Expert's View

Last week I wrote about employees who retire under the Voluntary Early Retirement Authority (VERA). This time I want to explain what happens if you leave government before you are eligible to retire.

If you have fewer than five years of creditable service, you won’t have been vested in the retirement system. So, unless you think you’ll be returning to federal employment sometime in the future, you can ask for a refund of your contributions.

On the other hand, if you have five or more years of creditable civilian service, and don’t take a refund of your retirement contributions when you leave government, you’ll be eligible for a deferred annuity.

If you are a former CSRS employee, you can apply for one at age 62. If you are a former FERS employee, it depends on your years of service when you leave and your age. With at least five years of service, you’d be eligible for an unreduced annuity at age 62. With at least 20, age 60. If you had 30, when you reach your MRA (minimum retirement age). Of course, if you had at least 10 but fewer than 30 years of service, you could retire when you reach your MRA; however, your annuity would be reduced by 5 percent for every year (5/12 percent per month) that you are under age 62. You could reduce or eliminate that age penalty by retiring and delaying the receipt of your annuity to a later date.

Once your annuity begins, you’ll receive it for the rest of your life. And, beginning at age 62, any cost-of-living adjustments (COLAs) will be added to your annuity. On the down side, your annuity will be frozen at the amount it would have been on the day you left. The longer the gap between when you leave and when you are eligible to receive your annuity, the more it will have been eroded by inflation.

One last point to consider. If you are eligible for a deferred retirement before age 62, you won’t be entitled to the special retirement supplement, which approximates the amount of Social Security benefit you earned while a FERS employee.