Two people sat at neighboring desks in the same agency office for nearly thirty years. Marcus was hired in 1982. Priya was hired in 1996. They retire the same month, with the same $100,000 high-3 average salary and the same 30 years of service. At the retirement party, someone does the math and gasps. Marcus's pension will be about $56,250 a year. Priya's will be $30,000.

Nobody made a mistake. Priya's retirement is simply built differently, and understanding that difference is the first step in planning for either system.

Two systems, two philosophies

The Civil Service Retirement System (CSRS) covers employees hired before 1984. It is a single-pillar design: a generous pension that replaces most of your income, with no Social Security contributions from the federal paycheck.

The Federal Employees Retirement System (FERS) covers everyone hired since. It rests on three legs: a smaller basic pension, Social Security, and the Thrift Savings Plan (TSP). FERS shifts some of the risk from the government to you, and it gives you more control and more portability in return.

How the pension is calculated

CSRS uses a stepped formula applied to your high-3 average salary:

  • 1.5% per year for the first 5 years
  • 1.75% per year for the next 5 years
  • 2% per year for everything beyond 10 years

Thirty years works out to 56.25% of high-3. The cap is 80%, reached at roughly 41 years and 11 months of service.

FERS is simpler and much lower: 1% of high-3 per year of service. If you retire at 62 or later with at least 20 years, the multiplier rises to 1.1%.

Here is Priya's situation in numbers:

CSRS (Marcus)FERS (Priya)
Years of service3030
High-3$100,000$100,000
Basic annuity$56,250$30,000 (or $33,000 if she waits until 62)

That gap is real, but it is only part of the picture for Priya.

The pieces FERS adds

Priya also has Social Security, which she earned through her federal paycheck. At 62 or later, that benefit might be substantial. Your own estimate is at ssa.gov.

She also has the TSP. Under FERS, her agency automatically contributes 1% of pay, whether or not she contributes anything. It then matches dollar for dollar on the first 3% she puts in and 50 cents on the dollar for the next 2%. Contribute 5% and the agency adds 5% total. Over 30 years, with consistent contributions and market growth, that can add up to a seven-figure balance for some people. For others, with lower contributions or less time, it will be well below that.

As a rough illustration only, a $600,000 TSP balance drawn down at about 4% a year would yield $24,000 annually. Add that to a $30,000 pension and her Social Security, and her total income starts to approach Marcus's. Past performance and future returns are different things, so treat this as a planning exercise, not a forecast.

CSRS employees can contribute to the TSP too, but they get no agency match. Marcus's TSP is a supplement. Priya's is a core piece of her retirement.

The Social Security question

Most CSRS employees did not pay Social Security tax on their federal wages, though they did pay the Medicare tax. Many of them earned Social Security benefits through other jobs, military service, or part-time work. For years, the Windfall Elimination Provision and Government Pension Offset reduced those benefits. The Social Security Fairness Act repealed both provisions in January 2025. If you have a CSRS or non-covered pension, check ssa.gov for how the change affects your benefit and whether you are owed retroactive payments.

A related group worth knowing about is CSRS Offset employees. They had a break in service or were hired in the 1984 to 1986 window, and they pay into both CSRS and Social Security. At age 62, their CSRS annuity is reduced to account for Social Security. If you are in this group, confirm your category with your agency's HR office.

Retirement eligibility

The age and service combinations are similar in both systems, with a few differences.

CSRS:

  • Age 55 with 30 years
  • Age 60 with 20 years
  • Age 62 with 5 years

FERS:

  • Minimum retirement age (MRA) with 30 years. The MRA is between 55 and 57 depending on birth year.
  • Age 60 with 20 years
  • Age 62 with 5 years
  • MRA with at least 10 years, but with a reduction of 5% for each year under 62, unless you postpone the start of your annuity

FERS also offers the special retirement supplement for many people who retire at their MRA with 30 years or at 60 with 20 years. It is a bridge payment that approximates the Social Security benefit you earned during federal service, paid until you reach 62. It is subject to an earnings test, so work after retirement can reduce or eliminate it. It is not available to those who retire under the MRA+10 provision.

Cost-of-living adjustments

This is where the systems differ in a way that compounds over decades.

CSRS retirees get a full cost-of-living adjustment (COLA) tied to inflation each year, starting right away.

FERS retirees generally do not receive COLAs until age 62. Then the adjustment is capped:

  • If inflation is 2% or less, the COLA matches inflation.
  • If inflation is between 2% and 3%, the COLA is 2%.
  • If inflation is above 3%, the COLA is inflation minus 1 percentage point.

Law enforcement officers, firefighters, air traffic controllers, disability retirees, and survivors are exceptions. Over a 30-year retirement, the difference in COLA treatment can matter as much as the difference in the starting pension.

What you pay in

CSRS employees contribute 7% of salary for most positions, with higher rates for certain groups such as law enforcement and firefighters.

Under FERS, the contribution rate depends on your hire date. It is 0.8% for those hired before 2013, 3.1% for those hired in 2013, and 4.4% for those hired in 2014 or later. Contribution rules have changed before and could again, so confirm your rate on your pay statement.

Survivor benefits and health insurance

Both systems let you provide for a spouse. A maximum CSRS survivor benefit is 55% of the annuity. FERS offers a maximum of 50%, with a 10% reduction in your annuity, or a 25% option with a 5% reduction. These choices are made at retirement, and they are hard to change later, so talk through them with your spouse and an advisor.

Both groups can carry Federal Employees Health Benefits (FEHB) into retirement if they meet the continuous-coverage requirements, generally enrollment for the five years before retirement.

What this means for your planning

If you are in CSRS, the pension does most of the work. Your planning questions are about taxes, survivor choices, and how to use the TSP and any IRA savings as a cushion rather than a foundation.

If you are in FERS, you are managing a portfolio. Your contribution rate, fund choices, and the timing of Social Security all affect the outcome. At a minimum, capture the full agency match, review your TSP allocation regularly, and look at your Social Security estimate before you pick a retirement date.

Current TSP contribution limits and fund details change every year. Check tsp.gov for the latest on those, and irs.gov for limits on IRAs and rules on taxes and withdrawals.

Marcus and Priya both retired well, just by different routes. Knowing which route you are on is what lets you build a plan around it.