The Ultimate CSRS Retirement Planning Guide

If you’re a federal worker approaching retirement age, you probably worry about whether your retirement benefits will enable you to live your Golden Years in comfort and security.

While the Federal Employees Retirement System covers new federal employees, older workers are under a different retirement plan called the Civil Service Retirement System (CSRS).

This guide will cover all the important facts you need to know about the Civil Service Retirement System, including eligibility, benefits, and retirement age.

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What is the Civil Service Retirement System (CSRS)? 

The Civil Service Retirement System (CSRS) is the federal government’s original pension plan for civil servants. Congress created the retirement system through the Civil Service Retirement Act of 1920. 

The Civil Service Retirement System is a defined benefit contributory retirement system. This means that a portion of a federal employee’s basic pay is withheld and deposited in the Civil Service Retirement Fund. The employing agency also contributes its share.

At the end of their service, CSRS retirees get their contributions paid back to them in the form of monthly retirement annuity payments. The annuities provided under the Civil Service Retirement System are adjusted for inflation. They are intended to completely cover federal workers’ cost of living and guarantee the same quality of life they enjoyed during federal service.

What’s the Difference: CSRS vs FERS?

In the mid-1980s, the federal government began phasing out the Civil Service Retirement System (CSRS). All federal employees hired after 1983 are covered by the Federal Employees Retirement System (FERS).  

CSRS retirement benefits only have a single source. Because the Civil Service Retirement System predates social security, the CSRS annuity is intended to cover all retirees’ living expenses in old age.

CSRS employees do not pay into social security and do not receive social security benefits when they retire unless they also worked in the private sector.

CSRS employees automatically pay retirement deductions of between 7 to 8 percent of their basic pay into the Civil Service Retirement Fund and a Medicare tax of 1.45 percent.

The employee’s CSRS contributions are matched by their agency. They also have the option to increase their annuity by paying up to 10 percent into a voluntary contribution account.   

By contrast, the Federal Employees Retirement System has three benefit sources:

• Basic Benefit Plan: The basic benefit is a defined benefit plan similar to a traditional pension where the employing agency withholds a portion of federal employees’ basic pay each pay period. It is smaller than the CSRS withholding because FERS employees receive benefits from other sources
• Social Security Benefit: Unlike civil servants covered by CSRS, federal employees covered by FERS must pay social security taxes and derive a share of their retirement benefits from social security.
• Thrift Savings Plan (TSP): All new federal employees are automatically enrolled in a tax-deferred voluntary contribution account called the Thrift Savings Plan. The TSP works like a 401(k) in the private sector. Employees can opt to put their retirement savings in a range of investment funds and take their TSP money with them if they leave federal service.

CSRS Retirement Benefit Categories

The Civil Service Retirement System has five benefit categories with different age and service requirements:

• Optional: You may receive optional deferred retirement benefits if you do not meet both the requirements for age and years of creditable service needed to receive immediate benefits. You must be 62 and have at least five years, 60 with 20 years, or 55 with 30 years.   
• Special/Early Optional: When an agency is undergoing a transformation or significant reduction in force, the Office of Personnel may authorize employees to retire early. However, benefits will be reduced if a person retires before 55. 
• Special Provision: Employees with special provision jobs like air traffic controllers and law enforcement may retire at age 50 with 20 years of service.
• Discontinued Service: If you were laid off but were not terminated for misconduct, you may accept early retirement at any age if you have at least 25 years on the job or at age 50 with 20 years.
• Disability: If you develop a permanent disability that cannot be accommodated, you can retire at any age with at least five years of service. 

CSRS Offset 

In 1987, Congress created the CSRS Offset for certain federal employees who left federal service for at least one year and returned. To qualify, government employees had to have worked in civilian service for at least five years before January 1, 1987.

CSRS Offset employees have social security and CSRS coverage. Their employee contributions are reduced or offset by the amount they pay in social security taxes (6.2 percent of pay). Agencies generally pay about 7 percent for the government contribution portion of CSRS Offset employees’ retirement funds.

Like CSRS employees, CSRS Offset employees may opt to contribute to a Thrift Savings Plan. 

Estimating Your CSRS Retirement Annuity

Your retirement benefit is calculated based on two factors:

• Years of creditable civilian service 
• Your “high 3” salary average

Creditable service is calculated from the year you entered service to the day you retired. The “high 3” salary is the average of your three consecutive highest-paying years.

Federal compensation is based on a pay schedule that rewards longevity, so your “high 3” is almost always your last three years on the job unless you were demoted toward the end of your career.

CSRS Retirment Calculator

 Your annuity is a percentage of your “high 3” salary multiplied by each year of service. The percentage goes up the longer you work, with a maximum annuity of 80 percent. You must work nearly 42 years before retirement to reach the maximum.

To estimate your retirement annuity consult the following table from the Office of Personnel Management:

Benefit Formula for Special Positions  

Certain federal employees receive additional benefits when they retire, including:

• Air traffic controllers
• Federal law enforcement officers
• Nuclear materials handlers
• Capitol police officers
• Supreme Court police
• Firefighters

For the job categories above, the following formula is used:

Annuity Reductions

According to the Office of Personnel Management, your annuity may be reduced in the following circumstances:

• If you retire before 55, 1/6th of 1 percent will be deducted from your annuity for every month under 55. Exceptions include those who retire for disability reasons or air traffic controllers, law enforcement officers, and others included in the category of workers listed above.
• If you failed to deposit federal service performed before Oct. 1, 1982, your annuity is reduced by 10 percent of the due amount plus interest. 
• If you have a survivor annuity to provide a full survivor benefit for your spouse, the annuity is reduced by 2.5 percent on the first $3,600 and 10 percent of every dollar after that. 
• If you are providing a survivor benefit to a person with an “insurable interest,” the annuity may be reduced by 10 to 40 percent, depending on the age difference between you and your survivor.  

Summary of CSRS Retirement Planning Guide

The Civil Service Retirement System (CSRS) is the original retirement benefit plan created by the 1920 Civil Service Retirement Act. It is a traditional contributory retirement system where federal workers pay a portion of their income each pay period, and their employer pays a share. Employees receive a monthly inflation-adjusted annuity upon retirement. 

The CSRS was replaced by the Federal Employees Retirement System (FERS) in the mid-1980s, but a small number of federal retirees continue to be under the CSRS. While FERS has three benefit sources, CSRS benefits come entirely from employee and agency contributions.