The Federal Employees Retirement System, a.k.a. “FERS,” is the special retirement plan that all U.S. civilian employees (think: federal government workers, with the exception of military; they’ve got their own thing) are entitled to. If this is your first time hearing about it, that’s probably because you’ve been floating around in the private (rather than public) work sector.
So what's all the fuss about FERS? Want to know what your Congressmen and women are getting in retirement, even if they do a bad job at getting anything done? Federal workers have a fixed-amount pension plan, meaning the money they put into the system doesn’t determine what they get out of it later (which is how it is in the private sector).
So how is that amount of retirement benefits determined? The longer you’re “serving” the federal government, the more you’ll get, and the higher up you are, the more you’ll get. There’s something in the federal public sector called the “high-3,” which is the highest-ranking federal job you’ve had for three years. Since most people climb the public ladder (just as folks climb the corporate ladder), their high-3 is usually their last job before they retire (or move to the private sector).
The basic calculation for the Federal Employee Retirement System is: High-3 salary x Years on the job x Pension multiplier = Annual pension payout. That doesn’t include any bonuses, overtime, or other extras, but them's the basics of FERS.
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Finance: What is a Pension?31 Views
finance a la shmoop. what is a pension? well it rhymes with tension, and likely
for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]
another state employees pension that's backed up by a state that's going
bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people
well a pension is another term for a retirement fund. but what's special about
a pension is that the employer essentially forces you to put away money
for your retirement and then they invested for you.
how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]
employed ditch-digger might get a contribution of say 10 grand a year into
her pension, and that's each year 10 grand of forced savings for as long as
she you know digs ditches for the state. and in some states where the unions are
strong in the governing financial knowledge is weak the government
guarantees a minimum financial return on the pension investment made on behalf of
the employees. that is in California for example the state guarantees a 10% per
year return on their invested pension savings. if the invested return like [equation]
investing it in Wall Street and stocks and bonds and private equity funds and
all that stuff well if that invested return is less than that number less
than that 10%, then the state rights to the pinch and a check to cover the
incremental difference. yeah it's a huge Delta and it's well pretty much why you
a Californian Illinois you're going bankrupt remember. Jesus Saves
but Moses invests. [ Moses, holding stone tablets glares and demands interest]
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