A pension estimate from your agency (or online tool) can be a great way to know what you’ll get in retirement, but most estimates are far from perfect and can be misleading if you don’t know what you are looking for.
Taxes
On almost all the pension estimates that I’ve seen, the tax estimate is way too low!
This happens because most of the software that is used will calculate your taxes as if your pension were the only income you’ll have in retirement. However, that is not the case for the vast majority of federal employees who also have Social Security, Thrift Savings Plan (TSP), and other sources of income.
So if I were you, I would check your pension estimate to see if the tax estimate seems reasonable.
What Goes In
There are a number of things that go into calculating your pension including:
- Your retirement date
- Your high-3
- Your unused sick leave
- Your years of service
And if any of these things change then your pension will adjust accordingly.
Most estimates will show what dates/numbers they have going into it so you’ll want to make sure they match your actual retirement plans.
What Comes Out
There are a number of things that come out of your pension before you receive it. Other than taxes, there are also:
- Survivor Benefits
- Insurance Premiums (FEHB, FEGLI, Dental/Vision, Long Term Care)
Does your estimate reflect your correct choice of survivor benefits? Does your estimate reflect your actual plan for what insurance you are keeping in retirement?
It’s Your Life
Pension estimates can be helpful in understanding your retirement, but it is up to you to make sure everything looks right.
