Still Under CSRS? Here’s Why That Matters More Than Ever in Today’s Retirement Landscape

This article was originally published here

Key Takeaways

• If you’re still under the Civil Service Retirement System (CSRS), your retirement income is structured quite differently than today’s FERS retirees. That distinction has never mattered more than it does in 2025.

• CSRS retirees now face specific challenges and opportunities, including recent Social Security changes and shifting inflation protections. Understanding these differences is essential to preserving your retirement advantage.

The Relevance of CSRS in 2025

The Civil Service Retirement System (CSRS) was closed to new federal employees back in 1984. Yet, in 2025, roughly 44,000 employees still remain under this legacy system. If you’re among them, you belong to a shrinking group with access to a pension model few workers in the U.S. still enjoy.

But here’s the reality: even though CSRS provides a generous annuity and no mandatory participation in Social Security, the landscape around your benefits has changed significantly. The repeal of the Windfall Elimination Provision (WEP), inflation-adjusted COLAs, and broader market trends all play a new role in your planning. It is no longer just about what CSRS offers you; it’s about how that offer fits into today’s retirement world.

Understanding the Foundation of CSRS

CSRS is a defined benefit retirement system that provides a predictable pension based on your years of service and highest salary (usually your “high-3” average). In contrast to FERS, it does not include automatic Social Security coverage or government TSP matching.

Your CSRS annuity is calculated using this formula:

• 1.5% of your high-3 average for the first 5 years of service

• 1.75% for years 6 through 10

• 2.0% for every year over 10

With a maximum benefit of 80% of your high-3 average, CSRS can provide a powerful foundation for retirement. Many CSRS employees retire with 30 to 40 years of service, giving them monthly annuities far above FERS counterparts.

What Has Changed in 2025

Even with a secure pension, 2025 brings new realities:

1. Social Security Now Applies Differently

The Windfall Elimination Provision (WEP) was repealed in January 2025. This is especially important if you worked in both CSRS and private-sector or Social Security-covered jobs.

• Before 2025, WEP reduced your Social Security benefit if you also received a CSRS pension.

• Now, your Social Security benefits reflect your full earnings history, even if you draw a CSRS annuity.

If you’ve already filed for Social Security, your monthly check may increase. If you haven’t yet applied, your future benefit could be higher than you once thought.

2. COLA Adjustments Are Still Generous but Lag Behind Inflation

CSRS retirees receive full Cost-of-Living Adjustments (COLAs), unlike FERS retirees, whose COLAs may be capped when inflation exceeds 2%.

• For 2025, the COLA is 2.5%, applied to your full annuity.

• However, inflation pressures in housing, health care, and long-term care continue to outpace COLA increases.

This means your CSRS pension retains more buying power than FERS annuities, but you still need to plan for out-of-pocket increases, especially for healthcare.

What to Watch: Healthcare Costs and Coordination

Although CSRS retirees typically have fewer moving parts in their retirement, 2025 healthcare coordination is more complex than it once was. Your options depend on whether you:

• Retain Federal Employees Health Benefits (FEHB) into retirement

• Enroll in Medicare Parts A and B

• Consider adding Part D for prescription coverage

FEHB and Medicare: Better Together?

Most CSRS retirees keep FEHB into retirement. But at age 65, you become eligible for Medicare. Here are the key points:

• FEHB + Medicare Part A: No premium if you worked 40 quarters under Social Security. Most retirees enroll automatically.

• FEHB + Medicare Part B: Part B premium in 2025 is $185/month. Many retirees weigh this cost against benefits like lower FEHB copayments and waived deductibles.

• Prescription Costs: Adding a Medicare Part D plan may help, especially with the new $2,000 out-of-pocket cap in 2025.

Be sure to confirm how your specific FEHB plan coordinates with Medicare. Some plans waive deductibles or offer reimbursements for Part B.

Thrift Savings Plan (TSP) May Still Be in Play

Although CSRS employees did not receive matching contributions, many still contributed to the Thrift Savings Plan during their careers. In retirement, your TSP provides:

• Tax-deferred withdrawals (or tax-free if you contributed to Roth TSP)

• Required Minimum Distributions (RMDs) beginning at age 73

• Flexibility to make partial or monthly withdrawals, or purchase an annuity

In 2025, the TSP offers more flexible withdrawal options than in the past, but tax strategy matters. A poorly timed withdrawal can push you into a higher tax bracket. Work with a licensed professional to time your distributions effectively.

Long-Term Care Planning Is No Longer Optional

With fewer CSRS retirees left in the system, you may feel confident with your strong annuity. However, one major risk remains: long-term care.

CSRS doesn’t provide long-term care insurance, and in 2025, premiums for such coverage have increased significantly. Consider these factors:

• The average cost of a private room in a nursing home now exceeds $120,000 per year

• Long-term care needs can last 3 to 5 years or more

• Medicare only covers short-term rehab, not custodial care

Evaluate whether to self-fund using your CSRS annuity and TSP, or explore alternative funding options.

Survivor Benefits Should Be Reviewed in 2025

CSRS provides survivor benefits if you elect them at retirement, but those elections may no longer match your family’s current needs. Reassess your plan if:

• You’ve remarried

• Your spouse is significantly younger or older

• Your TSP or life insurance beneficiaries have changed

Survivor benefits reduce your monthly pension but offer continued income to your spouse. A one-time review in 2025 could prevent unintended gaps in future support.

Tax Efficiency Matters More Than Ever

In 2025, changes in tax law and income thresholds impact retirees differently. Your CSRS annuity is partially taxable, depending on your contributions. Social Security (if applicable) and TSP withdrawals add to your income layer.

Strategies to consider:

• Income smoothing to avoid IRMAA brackets for Medicare

• Qualified charitable distributions (QCDs) to reduce taxable RMDs

• Withholding adjustments to avoid large tax bills in April

Work with a tax advisor who understands CSRS-specific rules. Tax treatment for annuities differs from other retirement sources.

Estate and Legacy Planning for CSRS Retirees

Most CSRS retirees have a solid financial base, which means legacy planning becomes a priority later in life. In 2025, key steps include:

• Updating your will and power of attorney

• Reviewing TSP and life insurance beneficiaries

• Establishing a living trust, if applicable

If you’re concerned about how your CSRS annuity ends upon your death, make sure your survivor elections, insurance policies, and TSP balances all support your goals.

Why CSRS Retirees Are Still in a Strong Position

Despite changes in healthcare costs, inflation, and taxation, CSRS remains one of the most secure retirement systems ever offered to public employees. In 2025, your main responsibility is not to earn more but to protect what you already have:

• Preserve your annuity by avoiding unnecessary elections or withdrawals

• Coordinate benefits like Medicare and FEHB carefully

• Plan for your spouse or dependents

• Ensure your estate reflects your financial strength

Your pension gives you predictability, but only thoughtful planning will ensure it supports your full retirement journey.

Make Your CSRS Legacy Work for You

CSRS was designed to reward a lifetime of public service with a secure retirement. In 2025, the environment around that promise has evolved, but the foundation remains strong. Now is the time to fine-tune how you manage and preserve it.

Whether you’re already retired or preparing to file soon, speak with a licensed professional listed on this website. A tailored review of your annuity, health coverage, TSP, and tax positioning can help you make the most of the advantages CSRS still offers.