As a FERS participant, with 30 years of creditable service, you can retire with an immediate annuity at your Minimum Retirement Age (MRA). Depending on the year you were born, your MRA can range from age 55 to 57. Or, you can retire at age 60 with a minimum of 20 years of creditable service.
Then again, you can retire under MRA+10 rules but your FERS annuity will be reduced by about 5% for each year you’re under age 62. With so many options, it’s important to get the facts before you make a decision.
At Age 62 You Qualify For The FERS 10% Bonus
If you wait to retire at age 62 (or older), with at least 20 years of creditable service, your high-3 salary is multiplied by 1.1% instead of 1%. This works out to a 10% bump in your monthly FERS annuity for the rest of your life. When you crunch the numbers, losing out on the 10% increase is can add up to quite a bit of money.
“When you consider the 2023 COLA is the highest in decades, it’s a considerable loss of income if you retire younger than 62.”
You Don’t Qualify For COLAs Until Age 62
With inflation on the rise, federal retirees count on Cost of Living Adjustments (COLAs) to combat increasing prices on goods and services. Under federal law, FERS retirees aren’t eligible for COLAs until age 62 (unless they’re special category employees like law enforcement, firefighters or air traffic controllers).
For example, if you retire at age of 57 with 30 years of creditable service, you will not receive a COLA increase for the next five years. When you consider the 2023 COLA is the highest in decades, it’s a considerable loss of income if you retire younger than 62.
Your Retirement Age Impacts Your TSP
If you retire in your mid-50s, your Thrift Savings Plan (TSP) has less time to grow. You lose the opportunity to make regular contributions, catch-up contributions, and get your agency match, for a few extra years. This results in a smaller nest egg and less compound interest.
Longevity Is Another Consideration
Financial analysts agree that the top risk to retirement is longevity. However, surveys show most people under-estimate how long they will live. If you retire in your mid-50s and live longer than you’ve planned for, will you be in danger of outliving your savings?
Though retiring relatively young may be tempting, consider working with an FRC® trained advisor before you decide. Together, you can you crunch the numbers to see if you’ll have enough money to life comfortably for 25 to 30 years.
