What is the magic age for federal employees to retire? There are many milestones in a federal career. Everyone fears getting older, but in the federal government when you turn 62 it can be a financial celebration. However, this does not apply to those federal employees who face mandatory retirement at age 57 such as law enforcement, fire fighters and air traffic controllers, and reaching age 62 does not play a factor in reaching your Minimum Retirement Age (MRA).
Federal employees can be eligible for a Federal Employees Retirement System (FERS) annuity by reaching various years of service and age requirements. The Minimum Retirement Age (MRA) is dependent on the year you were born. For most employees, their MRA could be between the ages of 55 to 57. If you reached your MRA and also have enough years of service, you can continue your Federal Employees Health Benefits (FEHB) in retirement.
The Office of Personnel Management (OPM) also provides them with a Social Security supplement which is a reduced amount of their estimated Social Security calculation at age 62. This figure is dependent on the number of years of federal service and what their estimated SSA benefit is at age 62. The Social Security supplement is provided with their FERS annuity if they choose to retire between the ages of 55/57 until age 61. The Social Security supplement terminates at age 62. A retired employee then has the option to elect their SSA benefit at age 62 or postpone that decision to a later date.
If you are able to hold off retirement until the age of 62, there is a large incentive provided by the government. As an example, let’s take two federal employees who both earn $100,000 and have 30 years of service. If one employee retires at the age of 60, their annual FERS pension will be $30,000. If the other employee happens to be age 62, their annual pension will be $33,000. This is due to the fact that when a federal employee turns 62, their FERS multiplier changes from 1.0 to 1.1 which is a 10 percent increase to their annuity. The 1.1 multiplier stays with the employee if they continue working beyond the age of 62. Many employees who retire prior to age 62 are unaware of this benefit and are unaware that they are leaving this large sum of money behind.
So why does the government do this? Because in the above example, the federal government did not have to payout the Social Security supplement when you retire at age 62. The supplement would be paid from age 60 until your 62nd birthday. The 10 percent increase to your annuity at age 62 is a financial incentive for employees to work up to age 62. That’s right; an incentive. It is another option when you are making your decision to retire from federal service. So, before you retire, you need to weigh your financial options.
Abraham Grungold is a retired Federal Employee with over 36 years of federal service. He is the owner of AG Financial Services, a business is to help employees with their TSP and FERS retirement decisions. He has written over 30 articles about the TSP and FERS.