Retirement Benefits

Before making a hasty decision in either direction, be sure to fully understand the benefits and consequences. Image: ANDREI ASKIRKA/Shutterstock.com

Early retirements are used in agency downsizing situations as an incentive to get employees near standard retirement eligibility combinations to leave and avoid cutting jobs through reductions in force.

The government does not offer these incentives to the extent it once did, so it is far from certain that you will receive one. But one thing that can be said for certain is that if you receive one, you will have relatively little time to decide whether to accept—most likely a matter of several weeks. In many cases the period effectively is shorter because an agency can cut off offers after receiving a target number of acceptances.

For some employees, the decision is made immediately. Some reject the idea out of hand, possibly because they haven’t reached a financial position from which they can stop working, even if they would be drawing an annuity. For some, it’s a lifestyle decision; they simply wish to continue working, possibly in order to coordinate their retirement with that of a working spouse and/or to build up their retirement income and assets to a more comfortable level.

Similarly, some employees accept offers with little thought. They are eager to leave their federal government employment for a variety of reasons—an outside job opportunity, dissatisfaction with the way their program is being administered, even personality conflicts with co-workers or supervisors.

But before making a hasty decision in either direction, be sure to fully understand the benefits and consequences. It might be a better deal than you expect and might open up opportunities for outside employment or retirement activities that you hadn’t anticipated. Or, it might be a worse deal than you expect, leaving you with a lifetime annuity smaller than you had been expecting.

In early retirement offers the age and service requirements are reduced to 20 years of service at age 50, or 25 years of service regardless of age. Those taking early retirement are eligible for the same carry-along benefits into retirement that apply in standard voluntary retirement, assuming they meet eligibility requirements.

It’s wise to regularly project not only what your retirement benefit would be if you retired at your target date, but also if you retired under early retirement.

Buyouts can sweeten the deal. In most cases, the maximum payment is $25,000, although the Defense Department can offer up to $40,000. For those in a position to retire, this often amounts to a nice going-away present. Some of them use the buyout money to make up for reductions in annuity that they may suffer from accepting an early-retirement offer, which often is made in conjunction with a buyout offer.

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