If you’re nearing retirement, but not sure you’re ready to take such a dramatic leap, there’s another option that could work for you. Qualifying federal employees can take advantage of a defined plan to ease into their golden years – phased retirement. The OPM describes phased retirement as “a human resources tool that allows full-time employees to work part-time schedules while beginning to draw retirement benefits.”
A Smoother Transition Process
Federal employees have had the option to apply for phased retirement since November 2014. Although the number of participants remains small, those who have chosen this gradual retirement process find it a helpful way to transition into the next phase of life. Additionally, it offers a chance to mentor the next generation of employees.
How It Works
When you enter phased retirement you work half of your full-time hours, while receiving half of your full-time salary along with approximately half of your annuity. Phased retirees, excluding USPS workers, are required to dedicate 20% of their working hours to mentoring. Employees participating in phased retirement can opt to return to full-time schedules or take their full retirement at any time, pending approval.
“Those who have chosen this gradual retirement process find it a helpful way to transition into the next phase of life.”
Who’s Eligible?
In order to qualify for phased retirement, the following criteria must be met.
- Employed full-time for three years immediately before entering phased retirement
- CSRS employees must have at least 30 years of service at age 55 or older, or at least 20 years of service at age 60 or older
- FERS employees must have at least 30 years of service at their minimum retirement age, or at least 20 years of service at age 60 or older
- Employees subject to mandatory retirement (such as law enforcement officers, firefighters, and air traffic controllers) are not eligible for phased retirement
Pay And Benefits
After entering phased retirement, you’ll continue to work 50% of your full-time schedule. Gross pay is cut in half to reflect the reduced work hours and is still subject to withholding. While your pay and hours are reduced, your health and life insurance premiums will be the same as that of a full-time employee. Good news – you can continue contributing to your TSP. You won’t lose access to TSP withdrawal options, such as loans, financial hardship withdrawals, or in-service withdrawals.
To find out more about phased retirement and determine whether it fits into your financial strategy, reach out to an FRC® trained advisor.
