Saturday night), in fact, and will likely up to the minute I call him for dinner.

Most of the federal cohort I know is like that.  Also, at least in the science divisions, the barriers to entry are quite high, so it really does weed out the less talented. My husband needed a doctorate to even apply for his job, and wouldn't have been seriously considered without a post doc.

I suspect the work ethic differs pretty dramatically among subsectors of the feds. I could totally see 'coasting' being pretty common among admin and support staff.

ETA: I 100% agree a lot of the infrastructure and training requirements and so on are super burdensome and outdated.

My experience was DoD and I worked mostly on the admin/finance/support side. There you have the issue that due to veteran preference most people are prior service (myself included) and they can crowd out more qualified candidates. I did work tangentially with some more science and engineering-oriented people and you definitely had some top performers there. It can also provide opportunities that don't exist in the private sector. But if you're pushing papers - doing it as a fed is a pretty cushy gig.

[Fomerly known as something]

The main downside I found working for the federal government was a significant number of my coworkers specifically choose that as a job they could just coast in. There were some hard workers and people who could have done well in the private sector. But there were also a lot of lazy worthless people who could basically never be fired as long as they didn't do anything egregious.

A good friend of mine went to work for Tesla several years ago and he described it as being surrounded by the top talent - everyone around him was in the top 10-20%. I feel like government jobs attract the opposite end of the spectrum - albeit the initial hiring process does tend to weed out most people who are truly incompetent.

Also, computer/technology systems and business processes are going to be a decade or two behind the private sector. It's like anyone who has ever built software for government use made sure no one with any ounce of UX (user experience) knowledge was let anywhere near the interface. Nothing was ever straightforward or intuitive. Everything was made to be overly complicated - probably so they could then sell training to the government as an ongoing service.

This is so radically different from the group of feds that I know (but they are all scientists and mostly intensely intrinsically driven people). My husband has months of leave built up every year, but is such a workaholic he rarely takes more than week or two around the holidays. He's working right this minute (7 pm on a Saturday night), in fact, and will likely up to the minute I call him for dinner.

Most of the federal cohort I know is like that.  Also, at least in the science divisions, the barriers to entry are quite high, so it really does weed out the less talented. My husband needed a doctorate to even apply for his job, and wouldn't have been seriously considered without a post doc.

I suspect the work ethic differs pretty dramatically among subsectors of the feds. I could totally see 'coasting' being pretty common among admin and support staff.

ETA: I 100% agree a lot of the infrastructure and training requirements and so on are super burdensome and outdated.

I think I lie somewhere in between.  In my field, I now know what is important and will work 24+ hours straight on it if necessary, but busy work.  Um I totally coast with it.

[Runrooster]

I hate long quotes but I agree 100% with Michael in ABQ about the quality of most feds. I was almost an outcast because I didn’t spend hours chit chatting. There are strict qualification standards but they were regularly ignored. I begged to be allowed to apply - just get my name in front of the hiring manager- for mid level jobs based on my academic credentials, as I was legally allowed to. The job went to someone who didn’t legally meet the standards. And the person I was objecting literally wrote the standards for our profession. I sound more bitter than I am, but it was the writing on the wall to leave. I won’t say it was 100% favoritism but 80% of the staff was not technically allowed to be at the salary scale they were, so someone somewhere was justifying their promotions.  So it was pretty clear that they weren’t “our hands are tied” from giving me a chance.

I have two family members who are both reasonably intelligent and hard working in theory, but completely coast through their (technical) federal jobs. Wfh is a joke. I’d peg each of them as putting in 10-15 hours a week of work beyond face time.

[DeniseNJ]

The other important thing about the health insurance in retirement is that currently FEHB is one of the only insurance that does not require you to take (and pay for) Medicare when you become eligible.  Most other insurance make you take Medicare at age 65 so that they can be the secondary payer.

[tj]

The other important thing about the health insurance in retirement is that currently FEHB is one of the only insurance that does not require you to take (and pay for) Medicare when you become eligible.  Most other insurance make you take Medicare at age 65 so that they can be the secondary payer.

The Postal Service requires one to take Medicare now though (as does the Military), so it's not unlikely that FEHB eventually follow suit. Just depends on Congress.

[TomTX]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

[rpr]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

These days for new employees hired after 2014, the employee contribution rate is 4.4%. People hired before 2013 pay a (grandfathered) rate of 0.8%.

[wenchsenior]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

New hires I believe it's 4.5-5%, but I might have outdated info.

ETA: Jinx for almost identical posting time.

[nouseforausername]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

These days for new employees hired after 2014, the employee contribution rate is 4.4%. People hired before 2013 pay a (grandfathered) rate of 0.8%.

Does anyone know if a Fed FTE hired prior to 2013 has a break in service and returns to Fed govt, they'll still be at .8%?

I've pondered that for a while now, re: Whether I could leave Fed service for a decade or two of FIRE, and return later on for 5 years prior to retirement age and have my high three calculation adjusted for inflation, and still only pay .8.

[rpr]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

These days for new employees hired after 2014, the employee contribution rate is 4.4%. People hired before 2013 pay a (grandfathered) rate of 0.8%.

Does anyone know if a Fed FTE hired prior to 2013 has a break in service and returns to Fed govt, they'll still be at .8%?

I've pondered that for a while now, re: Whether I could leave Fed service for a decade or two of FIRE, and return later on for 5 years prior to retirement age and have my high three calculation adjusted for inflation, and still only pay .8.

I believe the answer is that if you started before Jan 1 2013 you can keep the 0.8 % rate. The information is as usual not easy to find.

https://www.opm.gov/blogs/Retire/2013/5/13/FERS-Revised-Annuity-Employee-FERS-RAE/

You should check with your HR. It's possible that there are additional rules.

[tj]

Don’t forget to include how much a new federal employee now has to pay IN to the system.

How much? 9.5% of my salary gets skimmed off the top for my non-inflation-adjusting state pension.

These days for new employees hired after 2014, the employee contribution rate is 4.4%. People hired before 2013 pay a (grandfathered) rate of 0.8%.

Does anyone know if a Fed FTE hired prior to 2013 has a break in service and returns to Fed govt, they'll still be at .8%?

I've pondered that for a while now, re: Whether I could leave Fed service for a decade or two of FIRE, and return later on for 5 years prior to retirement age and have my high three calculation adjusted for inflation, and still only pay .8.

Yes, though some people have probably been processed incorrectly and eventually it gets fixed.

[Weathering]

No inflation adjustment of past wages that Im aware of. High three years is high three years.

[nouseforausername]

No inflation adjustment of past wages that Im aware of. High three years is high three years.

Exactly my understanding too. I'm just saying that returning to Fed service after a long break in service would have the effect of raising the high 3 calculation that was eaten away all the time by inflation --depending on new salary, # of years worked during new tour.