How Much Do I Need In Savings If I Want $X Per Year In Retirement and Not Run Out of Money?

Federal employees have several retirement savings benefits at their disposal. The author explains how these can work together to create a full retirement income.

The answer everyone wants to know!! This answer differs for everyone and there is no simple, cut and dried answer because everyone’s situation is different.

Let’s take a look at how you can come up with a ballpark answer.

Four Legs of Retirement

Remember that a civil service retirement is now composed of four legs: your Social Security (for those covered under the Federal Employees Retirement System, FERS), your Thrift Savings Plan (TSP), your civil service annuity, and whatever other savings and retirement accounts you have been able to gather.

As a mathematical equation, it would look something like this:

Social Security + Civil Service Annuity + TSP withdrawal + Other Savings/Retirement Accounts = $XXXX

You should have a good idea of what you will receive monthly from two of those sources.

Social Security

You can generate an approximate Social Security income projection by visiting and accessing your account (click in top right corner where it says Sign In/Up). This is very important as it gives you an approximation of what you will receive when you retire as well as allowing you to check to see if there are any mistakes with your account. You can detect mistakes now and not when you are 3 months away from claiming benefits. The earlier the better.


The other source of income you can get an approximation for is your civil service annuity.


The formula for FERS employees depends on your age and length of service. If you are 62 or older and have at least 20 years of service, you multiply 1.1 percent of your high-3 average for each year of service. If under 62 or over 62 with under 20 years of service, you then multiply 1 percent of your high-3 average for each year of service.

Remember that this is just base pay for your high-3; it does not include bonuses or overtime. The high-3 is typically your last three years of civil service but it could be any consecutive 3 years of service. You also get credit for months worked after your anniversary work date.


For those covered under the Civil Service Retirement System (CSRS), the formula is a little different. As we all know, CSRS is more reliant on the annuity while FERS has a TSP component where they match funds up to 5%. CSRS is based on years of service. 1.5 percent of your high-3 for the first 5 years, 1.75 percent for the next 5, and 2 percent for years of service over 10.

There are some reductions and tweaks for odd cases, but for this approximation these numbers are fine. Speak to OPM if you really need a detailed estimate for your particular situation.


Next come your TSP and outside investments for which you need a withdrawal strategy (decumulation plan).

Using simple high school algebra, you can back into a plan for withdrawal of your investment accounts from the equation listed earlier:

$GOAL – Social Security – Civil Service Annuity = TSP Withdrawal + Other Savings/Retirement Accounts

The industry standard for many years in the financial community has been a 4% withdrawal rate of retirement accounts so you don’t run a chance of running out of money. More conservative circles place the number a little lower than 3%.


Let’s run a hypothetical situation just to illustrate this exercise.

Alicia is retiring as a FERS employee after exactly 31 years of service. She hopes to have $50,000 per year as income after retirement. She has elected to take Social Security early at age 62 (please consult with a financial professional prior to making this very important decision). Her High-3 average salary is $75,000. A ballpark estimate of her annuity is:

High-3 average salary X years of service X 1.1% = Civil Service Annuity

$75,000 X 31 years X .011 = $25,575

She has received documentation from the Social Security Administration that her Age 62 benefit is $1600 per month.

Social Security Benefit

$1,600 X 12 months = $19,200

Now the pieces are slowly coming together. If she adds her social security to her civil service annuity, she can identify the deficit she has in reaching her goal.

Money Needed from Savings to Meet Yearly Income Goal

$50,000 – $25,575 – $19,200 = $5,225

We need to bridge her $5,225 need by tapping her retirement accounts. Using a 2.85% withdrawal rate:

$5,225 / .0285 = $183,333

This shows a retirement account balance of $183,333 needed in order to safely withdraw $5,225 per year. This withdrawal rate should last indefinitely if returns average 2.85% per year every year.

However, we all know that market conditions vary and a financial professional would have to take action and modify this plan if there are several consecutive years of very negative market returns. No plan is static and investing involves risk. Tweaks would have to be made in almost every situation to account for inflation, market conditions, etc. Please consult a financial professional before making any decisions.

Hopefully this exercise has given you an idea of how to break down and determine how to use the different sources of income available to civil servants in retirement. You still have a myriad of other issues that have to be addressed including when do you take Social Security, tax strategies on your investments, where to invest your retirement accounts, estate planning, etc.

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. Carefully consider your investment objectives, risk factors before investing. Investing involves risk, including the possible loss of principal. Diversification and asset allocation may not protect against market risk. Nothing in this article is intended as legal or tax advice. Please consult with your independent legal or tax advisor to seek advice based on your particular circumstances. For a list of states in which I am registered to do business, please visit and search for my name.

About the Author

Alexis Hongamen founded to exclusively help civil servants with their financial planning and investment needs. As a 28 year federal employee & a Chartered Retirement Planning Counselor, he writes about financial matters of concern to federal employees and retirees. He can be reached at (407) 900-1653.