# FERS Vs. CSRS: When A Little Adds Up to a Lot

on September 15, 2011 with

After the article When Small Savings Add Up to a Lot of Money appeared in Fedsmith, I was contacted by a couple of FERS employees who wondered what the results would have been for a FERS employee.

In the original article I used the example of a CSRS employee who made \$30,000 in 1987 and \$60,000 today, began contributing at a 5% rate and remained invested in the G fund the entire time. That individual would have roughly \$120,000 today and would receive \$6,000 in annual income (\$500 per month), basing withdrawals on a 5% rate that could be indexed for inflation.

To find out what a FERS employee would have in the TSP today I looked at two scenarios. The first one was that the FERS employee contributed the same 5% as his/her CSRS counterpart. The second was that they contributed the 10% that they were allowed to contribute at that time. In both of these scenarios, I assumed that their contribution rate did not increase. Also, in both scenarios, I assumed they were in the G fund for the entire period.

In the 5% scenario, the FERS employee would have twice as much as the CSRS employee. This is due to Uncle’s 5% match. This would give the employee roughly \$240,000 in their account today and an annual income of \$12,000 (\$1,000 per month)

In the 10% scenario, the FERS employee would have three times as much as the CSRS employee. This would give the employee roughly \$360,000 in their account today and an annual income of \$18,000 (\$1,500 per month).

All of these individuals could have had more in the TSP if:

• Their salary grew more quickly than I assumed.
• They increased the percentage he saved once CSRS employees were allowed to contribute more than 5%.
• They had diversified their holdings to other funds. The three “original” funds grew as follows since their inception on April 1, 1987:
• The F fund returned 7.34%
• The G fund returned 5.93%
• The C fund returned 9.78%

In all instances, twenty four years of investing in the TSP proved that, as renowned financial planner Mick Jagger once commented, “time is on (your) side.”

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