Q: What are my penalties if I retire at 62 years old but have less than 20 years in service? I am currently under the General Schedule pay system (GS-12, step 10).
A: Technically there are no “penalties” in your situation, but you give up a “bonus” in your annuity computation.
Under FERS, those who retire at age 62 or older and who have 20 or more years of service get a 1.1% per year factor used in computing their annuity, while all others (special category employees excluded) get a 1% factor.
You stated that you were a grade 12, step 10, but did not specify where you worked, so I used the GS pay table for areas that get no special locality adjustment ($81,541).
If you are 62 or over and retire with 19 years and seven months of service, your FERS annuity would be $15,968. If you wait until you have 20 years of service, it would be $17,939, a difference of $1,971 a year ($164.25 per month).
The only “penalty” that applies to FERS employees applies to those who retire under the MRA+10 criteria. That penalty is 5% per year (5/12 of 1% per month) for each year (month) the retiree is under the age of 62.