Dana, 56, sat across from a retirement counselor with a number scrawled on a sticky note: $1 million. A coworker had told her that's what a TSP balance needed to be. Dana had $540,000 in her account, 29 years of federal service, and a growing sense that she'd failed a test nobody had told her she was taking.

Then the counselor pulled up her pension estimate. The mood in the room shifted. Dana hadn't failed anything. She was just using a rule built for people without a pension.

Why the standard advice misleads FERS and CSRS folks

Most retirement targets assume your portfolio funds nearly everything until Social Security kicks in. Federal employees start from a different place. A FERS or CSRS annuity is a guaranteed, inflation-adjusted (mostly) paycheck for life. That changes how much your TSP has to do.

Think of your retirement income in layers:

  • Pension: the base layer, paid for life.
  • Social Security (FERS) or none/reduced (CSRS): a second layer that may not start until 62 or later.
  • TSP: the flexible layer that fills the gap between what you spend and what the first two layers deliver.

So the question isn't "how much is enough?" It's "how big is my gap?"

Start with the pension math

Under FERS, the basic annuity is 1% of your high-3 average salary for each year of service. If you retire at 62 or older with at least 20 years, it's 1.1%. Under CSRS, the formula is more generous: 1.5% for the first five years, 1.75% for the next five, and 2% for everything after, which lands around 56% of high-3 at 30 years.

Dana's high-3 is $110,000. She plans to retire at 57 with 30 years, which qualifies her for an immediate unreduced FERS annuity under the MRA+30 rule. At 1% per year, her pension is $33,000 a year.

If she elects the maximum survivor benefit for a spouse, that drops by 10%, to $29,700. Many people forget to subtract this before they start budgeting. Check your own estimate against what your agency or the Office of Personnel Management (OPM) provides.

The FERS supplement, and the cliff at 62

Here's the wrinkle that surprises people. If you retire before 62 under an immediate unreduced annuity, you may get the FERS Special Retirement Supplement. It approximates the Social Security benefit you earned during federal service and bridges you until 62.

Roughly speaking, it's your age-62 Social Security estimate multiplied by your FERS years divided by 40. Dana's Social Security statement shows about $1,800 a month at 62. Thirty years over 40 gives her a supplement near $1,350 a month, or about $16,200 a year.

Two cautions. The supplement is subject to an earnings test, so working after retirement can reduce or eliminate it. And it ends at 62 no matter what. It also doesn't receive cost-of-living adjustments. CSRS retirees don't get a supplement, but most also don't pay into Social Security, so the pension carries more of the load.

Building your gap

Dana wants $80,000 a year in gross income, which will cover her spending and the taxes on it. Here's how it plays out.

Ages 57 to 62:

  • Pension: $33,000
  • Supplement: about $16,200
  • Total: about $49,200
  • Gap: roughly $30,800

Age 62 and beyond:

  • Pension: $33,000
  • Social Security: about $21,600 if she claims at 62 (waiting would raise it)
  • Total: about $54,600
  • Gap: roughly $25,400

Now translate those gaps into a TSP target. A common starting point is withdrawing around 4% of the balance in the first year, then adjusting for inflation. Divide $30,800 by 0.04 and you get about $770,000. Divide $25,400 by 0.04 and you get about $635,000.

So Dana's realistic range is somewhere between $635,000 and $770,000, not $1 million. She's at $540,000 with a year of contributions and growth still ahead. She's closer than the sticky note suggested, but not done.

The 4% figure is a rule of thumb, not a promise. A retirement starting at 57 could last 35 years or more, which argues for a more cautious rate, perhaps 3.5%. Markets, your allocation, and how flexible your spending is all matter.

What changes the answer

The gap math is simple. The inputs are where people trip.

Your spending target

Many federal retirees spend more than they expect in the first few years, on travel and projects, then less later. A flat $80,000 may overstate the long-run need. Track your actual spending for six months before you retire.

Health insurance

FEHB premiums continue in retirement if you've kept coverage for the required five years before retiring. They come out of your annuity, so your take-home pension is smaller than the gross figure. Medicare enters the picture at 65. Build real premium numbers into your budget rather than guessing.

Taxes

Pension income is taxable. TSP withdrawals from a traditional balance are taxable. Roth withdrawals generally aren't. Having both types gives you control over your tax bracket each year. Required minimum distributions begin at an age that depends on your birth year, currently 73 or 75, so check irs.gov for your situation.

Inflation

FERS cost-of-living adjustments are muted. When inflation runs over 3%, the COLA is the inflation figure minus one point. Over a 30-year retirement, that gap compounds. CSRS annuitants get the full adjustment. A FERS retiree's pension quietly loses purchasing power in high-inflation years, and the TSP often has to make up the difference.

Survivors

If you're married and your spouse relies on your income, the survivor annuity matters more than the portfolio number. It's a permanent trade-off made at retirement, and it's hard to undo.

Practical moves for the years before you retire

  1. Get a real pension estimate. Not a guess. Use your agency's retirement calculator or request a formal estimate from your HR office.
  2. Pull your Social Security statement at ssa.gov and compare claiming ages.
  3. Write down your gap for both phases, before and after 62.
  4. Check your TSP contributions. Under FERS, contributing at least 5% captures the full agency match. Anything less leaves free money behind. CSRS employees can contribute but don't receive a match. For current contribution limits, including catch-up contributions after 50, see tsp.gov and irs.gov, since they change annually.
  5. Plan the withdrawal method. The TSP offers installment payments, partial withdrawals, and annuity options through its annuity provider. Each handles longevity and flexibility differently.
  6. Mind the early-withdrawal rule. If you separate from service in or after the year you turn 55 (50 for certain public safety employees), the 10% early withdrawal penalty generally doesn't apply to TSP money. It would apply to an IRA rollover you took before 59½, so think carefully before moving funds.

So how much do you need?

Not a million. Not a fixed multiple of salary. You need enough to cover the gap between your spending and your guaranteed income, with a cushion for inflation, taxes, and a long life.

For Dana, that's likely $650,000 to $770,000, and she's most of the way there. For a CSRS retiree with 35 years, the number could be dramatically lower. For a FERS employee with 15 years who's retiring at 62, it could be much higher.

Run your own numbers. Then run them again with a more pessimistic market and a more generous spending budget. If the plan still works, you're in good shape. If it doesn't, you've learned that while you still have time to adjust.