There are two main types of FERS Early Retirement. One is MRA+10 Retirement - which we'll be discussing here. Another type of Early FERS Retirement is when your agency is going through a RIF - and they offer employees a chance to take an Early Out.
Webinar Series with Tammy Flanagan and Micah Shilanski, CFP®
On this page, we'll be talking about MRA+10 Retirement. But click here if you want to learn more about Early Outs.
FERS have a special option to retire before you meet the regular immediate FERS retirement rules.
To qualify for FERS Early Retirement (MRA+10) you must...
This is a great option to have - but it comes with some serious drawbacks.
If you have reached your MRA, and have more than 30 years of creditable service, you may be eligible for regular Immediate Retirement. Under regular Immediate FERS Retirement, you will receive 100% of your pension. Click here to learn more about regular immediate FERS Retirement.
FERS Early Retirement is a nice option to have - but it comes with some important drawbacks you should know about:
Let's say your MRA is 56 years old, and you retire at 56 years old with 10 years of creditable service. And let's say you had a High-3 of $55,000.
Under the regular FERS pension formula - your pension would be calculated as...
$55,000 x 10 Years x 1% = $5,500/year
But - if you're taking an Early FERS Retirement under MRA+10 Rules, your pension will be reduced.
The reduction is 5% for each year you are under age 62 when you start your pension. Technically the reduction is calculated by months - it's 5/12ths of 1% for each month (which still works out to 5% a year). We're sticking to whole years to make this example easier to understand.
In our example, you're 56, which is (62-56) 6 years before you will be 62.
6 years x 5% = 30% reduction
So your full pension, before the reduction, was $458/month. 30% of $458 is $137. $458 - $137 = $321/month.
Your Pension After 30% Reduction: $321/month
And remember that reduction is *PERMANENT*. You will continue to get $321 a month until you reach age 62, at which point you will qualify for the Cost of Living Adjustment (let’s say the retirement COLA is 2% that year). At age 62, you will now receive $327 a month.
Let’s say you want to do an MRA+10 Early FERS Retirement, but you don’t want to take the permanent reduction to your pension.
You have a couple of options...
#1) Forgive me for being obvious here, you could keep working until you are eligible for regular immediate FERS retirement. For most people in this situation, that would probably be age 62. By age 62 you would likely qualify under regular FERS retirement rules of Age 62 with 5 or more years of service.
But if that's not an option...
#2) You can separate from service and leave your FERS contributions in the system. Later, you draw your pension when you have reached the age when you can begin receiving your unreduced pension (which for most people in this situation would probably be age 62).
If you separate from service but delay starting your pension - this is called either a Deferred or Postponed Retirement.
There is a *BIG* difference between a Deferred FERS Retirement and a Postponed FERS Retirement. Make sure you understand the difference between a Postponed and Deferred Retirement *before* you separate from service.