Fork in the Road: A Comprehensive Guide to Deferred Resignation for Federal Employees

Will I lose my benefits if I accept the Deferred Resignation Letter – Fork in the Road?

To quote, every lawyer asked a question ever, “it depends.”

Federal Employees have a unique, complicated, and enviable benefits package. We work with Federal Employees nationwide to help them get to and through retirement, and our goal is to ensure that Federal employees understand their options.

This Fork in the Road email that went to two million federal employees, giving them the option to return to work or resign, is no different. We want Federal employees to make financial decisions that are carefully thought out and assess whether or not they make sense.

If you are a Federal Employee, before you decide, ask yourself what you are gaining and giving up by resigning.

Federal Employees may lose their health insurance benefits—the best benefits—if they are not careful about their decisions when facing a fork in the road.

Let’s explore some of the big questions we have been receiving, as financial advisors for federal employees, about the Fork in the Road email.

Can I Opt for Retirement During the Deferred Resignation Period as a Federal Employee?

Yes, you can – if you are eligible that is.

Suppose you become eligible for early or normal retirement at any time before your scheduled resignation date of September 30, 2025. In that case, you can retire instead of continuing with the deferred resignation. During this period, you will still accumulate retirement benefits. If you decide to retire, this choice will take precedence over the deferred resignation, effectively replacing it.

Can I Opt for Deferred Resignation Close to My Retirement Eligibility Date? (normal or early retirement)

If you become eligible for normal or early retirement shortly after the September 30, 2025, deadline for deferred resignation, your agency will consider your situation individually. There aren’t any definitive answers to this question yet, so we advise err on caution vs. waiting for an individual approval.

OPM may offer a waiver to accommodate your request without negatively impacting your retirement benefits, but it is uncertain how those will be administered.

Who Is Eligible for Deferred Resignation?

Deferred resignation is open to all full-time federal employees, with a few exceptions.

It does not apply to military personnel, employees of the U.S. Postal Service, individuals working in immigration enforcement and national security roles, and any other positions that your employing agency may specifically exclude from the program.

What If I Don’t Respond to the Deferred Resignation Email?

There are no consequences if you choose not to respond to the email regarding deferred resignation. 

Responding to this offer is entirely voluntary, and you are not obligated to accept or reply to the email. The decision to accept deferred resignation rests solely with you.

Can I Accept the Deferred Resignation Offer After February 6, 2025?

So far, the deferred resignation offer will not be available to those who decide to accept it after February 6, 2025.

However, exceptions may be made for employees on approved absence from January 28, 2025, to February 6, 2025.

If you were on PTO or approved leave during this time, you might still be eligible to accept the deferred resignation offer beyond the deadline. Your agency will have more answers for these exceptions in the coming weeks as it unravels all of the questions it receives. 

Should I Take a Deferred Resignation?

Deciding whether to take a deferred resignation depends on your individual/family circumstances.

When we sit down with our federal employee clients, here is a list of questions we often run through before deciding on retirement.

Financial Considerations

Financial Stability: Deferred resignation allows you to maintain your income and benefits until the set resignation date, which can be a great cushion but doesn’t last forever. Are you financially ready to accept this offer?

Are you eligible for an early or immediate retirement and need to weigh that decision? Qualifying for early and immediate retirement under the Federal Employees Retirement System (FERS) involves specific criteria. Here’s a breakdown of the qualifications for each retirement type:

• Immediate Retirement
  • Immediate retirement is available to FERS employees who meet any of the following sets of age and service requirements:
    • Age 62 with at least 5 years of service
    • Age 60 with at least 20 years of service
    • Minimum Retirement Age (MRA) with 30 years of service
  • The MRA varies depending on your year of birth, ranging from 55 to 57.
• Early Retirement
  • Early retirement, also known as a voluntary early retirement authority (VERA), is offered during specific agency workforce restructuring and allows employees to retire early under the following conditions:
    • At least 50 years old with 20 years of service
    • Any age with 25 years of service
• Special Provisions
  • Certain categories of federal employees, such as law enforcement officers, firefighters, and air traffic controllers, have different eligibility requirements due to the nature of their jobs:
    • Age 50 with at least 20 years of service
    • Any age with 25 years of service
  • These employees can retire earlier because of their work’s physically demanding and stressful nature.

Considerations for Early and Immediate Retirement

Reduction in Benefits: Early retirees, particularly those who retire before reaching the age of 62, may experience a permanent reduction in their retirement annuity unless they meet specific age and service combinations that exempt them from reductions.

Social Security and FERS Supplement: Retirees are eligible to receive Social Security benefits at age 62, but there are often penalties for early withdrawal before reaching full retirement age that may not make this approach your best option. The good news is if you were going to retire under a full retirement with MRA&30 or 60& 20 retirement then you will still get the FERS supplement 

 TSP funds can be accessed without penalty starting at age 55, though there are options for earlier access under certain conditions, those rules get very tricky so make sure you are working with someone who really understands them before you do this. Also, keep in mind the TSP has different rules than an IRA on when you can access the money without a penalty.

Cash Flow: Remember cashflow is the heart of retirement and it is not the gross pension that you should care about, it is the net (what you take home).  So after reductions (penalty if any and survivor benefits costs) then deductions (health insurance, taxes, etc) what is your net? 

Health Insurance: The best benefit – from our deeply green, envious eyes – that Federal Employees have is their health insurance. Before deciding if taking a deferred resignation is right, ensure you understand if you will keep or lose your health insurance. We talk more about how to keep your best benefit here.

We can’t say it enough: the continuation of your health insurance in retirement is the best benefit federal employees have. Ensure you have carefully considered this when deciding whether to continue federal service.

Tieing the financial pieces together

When we talk with Federal Employees about strategically planning their retirement, we often describe their benefits as a three-legged stool.

Feds who retire under FERS have their pension, social security, and personal retirement savings (such as The Thrift Savings Plan). These make up the three legs of their retirement stool.

If you are a Federal Employee considering retiring, what is your strategy for optimizing each? If you think of these like levers, you must evaluate how and when to pull each so you don’t potentially outlive your retirement savings. It may not make the most financial, long-term sense to simultaneously rip down on all three levers. Sometimes, it is often pulling on one and easing off the other. This is where you want to ensure you have worked with your financial advisor to map out a ten-year retirement income and tax planning strategy – yes, I said ten years. I know that planning that far in the future can seem daunting, but think of all the decisions you would have made differently ten years ago. Would you have done anything differently? 

In addition to these core financial areas that you need to consider, there are also other – BIG – questions that you need to answer on a personal level that are just as important.

There are two sides to financial conversations: math and emotion. The math doesn’t care about your feelings. The numbers are what they are. Never forget, though, that money, well money is emotional. Weighing the emotional weight of retirement is just as critical as understanding financial planning mathematically. Anyone who tells you otherwise probably hasn’t helped that many people to and through retirement before. 

Are you ready to retire emotionally? How will you account for days when the novelty of retiring wears off?  When you stop feeling like it is vacation or you are playing hookey, what will you do?  It isn’t all-day golf and gardening for many retirees.

Is your spouse ready for you to retire? Will you need to continue to work while your spouse is retired? Have you had conversations with one another about what that will look like for your household? If someone is sleeping in and another is going to work, does this work for your family?  

Are you considering a second career? If you love what you do but don’t want to do it for your agency anymore, what opportunities are there for you in the private sector?  Have you cleaned up your resume and floated it by a few companies you would like to work with?  Many of our Feds that retire and find themselves too young to stop working entirely enjoy doing another career that interests them or volunteering and non-profits.  What do you want to keep doing?

What should Federal Employees facing the Fork in the Road do?

As a Federal Employee Benefits expert, my primary advice—though not intended to be self-serving—is to consult your financial advisor. Someone who specializes in your benefits as a federal employee.  Do not face these decisions alone; ensure you have a financial sounding board to thoroughly explore your options and discuss what is best for you and your family in the long term.