Retirement for the federal workforce was much easier to understand before 1986­­ — we were all under the same retirement system (CSRS), and the minimum retirement age (MRA) didn’t vary with our birth year. It was much easier to understand when we would become eligible for retirement and what our benefits would be once we retired.

We recently consulted with 49-year-old Nick (not his real name) who wanted to retire as early as possible. Nick came to us five months before his 50^th birthday. He is a FERS employee and had just completed 30 years of service. He told us he was tired and ready to do nothing, so he wanted to know what he had to do to retire in four months.

The first thing we had to tell Nick was that he was not eligible to retire until four months after his 56^th birthday  — the MRA (with 2 years of service) for those born in 1966. He said he didn’t care because he would live off of his Thrift Savings Plan (TSP) until he reached his MRA.

We had to tell Nick that if he planned on accessing his TSP 4.5 years before he reaches his MRA, he would be subject to a 10% penalty in addition to income taxes on his withdrawals. With the 10% penalty and starting withdrawals so early, his TSP would be depleted more quickly.

If Nick was intent on leaving Federal service and taking a deferred retirement (start receiving retirement payments when he reaches his MRA), we wanted to be sure he knew what he was giving up.

The biggest drawback to a deferred retirement is the loss of his Federal Employee Health Benefits (FEHB) that he would need to retire. Because if he leaves without a retirement benefit, he also leaves without his Federal Employee Health Benefits for life. FEHB for life is a benefit for Federal retirees, and he isn’t eligible to retire.

And finally, we told Nick if he doesn’t reach MRA before he leaves federal service, he would not be eligible to receive the FERS annuity supplement that he would receive in addition to his retirement benefit. The FERS annuity supplement is intended to provide payments equivalent to what Nick would receive from the Social Security Administration (SSA) for his FERS civilian service and is calculated as if he were eligible to receive SSA benefits on the day he retired. Any FICA contributions made at jobs outside of the government are not included. Eligibility for the annuity supplement continues until the last day of the month before the first month for which you would be entitled to actual social security benefits, or the last day of the month in which you reach age 62 — whichever comes first.

This was enough of a loss for Nick to rethink early retirement. He is resigned to working until he reaches 56 years and 4 months so that he isn’t giving up too much.

What is Nick giving up if he retires at his MRA?  We knew Nick wanted to retire sooner rather than later, but we still wanted to be sure Nick had the all the information about his benefits. So we reminded him that if he works until he’s 62 years old, he’ll receive 1.1% of his average high-3 years of salary for every year of service instead of 1%. A 10% raise is a good deal and something every FERS employee should think about when deciding to retire.

It’s important to understand your benefits BEFORE you retire. We recommend that all federal employees take a class about their benefits the first year they’re hired, after 10 years of service and every three to five years until they retire. The Office of Personnel Management (OPM) has issued an OPM Benefits Administration Letter 11-104 requiring that Agencies provide financial benefits training to employees. If your Agency doesn’t provide the training or the time for you to take the training, give yourself the gift of a training class every five years. Peace of mind in retirement is priceless.