How You Can Retire Early as a Federal Employee, by Aaron Steele

A significant difference between fed employees and those in the private sector is how they plan for retirement. Private sector employees generally think about “when they can afford to retire.” Federal employees, on the other hand, often ask when they are eligible to retire.


But while pension and your benefit eligibility are vital, it’s not everything. As a federal employee, you can become eligible for retirement at age 60. But maybe you have considered early retirement or want to work more years after being eligible for retirement. While the federal retirement benefit is essential and shouldn’t be ignored, you should focus more on your life and goals when planning retirement.


If you plan to retire early, financial independence becomes more important than reaching a specific age. Typically, if people ask whether you are ready for retirement, they are asking if you are financially capable of affording retirement. Financial independence is all about not having to work for money. If you stopped working today, which other income sources do you have, and how much can you get from those sources?


The amazing fact is that anyone can be financially independent before hitting age 60 (which is the average age most federal employees retire). Achieving financial independence is more about having enough money from your pension, investments, and other sources to meet your retirement needs. It’s all just math, though the execution may not be so simple.


Have a Plan to Attain Financial Independence

The fact is that everyone’s life, situation, and goals are different, so the journey to financial independence is also a little different. One thing that’s certain is that financial freedom doesn’t happen overnight. You need to create a plan on how to achieve your goals. Start by answering these questions. Do you enjoy your job? How long do you plan to work? Would you stop work today if you had the resources to do so? What would you do with your time in retirement?


It’s important to state that being financially independent isn’t about stopping work; it’s more about having the ability to stop working whenever you want to. When financially independent, you can quit your current job and work on your hobby or a side project. The beauty of financial independence is that you can do whatever you like and achieve all your goals without worrying about money.


Once you determine your financial goals, you’ll need to develop a set of actions that will enable you to get there. This may typically include investing more in your TSP, reducing your expenses, engaging in a side hustle, and other things you can do to make more money. Monitor the progress you make over time, and make adjustments if and when necessary.


MRA (Minimum Retirement Age)

The minimum retirement age is a significant issue when discussing early retirement. Depending on when you were born, your minimum retirement age might be between 55 or 57. However, the good news is that you don’t have to reach the MRA before you retire. There’s the option of an early-out or deferred retirement.


Just have in mind that all types of retirement, including immediate, deferred, postponed, and MRA +10, all have pros and cons and often result in massive changes in benefits. For instance, with an MRA +10, your pension will be reduced every two years before reaching age 62. That being said, no one retirement type is better than the other. They may pay more benefits but may require longer working years, which may not align with your goals.


The essence of this is to remind you of the essential things to remember as you work towards retirement. The simple trick is to forget about what other people are doing and focus solely on your plan and goals.

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