Feel free to skip to the relevant parts of the article for you
–How to Retire Early Under FERS
–FERS Postponed Vs. FERS Deferred Retirement
–When Does My Deferred Retirement Pension Start?
–Reductions to Your Deferred Retirement
–Should You Take a Deferred or Postponed Retirement?
–How Does a Deferred or Postponed Retirement Work for Special Provision Employees?
–Can I Get the FERS Supplement under Postponed or Deferred Retirements?
Some people are 100% content with doing their 30 years with the government, waiting until their minimum retirement age, and then retiring with their full benefits.
Others however, are much more interested in retiring early and may or may not be willing to give up some of their benefits to make that happen.
Before we dig into the details of retiring early, we have to understand what a normal retirement might look like. To retire with an immediate and unreduced pension, one must meet one of the following:
Age 62 with at least 5 years of service
Age 60 with at least 20 years of service
Minimum Retirement Age with at least 30 years of service
Your MRA (minimum retirement age) is based on your birthday per the chart below.
Note: The retirement rules for air traffic controllers, law enforcement officers, and firefighters are not the same as traditional FERS. See the section near the bottom of this article for the specifics on how this works for you.
How To Retire Early Under FERS
Under FERS, there are 3 main ways to retire early:
Deferred Retirement
Early Out Retirement (VERA)
MRA+10 Retirement
Postponed Retirement
Early Out
The early out retirement (VERA) is something that agencies only offer when they are trying to downsize and get more employees off their payroll. As a result, this is not a type of retirement that everyone will automatically have access to.
In efforts to stay focused, I will cover the early out retirement in depth in another article.
MRA+10
MRA+10 retirement is when you retire at your minimum retirement age with at least 10 years of service but less than 30 years of service. And while this type of retirement does allow you to retire “early” your pension will be reduced 5% for every year before 62 or 60 (depending on how many years of service you have.
To avoid this reduction, feds can postpone their pension until a later date. This action is called a postponed retirement.
You can learn more about the MRA+10 retirement here.
FERS Postponed Vs. FERS Deferred Retirement
In the English language the words postponed and deferred have almost identical meanings but in the context of your federal benefits, these two types of retirements are very different from one another.
To help you understand the key differences we will go through the specifics as well as some examples of each type.
But just so you know upfront, one of the major differences between these types of retirement is your ability to continue your health insurance (FEHB) into retirement. For a postponed retirement you are able to turn your health insurance back on but with deferred retirement you are not.
Here is a chart of the key differences to understand:
FERS Deferred Retirement
A deferred retirement is much easier to qualify for compared to a postponed retirement. To be eligible for a FERS deferred retirement you will have to have both of the following:
Have at least 5 years of creditable civilian service
You must leave your contributions in the FERS system
Having 5 years of service is fairly straightforward but the second requirement can get confusing.
Basically, every paycheck you contribute a percentage of your pay into the FERS retirement system. Later, this system will be what funds your pension in retirement. However, if you leave federal service early you will have the option to get a refund of everything that you contributed into this system. But, as stated above, if you do take the refund then you will NOT be eligible for a deferred retirement.
Note: Some people confuse the FERS retirement system with their TSP. These are 2 separate things. Every paycheck most federal employees also contribute money into their TSP as well but that money has nothing to do with your pension.
When Does My Deferred Retirement Pension Start?
So let’s say you have 5 years of service and you kept your contributions in the system, when can you start receiving your deferred pension?
It depends on how many years of service you have per the chart below.
As the chart shows, the more years of service you have, the sooner you’ll be able to turn on your deferred pension later.
For example, if you have 5 years of service the earliest you can start drawing a pension is age 62. But if you have 30 years of service then you can start your deferred pension at your minimum retirement age.
Reductions to Your Deferred Retirement
But as I am sure you noticed, if you have at least 10 years of service then you’d be able to start your deferred pension as early as your minimum retirement age but with a reduction.
Basically, you’ll see a 5% reduction to your pension for every year you take it before you’d otherwise be eligible. For example, with only 10 years of service you’d see a 25% reduction (5% for each of the 5 years) to your pension if you started it at 57 instead of 62. But if you would have had 20 years of service then you’d only see a 15% reduction because there is only 3 years between age 57 and age 60 (when you’d otherwise be eligible with 20 years of service).
Losing Your Health Insurance, Life Insurance, and FERS Supplement
And as I touched on earlier, if you leave the government with a deferred retirement then you will NOT be able to keep your health insurance (FEHB). This also means that you will NOT be able to get back into your health insurance (FEHB) when your deferred pension starts later.
On top of your health insurance, you are also not eligible to keep your life insurance and you will not be eligible for the FERS supplement.
So if any of these benefits are important to your retirement then you might want to consider working longer to be eligible for a different type of retirement.
FERS Postponed Retirement
Now that you understand how a deferred retirement works, we will dig into the details of a postponed retirement.
To be eligible for a postponed retirement you have to have at least 10 years of service and have reached your minimum retirement age.
And as you might have noticed, these are the same eligibility requirements for the MRA+10 retirement that I mentioned above. MRA+10 retirement is when you retire at your minimum retirement age with at least 10 years of service but less than 30 years of service. And while this type of retirement does allow you to retire “early” your pension will be reduced 5% for every year before 62 or 60 (depending on how many years of service you have).
However, you can avoid this reduction if you use a postponed retirement.
How Does a Postponed Retirement Work?
If you are eligible for a MRA+10 retirement you can use a postponed retirement to avoid the pension reduction that would otherwise come into effect.
For example, if you retire at 57 (your MRA) with 10 years of service then you can get a pension right away but it will be reduced by 25% forever. However, if you postpone your retirement until age 62 then you will receive 100% of your pension but it won’t start until age 62.
During the years that you are not receiving a pension you will not be covered by your health insurance (FEHB) or your life insurance. However, once your pension starts you would be able to get back into both of these programs.
Big Difference Between FERS Deferred and Postponed Retirement
Again, one of the major differences between a deferred and postponed retirement is that with a postponed you are able to return to FEHB and FEGLI once you start your pension. With a deferred retirement, this is not the case.
Should You Take a Deferred or Postponed Retirement?
Because of your ability to return to FEHB and FEGLI once your pension begins, a postponed retirement is definitely the better option. But with that said, for some people it will not be worth sticking around for.
For example, if someone starts working as a federal employee at age 30 and is now 40 they would have 10 years of service but would have to work another 17 years (if their MRA is 57) to qualify for a postponed retirement.
But with 10 years of service, they could leave the government for a different job right away and still get a deferred pension later.
So if you are close to being eligible for a postponed retirement then it may be worth it sticking around for but maybe not if it is still many years away. You will certainly want to think about your own career goals and retirement plans to see what makes the most sense for you.
Q&A
How Does a Deferred or Postponed Retirement Work for Special Provision Employees?
Special provision employees are often eligible to retire earlier with an immediate unreduced pension than their traditional FERS counterparts. Generally, special provisions needs the following to retire:
At least 20 years of service at age 50
At least 25 years of service at any age
However, if special provisions don’t meet either of these criteria then they would fall back into the traditional FERS retirement rules including the rules for deferred and postponed retirements.
Can I get the FERS Supplement with a Deferred Retirement?
No, you are not eligible for the FERS supplement with a deferred retirement.
Can I get the FERS Supplement with a Postponed Retirement?
No, you are not eligible for the FERS supplement with a postponed retirement.
