Early retirement, buyout, deferred annuity, postponed annuity? That’s a lot of possible choices. On the other hand, there’s one more. Hunker down, stay on the job, and hope for the best. Image: RAGMA IMAGES/Shutterstock.com
By: Reg JonesUpdated: Most federal employees retire when they have the right combination of age and service to do so. However, there are two additional forms of retirement that on the surface sound alike but are actually different. One is the deferred annuity, and there’s quite a lot of interest in this of late. The other is the postponed annuity. Let’s take a look and see if these options might be for you.
Eligibility Requirements – Deferred Retirement
If you leave federal service before you meet the age and service requirements for an immediate retirement, you may be eligible for a deferred annuity. To be eligible under either FERS or CSRS, you have to leave your retirement contributions in the retirement fund when you separate from the government and you have to have at least five years of creditable civilian service. If you do, you can receive a deferred annuity at age 62 or, if you have at least 10 years of service under FERS, your minimum retirement age (MRA), which is 55-57, depending on your year of birth.
Eligibility Requirements – Postponed Retirement
If you are eligible for immediate retirement under FERS, you can retire but postpone the starting date of your annuity. Most FERS employees are eligible for an annuity if they meet the following age and service requirements: age 62 with 5 years of service, age 60 with 20 years, MRA with 30 or MRA with10. See below for why you might want to do this.
Calculating Your Annuity
If you will be eligible for either a deferred or a postponed annuity, the formula used to calculate your annuity will be the same as it is for any other employee: FERS, if all your civilian service has been under that system; FERS and CSRS if you are under FERS but will have a CSRS component in your annuity; and CSRS if all your service was under CSRS.
When calculating your annuity, your highest three consecutive years of average pay (your high-3) will be the one in effect at the time you left government. It won’t be increased by any cost-of-living adjustments (COLAs) that are given to retirees between the time you separate and the date your annuity begins.
CSRS
0.015 x your highest three years of average salary x 5 years of creditable service, plus
0.0175 x your high-3 x 5 years of service, plus
0.02 x your high-3 x all remaining year of service
FERS
0.01 x your high-3 x years of service.
Note: The first multiplier is changed to 0.011 if your annuity begins at age 62 with at least 20 years of FERS service.
Annuity Reductions
Whether you are applying for a deferred or postponed annuity, you’ll have to make a deposit for any post-1956 military service before you leave the government. You won’t be able to do that when you later apply for your annuity. The consequences of not making a deposit are clear. If you become eligible for a Social Security benefit at age 62, those years of military service will not be included in your annuity computation. Any dollar benefit due for that time will only show up in your Social Security check.
While there isn’t any age-based reduction in the annuity of CSRS retirees, there is for those covered by FERS. Let me explain. If you are less than 62 years old when you apply for your FERS deferred annuity, it will be reduced by 5/12 percent for each month (5 percent per year) you are under age 62 unless you have 1) at least 30 years of service, 2) 20 years of service and postpone your retirement until you are age 60, or 3) at least 20 years of service as a law enforcement officer, firefighter or air traffic controller.
The same penalty applies to a FERS postponed annuity. That’s the reason why some retiring
employees defer the starting date of their annuity until the benefit reduction is reduced or eliminated.
If you don’t make a deposit for any post-1956 military service before you leave, you won’t be able to do that when you apply for your deferred annuity. If you decide to retire and postpone your annuity commencing date, you’ll also have to make that deposit before separating. The consequences of not making a deposit are clear. If you become eligible for a Social Security benefit at age 62, those years of military service won’t be included in your annuity computation.
Downsides to Deferred and Postponed Retirement
If you are a former CSRS employee who is applying for a deferred annuity, you’ll be able to receive the annual cost-of-living adjustment (COLA) on your annuity However, if you are a former FERS employee, in most cases you’ll have to wait until age 62. Whether you were covered by CSRS or FERS, you won’t be eligible to reactivate your Federal Employees’ Life Insurance (FEGLI) coverage or reenroll in the Federal Employees Health Benefits Program (FEHB).
If you are a FERS retiree who has postponed the receipt of your annuity, you’ll be treated the same as if you were a deferred annuitant with regard to COLAs and eligibility for FEGLI coverage. On the other hand, if you participated in the FEHB for 5 years before you left government (or from your first opportunity to enroll) and 1) separated after reaching your MRA and 2) have at least 10 years of service, you can reenroll in the FEHB when your annuity begins.
What about FEHB and FEGLI?
If you were enrolled in the FEHB or FEGLI programs for the five consecutive years before you retired, when your annuity begins, you can reenroll in either or both of those programs. You also can reenroll in the FEDVIP vision-dental insurance program with no five-year requirement.
Early retirement, buyout, deferred annuity, postponed annuity? That’s a lot of possible choices. On the other hand, there’s one more. Hunker down, stay on the job, and hope for the best.
Former head of retirement and insurance policy at the Office of Personnel Management, and longtime FEDweek contributor, Reg Jones is known throughout the federal workforce community as an authority on pay and benefits.
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See also
Attorney Schnitzer: How to Challenge a Federal Reduction in Force (RIF) in 2025
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
