There are many facets to consider for the retiring federal employee. It’s one of the more complex processes to navigate. Having helped hundreds of federal employees plan for and retire with strong, healthy retirement packages, I noticed a set of common misconceptions that arise in most situations. If we get this right, you’ll be on a better track for retirement. So, let’s dive in and discuss the top 3 mistakes I commonly see made when reviewing a Benefits Report.
Misconception #1: TSP Match and Full Contributions
This one always puzzles me, but I see this more commonly than you may think: Folks not contributing enough into TSP to get the full match. This is free money!
How do you get the full match? TSP automatically puts 1% into your TSP whether you’re contributing or not. The next 2% you get 100% match and the 2% after that the 50% match, so in total you would have to put in 5% to get the full match.
Now, what many Feds don’t realize is that this match gets paid each pay period, so if you max out early you could lose out on some of the government contributions. To avoid this, plan your contributions to stretch out across the year.
Misconception #2: Understanding the High-3
As if federal benefits weren’t already complicated enough—they call the “high-36” the “high-3.” What does that even mean?
Your pension is calculated as 1% × your high-3 × your years of service, but when you dig into it, the “high-3” is actually the average of your highest 36 consecutive months of basic pay over your entire career.
That might sound straightforward at first, but here’s where it gets tricky. The high-36 isn’t just an average—it reflects the time you were actually earning each salary.
We don’t need to dive into all the math here, but let me give you a common example. Let’s say a federal employee plans to retire on December 31 to maximize their annual leave payout, but then, a pay raise is announced for the following January. Suddenly, they’re tempted to push their retirement back to the end of January to include that new raise in their high-3.
Here’s the catch: the “high-3” is really a high-36. So yes, if they retire at the end of January, the higher pay would technically be included in their high-36 average—but it would only account for one of the 36 months. Not one-third, so the impact on their pension would likely be far smaller than expected if they misunderstood how the calculation works.
Misconception #3: Getting Credit for Prior Government Service You Haven’t Paid Back
RSCD vs. SCD (gotta love government acronyms!). You’re probably familiar with SCD (service computation date) and it’s often noted on your leave and earnings statement (LES). Lesser known is RSCD, which stands for Retirement Service Computation Date.
Are these the same? Oftentimes they are. But in many cases, they are not. The SCD on your LES is for leave accrual purposes. This can be different from your RSCD for several factors. First, internship or part-time work program while still in school, and second, credit for prior service outside the government.
Let’s say you worked for the government earlier in your career, then left and took your retirement contributions with you. You haven’t paid that money back, but now you’re back in federal service. What happens to that time? Well, in a lot of cases, your agency might still give you credit for that service for leave accrual purposes. That means you might start off earning 8 hours of leave per pay period instead of 4; great news, right?
But when it comes to retirement, that time doesn’t automatically count. What really matters here is your RSCD, or Retirement Service Computation Date. That’s the number used to figure out your pension, and if you haven’t made a deposit to repay that earlier service time, it won’t be included in your retirement calculation—even if it shows up in your SCD.
Here’s an example: say you did a year of intern work with the government while you were in college—maybe during summer and winter breaks. After graduation, you come on board full-time and work hard your whole career. You track your SCD, plan to retire at your MRA (minimum retirement age) with 30 years of service, and everything looks on track. You hit 57, submit your retirement paperwork, and walk out the door. But then HR calls and says, “You’re not eligible yet—you need to come back to work.”
Wait… what?? It’s because that intern time wasn’t counting toward your annuity. You never made the deposit. And unless you do, it won’t count—even though it felt like it was.
So how do you avoid surprises like this? Your payroll/retirement systems like GRB, Mypay, etc. should allow you to run retirement estimates; those reports will show the RSCD your agency has on file for you. If that number is different, based on the reasons above, then you should consider submitting an SF 3108 Application to make a service credit.
Conclusion
These tips will help ensure you walk away with a full and healthy retirement package. The last thing anyone wants is to have to come back to work after thinking they were done.
We routinely see other benefit-related mistakes too, even from folks who feel like they know their benefits inside and out! And that’s totally understandable; these rules are complicated.
That’s why we take the time to learn the details and explain them clearly. Because we want every federal employee to meet to maximize their benefits; you’ve earned them, and you deserve to get the most from them.
Prepare. Plan. Prosper.
James “Wes” Battle is a Financial Planner offering securities through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. 2101 Gaither Rd., Ste 600, Rockville, MD 20850.
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
