Last week I wrote about immediate retirement under CSRS and CSRS Offset. This time I want to review the immediate retirement rules for those of you who are covered by FERS.
FERS-covered employees can retire voluntarily on an immediate annuity if they meet these age and service requirements: 62 year old with 5 years of service, 60 with 20, at their minimum retirement age (MRA) with 30 or at their minimum retirement age (MRA) with 10, but with a 5 percent reduction in their annuity for every year (5/12 percent per month) they are under age 62. MRAs range between 55 and 57, depending on your year of birth, as you’ll see below.
If you were born before 1948, your MRA is 55
If you were born in 1948, it’s 55 and 2 months
1949, 55 and 4 months
1950, 55 and 6 months
1951, 55 and 8 months
1952, 55 and 10 months
In 1953 through 1964, your MRA is 56
1965, 56 and 2 months
1966, 56 and 4 months
1967, 56 and 6 months
1968, 56 and 8 months
1969, 56 and 10 months
And, in 1970 and later it’s 57
The formula used to calculate a FERS annuity is simpler than that for CSRS. It’s 0.01 x your high-3 x years and full months of service. However, if you retire at age 62 with at least 20 years of service, the first multiplier is increased to 0.011.
The rules for special category employees, such as law enforcement officers and firefighters are different. You can retire at age 50 with 20 years of covered service or at any age with 25. Your annuity will be computed using an enhanced formula: 0.17 x your high-3 x 20 years of covered service, plus 0.01 times all additional years and full months of service.
Note: Unlike CSRS, you won’t get any credit for active duty service in the armed forces unless you make a deposit for that time.
FERS employees who retire on an immediate annuity are eligible for a special retirement supplement (SRS) that approximates the Social Security benefit they earned while covered by FERS. That benefit is payable until age 62 unless you exceed the annual Social Security earnings limit. If you do, your SRS will be reduced or suspended. The rules are different for special category employees who retire before reaching their MRA. They won’t be subject to the Social Security earnings limit until they reach their MRA.
Note: Retirement supplements are never increased by COLAs.
As a rule, FERS retirees don’t receive a cost-of-living adjustment (COLA) until they reach age 62. On the other hand, special category retirees will be entitled to them regardless of the age at which they retire.
However, it’s important to note that FERS COLAs are often less than those received by CSRS employees. Further, they only occur when the Consumer Price Index (CPI-W) increases enough to trigger them. There have been years when it hasn’t. And, with the slowdown in the economy due to the COVID-10 pandemic, 2021 is looking like one of them.
Note: If you had at least five years of service under CSRS before being covered by FERS, you will have a CSRS component in your annuity. That portion will be computed using the standard CSRS formula. It will also be increased by annual COLAs, regardless of the age at which you retire.
Something to Consider
I’ll repeat what I wrote last week in my article about CSRS and CSRS Offset employees. If you are already eligible to retire, ask yourself a few questions. Am I emotionally ready to retire? Am I financially able? Do I know what I’m going to do with my time after I leave?
Before COVID-19 hit, those questions would have been easy to answer. Now and for the foreseeable future, those answers might be different. A word to the wise: Think before you jump.
Next week I’ll explain the rules governing retirement under the MRA+10 provision and the option it provides for those who retire under it.