Under FERS, the cost-of-living adjustment provided (CPI minus 1%) does not completely make up for inflation if the increase in the Consumer Price Index (CPI) is more than 2%. Also, cost-of-living adjustments normally do not start until you are age 62, even if your retire sooner. CSRS is better than many other retirement plans because it provides complete protection against inflation

If you do stay with the Federal Government until retirement, you will receive good benefits based on your FERS coverage. FERS comes out ahead of CSRS if you retire late because the annuity value of your Social Security benefit and Thrift Savings Plan go up quickly if you continue to work past age 62. The Windfall Elimination Provision penalty reduces as you go from 20 to 30 years of service under FERS. The reduced cost-of-living adjustments have less effect if you retire later.

FERS lets you take most of your retirement benefits with you when you leave Federal service and add to them in your future jobs. Instead of decreasing in total value, most of your benefits will continue to grow. You'll probably earn more Social Security credits wherever you work next. Also, your contributions and attributable earnings, Agency Matching Contributions and attributable earnings, and if vested, the Agency Automatic (1%) Contributions and attributable earnings, in your Thrift Savings Plan account can be transferred to an Individual Retirement Arrangement or other eligible retirement plan. You may also leave your Thrift Savings Plan account balance in the Plan where it will continue to accumulate earnings based on your investment decisions. The part of FERS that does decrease in value, the Basic Benefit, only requires a small contribution from you. If you withdraw your Basic Benefit contributions, you receive interest on that money.

Under CSRS, to help retirement benefits keep pace with inflation, CSRS gives all those who retire annual cost-of-living adjustments or COLA's. Your retirement benefits are eligible to be increased by a cost-of-living adjustment in the year after you retire, and every year after that. The increases you receive each year actually match the rate of inflation, as measured by the Consumer Price Index (CPI).

For example, if the increase in the Consumer Price Index is 2%, CSRS retirement checks will increase by 2%. If the increase in the Consumer Price Index is 5%, the cost-of-living adjustments will also be 5%. Cost-of-living adjustments help make sure that your retirement dollars keep the same buying power year after year. CSRS is better than many other retirement plans because it provides complete protection against inflation.

However, if you leave Federal service before you are eligible for an immediate CSRS annuity, the earliest you can begin receiving monthly retirement checks is at age 62. It doesn't matter how many years of Federal service you have. While you're waiting to become eligible for your benefit, the buying power of your retirement dollars goes down because of inflation. Under CSRS, you don't receive cost-of-living adjustments until your benefits begin. Also, the monthly checks you receive will be smaller than if you had stayed in Federal service. Your annuity is calculated according to the pay and service you had when you left Federal service; it is not adjusted for pay increases that occurred after you left Federal service.

Updated 26 May 1998