Let’s face it – if there’s one thing we’ve learned in the aftermath of the COVID-19 pandemic is that the unexpected can happen at any time. For FERS retirees who were caught up in the record-breaking inflation of 2021 and 2022, their annuity and Social Security didn’t go as far as it used to when paying the bills. Though no one can predict the state of the economy when you enter retirement, working till age 62 can provide some financial advantages.
You Can Increase Your Monthly Annuity By 10%
When you retire at age 60 with 20 years of creditable service, your FERS annuity is calculated using the standard 1% formula for regular workers: High-3 salary multiplied by 1% then multiplied by years of creditable service.
However, if you work just two more years, at age 62 your annuity is be calculated with the 1.1% formula. Though the difference between 1% and 1.1% may not seem that much at first glance, it works out to a 10% increase in your monthly FERS annuity (pension) for the rest of your life.
At 62, FERS Retirees Are Eligible For Cost Of Living Adjustments (COLAs)
Though CSRS retirees and special provision retirees (Law Enforcement Officer, Firefighter, or Air Traffic Controller), receive COLAs regardless of their retirement age, most FERS retirees are not eligible for COLAs until they turn age 62. When you consider that the 2023 COLA was 8.7%, this was a considerable loss of income for FERS retirees younger than 62. Working just a couple years longer ensures you’ll get the COLAs you deserve when inflation spikes.
Working Till Age 62 Helps Grow Your Thrift Savings Plan (TSP)
Working just a few more years means you can continue contributing to your TSP nest egg while getting your 5% agency match plus earnings. Add to this, it gives you an opportunity to take advantage of catch-up contributions and contributing more to your Roth TSP for tax-free distributions in retirement.
(Block quote): Those few extra years can also boost your Social Security because your benefit is based on your highest 35 years of earnings.
Working Longer Can Increase Your Annuity & Social Security Benefit
Since most federal employees earn more toward the end of their career, working until 62 can increase your High-3 salary calculation for a larger annuity. Those few extra years can also boost your Social Security because your benefit is based on your highest 35 years of earnings.
Longevity is another consideration. According to the Social Security Administration, one in four people turning age 65 today will live to age 90. When you work longer and save more for retirement, you can protect against outliving your money.
