With early retirement opportunities popping up in the Postal Service and the usual speculation about them elsewhere, a lot of employees are confused about how the age penalty would affect them if they were to retire before reaching their normal retirement age.

When it comes to retiring early, FERS employees have a big advantage over their CSRS counterparts. If you are a CSRS-covered employee who retires before regular retirement age, your annuity is reduced by 2 percent (1/6 percent per month) for every year you are under age 55. On the other hand, if you are a FERS employee who retires early but before reaching the correct retirement age for immediate retirement, there won’t be any age penalty. And a good thing, too. Under normal circumstances, the penalty for retiring under the MRA+10 provision – minimum retirement age plus between 10 and 29 years of service – is an annuity reduction of 5/12ths of 1 percent per month or 5 percent for every year you are under age 62 (60 if you have at least 20 years of service).

To qualify for early retirement under either CSRS or FERS, you must be at least age 50 with 20 years of service or at any age with at least 25. If you are already covered by the Federal Employees Health Benefits and/or Federal Employees’ Group Life Insurance programs, you can continue that coverage in retirement if you have been enrolled in them for the five years before you retire. Note: The five-year requirement can be waived if you have a specific notice of a reduction-in-force affecting your position.

If you are a FERS employee who retires early, you are entitled to a benefit that isn’t available either to those who retire under the MRA+10 provision or to your CSRS brethren. You will be eligible to receive the special retirement supplement, which approximates the Social Security benefit you earned while covered by FERS. However, the SRS won’t kick in until you reach your minimum retirement age.

The main downside of retiring early under FERS is that your annuity won’t be increased by annual cost-of living adjustments until you reach age 62. Neither will your SRS, which ends at age 62, when you are first eligible to apply for a Social Security benefit.