Val provides valuable information about the Federal Employees Retirement System (FERS) and its special groups. In this show, you will learn about important topics such as the eligibility requirements for benefits, how to calculate retirement annuities, and strategies for maximizing your retirement savings.
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3.24.23: Audio automatically transcribed by Sonix
3.24.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Val Majewski:
Well, welcome back to the Federal Retirement show. I'm your host, Val Majewski, with American Benefits Exchange. Really appreciate you taking the time out of your schedule to view today's episode. And today we're going to be talking about special groups, so special groups of federal employees. And if you are part of one of these special groups, hopefully the general public of federal employees. So throughout this episode, we're going to go over those little those little differences when it comes to the calculations of your benefits for retirement, the contribution percentages, your eligibility differences, when it comes to actually finding out when you can retire. So let's dive into the information today and let's see more about special groups within the first system. So as I mentioned, special groupings in the FIR system are those that are not your run of the mill ordinary FIR employees. Sorry for those that I just threw into that category, but I'm saying the general public affairs employees, you can go back to our first retirement episode when we went over the eligibility and the calculation for retirement. But just to review in general, FIRS employees are those that are hired after 1983, you're automatically covered under Social Security. So that's part of the first system. And we're talking about contribution percentages first here. So first, employees in general, if you're hired prior to 2013, a traditional FIRS employee will put in 0.8% towards their retirement pension, 0.8 8/10 of 1%.
Val Majewski:
If you were happened to be hired in 2013, you're considered a first rate, which stands for revised Annuity Employees. Now, you may have heard me say this before. It's not necessarily revised annuity. It's more like revised contribution employees because you contribute now 3.1% towards the pension system. If you're hired after 2013, you're considered fers FRA, which stands for further revised annuity employees and you put even more into the pension system 4.4% towards your retirement. Now, why did I say it's not revised annuity? Because you put in more than a traditional FERS employee, but your calculation for retirement benefits remains the same. So your annuity doesn't change, your annuity is not revised, it's just simply revising your contribution percentage. Now, this was the traditional FERS retirement setup, but what happens if you're part of a special group Now? First of all, what are the special groups, generally speaking? These include air traffic controllers. So if you are part of ATC with the FAA and you are considered an air traffic controller and you are accruing good time for ATC, then you are part of a special group if you are federal law enforcement. And that could be Secret Service, Customs and Border Patrol, FBI. You could be somebody that is in federal law enforcement. You're part of a special group. If you are a federal firefighter, you are also part of this special group that we're going to be talking about today.
Val Majewski:
Now, what provisions are different within this special group? The first thing is contribution percentage towards the retirement system. So if you are in a special group when it comes to your FERS employment, your contributions that are coming out of your paycheck are going to be slightly different than those that are traditional FERS employees. They're actually a half a point or half a percentage point higher than your counterparts as a traditional FERS employee. So if you're hired prior to 2013, the older version of FERS or the sorry, the regular version of FERS or putting in 0.8, you're putting in 1.3 FERS Ray is putting in 3.6 instead of 3.1 for regular FERS, and then the FRA is putting in 4.9% instead of the regular first putting in 4.4. So I said it's a half a percentage point higher in contribution. Now why is that? Well, you have a different retirement eligibility and a different retirement calculation. I'm going to get into that next. But if you're part of these special groups, these are the contributions you're putting in. You're still putting in 6.22 Social Security. You're still putting in 1.35 to Medicare each pay period. You're just putting in a half a percentage point higher for your pension calculation. Now, what are the eligibility requirements for special groups? Well, let's just review what the regular requirements are for traditional FERS employees in order to retire with full benefits, full benefits, no strings attached, no penalties, no reductions.
Val Majewski:
You need to satisfy one of these three criteria as a FERS employee by 60 with at least 20 years of service, 62 with at least five years of service, or have 30 years of service and hit your minimum retirement age your mirror. Now that is anywhere between age 55 and 57, depending upon your birth year as a regular FERS employee. These are the requirements for full voluntary retirement as a first employee. Now, how does it work for special groups? Special groups. Slightly different. You can retire at age 50 with at least 20 years of service. You can retire at any age once you have at least 25 years of service. And there are mandatory retirement requirements for those that hit a certain age. If your air traffic control ATC, it's age 56, which is mandatory retirement for air traffic controllers, age 57 for law enforcement officers and firefighters. So if you are in the special group, these are your retirement requirements for that group. So you are putting more towards your pension contribution, but you have earlier retirement eligibility, right? Age 50 with 20 years of service. Any age with 25 forced to retire, mandatory retirement age 56 for air traffic, age 57 for law enforcement officers and firefighters.
Val Majewski:
So not just the eligibility requirements or I shouldn't say shortened, but the ages at which you can retire are younger. There's also a difference in how your retirement benefits are calculated. So let's talk about the traditional FERS employee and just review what that pension calculation looks like so you can compare it to what the special group retirement looks like. Traditional furs employee actually in both systems it starts with your high three. So that's the average of your highest three consecutive years of total base pay. Base pay plus locality. And then they're going to multiply that number by a factor of 1 or 1.1%. And this depends at what age in which you retire and how many years of service you have. If under the age of 62, they're going to use 1%, 62 or older, and you have at least 20 years of service. They'll use a little bit higher factor of 1.1%. Hey, every little bit counts and they're going to multiply that result by your years of service and you'll get your total annual retirement annuity. Now years of service for the pension calculation is going to include your actual years of service. Any military time you've purchased back and any leftover sick leave time that you have at retirement. Rule of thumb is you're going to get about 1% of your high three for every year of service.
Val Majewski:
Pretty simple for traditional FERS employee. Now, how does this change with special groups? If you're in the special group, air traffic control, law enforcement firefighter. Again, it starts with your high three, but the calculation is slightly enhanced. You are going to receive 1.7% for the first 20 years of good time under this special group, plus 1% for every year thereafter. That would be your annual retirement annuity as a member of these special groups. So what does this mean? Well, let's say that you worked for the federal government as a law enforcement officer for 25 years. 25 years, you could retire at any age. You decide. I'm out of here. I'm done. I'm going to retire. Well, they would take your high three and multiply it by 1.7% and then multiply that by the first 20 years. Then 1% of your high three for the remaining five years. That total will be your annual retirement annuity as part of that special group. As a law enforcement officer, if you don't have 20 years of service or you don't have 20 years of good time, let's say for air traffic control or something like that, you took a different job within the FAA and you didn't have 20 years. Well, it's only 1.7% for up to the first 20 years and then 1% thereafter. So understand, it can vary the way it's calculated.
Val Majewski:
It's not always 20 years max that we're using or 20 years that we're using in the calculation. It could be less than that depending upon your situation. So this is the general way in which you can calculate your special group retirement. If you're unsure about how to do the math or you're unsure if you qualify for these special groups or you just want to see how the calculation is done, we can certainly help you out. As you've seen through our previous episodes, this is what we specialize in. This is what we help federal employees out with All over the country, all different agencies is estimating retirement calculations, estimating what their retirement income is going to look like. So if you do have a question, you do have a scenario that you want us to run. Allow us to do a benefits and retirement analysis for you. Run a few reports, show you what those projections look like and and really give you that peace of mind so you can see what your future numbers will be and you can make the best decisions when it comes to when you want to retire, especially if you're in that special group and you're saying, hey, do I want to leave as soon as I'm eligible or do I want to wait until I'm mandatory and I have to leave, we can run the comparisons and show you what that looks like.
Val Majewski:
So when we take all that into consideration, we want to look at your annual pension in retirement, whether your traditional fers or part of a special group. We'll also calculate Social Security and the first supplement because that's a big thing for you all in the special groups. If you retire at age 50 with 20 years of service, well, you're a long ways away from Social Security. 12 years out, you are still eligible for that FERS supplement. And that first supplement will come to you all the way from age 50 until you are Social Security eligible at age 62. That's a pretty big bridge or a gap filler that we'll see for those that retire prior to the age of 62 with full benefits. So just because you're a special group member and you can retire well in advance of a traditional MRA, you are still eligible for and can receive that first supplement. Of course, there's TSP and the matching that you get and any supplemental accounts that you may or may not have all add up to your retirement income picture. And it doesn't matter if you're a traditional first employee or part of the special group, we want to get you to as close to 100% of your pre-retirement net income, your take home pay. Most people that we talk to want to be at or as close to as they possibly can, 100% of their net take home pay in retirement.
Val Majewski:
However, a lot of federal employees that I do talk to and hopefully this is not you, but a lot that I do talk to, fall into the 50 to 80% of their pre-retirement net income. Hopefully you're closer to 80 if you're in that category. If you are looking to see where you fall again, reach out to us. We'd be happy to go over your situation with you, run a few estimates, show you the numbers in plain black and white so you can make sure you're preparing properly to do that. Go to federal retirement. Show.com there's a form that you can fill out. It'll come directly to us and we'll be happy to reach out to you and go over all that information with you. Well, I really do appreciate you taking the time to join me for this episode and learn more about special groups, especially the special groups that are part of the FERS retirement system. My name is Val Majewski with American Benefits Exchange. Again, I really do appreciate you checking out our show. Please tune into all of our future shows as well as go back and learn as much information as you can from our previous episodes. Thank you again and look forward to talking to you real soon.
Producer:
Do you want to be a jet setter in retirement? Keep an eye on how much you're spending. I'm Matt McClure with the Retirement.Radio Network. Powered by Amara Life. Pretty much everyone loves saving money, but that doesn't mean you can't pack your bags and see the world. This year. There are some simple steps you can take to reduce costs while still checking off your travel wish list. One thing to consider traveling during the off season peak season will always be more crowded and more expensive. So take that trip to the beach in the early fall when the weather is still warm, but the kids are back in school. While the timing of your trip is important, so is when you book Mark with a popular travel focused YouTube channel. Walters World says you should book as far in advance as possible.
Mark with Walters World:
I know, for example, in Germany, if you pre-book your tickets on the train, it's a significant discount than if you buy at the same day. So make sure you use that advantage of doing things beforehand, whether it's a hotel room or it's tickets to a show or it's tickets to transportation, it can make a big difference. So use those discounts you can get by booking early.
Producer:
Also look for deals on flights and hotels through discount sites. Consider booking a rental home or apartment instead of a hotel, and think about taking public transit instead of a cab or ride share. So have you considered all the ways to cut your travel costs this year? It's a key question to consider, and it's one of the 23 retirement cost cutters for 2023 with the Retirement.Radio Network powered by AmeriLife. I'm Matt McClure. Like what you're.
Producer:
Hearing? You can watch the show, too. Just go to YouTube.com and search the federal retirement show to watch clips from this program.
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