When you retire as a regular Federal Employee Retirement System (FERS) employee, your eligibility is determined by your years of service and age. To be eligible for an “immediate” unreduced pension, you must fulfill one of three primary minimum age and service criteria. While there are additional elements to consider when planning for retirement, such as income demands, and health and Social Security benefits, the basic necessities are a great place to start.
Minimum Retirement Age (MRA) with a minimum of 30 years of service
Other than an “Early Out” option, retiring at MRA with a minimum of 30 years of service is the earliest that regular FERS employees may retire without penalty. The FERS employee’s birth year determines the MRA.
Separating at MRA with a minimum of 30 years of service also makes you eligible for the supplement. The OPM supplement is intended to bridge the income gap between retirement and Social Security eligibility at 62. These retirees also maintain their Federal Employee Health Benefits (FEHB) and Federal Employee Group Life Insurance (FEGLI). Remember that regular FERS retirees don’t get cost-of-living adjustments (COLA) until they’re 62.
Age 60, with a minimum of 20 years of service
For employees who may have later started their careers with the government, retiring at age 60 with at least 20 years of service might be a viable “middle ground” choice to still qualify for a penalty-free pension. Like the previous qualification, this retiree is eligible for the supplement and retains their health benefits and life insurance coverage. It also brings them closer to qualifying for a cost-of-living adjustment (COLA). There’s a benefit to working two more years and retiring at 62 with at least 20 years, which we’ll discuss shortly.
Age 62, with at least five years of service
Retiring at 62 with at least five years of service also makes you eligible for an “immediate” unreduced pension. As the Social Security age has been reached in this case, there’s no supplement for retiring at 62 because you can begin receiving Social Security benefits immediately. You would also be allowed to carry over your health coverage and life insurance into retirement. One significant advantage of leaving at 62 is that you don’t have to wait for a COLA.
Pension Calculation
FERS employees who retire in any of the above-discussed scenarios receive 1% annually of service towards their high-3 (the highest average three years of the base plus locality earnings at any point in a FERS employee’s career).
Example: Jen has attained her MRA at 57 with 32 years of service and a high-3 of $65,000. Jen would receive 32% (1% multiplied by years of service) of the $65,000 (her high-3).
$65,000 x 32% = $20,800 annually
$20,800/12= $1,733.33 monthly
Please remember that this example excludes Jen’s income from the supplement.
Age 62, with a minimum of 20 years of service
Employees who reach 62 with at least 20 years of service receive a higher pension calculation. Instead of getting 1% for every year of service, this employee receives a 10% higher calculation of 1.1%.
Example: Peter is 63 years old, has 25 years of service, and has a high-3 of $80,000. Peter would receive 27.5% (years of service multiplied by 1.1%) of the $80,000 (his high-3).
$80,000 X 27.5% = $22,000 annually
$22,000/12= $1,833.33 monthly
Peter doesn’t qualify for a supplement because he retired at 62.
What works for you?
It’sessentialt to be aware of your alternatives and prepare for retirement ahead of time. Just because you achieve your MRA and have those 30 years doesn’t guarantee that the numbers will work out and lead to a good retirement. Working a couple of additional years to earn a COLA right away or a higher pension calculation can make all the difference. It also leads to more time contributing and receiving a match in your Thrift Savings Plan (TSP). All of this will impact your retirement’s success.
Contact Information:
Email: [email protected]
Phone: 9187441333
Bio:
Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark’s passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families.
Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation.
Additionally, we’ve counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.
Disclosure:
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