Reg Jones Expert's View

When it comes to retiring early, FERS employees have a big advantage over their CSRS counterparts. If they are under the normal retirement age when they retire, they can often avoid the age reduction penalty, which is 5/12ths of 1 percent per month or 5 percent per year.

Deferred Annuity

To be eligible for a deferred annuity, former FERS employees must be at least age 62 with 5 years of service, age 60 with 20 years, or have reached their minimum retirement age (MRA) with 30. To retire at an earlier age and avoid the age reduction penalty, you can defer the receipt of your annuity. How much you will be eligible to receive will depend on your years of service and your highest average salary over three consecutive years (your “high-3”).

Deferred annuities are calculated using the same formula as that for any other employee. However, the “high-3” figure used will be the one in effect at the time you left the service. Although your high-3 figure won’t have been increased by any intervening cost-of-living-adjustments (COLAs), future COLAs will be paid on any annuity you receive.

If you are eligible for a deferred annuity, you may elect a survivor annuity. And, as long as you were eligible to take your Federal Employees Health Benefits coverage into retirement, you will be able to reenroll in the plan of your choice at the same time as your annuity begins. On the other hand, you won’t be able to reacquire Federal Employees’ Life Insurance coverage.

Early Retirement

The age and service hurdles are lowered for employees when an agency is faced with such things as a reduction in force, major reorganization or transfer or function. When that happens, a FERS employee can retire at age 50 with 20 years of service or at any age with 25 years of service. The additional good news is that the age reduction penalty is waived for those who elect to leave or are forced out during a period when early retirement offers are being made. And as long as you were covered by the FEHB program or FEGLI for at least five years before retiring, you will be able to carry that coverage into retirement.

The Special Retirement Supplement

If you are an employee who takes an early voluntary retirement, you will be eligible to receive a Special Retirement Supplement (SRS). That supplement approximates the amount of the Social Security benefit you will receive when you reach age 62. On the other, the SRS is only available to those deferred retirees who 1) have reached their MRA and have 30 years of service or 2) are age 60 with at least 20 years of service.