Retirements tend to concentrate at the end of the year, to the point that some federal employees seem to think that’s the only allowable time to do it. However, there’s no such requirement –you are free to, and should, start preparing for retirement as soon as it is even dimly within view on the horizon.
In this series, we’ll start by looking at the basics you need as a foundation: when you can be eligible to retire voluntarily, how benefits are first calculated and how inflation adjustments work. Since more than nine-tenths of you are under FERS, we’ll start with that system before turning to CSRS.
We’ll first look at retiring under each on an immediate annuity—either under standard rules or the special early retirement rules—and then look situations in which payments would not begin immediately. Then we’ll look at one of the more complicated aspects of service time for retirement purposes, crediting for periods of active duty military service, before wrapping up with another important retirement planning consideration, providing for survivor benefits.
If you basically know all this already, good for you; this will confirm your understanding. If you don’t know, there’s no time like the present to learn.
Eligibility to retire under FERS
There are two things that determine if you are eligible to retire on an immediate unreduced annuity: your years of creditable service and your age. For FERS employees the combinations look like this:
Age 62 with 5 years of service
Age 60 with 20 years of service
At your minimum retirement age (MRA) with 30 years of service
Depending on your year of birth the MRA ranges from age 55 to age 57.
If Year of the Minimum
Birth is . . . Retirement Age is . . .
Before 1948 55
1948 55 and 2 months
1949 55 and 4 months
1950 55 and 6 months
1951 55 and 8 months
1952 55 and 10 months
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
1970 and After 57
While you can also retire at your MRA with at least 10 but fewer than 30 years of service, your annuity would be reduced by 5 percent for every year (5/12ths of 1 percent per month) that you were under age 62. You can reduce or eliminate that penalty by postponing the receipt of your annuity to a later date. That might make sense if, for example, you are leaving the government for a job in the private sector.
You can also retire on an immediate unreduced annuity as early as age 50 with at least 20 years of service, or at any age with 25, if your agency is undergoing a reduction-in-force (RIF), reorganization or transfer of function and offers you an early retirement opportunity.
Standard FERS retirement computation
The formula used to calculate your annuity is simple:
0.01 X the average of your highest three consecutive years of basic pay (your “high-3) X your years of creditable service, with full months past the last full year credited proportionately
If you retire at age 62 with at least 20 years of service, the following formula is used:
0.011 X your “high-3” X your years of creditable service, with full months past the last full year credited proportionately
Note: While unused can’t be used to increase your years of service and make you eligible to retire, it will be added to your years of service after you’ve become eligible.
The high-3 is an average of your highest rates of basic pay over any three consecutive years of creditable civilian service, with each pay rate weighted by the length of time it was received. That three-year period starts and ends on the dates that produce the highest average pay. If you are like most federal employees, your highest three years of basic pay will be the 36 months (to be completely precise, the 78 pay periods) immediately before the day on which you retire.
Special category FERS retirement computation
The rules for special category employees, such as law enforcement officers and firefighters are different than the ones for all other federal employees. If you are one of those, you can retire:
At age 50 with 20 years of covered service or
At any age with 25 years of service
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.
The FERS special retirement supplement
The special retirement supplement (SRS) approximates the Social Security benefit you earned while a FERS employee. It will remain fixed at its original dollar amount until age 62 when you first become eligible for a regular Social Security benefit. Whether you apply for a Social Security benefit at that time or not is up to you. In either case the SRS payment will end. FYI: If you exceed the Social Security earnings limit while you are receiving the SRS, your SRS will be reduced or eliminated.
Note: If you are a special category employee who retires before reaching your MRA, you won’t be subject to the Social Security earnings limit until you reach your MRA. In other words, you can earn as much as you want during that window.
COLAs are paid to:
• regular retirees age 62 or older;
• law enforcement officers, firefighters, and air traffic controllers;
• disability retirees;
• military reserve technicians age 50 with 25 years of service if they lost their military status due to medical reasons; and
• special CIA employees.
Note: For retirements from occupations subject to mandatory retirement, including law enforcement officers, firefighters and air traffic controllers, COLAs are paid regardless of whether the person worked up to mandatory retirement age or retired earlier.
If you retired before age 62, regardless of the month in which you turn age 62 your annuity will be increased by the full FERS COLA paid in January of the next year.
FYI: FERS COLAs are not always the same as CSRS COLAs. If the annual percentage increases by 2 percent or less, the FERS adjustment will equal the increase given to CSRS retirees, If it increases by 2 to 3 percent, it will be no more than 2 percent. And if it increases by 3 percent or more, it will equal the CSRS increase minus 1 percent.