Calculating a Deferred Annuity

Deferred annuities for CSRS/CSRS Offset employees are calculated the same as those who take immediate or early retirement. In other words, a deferred annuity is determined by the following formula:

  • 1.5% x high-3 x first 5 years of creditable service,
  • + 1.75% x high-3 x next 5 years of service,
  • + 2.0% x high-3 x all years of service over 10.

Note: The high-3 used will be the one in effect when the employee left government. It is not adjusted upward for any inflation that may have occurred between the time the employee left government and the time he or she applied for an annuity.

Example 1:

Age: 62

High-3: $28,000

Service: 5 years

.015 x 5 x $28,000 = $ 2,100 (7.5% of high-3)

Example 2:

Age: 62

High-3: $32,000

Service: 23 years

.015 x 5 x $32,000 = $ 2,400

.0175 x 5 x $32,000 = $ 2,800

.02 x 13 x $32,000 = $ 8,320

Result: $13,520 (42.25% of high-3)

Under FERS, just as with an immediate or early retirement annuity, a deferred annuity benefit will be based on the high-3 average salary. The benefit is calculated according to this formula: .01 x high-3 x years of creditable service.

Those who retire at age 62 or later with at least 20 years of service will have a factor of 1.1 percent used rather than 1 percent.

Example:

Age: 60

High-3: $42,000

Service: 23 years

.01 x 23 x $42,000 = $9,660 (23% of high-3)

A FERS employee who has completed at least 10, but fewer than 30 years of creditable service before leaving the government, will have his or her annuity reduced if it begins before age 62. (Exception: There is no reduction if the employee had at least 20 years of service and the annuity begins at age 60.) The annuity will be reduced by 5/12 of 1 percent (5 percent per year) for each month short of the 62nd birthday. However, to reduce or eliminate this age penalty, a deferred annuitant can postpone the annuity commencing date.

Deferred retirees under FERS are not entitled to the Special Retirement Supplement.

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