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

By on September 15, 2011 in Current Events, Retirement with 28 Comments

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.”

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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