How does Social Security Work with FERS?

When you retire under FERS, you'll receive a FERS annuity and Social Security benefits. Your FERS annuity is based on your federal service and contributions, while your Social Security benefits are based on your overall work history. To be eligible for Social Security retirement benefits, individuals generally need to have earned enough "credits" by working and paying Social Security taxes.

What Can an FERS Employee Expect from Social Security?

SOCIAL SECURITY - ARE YOU ELIGIBLE?

Social Security & FERS - A Brief History

Prior to the FERS, federal employees worked for the CSRS or Civil Service Retirement System. The CSRS was designed to replace 80% of the employee's working salary. Employees did not pay into or receive any Social Security retirement benefits. The government soon saw that they were on the hook for a huge retirement payout so they decided to shift to a system like the 401k, which required employees to fund a larger portion of their own retirement.

The FERS replaced the CSRS in 1986 and by January 1, 1987 it was in full swing. All federal employees between January 1, 1987 to December 31, 2012 contributed .08% of their salary to their own pension and 6.2% to Social Security. Beginning January 1, 2014 to present FERS employees must contribute 4.4% of their salary to their own pension and are still required to contribute 6.2% to Social Security.

INTERESTING SUMMARY OF THE HISTORY OF SOCIAL SECURITY AND THE CREATION OF THE FERS

Social Security was designed make up 20-30% of your retirement income. FERS is the other 20-30% and your TSP another 20-30%. These components combined can make up 60-90% of your working salary if utilized properly.

The Role of Social Security

HOW DO SOCIAL SECURITY CONTRIBUTIONS EFFECT YOUR FERS RETIREMENT?

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If you're covered by the Federal Employees Retirement System (FERS), you contribute a portion of your salary to Social Security, just like employees in the private sector. The Social Security tax rate is consistent regardless of whether you're covered by FERS or not.

The Social Security tax rate is 6.2% of your gross salary, up to a certain income limit (known as the Social Security wage base). This means that the maximum amount of your salary subject to the Social Security tax is capped each year. If your total annual salary exceeds the wage base, you won't pay Social Security taxes on the amount above that limit.

Keep in mind that tax rates and income limits can change over time due to updates in tax laws and regulations. Therefore, it is recommend that you check with your HR department or the Social Security Administration for the most up-to-date information on Social Security tax rates and wage bases.

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