Does FERS Calculate Locality Pay in An Annuity?

Does FERS Calculate Locality Pay in An Annuity?

 

As you plan a federal retirement, it’s important to understand the factors that make up your FERS annuity calculation. Perhaps the most complex example is how locality pay affects the FERS basic benefit, which is based on years of service, the highest salary from three consecutive years, cost of living adjustment, and a specific multiplier. Federal Educators take a look at this intricate retirement benefit and how it may impact your retirement.

Because there are millions of federal employees working around the globe in varied economic situations, locality pay was created as a compensation adjustment to an employee’s base pay for a higher cost of living where they work. For example, an employee that works in New York City will receive higher compensation than someone that works in Tulsa, Oklahoma. This can be a critical part of understanding the full picture of your retirement benefits. The good news is that locality pay adjustments are included in your base pay when calculating a FERS annuity. If you choose to move after retirement, there is no additional adjustment made to where you live.

Locality pay is just one of the important factors that make up a FERS annuity calculation. Additional variables to make a note of include years of service and the highest salary earned in three consecutive years. It’s critical to note that these may not necessarily be the last three years of your career. To ensure that you avoid the OPM Trap, confirm that your records are up to date when planning for retirement.

If you need additional information about locality pay and how it may affect your FERS benefits, Federal Educators can provide you with the perfect combination of educational resources and a knowledgeable team. Call our St. Petersburg office at (813) 755-7037 to get started today.