How to Make Early Retirement a Reality

The author outlines some of the resources available to federal employees to help them save for an early retirement.

The economy today is much different from that of our grandparents’ time. People are no longer retiring at the age of 65, nor are many people capable of retiring that early. The cost of living and healthcare expenses have risen, and Social Security benefits are decreasing.

The average retirement age is 62, and the average number of years people spend in retirement before passing away is 18. The number of people who are financial prepared for those 18 years is far below average.

Despite the total cost of a couple’s healthcare in their last 20 years being $215,000, the average savings of a 50-year-old is less than $44,000 – which equates to a total of $88,000 for retirement between a couple. This is far less than enough to cover half of the medical bills they will receive between age 65 and 85, and does not begin to account for housing, food, or any of the other necessities of a comfortable life.

More than a third of Americans over the age of 65 rely completely on Social Security, without any help from other sources. Out of every hundred people who begin working at the age of 25, only four percent will have enough stored up for retirement by the time they reach 65 years old. 63 percent of these people, on the other hand, will be relying on social security, family and friends, and charity. To retire and live in a financially secure lifestyle, people need to begin saving money as young adults, putting aside cash, and investing their money wisely.

Early Retirement Resources for Federal Employees

There are ways, however, to retire early – especially for federal government employees.

As federal government employees, you will be able to retire on the Federal Employees Retirement System (FERS). This means you will be receiving benefits from multiple sources: a Basic Benefit Plan, Social Security, and a Thrift Savings Plan (TSP). The Basic Benefit Plan and Social Security work like any Social Security plan; a payment is withheld from your paycheck each pay period, and when you retire you begin receiving the benefits of those withheld payments.

The TSP is slightly different in that it is automatically set up for you by whichever agency you work for. Each pay period, one percent of your basic pay is deposited into the account; if you deposit further money of your own, then your agency will match it. Both the TSP and Social Security plans will stay with an employee even if they leave the services of the federal government before retiring.

While these plans make it somewhat easier for federal employees to be certain of their financial security during retirement, it does not automatically allow them to retire early. For example, there is the Minimum Retirement Age (MRA), before which the employee is not eligible for full retirement benefits. The MRA is dependent upon the date of birth of the employee and set at 57 for any employee born in 1970 or later.

Retiring at the minimum or earlier retirement age can pose certain drawbacks. For each year a federal employee is younger than 62 years old, his or her benefits will be reduced by five percent. This is if the employee has given between 10 and 30 years of service. There are different options for early retirement, though these are usually due to an agency restructuring of some kind.

Early Optional Retirement usually applies when an agency’s workforce is being reduced and employees must be let go. Any employees eligible for Early Optional Retirement are offered the choice to voluntarily retire. To be eligible for this option, an employee must be at least 50 years old and have given 20 years of service; those of any other age must have given 25 years of service.

If you are under age 55, your annuity will be reduced by five percent for each year under this age limit. Therefore, if you are offered Early Optional Retirement, consider how much annuity you will have and determine whether it will be worth it to retire voluntarily. If you have been wise in investing in your TSP, you may be in a financial position that will allow you to retire comfortably.

There are a few ways for federal employees to retire early and not have their annuity reduced, one of which is simply postponing retirement benefits. If an employee retires before age 62, they may simply postpone the payment of their retirement benefits until they are eligible to receive their full annuity.

If two married persons both work for the federal government, they may decide whether or not to enroll in the Self and Family retirement plan or to each hold a separate self-retirement plan. There are a large number of ways in which a government employee can make the most of his or her retirement benefits. Employees should research all of their options to ensure they retire in the best financial situation possible.

You may still be able to retire before you reach age 60 and continue to live quite comfortably if you decide to retire at the minimum retirement age or if you have given the number of years required to retire with a pension plan. To do this, however, you need to be financially responsible during your working years. Federal agencies are required to provide retirement counseling services to their employees, which can involve assistance with many financial questions and concerns.

One way to ensure you are making the most of your federal retirement plan is to contribute to your TSP. This plan functions similarly to a 401k plan for a private corporation, in that employees can save money over time by contributing to their plan and receiving contributions from their employer. As mentioned earlier, your agency will put in an automatic one percent of your basic payment each pay period. Any additional amount contributed by you will be matched by your agency up to five percent.

Thus, if you invest five percent of your payment amount each pay period, your agency will put in an additional four percent on top of the automatic one percent due to you. This gives you a total contribution of ten percent every pay period going towards your TSP. If you contribute more than five percent, it will not be matched by your agency, meaning you will receive your contribution plus an additional five percent from the agency.

There are several ways an employee of the federal government can make money in other avenues while working for the government, improving the chances for an early retirement. One of the most obvious is by making other investments. Investing in stocks and bonds can be lucrative if done wisely and with proper care, caution, and planning. Of course, success in this type of investing requires research and an understanding of the companies in which you invest. Making snap decisions and buying stocks on instincts or on rumor is rarely a smart decision. Other forms of investment are also wise; land and property, for example.

One popular way of making money while working for the government is by renting your home. This is a viable option for people whose jobs require that they move often and spend long periods of time on assignment. Employees of the State Department or the military might fall into this category.

Some employees who are stationed in foreign countries for multiple-year tours often retain a home in the United States, to have a home base whenever they return to the U.S. between tours. Since the home is not in use while the employee is away, it is reasonable to rent the house during that time period. Not only is this a good way to retain an American residence while abroad, it also allows the employee to make money while on assignment. Just be sure to use a good property management company to look after your investment when you’re away.

A similar method of earning money is for a federal government employee to buy a rental property. A beach house or a home on a mountain lake can be a great spot for vacations, and while the employee is away on assignment or simply too busy to use the property, it can be rented for a profit. Many a government employee has bought a rental property while in the service of this country and found that the investment helped bring greater financial security later. Furthermore, if the location of the rental property is good for retirees, government employees may simply move into their rental property upon their leaving government service.

Whether choosing to rent out a single room or your whole home while away or to invest in a rental unit for the sole purpose of generating additional income, rental properties are a sound means of increasing wealth and planning for life after retirement.

By handling finances wisely from the very beginning, a government employee can ensure to not only have enough money on which to live when choosing an early retirement, but they can live well and enjoy life after their service to this country is complete. Through smart investing in the TSP and other investment agencies, and through wise handling of rental properties, a federal employee can do very well and have little need to worry about future financial security.

About the Author

Jason Kay is a professional resume writer and regular contributor to, a professional federal resume service and repository of sample KSA statements.