Deciding When to Retire: Age 60 vs. Age 62

Choosing the right time to retire from federal service is a significant decision that can shape your financial future. For those nearing 20 years of service, it’s crucial to evaluate your options carefully, as the timing of your retirement impacts your FERS annuity (pension) and long-term benefits.

Retiring at Age 60 with 20 Years of Creditable Service

At age 60, with at least 20 years of creditable service, you become eligible for a full, unreduced FERS annuity. Creditable service refers to employment during which your salary was subject to FERS retirement deductions. If you retire at this age, you also qualify for the FERS Special Retirement Supplement (SRS).

What Is the FERS SRS?

The FERS Special Retirement Supplement bridges the gap between age 60 and 62, before you qualify for Social Security. The Office of Personnel Management (OPM) calculates your SRS based on what your Social Security benefit would be at your Full Retirement Age (FRA). This calculation is adjusted to reflect your federal service and provides an estimated partial benefit.

Potential Drawbacks of the SRS

While the SRS offers valuable support, there are some limitations:

• Active duty exclusions: Years of active duty aren’t factored into your SRS calculation, even if you’ve paid for service credit.
• No COLAs: FERS retirees under age 62 do not receive cost-of-living adjustments (COLAs).
• Earnings test restrictions: If you work after retiring, your SRS is subject to the Social Security Earnings Test, which could reduce your supplement.

At age 62, the SRS ends. You’ll then have the option to file for Social Security early (at a reduced rate), wait until your FRA for full benefits, or delay until age 70 to maximize your payout.

Retiring at Age 62 or Older with 20 Years of Creditable Service

Waiting until age 62 to retire offers notable financial incentives. With at least 20 years of service, you qualify for the FERS 10% Bonus. Under this provision, the OPM calculates your annuity using a 1.1% multiplier instead of the standard 1%. This adjustment results in a 10% boost to your FERS pension for life.

Additional Benefits of Working Until Age 62

Delaying retirement has other significant advantages:

• Increased High-3 salary: Additional years of service and potential pay raises can increase your “High-3” salary, which is used to determine your pension.
• More time to save: You’ll have extra years to contribute to your Thrift Savings Plan (TSP), take advantage of catch-up contributions, and receive the 5% agency match.
• Accrued leave: By staying longer, you can accumulate more unused sick leave (added to your creditable service) and additional annual leave for a larger lump-sum payout.

Crunching the Numbers

Ultimately, deciding whether to retire at age 60 or 62 depends on your financial goals, lifestyle plans, and overall retirement strategy. Each option has its benefits, whether it’s early access to the SRS or the lifetime bonus for waiting until 62. To ensure you make the most informed decision, consult with a Federal Retirement Consultant® who can help you evaluate your unique circumstances.