Back to Basics: Deferred, Early, & Postponed Retirement for Federal Employees

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2.28.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as always, I appreciate you taking the time out of your busy schedule to join us to view our content, listen to our content whichever way you're doing it, and I appreciate those that are sharing this with others. I have heard recently and just talking to folks, hey, I heard from So and So or my colleague had told me my federal employee friend had told me, I need to listen to this and there are more and more of you that are viewing the show, watching the show, listening to the show, getting the information. And I really do appreciate it because that is why we did it and that is why we started. This show is for you, the federal employee that is looking for information regarding your benefits and retirement situation so you can make the best decisions as you go through your working career and into retirement. That's what we do. That's what we specialize in. Hopefully you've gotten that up to this point with over 120 episodes. But if I'm getting into our series that we're currently in, I'm calling it back to the basics, really starting from scratch and getting back to some of the fundamentals with some updated content of today, we're going to be talking about deferred early and postponed retirement. So we've gone to the retirement systems, we've talked about Fegli, we talked about TSP.

Speaker1:
And now in our back to the basics series, we're going to be talking about deferred early and postponed retirement. We've been getting a lot of questions about this, especially with the circumstances and the things that were going on with the deferred resignation and some of the the agencies offering the Vera or the Vsip and a lot of things going on about, you know, what happens if I retire early, what happens if this what happens if that now this is outside of all of that, right. Outside of all the circumstances, what are the things known as deferred retirement. Early retirement and postponed retirement. So let's dive into today's content and talk about these three things in further detail. So first of all, first of all, um, we want to go up to and back to the basic what is your eligibility for full retirement? Now we're just talking about the first system. Um, I do every now and then still run into a CSRs had talked to a CSRS offset, but most of you that are going to be listening are Fers. So for Fers employees, just a reminder your eligibility for full retirement benefits. So anytime we talk about deferred early or postponed retirement these are not full retirement scenarios. But what is full retirement. Just so we can go back to the basics on this, you have to satisfy one of these three criteria in order to retire with full benefits, you have to be age 60 with at least 20 years of service, 62 with at least five years of service, or have 30 years of service and hit your minimum retirement age.

Speaker1:
And if you're not familiar with minimum retirement age, it's here on the chart. It's anywhere between age 55 and 57, depending upon your birth year. And we'll come back to minimum retirement age here in a little bit and discuss that. But satisfying one of those three criteria. If I go back to this, it's 60 with 20, 62 with 5 or 30 years and your minimum retirement age, you can walk away as a retiree now with full benefits, that means it's unreduced pension, immediate pension. You get to keep your family if you want to. You get to keep your health insurance and ancillary health insurance products if you want to. That is, those are the benefits of retiring with full benefits. So getting past minimum retirement age, let's go to retirement eligibility for early retirement scenarios. Right. So these are the three we have deferred retirement. We have early retirement voluntary early retirement. And we have postponed retirement. Now the first thing going back to those criteria deferred retirement sounds exactly as it describes. Right. You're going to defer retirement or defer your retirement payments, your pension payments to a future date.

Speaker1:
Now, how long do you have to wait and how many years of service or age? What do you need to be eligible for a deferred retirement? So here's the interesting thing. You can technically retire if you have at least five years of service and you are any age, right? Full retirement was age 62 with at least five years of service, but if you have at least five years of service, you can retire at any age. The problem is, if you're not 62, you have to defer your retirement, meaning you cannot collect an immediate pension, you have to defer that retirement pension or those retirement payments until age 62. So understand that you can retire under the deferred retirement. You have five years of service and you are any age, but you cannot collect those payments until age 62. Now there are some ways, if you have at least 20 years of service and you have not yet hit the minimum requirement for, um, full retirement with 20 years, you can defer until age 60, but you're going to face some penalties. So I normally recommend if you're going to do deferred retirement. And it's only come across my desk a couple times where this was beneficial for somebody. Maybe they got the dream job or they got something that they couldn't refuse. Or maybe they're they're married to somebody who got a job that took them elsewhere overseas, whatever.

Speaker1:
And they're no longer going to be employed by the government because they just can't. Um, then I would say, hey, you have enough years of service. Don't let those go to waste. File for deferred retirement at age 62. And collect something for the time that you spent as a government employee. A lot of times I'm not recommending this, but again, in certain circumstances it might work out. So five years of service, I'll just summarize and you got to wait until age 62 to collect benefits. You cannot keep your health insurance vaguely or your ancillary, uh, insurance products like dental or vision. Then there's the MRA plus ten. Mra plus ten. Mra again is minimum retirement age between age 55 and 57, depending upon your birth year. This is a way that you can voluntarily retire early under the MRA plus ten provision and collect an immediate pension. So remember deferred you can't collect an immediate pension. You have to defer it until age 62. Mra plus ten is a way for you to voluntarily retire early and collect an immediate pension If you have hit your minimum retirement age and have at least ten years of service. So let's say I go back and my minimum retirement age is 57 and I have 15 years of service. Now, if I look at the criteria for full retirement, I don't satisfy any of those. But I have hit my minimum retirement age, and I do have at least ten years of service so I can, under this provision, retire with an immediate pension.

Speaker1:
That's the good news. The bad news is that for every year that you retire prior to the age of 62, you're going to see your benefits reduced by 5%. We'll talk about this here in a second. We'll talk about it a little more detail. So hang on to that thought if you're thinking about that. And then postponed retirement. Postponed retirement is a way that you can do the MRA plus ten provision. Right. You can execute that but remove the reduction. Remove the reduction because I am now postponing payments. So let's go. Deferred. Deferred is deferring payments. You're not collecting an immediate pension. Mr. plus ten you are going to collect an immediate pension. But there's a reduction. And then postponed is Mr. Plus ten without the reduction. So we'll talk a little bit more about this here in a second. Deferred. We already went into some detail but let's just go into the retirement pension calculation. We've done this before. And if you're familiar with this this should be just a refresher. Uh, redundancy. But they start with your high three. Take your high three. Multiply that by a factor of 1 or 1.1%, depending upon your age and years of service at retirement. Now, understand that in all of these early retirement scenarios, it is going to be 1% deferred.

Speaker1:
Postponed or a plus ten is going to be 1%. Um, multiply that by your years of service. So we've got high three 1% years of service is going to be the calculation for those that are in this scenario. But for full retirement folks, you get a little bit of a bump. If you're age 62 or older and have at least 20 years of service. You'll get 1.1% as your factor. But this is just a typical this is a full benefits retirement calculation. Same is going to be true for deferred pension. If you defer it you're just you're going to get the same calculation. It's just going to be deferred. Those payments will be deferred until age 62. So if you only had five years of service and you're making $100,000 at the time that you left, when you file for deferred retirement at age 62, it's gonna be 100,000 times, 1% times five. So your pension would be $5,000 a year for the rest of your life, starting at age 62. Okay, at least you're going to get something right. Hopefully you've saved for retirement. You're collecting other retirement income sources as a result. But you know that that five years of service you at least get credit for and something for it if you happen to leave before being fully eligible. So that's the first thing.

Speaker1:
Deferred retirement. Uh. Simple calculation. What if it's now Mr. plus ten? How does this work? Well, again, it's the same thing. Same calculation. Um, you're eligible if you hit your minimum retirement age and have at least ten years of service. Great. We're going to calculate your pension the exact same way. Hi. Three times 1% times years of service. That's the calculation. But you're going to see this 5% reduction for every year prior to age 62. So in my example let's say I was 57 years old. But that's my minimum retirement age and I have 15 years of service. And let's go back to the, you know, $100,000 example. So making $100,000 times, 1% times 15 years, great. That's 15,000. But but I'm going to see a reduction of in this case 25%. That's 5% for every year prior to age 62. So in this case, that's five years. That's 25%. So I thought I was going to get 15,000. I'm going to get 25% less unfortunately. So just just understand this is not something we normally recommend because I do not want to see any of you get a reduction or a reduced pension. Good news is that pension will be immediate. Um, the good news is also, you could still keep your health insurance and and other things when it comes to your benefits, but you're going to see a lot less in your pension because of the reduction.

Speaker1:
That is the MRA plus ten calculation. Again, not something we normally would recommend, but as I mentioned then the postponed retirement. Postponed retirement. What does that look like. That is the MRA plus ten without a reduction. Mra plus ten without a reduction. So if you've hit that minimum retirement age at least ten years of service. So let's say this example I was showing you at age 57 with 15 years. I'm kind of caught in the middle here. I can satisfy the MRA plus ten, but I do not want to get the reduction. I do not want to accept that 25% subtraction or reduction on my pension. So I'm going to postpone it. I'm going to postpone it. Now, when do I postpone it? Until until age 62. I'll start collecting a benefit then. So I will forego getting a reduced pension now to get a full unreduced amount at age 62. That's called postponed retirement. So it's those that are eligible for the MRA plus ten but do not want the reduction. You are going to be able to postpone it until age 62. Good news is again, there's no reduction. Bad news is you're going to have to go some years without collecting a benefit. You got to wait till age 62. The good news also is you can still keep the health insurance. Bad news there. You're going to have to wait until you restart your pension at age 62 in order to get those things so you can re-enroll back into health, dental, vision, life, long term, all that stuff.

Speaker1:
You can go back in there. Um, so just understand that the postponed, uh, it nullifies the reduction, but you have to also delay and postpone getting back into the different benefits that you have. So just just reminder for all of that. Uh, when it comes to the the differences between all three of these, now, these are not something we normally recommend. Uh, all of these are ways in which you can voluntarily retire early, but there's different requirements. There's different things that you need to satisfy. Unfortunately, if you have not hit your minimum retirement age, your only option is going to be. Or if you have not satisfied any of the full retirement requirements or hit your minimum retirement age, your only option is going to be deferred retirement. If you want to get something once you've hit that minimum retirement age, if you have at least ten years of service, you have those two choices MRA plus ten or postponing in order to avoid the reduction. Right now in cases like this in the postponed section, I did not mention this, but remember, if I go back to the full retirement requirements, one of those eligibility requirements is age 60 with at least 20 years of service.

Speaker1:
So let's say I was 57 in this example and I had 20 years of service. I don't satisfy you the full retirement requirement, so I can then only postpone until age 60. That would avoid my reduction, because now I'd be eligible at age 60 with at least 20 years of service. So that's one way in which I can collect benefits a little earlier is if I'm Mr.. With at least 20 years of service and not yet 60 years old, if I postponed it, I can collect at 60 with no reduction rather than wait till 62. So I hope that makes sense in a lot of cases. Again, we don't normally recommend this unless there's extenuating circumstances or other things to consider, but just in general, I would not want to see you have a reduction. I wouldn't want to see you retire and have to wait to collect money. So if you can wait until your first eligibility for full and immediate retirement to collect an immediate and unreduced pension, that's typically what we recommend. That's more of a general blanket statement. Obviously, individual scenarios, you know, differ. What's best for you may not be best for the person next to you. So I'm just speaking in general here. Very painting with broad strokes, not not specific to your situation. But if you do have questions about this, you're considering these things. You're looking into these things.

Speaker1:
You have again, another scenario. You want to run by me so you can see if that's beneficial for you. Please reach out to us. Go to our website, Federal Retirement Show.com fill out the form. And one of our experts, if it's not me personally, will be reaching out to you to schedule a time to go over your benefits and retirement situation. That way you get all the ins and outs, you get the reporting, you make sure you have a full understanding of your situation as well as get your questions answered. Right? I mean, and if it's if it's just a redundancy, I should say if it is just a confirmation of everything that you already knew, then great. Then you heard from an expert. You know everything already. You got confirmation of that. But chances are there will be, you know, a nugget or two or a piece of information that you did not know that we review with you and you're thankful that you had that review done. So again, if you do have questions, reach out. We'd be happy to help. If you do like this show, I already mentioned earlier about sharing this with your colleagues, sharing this with the folks that you work with, your manager, your teammates, or if you are the manager with your your folks that you lead, um, share it with them, tell them that they they should go watch it.

Speaker1:
And it's just my opinion. I don't have to force you to do it, but go watch the show, review all the episodes, gather the information, reach out for help. It's extremely beneficial for them. The earlier they can do that, the better. I hear it all the time when I give presentations. Hey, I wish you would have been speaking to us 20 years ago. 15 years ago, whatever it might be, because this information is not regularly given to federal employees, just at least in general. Most agencies I talk to do not have these regular trainings. Also, if you like it personally, make sure you you like subscribe. Um, you know again share this on on different platforms. That way you'll be notified when new episodes, new content, new things come out. We'll be sure to get that in your hands. First thing, thank you very much for your attendance. Thank you very much for your obedience as a as a listener and avid listener to the show. If this is your first time, I really thank you for joining us. Hopefully you go back and view our previous content. Um, as I mentioned, I'll say it one more time. Go to our website, fill out the form, get a personal and individual benefits and retirement evaluation. Get all of your questions answered and we'll be in touch. Thank you again for joining us, and we'll talk to you in a future episode.

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