Early retirement is one of the most attractive features of government work. The federal government is one of the few employers still offering a pension, which takes the form of an annuity offered through the Federal Employees Retirement System (FERS). Depending on your length of service, it’s often possible to qualify for a retirement annuity in your late 50s or early 60s.
Just how early can you retire, though? At age 60 you can retire with a full annuity as long as you have 20 years of creditable service. At 62 you can retire with a full annuity with only five years of service.1
What if you want to retire earlier than those dates? For example, what if you’re 60 but have less than 20 years of service? Or what if you’re in your late 50s and would like to leave government service? Can you still receive an annuity?
Minimum Retirement Age
Your ability to retire early depends on your creditable service, but it also depends on something called minimum retirement age (MRA).
Your MRA is based on your year of birth:1
|If you were born:||Your MRA is:|
|In 1948||55 and 2 months|
|In 1949||55 and 4 months|
|In 1950||55 and 6 months|
|In 1951||55 and 8 months|
|In 1952||55 and 10 months|
|In 1965||56 and 2 months|
|In 1966||56 and 4 months|
|In 1967||56 and 6 months|
|In 1968||56 and 8 months|
|In 1969||56 and 10 months|
|In 1970 or after||57|
You are always eligible to retire with a full annuity once you reach your MRA and have 30 years of service. So if you were born after 1970, for example, you could retire at age 57 with a full annuity assuming you have 30 years of service.
You don’t have to have 30 years of service to retire, though. You also have the option of retiring after 10 years of service once you reach your MRA. If you do, however, your annuity payment will be reduced.
If you retire after your MRA with more than 10 years of service but less than 30, your annuity payment is reduced by 5/12 of 1 percent, or 5 percent annually, for every month left until your 62nd birthday.2
Assume you just turned 59 and wish to retire. You have 15 years of service, so the earliest you could take your full annuity would be age 62. However, maybe you have other opportunities available now and don’t want to wait three more years to retire from government work.
In this scenario, you could retire today because you’ve reached your MRA and you have more than 10 years of service. However, you also have three years left until your 62nd birthday. That means your annuity payment would be reduced 15 percent, or 5/12 of 1 percent for 36 months.
That reduction may be acceptable to you, especially if you’re retiring to pursue private sector work or some other exciting opportunity. However, you may want to meet with a financial professional to fully analyze your annuity benefits and discuss how early retirement may impact your income.
Ready to plan your retirement? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your options and make an informed decision. Let’s connect soon and start the conversation.
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18585 – 2019/2/27