Reg Jones Expert's View

Last time I went over the advantages and disadvantages of early retirement. This time I’ll summarize the early retirement rules.

There are two authorities available to an agency that needs to reduce the size and/or shape of its workforce. The first and oldest of these is the Voluntary Early Retirement Authority (VERA), our topic today. The second, which I’ll talk about next week, is the Voluntary Separation Incentive Program (VSIP), better known as buyouts. When an agency is facing serious staffing problems that will lead to a reduction-in-force (RIF), reorganization or transfer of function, it can get approval – usually from OPM – to use one or both of these authorities.

The VERA criteria are simple. Whether you are covered by CSRS or FERS, you may retire at age 50 with 20 years of service or at any age with 25. However, depending on whether you are a CSRS or FERS employee, different rules apply after your eligibility to retire has been determined.

Under CSRS, your annuity will be reduced by 1/6 percent for each month you are under age 55. That’s 2 percent per year. On the other hand, you’ll be eligible to receive annual cost-of-living-adjustments on your annuity. As I mentioned last week, that hasn’t paid off as a benefit the last two years because there haven’t been any COLAs. However, that could change next year.

Under FERS, the usual 5 percent per year penalty for retiring before age 62 is waived. You will also be eligible for a special retirement supplement, which approximates the Social Security benefit you earned while employed under FERS. However, it will only be paid when you reach your minimum retirement age, which ranges between 55 and 57 depending on your year of birth. Currently it’s 56.

The SRS ends at age 62 when you become eligible for a Social Security benefit. However, it can end even sooner if you have earnings from wages or self employment that exceed the Social Security earnings limit. In 2011 that limit is $14,100.

As a FERS retiree, you won’t get COLAs on your annuity until you reach age 62. And COLAs are never added to your SRS.

Next time I’ll talk about the rules governing the VSIP.