What Penalties Would I Face If I Retire at 62 With Less Than 20 Years of Service?

What penalties would I face if I retire at 62 years old but have less than 20 years in service?

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.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at johnfgrobe@comcast.net to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.