Federal employees hired after 1983 participate in the Federal Employees Retirement System (FERS) — a three-part retirement structure that includes a defined benefit annuity, the Thrift Savings Plan, and Social Security. Veterans who transition to federal civilian employment encounter all three simultaneously, and understanding how they interact is critical for retirement planning.

Leg One: The FERS Basic Annuity

The FERS Basic Annuity is a defined benefit pension paid monthly for the rest of your life after you retire. Your annuity amount is calculated as follows, per OPM.gov:

For most FERS employees: 1% × High-3 Average Salary × Years of Creditable Service

If you retire at age 62 or later with 20 or more years of service, the multiplier increases to 1.1%.

Example: An employee with a High-3 salary of $75,000 and 25 years of service retires at 62. Their FERS annuity = 1.1% × $75,000 × 25 = $20,625/year, or approximately $1,719/month before deductions.

Military service can sometimes be credited toward FERS if you make a deposit to OPM (equal to 3% of military base pay for active duty service). This deposit makes your military years count toward both the annuity calculation and meeting service length requirements. The decision to make this deposit should be evaluated carefully with an HR specialist, as military time is already counting toward your military retirement if you have 20+ years of service.

Leg Two: The Thrift Savings Plan

As covered in the TSP Contribution Limits article, FERS employees contribute a percentage of their paycheck to the TSP. The government automatically contributes 1% and matches up to 4% of your basic pay. This is the portable, investment-driven leg of FERS — unlike the annuity, your TSP balance goes up and down based on market performance.

The TSP is where most FERS employees can build the majority of their retirement wealth if they start early and contribute consistently. The FERS Basic Annuity alone is typically not sufficient to replace pre-retirement income — the TSP is designed to bridge the gap.

Leg Three: Social Security

FERS employees pay full Social Security (OASDI) payroll taxes and are fully covered by Social Security. Active duty military service also counts as covered employment for Social Security purposes (military members pay into Social Security). You need 40 credits (typically 10 years of covered employment) to qualify for Social Security retirement benefits.

You can claim Social Security as early as 62 (at a permanently reduced benefit) or delay up to age 70 (at a permanently increased benefit). For 2025, the maximum monthly Social Security benefit for someone claiming at full retirement age is $4,018, per SSA.gov. Your actual benefit depends on your 35 highest-earning years.

The FERS Special Retirement Supplement

FERS employees who retire before age 62 (meeting years-of-service minimums) may receive the FERS Special Retirement Supplement — a payment from OPM that approximates the Social Security benefit earned during federal service. This bridge payment stops at age 62, when you become eligible for actual Social Security. It is subject to an earnings test similar to Social Security's earnings limit.

Coordination Between All Three

The three legs are designed to work together: the annuity provides a reliable monthly floor, the TSP provides investment-driven growth, and Social Security provides inflation-indexed lifetime income. FERS was deliberately designed so that no single component provides full retirement income — all three together are intended to replace approximately 70–80% of pre-retirement income for a full-career employee.

KEY TAKEAWAYS:

  • FERS annuity = 1% (or 1.1% if 62+ with 20 years) × High-3 salary × years of service
  • Paying the military service deposit to OPM can credit active duty time toward your FERS annuity
  • TSP is the portable, growth-driven leg — government match up to 5% of basic pay
  • Social Security covers FERS employees and active duty military alike; full eligibility requires 40 credits (10 years)
  • The FERS Special Retirement Supplement bridges the gap between early FERS retirement and Social Security eligibility at 62