Navigating Federal Retirement Options: What You Need to Know Amid Government Downsizing

Amid copious early retirement offers and the looming threat of a government-wide Reduction in Force (RIF), many federal employees are feeling uncertain about their future retirement options. Whether you’re nearing retirement or just beginning to consider your long-term financial plans, it’s important to understand the different federal retirement benefits available to you.

At Serving Those Who Serve, we’re committed to guiding you through these complexities, ensuring that have the information you need to make educated decisions in these challenging times. In this post, we’ll explore the key types of federal retirement, examining each type of retirement based on its eligibility requirements and impact on benefits.

Normal Retirement

• Eligibility Requirements:

Type	Minimum Years of Service
Age 62	5 years
Age 60	20 years
MRA	30 years
MRA	10 years

• Effect on Benefits:
  • Unreduced FERS annuity beginning at applicable age (MRA, 60 or 62)
  • Eligible for FERS annuity supplement until age 62, if you retire at age 62
  • COLAs will begin at age 62
  • FEHB can be continued provided you were covered for at least the last five years of service prior to retirement
  • FEGLI can be continued provided you carried the coverage for at least the last five years of service prior to retirement

Deferred Retirement

• Eligibility Requirements:

Type	Minimum Years of Service
MRA + 30	At least 30 years but FERS employee leaves federal service before MRA
Age 60 + 20-29 years of service	Between 20 and 30 years but FERS employee leaves federal service before 60
Age 62 and 5 to 19 years of service	Between 5 and 20 years but FERS employee leaves federal service before 62

• Effect on Benefits:
  • Unreduced FERS annuity beginning at applicable age (MRA, 60 or 62), provided that you leave your contributions in FERS upon retirement
  • Not eligible for FERS supplement
  • No FEHB or FEGLI continuation
  • Unused sick leave is lost (instead of being added into the pension calculation to increase pension amount under normal retirement). If a deferred retiree were to return to government service at some point, however, there is a possibility that forfeited unused sick leave can be reclaimed, provided that records have been kept by the retiree.

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Postponed Retirement

• Eligibility Requirements:

Type	Minimum Years of Service
MRA + 10	Leaves federal service between MRA and 62 with between 10 and 20 years of service
MRA + 20	Leaves federal service between MRA and 60 with between 20 and 30 years of service

• Effect on Benefits:
  • Unreduced FERS annuity beginning at applicable age (60 or 62), provided that you leave your contributions in FERS upon retirement
  • Not eligible for FERS annuity supplement
  • FEHB can be suspended and restored provided they were covered for at least the last five years of service prior to retirement
  • FEGLI can be suspended and restored provided they carried the coverage for at least the last five years of service prior to retirement

“Reduced” Retirement

• Eligibility Requirements:

Type	Minimum Years of Service
MRA + 10	Leaves federal service between MRA and 62 with between 10 and 20 years of service

• Effect on Benefits:
  • FERS annuity is payable immediately under Reduced Retirement, but the amount of the pension is reduced by 5% for each year you are under age 62
  • COLAs will not begin until age 62
  • Not eligible for FERS annuity supplement
  • FEHB can be continued provided they were covered for at least the last five years of service prior to retirement
  • FEGLI can be continued provided they carried the coverage for at least the last five years of service prior to retirement

Voluntary Early Retirement Authority (VERA)

• Eligibility Requirements:

Age is at least…	and Creditable Service is at least…*
50	20 years
Any age	25 years

• Effect on Benefits:
  • FERS pension is payable immediately to VERA retirees, however, the FERS supplement will not begin until MRA is reached
  • COLAs start at age 62
  • FEHB can be continued provided they were covered for at least the last five years of service prior to retirement (or continuously covered since the beginning date of the agency’s approved VERA)
  • FEGLI can be continued provided they carried the coverage for at least the last five years of service prior to retirement
  • CSRS annuities under VERA reduced by 2% for each year under age 55
  • If you take a Voluntary Separation Incentive Payment (VSIP) and return to federal service before 5 years, you would owe the VSIP amount back.

Discontinued Service Retirement (DSR)

• Eligibility Requirements:

Age is at least…	and Creditable Service is at least…*
50	20 years
Any age	25 years

*For Discontinued Service Retirement (DSR), annual leave may be used to extend retirement date in order to reach service requirements

• Effect on Benefits:
  • FERS pension is payable immediately to Discontinued Service retirees, however, the FERS supplement will not begin until MRA is reached
  • COLAs start at age 62
  • FEHB can be continued provided they were covered for at least the last five years of service prior to retirement
  • FEGLI can be continued provided they carried the coverage for at least the last five years of service prior to retirement
  • CSRS annuities under DSR reduced by 2% for each year under age 55

**The primary difference between VERA and Discontinued Service Retirement is that it is involuntary.

As a federal government employee, it’s more important than ever to take a proactive approach to your retirement planning. By understanding the different retirement options available, you can make informed decisions that align with your goals, even in a time of uncertainty. At Serving Those Who Serve, we’re here to help you navigate the complexities of your federal benefits, ensuring you’re well-prepared for whatever the future may hold.

If you have any questions or need assistance with your financial planning or investment management, feel free to reach out to us at [email protected] to schedule a 1-on-1 consultation. You can also learn about your benefits in a group setting through our complimentary webinars: register here.

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. **

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