Federal Retirement – Should You Early Out?

When it comes to retirement from a career working for the federal government, there are a lot of different options.  No two retirements look the same.  People retire at different ages, at different stages of their career, and for a variety of different reasons.  VERA is a term that all federal employees should be familiar with because it stands for Voluntary Early Retirement Authority and it is what we are talking about when discuss whether or not you should opt to “early out” for retirement.  It is important to know that you must be eligible to early out, not everyone can be granted VERA.  There are 4 government requirements for an employee to be granted VERA:

  1. Meet the minimum age and service requirements –
    • At least age 50 with at least 20 years creditable Federal service, OR
    • Any age with at least 25 years creditable Federal service;
  2. Have served in a position covered by the OPM authorization for the minimum time specified by OPM (usually 30 days prior to the date of the agency request);
  3. Serve in a position covered by the agency’s VERA plan; and
  4. Separate by the close of the early-out period.

In essence, if you opt to early out for retirement, you are able to retire and receive an immediate annuity many years earlier than ordinary eligibility would mandate.  VERA was implemented for agencies that may be struggling financially, restructuring, reshaping, downsizing, transferring function, or reorganizing to temporarily lower the age and service requirements in order to increase the number of employees who are eligible for retirement.  For an agency to be able to offer employees VERA they must apply and receive approval from the Office of Personnel Management (OPM).  Typically, agencies are granted VERA for a period of time and employees must choose to early out within that window of time.

While an early retirement may sound great, there are some important considerations.  For CSRS employees, there is a penalty.  The Office of Personnel Management explains how the annuity will be calculated if you opt to early out, “Annuity is calculated based on the average high-3 salary and years and months of creditable service. Unused sick leave can be used for additional service credit. If the employee is under age 55, this calculation is reduced by one-sixth of one percent for each full month he/she is under age 55 (i.e. 2% per year).”  So, in essence, your annuity will be penalized by a small percent but, if you have not yet saved enough for retirement, that could impact your ability to live on your retirement income in the long run.  The OPM also notes that there is no annuity penalty for FERS employees who choose to early out but the Special Annuity supplement will not be provided until the minimum retirement age is reached.  Determining what the right step is for you can be confusing because there are a lot of calculations to consider and planning to be done.