How To Receive Your FERS Pension If You Retire Before Your Eligibility Date
Is a deferred retirement right for you?
Do you ever feel like you can’t continue working until your eligible retirement date?
Maybe it’s the physical nature of the job or maybe you want to switch careers — and you haven’t met the age requirement for a full, immediate retirement.
One of the great things about the FERS system is you can still receive a pension in certain situations if you decide to leave early.
Let’s discuss one of the options available to you.
FERS Deferred Retirement Eligibility
A FERS Deferred Retirement is available for many federal employees who separate from service prior to their scheduled full, immediate retirement date.
Most often, this option best fits someone who has at least 5 years of service. (When having at least 10 years, a postponed retirement typically makes more sense).
In order to qualify for a FERS Deferred Retirement, you must meet the following conditions:
- You have at least 5 years of service before separating from service
- Your FERS contributions stay in the system (no refund of contributions)
- You are under age 62 (if you were age 62+ with 5 years of service, you would qualify for regular retirement)
How FERS Deferred Retirement Works
Like the name deferred implies, when you leave service, you’ll defer your pension until a certain age.
Below are the guidelines for when you’d be eligible to start receiving the deferred pension.
With at least 5 years of service, you can start receiving your FERS pension at age 62.
With at least 20 years of service, you can start receiving your FERS pension at age 60.
With at least 30 years of service, you can start receiving your FERS pension when you reach your MRA (minimum retirement age).
With at least 10 years of service, you can start receiving your FERS pension at your MRA, however it will be reduced by 5% per year, prior to age 62.
Example of FERS Deferred Retirement
Michael is a postmaster with 13 years of creditable service. He is currently 42 years old.
Michael decides he would like to switch careers to go into coaching, so he leaves his federal employment.
During his career, Michael’s high-3 was $68,000.
Approximately 20 years from now, Michael would be eligible to receive his full federal pension at age 62.
(He would be age 62 with at least 5 years of service).
The pension amount would be: 68,000 * 13 * 1% = $8,840 annually or $734 per month.
Another option for Michael would be receiving a reduced pension under the MRA+10 years of service provision once he hits age 57 (his minimum retirement age).
Because age 57 is 5 years before age 62, and the penalty is a 5% reduction per year, Michael’s pension amount would be reduced 25%.
$8,840 would be reduced to $6,630 annually or $553 per month.
This reduction is permanent.
Michael would then be eligible for his first COLA adjustment at age 62.
*This hypothetical example is for illustration purposes only and is not indicative of an actual person. Your experience/results may differ.
Deferred Retirement and FEHB
One of the major considerations with a deferred retirement is the inability to keep your FEHB (federal health insurance) in retirement.
Make sure you take this into consideration when deciding to separate from service.
The FEHB is one of the most important benefits you have as a federal employee.
You can, however, keep your FEHB under a postponed retirement, which is what we’ll discuss in next week’s blog.
Make sure you check back to read more on the options available to you.
Everyone’s situation is unique.
But it always helps to know your options.
Our experienced staff fields questions and walks through situations like these every day.
If you’d like to learn more, schedule your complimentary federal benefits review and retirement analysis here with a licensed insurance professional.
For additional information, you can also contact your friends at GPIS by calling 866-201-7829 or by sending an e-mail to firstname.lastname@example.org.
-Sam Wiss, RICP
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