Federal (FERS) Pension Valuation & Allocation Guide (2026)
Your Federal (FERS) pension is backed by the US Treasury. Here is how that changes your true asset allocation.
Disclaimer: This tool is for educational and informational purposes only. It does not constitute financial, investment, or tax advice. Calculations use simplified actuarial models and assumptions that may not reflect your individual circumstances. Consult a qualified financial advisor before making investment decisions.
Personal Information
Pension
Your own pension(s) — add multiple if you receive income from more than one source (e.g., FERS + military retirement, or dual state pensions).
Social Security
Plan Through Age
Uses SSA actuarial life tables (age 110 terminal)
Spending
Other Income
Wages, rental income, annuities, etc. Reduces your liquidity buffer.
Assumptions
Months of spending shortfall held in short-duration assets
Portfolio
Target Equity Allocation
Market-derived target: 50.6%
Present Value of Income Streams
PV of Pension
$270,412
Discount rate: 4.3%
PV of Social Security
$343,548
Discount rate: 4.3%
Life Expectancy
17.3 years
SSA actuarial life tables (2021)
Total Wealth Analysis
$1,113,960
| Component | Value | Share |
|---|---|---|
| Investable Portfolio | $500,000 | 44.9% |
| PV Pension | $270,412 | 24.3% |
| PV Social Security | $343,548 | 30.8% |
36-Month Liquidity Buffer
Monthly Income (Pension + SS)
$4,000
Monthly Spending
$5,000
Monthly Shortfall
$1,000
Portfolio Allocation Recommendation
Target (Total-Wealth Basis)
Based on an equity risk premium* of 4.4% and risk-free rate of 4.3%:
- Target equity: 50.6% of total wealth = $563,382
- Target bonds: 49.4% of total wealth = $550,578
Bond-equivalents already held: $649,960
(PV Pension + PV SS + liquidity buffer)
Recommendation (Your Portfolio)
Equities: 92.8%
$464,000
Bonds: 7.2%
$36,000
Even at 93% equities in your portfolio, your total wealth equity allocation only reaches 41.7% — short of the 50.6% total-wealth target by $99,382. Your bond-equivalent income streams (pension + SS) make up too large a share of total wealth.
Allocation Summary
| Allocation | Equities (%) | Bonds (%) |
|---|---|---|
| Recommended Portfolio | 92.8% | 7.2% |
| Achieved Total Wealth | 41.7% | 58.3% |
| Target Total Wealth | 50.6% | 49.4% |
The Federal Employees' Retirement System (FERS) pensions are backed by the US Treasury and are considered risk-free assets. However, their true value is often hidden by complex Cost-of-Living Adjustment (COLA) rules and the 'Accounting Gap' in traditional financial planning.
The FERS 'Accounting Gap'
Most federal employees look at their brokerage statement and see a 60/40 or 80/20 allocation. But if you have a FERS pension worth $1M in present value, your investable portfolio is only a fraction of your total wealth.
Because your pension acts as a high-quality bond, your 'true' allocation is likely far more conservative than you realize. Our 60/40 Illusion guide explains how to recalibrate your portfolio to account for this hidden bond-equivalent asset.
Comparison: FERS vs. CSRS
Understanding the difference between the two primary federal systems is critical for valuation. FERS is a 'three-legged stool' (Pension, Social Security, and the Thrift Savings Plan (TSP)), whereas the Civil Service Retirement System (CSRS) is a more traditional, higher-payout pension that often excludes Social Security participation.
| Feature | FERS | CSRS |
|---|---|---|
| Social Security | Included | Excluded (usually) |
| COLA Start | Age 62* | Immediately |
| Employee Contribution | 0.8% to 4.4% | 7.0% to 8.0% |
| TSP Match | Up to 5% | None |
Frequently Asked Questions
When does the FERS COLA actually start?+
For most FERS retirees, Cost-of-Living Adjustments (COLA) do not begin until age 62. This creates a valuation gap of **as much as 20%, depending on the situation**. Our calculator precisely models this by holding your payment flat at the year-1 amount until you reach age 62, and then applying the 2% COLA compounding thereafter.
Is the FERS Annuity Supplement included?+
The current version of our tool focuses on the core life-contingent annuity. The FERS Supplement (the 'Social Security Bridge') is a high-priority item on our Pro roadmap.