Closing the MRA-to-62-Years Gap: FERS Supplement Alternatives

As a federal government employee, you could take advantage of your minimum retirement age (MRA). If you’re fortunate, the FERS annuity supplement bridges potential income gaps between your MRA and age 62 (when you apply for Social Security).

What if you’re not eligible for the supplement? You’ll receive the Basic Benefit at a reduced amount. Still, a glaring income gap might be a problem until it’s time for Social Security benefits.

The good news is that there are FERS supplement alternatives available if you decide to separate at the MRA.

The FERS Annuity supplement: Not for Everyone

But first, let’s dive into the FERS annuity supplement, which is part of the Basic Benefit. It’s in place to support early retirees until they’re eligible to apply for Social Security retirement benefits. The supplement stops when Social Security begins.

But to be eligible for the annuity supplement, you must be

• At your MRA with 30-plus years of service, OR
• At age 60 with 20-plus years of service

In other words, not all Feds qualify for this benefit.

Solutions to Crossing the Income Divide

Here are the steps to take if you don’t have FERS annuity supplement eligibility but still want to separate from service at your MRA.

Analyze income versus expenses

One way to help bridge that gap is to spend less. Determine your after-tax spending habits. Then calculate anticipated income from your TSP and pension. Finally, close the divide by paying down debt, cutting back on expenses and tracking everything.

Consider part-time work

You can work part-time for the federal government and receive income even after retirement. You’re a part-time employee if you work between 16 and 32 hours a week (or between 32 and 64 hours per pay period).

However, consider that:

• The Income-Related Monthly Adjusted Amount (IRMAA) can increase your Medicare payments.
• A part-time salary can increase your income and taxes, especially when factored with pension receipts and TSP withdrawals.

Part-time work could reduce TSP contributions and pension benefits

Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer –

Change investment strategies

While you’re still a Fed, direct TSP allocations into the following buckets:

• Bucket #1 – Short term (12-24 months). Contribute to G Funds, which support expenses during early retirement.
• Bucket #2 – Medium term (three to five years. Allocate money to the fixed-income F Fund and the higher-return G Fund, which combines higher returns and relative safety.
• Bucket #3 – Long-term (five years and beyond). Direct contributions toward longer-term C, S, or I Funds to maximize income growth.

If you’ve reached your TSP maximum contribution limit, think about working with a CERTIFIED FINANCIAL PLANNER® (CFP®) like those with Serving Those Who Serve. These professionals can help you open an Individual Retirement Account, which can stretch your income further.

Consider TSP withdrawals

You can withdraw from your TSP without the 10% early‑withdrawal penalty if you separate from federal service in the calendar year you turn 55 or later (age 50, or 25 years of service for certain public safety employees).

Delay your retirement

Postponing retirement until 62 or later can increase your service years. This means an elevated “High-3” (which could raise your pension payments) and a potential boost in your Social Security benefits.

Retire at MRA Without the Supplement

There are income options between your MRA (if you decide to separate) and Social Security benefits. Reducing the income-expense divide, working part-time, focusing on cash bucket allocations, and withdrawing conservatively from your TSP can help.

Also, contact the Fed-focused CPFs® at Serving Those Who Serve for retirement advice and top-of-the-line financial planning. To set up a no-obligation meeting, visit the website or email [email protected]

The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **