How to Calculate Your FERS Retirement Annuity: 2025 Complete Guide for Federal Employees

Are you a federal employee wondering exactly how much your FERS retirement annuity will be? With recent 2025 updates from the Office of Personnel Management (OPM), it’s more important than ever to understand your federal retirement benefits and plan accordingly.

At Drexel & Co. Financial Planning in Fallston, Maryland, we help federal employees throughout Harford County, Baltimore County, and Aberdeen Proving Ground navigate their FERS retirement planning. Let’s break down how to calculate your FERS annuity step-by-step, including critical 2025 changes you need to know.

What is the FERS Annuity?

The Federal Employees Retirement System (FERS) is a three-part retirement plan for federal employees hired after 1983. Think of it as a three-legged stool supporting your retirement:

  1. FERS Annuity – A guaranteed monthly payment for life
  2. Social Security – Federal employees participate in Social Security
  3. Thrift Savings Plan (TSP) – The federal 401(k) equivalent

Today we’re focusing on the FERS annuity, which provides a foundation of guaranteed retirement income that you can count on regardless of market conditions.

Critical 2025 OPM Updates Affecting Your FERS Annuity

Before diving into calculations, here are the major 2025 changes that could impact your federal retirement planning:

FERS Special Retirement Supplement Elimination

Starting January 1, 2028, Congress has proposed eliminating the FERS Special Retirement Supplement for new retirees. This supplement bridges income for early retirees under age 62 until Social Security begins.

Who’s affected:

  • Current retirees and those retiring before 2028 – You’re protected
  • Planning to retire early after 2028 – You’ll need alternative income strategies

High-3 vs High-5 Calculation

Good news: The proposal to change from High-3 to High-5 salary calculations has been shelved. Your FERS annuity will continue using your highest three consecutive years of salary.

The FERS Annuity Calculation Formula

Calculating your FERS annuity is straightforward once you understand the three key components:

Annual FERS Pension = High-3 Average Salary × Years of Creditable Service × Pension Multiplier

Let’s break down each factor:

Factor 1: Your High-3 Average Salary

Your High-3 is the average of your highest three consecutive years of basic pay. This is typically your final three years of service, but it could be an earlier period if your salary was higher then.

What’s Included in Basic Pay:

  • Base salary
  • Locality pay adjustments
  • Shift differentials

What’s NOT Included:

  • Overtime pay
  • Bonuses
  • Awards
  • Premium pay

How to Find Your High-3:

  1. Check your SF-50 forms in your electronic Official Personnel Folder (eOPF)
  2. Add up 36 consecutive months of basic pay
  3. Divide by 3 for your High-3 average
  4. Use OPM’s Federal Ballpark E$timate tool for quick estimates

Pro Tip for Aberdeen Proving Ground Employees: APG’s competitive locality pay rates often result in higher High-3 calculations, maximizing your FERS annuity.

Factor 2: Years of Creditable Service

Your creditable service includes:

  • All time in FERS-covered positions
  • Military service (if you made the required deposit)
  • Unused sick leave (for annuity calculation only, not eligibility)

How OPM Calculates Service Time:

  • Uses your Service Computation Date (SCD) from SF-50 forms
  • Counts only full months – partial months are dropped
  • 174 hours of sick leave = 1 month of additional service

Important Notes:

  • Verify your SF-50s for accuracy – mistakes can reduce your annuity
  • Military time requires a deposit to count toward FERS
  • Breaks in service may affect your calculation

Factor 3: Your Pension Multiplier

The pension multiplier depends on your age and years of service at retirement:

Standard Multiplier: 1.0%

  • Most federal employees receive 1% per year of service

Enhanced Multiplier: 1.1%

  • Available if you retire at age 62 or older with 20+ years of service

Special Categories: 1.7%

  • Law enforcement officers
  • Firefighters
  • Air traffic controllers
  • Other special provisions employees

Complete FERS Annuity Calculation Example

Let’s calculate the FERS annuity for Sarah, a federal employee in Maryland:

Sarah’s Details:

  • Age at retirement: 62
  • High-3 average salary: $87,400
  • Years of service: 19 years, 5 months
  • Unused sick leave: 174 hours (= 1 month)
  • Total creditable service: 20 years, 5 months = 20 years (rounded down)

Sarah’s Calculation:

Step 1: Determine multiplier

  • Age 62 with 20+ years = 1.1% multiplier

Step 2: Apply the formula

  • $87,400 × 20 years × 0.011 = $19,228 annual annuity

Step 3: Convert to monthly

  • $19,228 ÷ 12 = $1,602 per month (gross annuity)

FERS Annuity Reductions You Need to Know

Your gross annuity may be reduced by:

Survivor Benefit Elections:

  • 50% survivor benefit: 10% reduction in your annuity
  • 25% survivor benefit: 5% reduction in your annuity
  • No survivor benefit: No reduction (but no protection for spouse)

Early Retirement Penalty:

  • 5% reduction per year under age 62 (for MRA+10 retirements)
  • Does not apply to special provisions or involuntary retirements

Using Sarah’s Example with Reductions:

If Sarah elects a 50% survivor benefit:

  • $1,602 × 90% = $1,442 per month net annuity

2025 Tax Considerations for Your FERS Annuity

Your FERS annuity is taxable income, except for a small portion representing after-tax contributions. Key considerations:

  • Federal income tax applies to most of your annuity
  • Maryland state tax applies to FERS annuities (important for local federal employees)
  • Use OPM’s tax calculator to estimate your net annuity
  • Consider Roth TSP conversions to manage retirement tax burden

Tools and Resources for Accurate FERS Calculations

Official OPM Resources:

  1. Federal Ballpark E$timate – Free online calculator
  2. OPM.gov retirement planning tools
  3. Your agency’s HR retirement services

Professional Verification:

  • Review all SF-50 forms in your eOPF
  • Attend agency retirement workshops
  • Consult with federal retirement specialists

For Aberdeen Proving Ground and Harford County federal employees: Drexel & Co. offers specialized FERS planning consultations to ensure your calculations are accurate and your retirement strategy is optimized.

Special Considerations for 2025 and Beyond

If You’re Planning Early Retirement:

  • FERS Supplement ends in 2028 for new retirees
  • Boost TSP contributions to fill the income gap
  • Consider Roth IRA conversions during lower-income years
  • Plan for healthcare coverage between FEHB and Medicare

If You’re Nearing Regular Retirement:

  • Verify your High-3 calculation is maximized
  • Review survivor benefit options with your spouse
  • Coordinate Social Security timing with your FERS annuity
  • Plan tax-efficient withdrawal strategies

How Drexel & Co. Helps Federal Employees Maximize Their FERS Annuity

At Drexel & Co. Financial Planning, we specialize in helping federal employees in Maryland optimize their entire FERS retirement strategy:

Our FERS Planning Services Include:

  • Accurate annuity calculations using your actual service records
  • Survivor benefit analysis to protect your spouse
  • TSP optimization to complement your FERS annuity
  • Tax planning strategies for federal retirees in Maryland
  • Healthcare transition planning from FEHB to Medicare

Why Federal Employees Choose Drexel & Co:

  • Located in Fallston, MD – convenient for Harford County and APG employees
  • Specialized in federal benefits – we understand FERS, TSP, and FEHB
  • Values-based approach – financial planning aligned with your principles
  • Comprehensive planning – coordinate all three legs of your retirement stool

Take Action: Secure Your FERS Retirement Today

Understanding your FERS annuity calculation is just the beginning. With 2025 changes like the elimination of the FERS Special Retirement Supplement, federal employees need proactive retirement planning more than ever.

Your Next Steps:

  1. Calculate your estimated FERS annuity using the formula above
  2. Verify your service records in your eOPF
  3. Review your overall retirement strategy including TSP and Social Security
  4. Consider the impact of 2025 changes on your retirement timeline

Ready for Professional FERS Planning?

Schedule your free consultation with Drexel & Co. Financial Planning:

📞 Phone: 443-338-6676
📧 Email: info@drexelandco.com
📍 Office: 2303 Bel Air Road, Fallston, MD 21047

Serving federal employees in:

  • Aberdeen Proving Ground
  • Harford County, Maryland
  • Baltimore County, Maryland
  • Throughout the greater Baltimore area

What We’ll Cover in Your Consultation:

  • Your specific FERS annuity calculation
  • Optimization strategies for your High-3 and service time
  • Survivor benefit decisions and their financial impact
  • TSP coordination with your FERS annuity
  • Tax planning for Maryland federal retirees
  • Healthcare transition strategies

Frequently Asked Questions About FERS Annuity Calculations

Q: Can I increase my FERS annuity after retirement?

A: Your base annuity is fixed, but it receives annual Cost of Living Adjustments (COLAs). You cannot change your High-3 or service time after retirement.

Q: What happens to my FERS annuity if I die?

A: If you elected a survivor benefit, your spouse receives the designated percentage. If not, the annuity ends with your death.

Q: Can I retire early and avoid the 5% per year penalty?

A: Yes, under special circumstances like involuntary retirement, reduction-in-force, or if you’re in a special provisions job category.

Q: How does unused sick leave affect my annuity?

A: Unused sick leave adds to your service time for annuity calculation purposes (174 hours = 1 month), but doesn’t count toward retirement eligibility.

Q: Should I take the survivor benefit if my spouse has their own retirement?

A: This depends on your overall financial situation, your spouse’s benefits, and your family’s income needs. It’s a complex decision best made with professional guidance.

Bottom Line: Your FERS annuity is a critical component of your federal retirement, but it’s just one piece of the puzzle. With proper planning and understanding of 2025 changes, you can maximize your federal retirement benefits and enjoy financial security.

Don’t leave your federal retirement to chance. Contact Drexel & Co. Financial Planning today to ensure your FERS annuity calculation is accurate and your retirement strategy is optimized for the changes ahead.