Will 5% pay cut change your retirement plans?


The House yesterday passed a budget that hikes federal employees’ retirement contributions by 5 percent, which translates to an effective cut in take-home pay. If that becomes law, what would it mean for you? Would it change how much you invest in the Thrift Savings Plan? Or would you go so far as to bail out of the pension system — leave the federal service before retirement and get your FERS contributions refunded, with interest? (See “If You Leave Before Retirement Age” on this page for more details.)

Write me at slosey@federaltimes.com if you’d like to talk further. If you prefer to stay anonymous, that’s fine.


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  1. D Alexander on

    I doubt a 5% cut would make anyone leave service before retirement. But for those who are eligible and had not yet decided to retire, I think this will push them right over. I had planned to retire at the end of the year anyway, but this 5% cut in pay gets me a lot closer to my pension being mostly equivalent to my take home pay. With the SS supplement and life expectancy withdrawal, I needed about $900 per month to get back to my working take home pay. Now that will roughly be cut to about $550 per month. I can do that working a day a week at Home Depot with a lot less stress.

  2. I am CSRS with 39 years of service this October. I was planning to retire 5/30/14. If this goes into law, despite the increase in the retirement contribution and cut in pay, will it translate into a higher pension benefit? Or is it simply just a cut in pay? Do you feel it might be best for me to consider retiring before this goes into effect, if passed? I’m so close to my “planned” retirement date – I just hate the thought of being “pushed out” under their terms and not being able to retire on my terms without suffering a further financial loss. Thank you for your thoughts on this.

  3. Larry Willis on

    Will this change my investment in the TSP? No, because I had to stop my TSP in order to afford my current household bills. What the hike in my contribution level would mean to me (GS5) would mean a further reduction in my take home pay, and falling further behind in my household bills. My family does not live beyond our means, and every year we’ve had to further curtail any discretionary spending, which is currently at $0. Stop treating my pay as a luxury, and start paying attention to the pay and benefits afforded to our legislators.

  4. Thomas Saracco on

    After 41 years under the CSRS system you will receive 78% of your high three average. Is that not enough for you? Do you know anyone in private industry who gets such an outrageous pension?

    Taxpayers should revolt over this waste of their hard earned money.

  5. Fran,
    This legislation will not yield any pension benefit whatsoever. It will amount to a 5% tax on all Federal employees.
    However, you must consider many things when contemplating retirement. While your take home pay may be lower next year, it will still be much higher than your retirement check. If you don’t plan to work after you retire from Federal service, you’ll need to decide if you can afford the lower income more than a year earlier than you originally planned.

  6. Paying an additional 5% (gross pay, resulting in a nearly 10% net pay cut) will not affect my decision to retire or when. It will definitely affect other things though: Goodbye CFC! Not only will I not contribute, I shall not permit anyone to even contact me regarding this outdated albatross.
    Goodbye to working weekends or staying late to meet short suspenses created by a dysfunctional organizational culture seemingly unable or unwilling to try something other than line-of-sight tasking.
    Goodbye to supporting any office “fun” functions–not a huge change since I long ago stopped bothering with “holiday” parties not knowing exactly what “holiday” was intended to be celebrated. Instead, I went to Christmas parties with friends and neighbors after work.
    Goodbye to those crummy TDYs where you’re packed in a sardine can operated by an airline unable and unwilling to meet Geneva convention requirements governing the safe and humane transportation of POWs. I shall travel TDY only with sufficient time to rent a comfortable car and drive to/from the destination.

    It’s beginning to look like change indeed will be good!

  7. Since I pay the salary of federal employees, I have no problem with reducing their take home pay so that their retirement is bulked up. They need to contribute more to their own retirement.

  8. “The bill requires CSRS employees to contribute 12 percent, yet it does not increase employees’ annuities or provide any additional benefits upon retirement.” There is an exception according the Handbook EL-502 (233) – “Retirement deductions withheld after 41 years and 11 months of service are applied toward payment of deposits or redeposits, with any balance automatically refunded to the employee at the time of retirement. Excess contributions may be used as voluntary contributions to increase annuity or be returned to the employee as a refund.” This is 3 years away for me and with a 5 years phase-in (guessing 1% a year) I would lose maybe 1% first yr, 2% second yr, and 3% the third year. Then I max. out and anything after that I can have refunded to me. So I could possibly have that extra 5% refunded to me if I was willing to work that long.

  9. When will those who enjoy commenting on postal employee pay and benefits ever learn that these are NOT PAID FOR BY TAXPAYERS. They are paid from postal revenue. Get the facts before posting assumptions.

  10. What this is most likely to do is: Those who are eligible to retire, will start looking for a job as a contracted employee. When they find the new job they will leave the Federal Government and the company will gain the benifet of their years of service and experience. The ultimate loser will be the Federal Government

  11. It seems that those who are complaining on the wage Federal employees are being paid are jealous of not meeting the qualifications to become a Federal Employee.

  12. A 5% increase in retirement contributions will not change my retirement plans whatsoever. I try not to live so close to the edge of insolvency that 5% less take-home pay would translate into an immediate financial disaster.

  13. Kathy,
    I agree!! We as federal employees ought to start putting more “skin in the game” to save tax dollars.

    While we’re at it, let’s eliminate the Pension Guarantee Board to save tax dollars and simply ignore the bankrupcy of private sector pensions.

    (You are aware that FERS is more than fully funded, aren’t you?)

  14. Yeah, right. The public wants to cut us back in hard times, but in good times, they darn sure don’t increase our pay when theirs goes higher. We got paid the same whether the economy was good or bad. Many people didn’t want to join the Federal Government during the “good times” and they complain that we have “cush” jobs. Well, the days I had in the military that I lost (weekends and holidays) or spent in the field or combat zones is about 5+years. Maybe the next time the economy is booming, think about us and put some of the “increased pay” you get then for the lean times. Maybe get us some increases when times are good? Don’t we deserve it? We get paid the same no matter how well we do our jobs. I have been in the top 50 in the world doing a particular job, but I got nothing else in my paycheck. Were I a basketball player what would I get for being in the top 50 in the world? Yeah, right. Nothing for us no matter how good. We have limitations for raises/bonuses – not talking about the Executives just like the CEO’s and others on the Board or in Upper Management, but the person that is actually doing the work. We bust our butts for what? Because we love our country. People complain about the military and want to cut back and give them less and less, but when the body count is high, they get all indignant and want changes. Look what is going to happen to the change in the retirement system in the military. Just remember – You get what you pay for, so don’t complain.

  15. That is 5%+ more I will NOT be spending. Cutting back on stuff like canceling my home phone so I won’t have to listen to those stupid recordings of politicians wanting me to vote for them. I may just walk away from a mortgage I already have trouble paying. Definitely no more CFC contributions. We aren’t called “civil servants” for no reason. I may just take a sick day every week to save on gas. No more coming to work feeling bad just to meet a suspense.

  16. Since FERS is fully funded, the extra contribution paid by Feds will go somewhere…..probably to go to rich banker friends of politicians, it won’t be used to reduce deficit or cut spending based on D.C. history.

    Any sane analysis will show that it costs agencies much more to complete work by contract over time and virtually every outsourced job will only show nominal benefits in the short term.

  17. Another way to save tax dollars on federal pensions would be; All Federal legislators (Senators and Members of Congress) have the exact same retirement plan as FERS employee’s. To include: Minimum Age of retirement, number of years, and the same same percentage rate for retirement as FERS employees.

  18. I might not leave the Federal government, but I’d definitely take a position not covered by FERS (and ideally one covered by an alternate plan). Maybe I’d try to go to a NAFI, the OCC, or the Fed. I’ve given up enough for a job that has promotion potential that’s falling through the floor. I enjoy contributing to the business of the nation, but if I’m to contirbute to a charity, I’d best be able to at least afford some fresh produce.

  19. norm from ga on

    All the (OTHER) tax payers who think we should pick up our fair share of our pensions didn’t seem to balk when Obama started giving back nearly a third of THEIR SS contribution (“wage tax.”) As a FERS employee, I benefited from that, but if I were a CSRS employee, I would be thoroughly ticked.

    AS for myself, I had planned to retire at the end of the year, but this increase in pension contribution pretty much sealed the deal.

  20. we’ve been offered early voluntary retirement now thru end of this year. No buyout offered this time either. If I could figure out whether this cut would affect me in retirement or does it only affect those still working and putting in to retirement, I could decide when to leave. My HR can’t tell me what I need to know. I’m 31 years CSRS/FRS offsett and 52. I just am unsure what cuts those already retired end up also having to pay for. If I leave by Dec. 31 this year and won’t get hit by the cuts they plan, then I’m going out now and take what I can get. Doesn’t matter to me who wins next election but I believe if the republicans get in, they indeed plan to hit fed workers pretty hard to apease a public which see’s us all as wastefull employees now. Any feedback on this from you civil servants like me is much appreciated.

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