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

After “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. Here are the results.

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.”

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at johnfgrobe@comcast.net to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.