Your CSRS annuity is computed based on your length of civil service (which includes unused sick leave if you retire on an immediate annuity) and "high-3" average pay. The high-3 average pay includes locality pay and annual premiums for standby duty and availability if applicable. Other pay such as differentials, overtime, allowances and others are not included.
To determine your length of CSRS service for computation, add all your periods of creditable service, and the period represented by your unused sick leave, then eliminate from the total any fractional part of a month. Your "high-3" average pay is the highest average basic pay you earned during any 3 consecutive years of service. Generally, your basic annuity cannot be more than 80 percent of your "high-3" average pay, unless the amount over 80 percent is due to crediting your unused sick leave. Follow the guidance that follows to estimate your monthly CSRS retirement annuity.
If you are married, your annuity will be reduced automatically to provide the maximum survivor annuity for your spouse, unless you and your spouse jointly agree to provide a lesser amount or none at all. Your spouse's survivor annuity would be 55 percent of your basic annuity or any lesser amount you and your spouse agree to. Your annuity would be reduced by 2 1/2 percent of the first $3,600 in basic annuity and 10 percent of the remainder of your basic annuity. Review the information on electing a survivor's annuity and issues that you should consider before electing a reduced spousal annuity.
Your annuity is increased periodically by cost-of-living increases that occur after you retire. Your initial cost-of-living increase will be prorated based on how long you have been retired when that cost-of-living increase is granted.
For those who left federal civil service earlier in their career, cashed out their
retirement account, and then returned your time still count towards years in
service but your annuity will be reduced if you don't redeposit what you
withdrew earlier in your career.
To estimate the interest charges for deposits covering employment on or after 10/1/1982 and redeposit of refunds applied for on or after that date, are subject to an interest rate of 3 percent per year through December 31, 1984. After that date, annual interest is based on market rates.
To redeposit your contributions with interest you will need to complete a SF 2803 form. Download this form and complete Part A. Your agency must complete Part B using your official personnel (OPF) data. Print out the form and the instructions will explain what the interest charges are and how they are calculated.
You can explore all of your civil service retirement benefit options on this site and I suggest signing up for our free monthly retirement planning email newsletter. In additional to redepositing this amount visit our FAQ page for a list of what you need to do starting one year before you leave and a summary of what to expect from OPM the first three months after you leave. You will also find helpful articles on how to emotionally, physically, and financially prepare for retirement.
Previously, individuals retiring under CSRS who were employed on a part-time
basis during their final three years of service have had their annuities
computed using two different high-three average salaries. The annuity
calculation for service performed on or after April 7, 1986, utilizes what is
referred to as a “deemed high-three” average salary which is computed using the
full-time equivalent rates of pay for the high-three period. The
annuity calculation for service performed before April 7, 1986, utilizes a
high-three average salary based upon the highest rates of pay actually received
by the individual, which may be for a period prior to the final three years of
service. In other words, under law prior to this amendment, one high-three
average salary was based on the pay actually received and the other based on pay
the individual would have received assuming they worked full-time (the deemed
Section 1903 provides that the “deemed high-three” average salary will be utilized for all service, regardless of when performed. Section 1903 does not change the other provisions applicable to calculation of annuities involving part-time service. The amendment applies only to annuities based on a separation from service occurring on or after October 28, 2009.
Everyone planning their retirement needs to know how much they will have to live on in retirement and how much their spouse’s survivor benefit will be. This comprehensive spreadsheet accurately project the CSRS annuity and survivor benefit for the next 40 years. This spreadsheet accurately determines your projected monthly and annual annuity, based on a selected growth rate, with and without survivor benefit for forty years and your projected survivor’s annual and monthly annuity.
The spreadsheet also provides a list of annual COLAs going back to 1975 and provides the average 2, 5, 10 and 38 year COLA growth to give you an idea of what to use in your estimate. When I ran my numbers back in 2004 I used 2.5% and that came very close to the actual grow rate for that period. The most recent 10 year average that includes the two years that we didn’t receive an increase was 2.6% for those in the CSRS program. The average over the past 38 years is 4.1%. During the past 38 year period we had COLAs ranging from as low as 0% for two years to as high as 14.3% in 1980!
You can download and use the Projected Annuity Calculator to project your annuity growth for you and your spouse. This spreadsheet is tailored to CSRS employees that elect full survivor’s benefits however with a few minor modifications and manual calculations FERS employees will also be able to use the spreadsheet. For FERS employees the projected annuity without survivor benefit will be the same; just enter your annuity estimate, enter your age, year of retirement, what you consider to be a realistic growth rate, and the spreadsheet will calculate your annuity for the next 40 years! The column reserved for your projected annuity with survivor benefits will be slightly lower since the maximum spousal benefit is 50% for FERS, not the 55% for CSRS. Also, the full FERS annuity will cost the retiree a little more because FERS employees pay 10% of their annuity for a full survivor’s benefit where CSRS pay just under 10%. FERS COLAs are also weighted and adjusted down when the COLA exceeds 2%.
Because the CSRS plan is only offered to government employees (not the general public) it is an employer-sponsored plan, unlike Social Security and IRAs. This topic general comes up with IRA use and therefore the best information I found on the topic is in the IRS Publication 590.
Tax information about the federal retirement programs is available at: http://www.irs.gov/pub/irs-pdf/p721.pdf . You should seek the guidance of a professional tax preparation specialist or the IRS for specific tax information.