There are several retirement options unique to Federal employees under the FERS system. A common source of confusion is the difference between deferred and postponed retirement, so let’s take a minute to break it down.
Components of FERS
The core of FERS is its pension plan annuity. Contributions come from federal employees, the government, and various agencies. The package is supplemented by Social Security and a Thrift Savings Plan (TSP).
To qualify for an immediate FERS annuity, federal employees must meet the following age and service requirements:
- Age 62 with 5 years of service
- Age 60 with 20 years of service
- Minimum retirement age (MRA)—between 55 and 57 depending on birth year—with 30 years of service
If these criteria are not met, options like deferred or postponed retirement may be viable alternatives.
Deferred Retirement Explained
FERS employees who leave federal service before reaching their MRA can still receive a pension through deferred retirement. With at least five years of service, they can defer their pension until age 62. Those with 20 years of service can start receiving benefits at age 60 but will incur a 0.416% reduction for each month under 62, (equating to 5% per year). Thus, starting at age 60 results in a permanent 10% reduction, while starting at age 61 results in a 5% reduction.
Advantages:
- Eligible former employees can retain access to their FERS pension even if they leave federal service before reaching their MRA.
Disadvantages:
- Upon leaving federal employment, they lose eligibility for Federal Employee Health Benefits (FEHB), Federal Employee Group Life Insurance (FEGLI), and the Federal Employee’s Dental and Vision Insurance Program (FEDVIP).
- Deferred retirees don’t receive COLAs until age 62
Postponed Retirement Explained
Employees who reach their MRA with at least 10 years of service can delay receiving their annuity until age 62, thus avoiding age reduction penalties. Unlike deferred retirement, postponing allows for re-enrollment in FEHB upon retirement, assuming you meet eligibility requirements.
Advantages:
- Separated employees can reduce or eliminate age reduction penalties
- In some cases, you can re-enroll in federal insurance benefits (health, dental/vision, life, and long-term care).
- Postponed retirees may receive COLAs as soon as their annuity begins
Disadvantages:
- Separated employees may face reduced benefits due to earlier retirement.
- You temporarily lose federal insurance benefits, which are suspended until the postponed FERS annuity begins.
Understanding your options and which works best for you will help you get the most out of your FERS benefits. Reach out to an FRC® trained advisor for more information.
