What's the Difference Between Postponed vs. Deferred Retirement?

Are you thinking about leaving federal service before you are eligible for an immediate FERS retirement?

Then you need to know the difference between a postponed and a deferred retirement. They sound similar, but there are big differences.

Immediate FERS Retirement Basics

Before we get into the difference between postponed and deferred retirement, let’s look at the basic requirements for immediate FERS retirement. We’ll be referring back to these rules quite a bit, so let’s take a quick look…

In order to qualify for an immediate retirement – you must have a certain number of years of creditable service, and have reached a specific age.

There are three combinations of service and age, and they are…

  • 30 years in service & MRA (Minimum Retirement Age – varies between 55 and 57)
  • 20 years in service & age 60
  • 5 years in service & age 62

If you can meet any one of these three combinations, you are eligible for a regular immediate FERS retirement. You get your full pension, based on your service, and it starts soon after you retire.

But what if you’re ready to leave federal service, before you meet these qualifications?

What is Deferred Retirement?

If you have 5 or more years of creditable service when you leave the government, you can leave your contributions in the retirement system.

Then, when you reach a certain age, you can start drawing a pension. Let’s say you had 6 years of creditable service. You leave federal service, and you leave your FERS retirement contributions in the system. In this case, once you reach age 62, you could file paperwork and begin receiving your pension.

You’ll have to wait until 62, because that’s the first time you meet the immediate retirement rules. You would be age 62, with 5 or more years in service.

Some Drawbacks of Deferred Retirement

While you’ll be able to draw a pension, keep in mind that it’s based on your High-3 Salary and your years in service. So if you don’t have many years in service, your pension will reflect that.

Going back to our example, let’s say you had 6 years of creditable service. For easy numbers, let’s say your High-3 salary was $100,000. When you draw your deferred pension, you’d be receiving about $6,000 a year, or $500 a month. But the biggest drawback, in my opinion, is when you take a deferred retirement,  you can *not* keep FEHB in retirement.

Even with these drawbacks, it’s almost always better to leave your retirement contributions in the system and draw a pension later than to take a refund of your contributions.

So how is postponed retirement different?

Important Difference: Postponed Retirement

If you meet certain qualifications, you may be eligible for a postponed retirement instead. And a postponed retirement has a huge advantage over a deferred retirement. With a postponed retirement, you *can* keep your FEHB in retirement.

So how do you qualify for a postponed retirement?

When you separate from service, you must be *eligible* for MRA+10 retirement; but instead of actually retiring MRA+10 and starting your pension, you wait to file your paperwork later. (Also see Future Retirees: Do You Know Your MRA?)

What is MRA+10 Retirement?

FERS employees have a special option to retire before you meet the regular immediate retirement rules. Once you have reached your Minimum Retirement Age (between 55 to 57) and have at least 10 years of creditable service, you can start drawing a pension.

What’s the catch? A big reduction in your pension.

When you retire with MRA+10 rules, your pension will be reduced by 5% for each year you are younger than age 62.

Let’s say your MRA is 56, and you left service at age 56 with 10 years in service… if you actually retired under MRA+10 rules, your pension would be PERMANENTLY reduced by 30% (5% x 6 years). If you were expecting a pension of $1,000 a month, after your MRA+10 reduction, you would be receiving $700 a month. There’s more to know about MRA+10 retirement. Check out our page on Early FERS Retirement for more information.

What if You Don’t Want the Reduction?

Let’s say you qualify for MRA+10 retirement, but you don’t want to take the permanent reduction to your pension.

You can choose to separate from service and leave your FERS contributions in the system. When you reach the age where you qualify for immediate retirement, you can file paperwork and begin receiving an unreduced pension at that point.

And what about FEHB? If you had been enrolled in FEHB for the 5 years prior to your separation, you can elect to start FEHB coverage again and keep it in retirement. That’s a tremendous benefit. It is important to remember that you will likely have a gap in coverage with your health insurance.

When you separate from service, you can choose to continue FEHB for a limited time on COBRA, but COBRA won’t last forever. So you may need to look into other options for health insurance to cover you until you pick up your postponed retirement and turn FEHB back on.

Quick Summary: Postponed vs. Deferred

Here’s a quick summary of the major differences between a postponed and deferred federal retirement…

 

Ever Wish There Was a Checklist for Planning Your FERS Retirement?

The difference between a Postponed and Deferred FERS retirement is just another example where understanding the nuances of federal retirement rules can make a big difference in your retirement. The key part: You have to understand the differences before you retire.

If you’ve ever wished for a ‘checklist’ for FERS retirement, you’ll want to learn more about our step-by-step program called, FERS Route to Retirement.  I have turned the same process I use with my new clients into a do-it-yourself program to help FERS federal employees learn about their retirement benefits and create their own financial plan. Find out more at FERS Route to Retirement.

© 2016 Micah Shilanski, CFP®. All rights reserved. This article may not be reproduced without express written consent from Micah Shilanski, CFP®.

About the Author

Micah Shilanski is a Certified Financial Planner™ professional who specializes in helping federal employees get the most out of their retirement benefits. Micah helps his clients with tax planning, retirement planning, federal retirement planning, estate planning, and investment advice.

Plan Your Federal Retirement is a dba of Shilanski & Associates, Inc., an Alaska Registered Investment Advisor, with securities offered through Summit Brokerage Services, Inc., Member FINRA/SIPC.

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  1. newtothis says:

    i have a question. if i am over 65 with 12 years of  fed. service and want to joint peace corps as way to continue my fed service how to i do that and not affect 3 years salary and also FEHB(peace corps requires it own insurance)? 

  2. JimBOP says:

    What about FERS/LEO?

  3. ziggy says:

    I’m 59 and 10 months and really would like to go now but want to be able to use Sigbee Island in Key West for some winter getaways which I’m sure will require an ID card.
    I’ve had enough!!!!!! High 3 means nothing now without any raises. Anyone verify or have a number I can call to verify?

    • Navy Guy in AF Land says:

      My experience (Navy Guy in AF Land) says that you need to be able to do an immediate retirement, i.e. you must qualify to draw a pension immediately in order to qualify for the ID card (assuming you are DoD, don’t know about others).

  4. Bill says:

    The biggest deal I see here is the loss of FEHB.  But then again, I’m reading that the govt is considering cutting all of our FEHB and replacing it with the aweful Tricare for Life system. 

  5. A7492097 says:

    Anyone have an answer to A7?

  6. Bethm1522 says:

    How about 20 years at fifty, but wanting to defer or postpone receiving retirment until 60 or 62?

  7. Gary says:

    Does bought military service count towards count 6 years of service requirement. I have MSD military service deposit of 5 years if I buy this time back and work 1 year wil that count.

  8. Navy guy in AF country says:

    Good description of the differences but there is one other thing to consider if you are DoD. If you take an immediate retirement from DoD, you are eligible for a DoD retiree ID card which can give you some benefits and access on certain Military Facilitiies (I’ll give an example later). If you postpone, even for a short period (I postponed drawing my pension for six months before I reached 60, so as to not suffer any reductions), you are NOT eligible for the ID card. 

    The example..I separated from FERS service at 59.5 years of age and 29.6 years of govt. service, moved to Colorado Springs from DC area and was looking forward to using the AF Academy facilities (specifically the great golf courses on base) at the “Retired/Govt. Employee” rates based on my retired GS rank. That worked fine for a period, but then the Academy changed the rules and said I needed to have the ID mentioned above. Applied for one but was told, quite emphatically, that unless you retire on an immediate pension that you are not eligible for the ID. Needless to say I was disappointed since no one told me about that ID or it’s requirements prior to my retirement.

  9. A7492097 says:

    How does the newly enacted benefit for FERS employees to get service longevity credit for un-used accumulated sick leave operate under the “postponed” and “deferred” retirement scenarios?  I know you get 50% credit for longevity purposes for all unused accumulated sick leave for retirements between now and 31 DEC 2013 and full day for day credit for un-used accumulated sick leave for longevity credit for retirements on and after 1 JAN 2014 in the “immediate” retirement situation.  An explnantion of this new and potentially valuable FERS sick leave credit benefit - that can increase service time credit at retirement - in the “postponed” and “deferred” retirement context would be very helpful.

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