By Reg Jones
February 5th, 2013 | Uncategorized
Q. I am a GS-12 FERS eligible employee with five years of service and am 46. I receive a military retirement of $21,684 per year for 20 years of service and plan to work an additional 10 years until age 56, for a combined total of 40 years with (if) converted military retirement credit, which would be based solely on your actual years of FERS service.
According to my calculations, a FERS retirement at 56 would provide $32,000 per year (40 years x .01 percent x $80,000), minus a 30 percent reduction of $9,600 due to the age penalty, leaving $22,400 yearly. Additionally, the special retirement supplement would provide an additional ~$2,000 per month ($24K per year), for a total retirement of $46,400 per year. If this calculation is correct, I estimate a retirement increase of $24,716 per year over my current military pension, which would be the correct course of action from a financial planning standpoint. Am I correct?
A. I won’t check your arithmetic. Instead, I’ll explain how your annuity would be computed using the two scenarios you laid out.
If you don’t make a deposit for your active-duty service, you would be retiring under the MRA+10 provision. As a result, your annuity would be reduced by 5/12 percent per month (5 percent per year) that you are under age 62. In addition, you wouldn’t be entitled to the special retirement supplement. No one who retires under the MRA+10 provision is.
If you make a deposit for your active-duty service and waive your military retired pay, you would have the age and service needed for an immediate, unreduced annuity. And you would receive the special retirement supplement.
The formula used is both cases would be .01 x your high-3 x all years and full months of service.
February 5th, 2013 at 4:37 pm
Check your math because I only count 35 years with the numbers you give here. The SRS retirement supplement is probably going to be much lower than 2000 per month since it is calculated from your FERS time and not your total employment time. Also, don’t forget to account for the money you will pay for the buy back, which will probably be over 20,000 dollars. That should be part of your decision on which direction is better. It’s worth doing the investigation though. You want to find out what the buy back is going to be right away.
February 5th, 2013 at 4:42 pm
Correction, the buy back will likely be between 15 and 20 thousand not counting potential interest.