When retiring as a regular FERS (Federal Employee Retirement System) employee, your eligibility is based off of years of service and age. You must meet one of the three main minimum age and service requirements in order to qualify for an “immediate” unreduced pension. While there are other factors to consider when planning for retirement, such as income needs, strategies around social security and health benefits, the basic requirements are a good place to start.
MRA (Minimum Retirement Age) with at least 30 years of service
Retiring at MRA with at least 30 years of service is the earliest a regular FERS employee can retire (other than excepting an “Early Out” option) without a penalty. Minimum retirement age is based on the year of birth of the FERS employee. The following chart shows what that age is based on year of birth:
|If you were born||Your MRA is|
|In 1948||55 and 2 months|
|In 1949||55 and 4 months|
|In 1950||55 and 6 months|
|In 1951||55 and 8 months|
|In 1952||55 and 10 months|
|In 1965||56 and 2 months|
|In 1966||56 and 4 months|
|In 1967||56 and 6 months|
|In 1968||56 and 8 mo|
|In 1969||56 and 10 mont|
|In 1970 and after||57|
Separating at MRA with at least 30 years of service also qualifies you for the supplement. The supplement is from OPM and is designed to bridge the gap in income from retirement to social security eligibility, at age 62. These retirees also get to keep their FEHB (Federal Employee Health Benefits) and FEGLI (Federal Employee Group Life Insurance). Keep in mind that regular FERS retirees do not get any cost-of-living adjustments (COLA) until age 62.
Age 60 with at least 20 years of service
For employees who may have gotten a later start in their careers with the government, retiring at age 60 with at least 20 years of service can be a good “middle ground” option to still qualify for a penalty-free pension. Much like the previous qualification, this retiree also qualifies for the supplement and gets to keep their health benefits and life insurance coverage. It also puts them closer to qualifying for a cost-of-living adjustment. There is an advantage to making it two more years and retiring at age 62 with at least 20 years which we will cover shortly.
Age 62 with at least 5 years of service
Retiring at age 62 with at least 5 years of service also qualifies you for an “immediate” unreduced pension. Since social security age has been reached in this scenario, there is no supplement for retiring at age 62, because you can start social security payments right away. You would also be able to carry your health benefits and life insurance into retirement. A big advantage to going out at age 62 is you do not have to wait for a cost of living adjustment.
FERS employees who retire under any of the previously discussed scenarios (MRA w/ 30 years of service, Age 60 w/ 20 years of service and Age 62 w/ at least 5 years of service) get 1% per year of service towards their high-3 (the highest average 3 years of base plus locality earnings at any point in a FERS employee’s career).
For example: Sue has reached her MRA at age 57 with 32 years of service and has a high-3 of $65,000. Sue would get 32% (1% multiplied by years of service) of $65,000 (her high-3).
$65,000 X 32%= $20,800 per year
$20,800/12= $1,733.33 per month
Please note that this example does not include the income from the supplement that Sue would qualify for as well.
Age 62 with at least 20 years of service
Employees who make it to age 62 with at least 2o years of service get a higher pension calculation. Instead of receiving 1% per year of service, this employee gets a 10 % higher calculation of 1.1%.
For example: Carl is age 63 with 25 years of service and has a high-3 of $80,000. Carl would get 27.5% (years of service multiplied by 1.1%) of $80,000 (his high-3).
$80,000 X 27.5%= $22,000 per year
$22,000/12= $1,833.33 per month
There is no supplement for Carl, because he retired at age 62.
What works for you?
It is important to know your options and have a plan leading up to retirement. Just because you reach your minimum retirement age and have those 30 years, that does not mean that the figures will work out and lead to a successful retirement. Sometimes working those couple extra years to get a COLA right away or get the higher pension calculation makes all the difference and also leads to extra time contributing and getting a match in your Thrift Savings Plan. All of which increase how successful your retirement can be down the road.
* Information from the Office of Personnel Management
Steven Puckett is co-owner of Federal Retirement Consultants and co-host of the FedSmart podcast. He does webinars, seminars and one on one appointments with federal employees all across the country and has thousands of social media followers he keeps up to date on the retirement system.
Advisory services offered through CreativeOne Securities, LLC an investment advisor. Federal Retirement Consultants and CreativeOne Securities, LLC are not affiliated. Address: 26370 N 98th Ave Peoria, AZ 85383.