If You've Reached Your MRA+10, Have You Considered A Postponed Retirement?

If You've Reached Your MRA+10, Have You Considered A Postponed Retirement?

FERS Postponed Retirement

In last week’s blog we discussed a Deferred FERS Retirement.

While they might sound similar, a Postponed FERS Retirement is different, and has the potential to be a good option for federal employees when available.

There’s not an equivalent postponement election in the CSRS system.

What’s a FERS Postponed Retirement?

A FERS Postponed Retirement is an option for you if you’re a federal employee who separates from service and has at least 10 years of creditable service.

You must also have reached your minimum retirement age (MRA).

Like the name ‘postponed’ implies, rather than taking your pension right away, you postpone it until a later date.

One of the biggest reasons you might decide to postpone your pension is to avoid a reduction in your overall FERS pension amount.

Each year prior to age 62 is a 5% reduction on your pension.

Let’s take a look at a hypothetical example with numbers to illustrate.

Example of FERS Postponed Retirement

Jessica is a postal clerk with 11 years of creditable service.

She’s currently 57 years old and has reached her minimum retirement age.

Jessica decides she wants to retire from her job at the post office.

She’s going to continue working in another private-sector job, and she doesn’t need the FERS pension income right away.

Instead, she wants to wait and start receiving her FERS pension at age 62.

During her working career, Jessica’s High-3 was $58,000.

Her FERS pension amount at 62 will be $58,000 * 1% * 11 = $6,380 annually or $532/month.

If Jessica decides to start receiving her pension at her federal retirement age of 57, it would be reduced by 25%.

62-57 = 5 * 5% = 25% reduction in benefits

This equates to a reduced FERS pension of $4,785 annually or $399/month.

By waiting until age 62 to collect her pension, Jessica will receive $6,380 per year, rather than $4,785.

*This hypothetical example is for illustration purposes only and is not indicative of an actual person. Your experience/results may differ.

Postponed Retirement and FEHB

As we learned in last week’s blog, under a FERS Deferred Retirement, you lose FEHB coverage on separation.

However, with a postponed retirement, eligible employees can keep their FEHB coverage so long as you were enrolled in the five years prior to separation.

In Jessica’s case, when she retires at 57, she will no longer receive FEHB.

But, when she begins receiving her FERS pension at age 62, she can re-enroll for FEHB coverage.

This is could be an extremely valuable benefit to her financial well-being in retirement.

Conclusion

It’s always good to know your options before you decide to retire.

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 info@gpis4u.org.

-Sam Wiss, RICP

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