Taking Early FERS Retirement Could Cost You Your SRS Benefit
By: Kevin O’Leary
For many people, taking an early retirement may sound appealing. The thought of relaxing on the beach or having time for personal travel can certainly be enticing. However, in some cases, opting out of employment early could come at a price. This may be the case when taking early FERS (Federal Employees Retirement System) retirement.
Federal Employees Retirement System Options
There are actually two early retirement options in the Federal Employees Retirement System. These consist of:
- MRA (Minimum Retirement Age) + 10
- Early Out, when there is a Reduction in Force (or RIF) offered by an agency
MRA + 10 Option
In order to qualify for the MRA + 10 option, an individual must have met their minimum retirement age, and have at least ten years of creditable service with the agency.
While it is a nice early retirement option, the MRA + 10 does have some drawbacks. One such negative is that the individual’s pension will be permanently reduced by 5 percent for every year that they are under age 62.
Normally FERS retirees will enjoy a ‘special retirement supplement’ (SRS) payable by OPM until they are eligible to receive Social Security benefits at age 62. This is in addition to their FERS pension annuity. However, the SRS is not payable to employees who retire on a reduced (MRA+10) or deferred retirement.
Furthermore, the individual’s pension will not be eligible to receive Cost of Living Adjustments until he or she reaches age 62 – and when they do reach that age, they will not receive any retroactive increases. This can make a substantial difference in the amount that you end up receiving over time.
Early Out Option
Although an Early Out is considered to be a “voluntary” early retirement, this option can really only be chosen if and when it is offered by your agency. There are typically only two times when this may occur. One is when there is a Reduction in Force. The other is when there is a major reorganization in the agency.
In addition, an individual will also need to meet certain requirements in order to take an Early Out retirement. These criteria include the person being either at least 50 years old and having a minimum of 20 years of service with the agency, or being any age and having at least 25 years of service.
Also, it will be required that the person has actually separated from service prior to the end of the Early Out period – and, the individual must have been on the rolls of the agency that is offering the Early Out for at least 30 days prior to the agency making the Early Out request.
Unlike with the MRA + 10 early retirement, however, the Early Out option will not result in a reduction in pension benefits and the retiree would be eligible to receive SRS payments when they reach their MRA although they are already retired. In fact, this particular option may even come with additional incentives such as a lump sum dollar amount in order to make the Early Out offer more attractive.
SRS Benefit Determination
The SRS (Special Retirement Supplement) amount will be based on the number of years of service you have provided, as well as the amount of your expected amount of Social Security benefit. With that in mind, taking an early retirement can have an effect – and in some cases, a substantial effect – depending on how early you retire from service.
More about Kevin O’Leary
Kevin O’Leary is a Federal retirement expert who works out of his Southern California office, but helps federal employee clients throughout the country. Kevin O’Leary is a regular contributor to PSRetirement.com and Kevin O’Leary is highly sought after speaker and advisor on federal retirement benefits.
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