Early Retirement Revisited

Since the opening days of the Trump administration, tensions have continued to rise in the workforce. Employees are asking, “Are all those program and personnel cuts the president talked about during the run-up to the election really going to happen?” I don’t know. What I do know is that some agencies are already announcing plans to downsize. And others may soon be doing the same.

If those anticipated cuts become a reality, what are your retirement options? Well, those of you who already meet the age and service requirements to retire on an immediate, unreduced annuity can retire any time you either want to (or are forced to). But what about the rest of you?

The “you” in that last sentence fall into three categories:

• those who will be eligible for early retirement if—there’s no guarantee—your agency offers it to you;

• those who aren’t eligible to retire now but will be in the future; and

• a subset of FERS employees who retire under the “MRA+10” (minimum retirement age with 10 years of service; the age ranges between 55 and 57, depending on your year of birth) provision and want to postpone the receipt of their annuity to avoid the 5 percent per year age penalty.

To start, let’s look at those who are eligible for early retirement.

The eligibility rules are the same for CSRS and FERS employees. Under the Voluntary Early Retirement Authority (VERA), you can retire at age 50 with 20 years of service or at any age with 25. If you are a CSRS employee, your annuity will be reduced by 2 percent for every year (1/6 percent per month) that you are under age 55—that applies to relatively few CSRS employees anymore, however. If you are a FERS employee, the 5 percent per year (5/12 percent per month) age penalty will be waived.

In either case, your annuity will be computed using the following standard formulas for each retirement system:

• FERS: .01 x your high-3 x your years and full months of service.

• CSRS: .015 x your high-3 x 5 years of service, plus

.0175 x your high 3 x 5 years of service, plus

.02 x your high-3 x all remaining years and full months of service

If you are a CSRS retiree, you’ll receive cost-of-living adjustments (COLAs), regardless of the age at which you retire. If you are a FERS retiree, you’ll have to wait until you are 62.

If you are a FERS retiree, you’ll receive the special retirement supplement when you reach your minimum retirement age. The SRS approximates the Social Security benefit you earned while a FERS employee. It doesn’t include credit for any active duty service in the military, even if you’ve made a deposit for that time.