The other day, a friend of mine told me that he was planning to retire from the government. So, I asked him what kind of retirement he was taking. I got a blank stare in return. When we finally got on the same page, it turned out that he had had the correct combination of age and service to retire on an immediate annuity. But, as I pointed out to him, that’s not the only kind of retirement available to federal employees. Among the others are voluntary, discontinued service, early, postponed, deferred, and disability.
It got me thinking that now would be a good time to do a series on retirement, one that would explain the eligibility rules for each kind, how the benefits are calculated, and when you take one versus the other. At the end of the series, I’ll describe the impact each has on benefits such as health insurance, life insurance, survivor, etc.
I’ll start with the one my friend was taking, an immediate annuity. Because the rules are slightly different, I’ll describe each system in turn. This time I’ll focus on CSRS.
If you are covered by the Civil Service Retirement System, whether in CSRS or CSRS Offset, you can retire voluntarily on an immediate annuity if you meet the following age and service requirements: 55 with 30, 60 with 20 or 62 with 5. Your annuity will be calculated using the following formula:
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
The rules for CSRS special category employees, such as law enforcement officers, firefighters and air traffic controllers are different. If you are an LEO or firefighter, you can retire at age 50 with 20 years of covered service. Your annuity will be computed using this formula: 0.025 x your high-3 x 20 years of covered service, plus 0.02 x all remaining service. If you are an ATC, you can retire at age 50 with 20 years of covered service or at any age with 25. As an ATC, you are guaranteed an annuity of no less than 50 percent of your high-3.
Creditable service includes active duty service in the armed forces of the United States; however, the rules differ depending on when you were first hired as a civilian employee. If it was on or after October 1, 1982, you won’t receive any credit for your active duty military service unless you make a deposit to the civilian retirement system before you retire.
On the other hand, if you were first hired before October 1, 1982, you have two options. You can either make a deposit for that time before you retire or decide not to do that. If you choose the latter course and are eligible for a Social Security benefit at age 62 (or when you retire if after age 62), your annuity will be recomputed to eliminate all credit for any post-1956 military service.
CSRS retirees are eligible to receive annual cost-of-living adjustments regardless of the age at which they retire.
With one exception, everything I wrote about retirement under CSRS is true for those covered by CSRS Offset. If you are a CSRS Offset employee, you are covered by both CSRS and Social Security. If you retire and are eligible for a Social Security benefit at age 62, your CSRS annuity will be offset by the amount of Social Security benefit you earned while covered by CSRS Offset. If you retire after reaching 62, the offset will occur on the day you retire. The amount you receive in total will be the same; it will just come from two different places: OPM and the Social Security Administration.