What is a Postponed Retirement under FERS?
A Postponed Retirement is another alternative option of federal retirement that is similar to the Deferred Retirement option. Both options are for those who do not meet both the age and/or the years of service requirements to qualify for the Immediate Retirement under FERS. The Postponed Retirement is a lesser-known option which has its advantages and disadvantages which we will explore here in just a bit.
Who is eligible for a Postponed Retirement?
In order to be eligible for a Postponed Retirement, the requirement is to retire having reached your MRA with at least 10 years of creditable service. This requirement overlaps with the requirements for a Deferred Retirement, and some retirees will have the option to choose either a Postponed or Deferred Retirement if they have not met the requirements for the full Immediate Retirement. The difference between requirements for a Postponed Retirement and a Deferred Retirement is that under a Deferred Retirement, you are able to retire before having reached your MRA, as well as having only 5 years of service. Here are a couple of examples illustrating the difference:
Example – Samantha: Samantha retires from her federal agency at the age of 60 with 15 years of service. Since Samantha has reached her MRA and has at least 10 years of service, she is eligible for a Postponed Retirement. She also has met the requirements for a Deferred Retirement, which include retiring younger than 62 with at least 5 years of service.
Example – Chris: Chris retires from his federal agency at the age of 52 with 25 years of service. Since Chris did not retire with special provisions under FERS (which includes law enforcement officers, firefighters, air traffic controllers, and more), then he would only be eligible for a Deferred Retirement since he didn’t meet his MRA to qualify for a Postponed Retirement.
When can I start my pension under a Postponed Retirement?
Like we discussed, a federal retiree who hasn’t met either the age and/or the length of service requirements found under the Immediate Retirement will be able to choose a Postponed Retirement if they have at least retire having reached their MRA with at least 10 years of service. They are allowed to start their pension either at 60 or 62, depending on how many years of service they have. As a reminder, the qualifications for an Immediate Retirement are:
- retiring at the MRA or older with at least 30 years of service;
- or retiring at 60 or older with at least 20 years of service;
- or retiring at 62 or older with at least 5 years of service.
Let’s at a couple of examples to illustrate when someone can start withdrawing their pension under a Postponed Retirement:
Example – John: John retires with the federal government at the age of 58 with 22 years of service. John can choose a Postponed Retirement and postpone his pension until he reaches his age 60 since he already has at least 20 years of service. Once he’s reached age 60, he can start withdrawing his pension.
Example – Samantha: Let’s reference our example of Samantha from above. Since Samantha has 60 years of service but has not met the requirement of having 20 years of service to qualify for the full Immediate Retirement, she can choose a Postponed Retirement and postpone her pension to 62 and start withdrawing it then. At age 62 she will have 15 years of service, which satisfies the requirement under the Immediate Retirement.
What are the Advantages and Disadvantages of a Postponed Retirement?
The main advantage of a Postponed Retirement is that you get to keep your health insurance, FEHB when you turn on your pension. This is the major drawback of retiring under a Deferred Retirement since you do not get to continue FEHB. In order to to keep your coverage, you had to have been enrolled in FEHB for at least 5 years prior to retiring. Under a Postponed Retirement, you are also able to continue life insurance coverage or FEGLI. Another advantage to the Postponed Retirement is that there is no penalty for starting your pension earlier than 62 like there is for the Deferred Retirement. As long as you have met the age and length of service requirements for an Immediate Retirement, then you will not be penalized for starting your pension at MRA or 60 under a Postponed Retirement.
The main disadvantage to the Postponed Retirement is that you have to temporarily give up FEHB during the time between when you retire and postpone withdrawing your pension. This can pose a challenge and can be a costly time period if you do not have coverage through another spouse or with another health insurance plan (such as TRICARE).
Sources
https://www.opm.gov/retirement-services/publications-forms/pamphlets/ri92-19a.pdf