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

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By on August 16, 2017 in Pay & Benefits, Q&A with 0 Comments

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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 [email protected] to discuss schedules and costs.

© 2018 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.


About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.