Could Taking Early FERS Retirement Cost Benefits?
By June Kirby
June Kirby has well over a decade of experience serving as a Federal Employee Retirement Trainer and expert. June Kirby has extensive knowledge in both TSP and other Federal Retirement benefits. Ms. Kirby tirelessly travels the Country making herself available to Federal & Postal Employees, Federal Agencies, Unions and Organizations and partners with PSREducators.com (PSRE), and as one of the top providers of PSRE’s services, June Kirby continues to generously make herself available to hundreds of deserving Federal and Postal Employees each and every year by offering consultation on federal retirement benefits and TSP maximization strategies.
Although taking retirement early may sound appealing to many people, doing so could end up being detrimental to your retirement income situation – especially in terms of your FERS (Federal Employees Retirement System) Special Retirement Supplement (SRS) benefit.
The SRS was implemented in order to help in bridging the gap between the time that a FERS employee retired and the time that he or she was able to draw on Social Security income at age 62. This benefit will end when you turn age 62 and become eligible for Social Security.
The amount of the benefit is calculated based upon the age that you are when you take your retirement, as well as the number of years you have in agency service. With that in mind, taking an early retirement could essentially cost you in the dollar amount of benefit that you receive.
Determining the Amount of Your Monthly Special Retirement Supplement Benefit
Looking at an example, if your minimum retirement age was 57, and you retire with 30 years of federal service, your Social Security benefit may be $1,000 per month. In determining your SRS benefit, the 30 years of your federal service would be divided by 40 (the number of years in which Social Security considers to be a “full” career).
That figure, 75%, is then multiplied by the dollar amount of the age 62 Social Security benefit. This will result in the amount of your SRS benefit. In this particular case, the amount of your monthly benefit would be $750 per month.
However, if you had retired early with only 20 years of service, the calculation would come out different. For example, 20 years divided into 40 would come out to a 50% fraction. This multiplied by the $1,000 Social Security benefit at age 62 would instead leave you with $500 per month in SRS benefits – a substantial difference from the $750 you would have with 30 years of service.
In either case, your SRS benefits would end when you reached age 62 and you were eligible for Social Security retirement benefits. However, these benefits can end even sooner if you have earnings from wages or self-employment that exceed the Social Security earnings limit. So, if you do plan to have even a part-time job in retirement or to start your own new business endeavor, this is also something to be mindful of.
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