Every year, federal employees face the ultimate question: When should I finally walk out the door? It’s not just a financial decision; it is a deeply personal choice that changes your routine and life forever.
Many fantasize about their last day in the office, but figuring out your ideal retirement age requires you to carefully balance your financial needs with your life goals. To help you navigate this maze, let’s explore the “magic” ages of federal retirement and the crucial, often overlooked, personal factors you must consider before you make the leap.
The Financial Milestones: Ages 57 and 62
From a financial perspective, the two most common ages federal employees target for retirement are 57 and 62.
- The Magic of 57 (Your MRA): For most current federal employees, age 57 is their Minimum Retirement Age (MRA) and often the earliest point they become eligible for a full retirement. If you hit your MRA with 30 years of service, you are fully eligible for an unreduced pension and the FERS Retiree Annuity Supplement. The (FERS Supplement) is a tremendous benefit designed to bridge the income gap between your retirement date and age 62, when you become eligible for Social Security. A word of caution: If you reach your MRA and have between 10 and 29 years of service, you can still retire, but your pension will be permanently reduced and you will not receive the FERS Supplement.
- The Magic of 62 (The 10% Bonus): Age 62 is an extremely popular target because it triggers a significant pension boost. If you retire at age 62 or older with at least 20 years of service, your FERS pension multiplier increases from 1.0% to 1.1%. This gives you a 10% increase to your FERS pension for the rest of your life. It is important to note that you cannot get both the FERS Supplement and the 10% bonus; qualifying for one means you do not qualify for the other.
- Special Provisions: If you are a Law Enforcement Officer (LEO), Firefighter, or Air Traffic Controller, the rules are different. You can retire under the early retirement system at age 50 with 20 years of service, or at any age with 25 years of service. However, you do not qualify for the 10% bonus at age 62—that is strictly for traditional FERS employees.
Beyond the Numbers: The True Cost of Working Longer While maximizing your pension and Thrift Savings Plan (TSP) is important, you have to weigh those financial gains against the non-renewable resource of time. When deciding on your ideal age, consider these vital personal factors:
- Your Health and Stress: A full-time career comes with a level of stress that we often just get used to. However, working longer than you need to can take years off the front and back ends of your retirement. Every extra year you continue to work is trading away some of the healthiest, most active years of your retirement.
- Time vs. Money: It is entirely possible to double your money in the TSP if you just work another 10 years. But is it worth the trade?. When you are fully eligible to retire, you are simply trading time for money, and you have to decide if you want more wealth or more freedom.
- Fading Passions and Energy: Many retiring feds put travel at the top of their to-do list. But the reality is that embarking on a backpacking trip across Europe is much different in your 60s than it is earlier in life. The longer we push off our passions, our physical ability and desire to do certain things will inevitably change.
- Fostering Relationships: Retiring earlier gives you the time, energy, and resources you need to assist aging parents, enjoy your young grandchildren, and build deep relationships with friends. It is incredibly hard to foster great relationships when you simply do not have the time for them.
The 90% Rule: Buying Your Time Back I talk to many federal employees who have a specific “magic number” in their head—a TSP goal of $1 million or $2 million that will make them comfortable enough to retire.
If your goal is $1 million, and you are currently sitting on $900,000, you have to ask yourself: is it really worth working those few extra years just to hit 100% of your goal?. Essentially, you have the option to “buy” time. You can accept slightly less money in your TSP and use that unearned $100,000 to buy yourself three extra years of an active, youthful retirement.
The Bottom Line
There are certain ages that are highly popular for federal retirement, but that doesn’t mean they make sense for you. You must find the perfect balance that lines up your money with your overall retirement goals. I highly recommend requesting several official annuity estimates from your HR office for a few target dates so you know exactly what to expect. Having a solid financial plan is crucial so you know exactly what the impact will be if you retire sooner rather than later.
Take the time to evaluate your situation and discuss these expectations honestly with your significant others. Please forward this article to anyone in your organization who is contemplating retirement so they can start planning their escape today!
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Dennis V. Damp is an author, retired federal manager, business owner, career counselor and veteran. Damp is the author of 28 books, a recognized benefits expert, and a retired federal manager with 35 years’ service. Dennis has been a guest on hundreds of radio talk shows, CNN’s YOUR MONEY and the Lou Dobbs Cable TV shows, lectured at universities and colleges, produced Internet web sites and training videos, and has written hundreds of articles for national magazines and newspapers. His books have been featured in the Wall Street Journal, Washington Post, New York Times and U.S. News & World Report.
Dennis joined the Air Force in 1968 and spent over three years on active duty and an additional seven years with the Air National Guard. He was hired by the Department of Defense (DOD) after leaving active duty and transferred to the Federal Aviation Administration (FAA) in 1975. He spent the remainder of his career in various positions with the FAA. His last position was technical operations manager at the Pittsburgh International Airport’s air traffic control tower.
