Retirement is a major decision for federal employees, and one of the key factors to consider is the age at which to retire. In this blog post, we will delve into the debate among federal employees regarding the ideal retirement age. We will compare the benefits of retiring at age 60 versus age 62, considering both the numerical aspects and intangible advantages. So, let’s get started!
Retirement Age Options in the Federal Government
Federal employees often contemplate retirement at either age 60 or age 62, particularly if they have at least 20 years of federal service. While some may have the option to retire before 60 or choose to work beyond 62, we will primarily focus on these two ages for comparison, as these ages are often considered the “Sweet Spot” for federal retirement.
The Numbers: Comparing Retirement at Age 60 and Age 62
When comparing retirement at age 60 and age 62, it’s important to consider the FERS pension payment. The FERS retirement pension is influenced by three main components: high three average salary, years of credible service, and a pension multiplier. For most federal retirees, the pension multiplier is 1%, but if you retire at age 62 with 20 or more years of service, the pension multiplier increases by 10% to 1.1%.
To illustrate this, consider the hypothetical scenario of two federal employees, David and James, both with 20 years of service and a high three average salary of $120,000. David, planning to retire at 60, would receive a $24,000 annual pension, while James, intending to retire at 62, would receive an annual pension of $26,400. This difference is attributed to the 10% increase in the pension multiplier for those retiring at 62 with 20 or more years of service.
Furthermore, retiring at 60 means forgoing a cost-of-living adjustment until reaching 62. However, additional benefits such as the FERS Special Retirement Supplement (SRS) can enhance your income until then. If eligible, the SRS provides a level of income between the start of retirement and until you become eligible to draw Social Security at age 62.
Evaluating the Decision
When analyzing the numbers for the FERS pension and SRS, federal employees like David, must also evaluate other variables of working longer. By working an additional two years until 62, federal employees can not only increase their pension, but they can also receive their full salary for two extra years, make contributions to their Thrift Savings Plan (TSP), and accrue more annual and sick leave, all of which can impact their retirement benefits.
Intangible Benefits and Considerations
While the numerical comparison is essential, there are other factors to consider. For some federal employees, the decision to retire at 60 or 62 isn’t solely about the numbers. Factors such as work environment, health considerations, pursuing new career goals, and overall peace of mind play a significant role in their decision-making process.
Conclusion
Ultimately, the decision to retire at age 60 or 62 in the federal government involves a careful assessment of both the quantitative and qualitative aspects of retirement. While the numerical benefits are crucial, personal circumstances and individual priorities also weigh heavily in this decision.
We hope you enjoyed this blog post. If you have any questions or concerns about federal benefits or retirement planning, connect with us. Here are a couple of ways that we can help:
- Book a free 45-minute consultation with a Fedway Financial Advisor.
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