For federal employees contemplating retirement, understanding the nuances between different retirement strategies is essential.
Except for a few very senior employees, most federal workers fall under the Federal Employee Retirement System (FERS).
It’s particularly important to understand whether FERS deferred retirement or FERS postponed retirement is a better fit for your circumstances.
In this article, we’ll clarify the difference between these two different retirement options and help you understand which one might be better for you.
However, if you need specific advice for your situation, then contact a competent FERS disability retirement attorney today.
Understanding Your Options: FERS Deferred or Postponed Retirement
First, we need to explore what the terms “deferred retirement” and “postponed retirement” mean. Although these options fall under the FERS, they each operate under distinct circumstances and hold unique implications for retirees.
Deferred retirement is typically for FERS employees who leave federal service before they reach the minimum retirement age (MRA).
You can apply for deferred retirement if you have at least five years of creditable civilian service. However, bear in mind that you can’t withdraw your contributions to the retirement fund. If you do, you won’t be eligible for deferred retirement.
On the other hand, postponed retirement is an option for FERS employees who have reached their MRA and have somewhere between 10 and 30 years of service.
Postponed FERS retirement allows you to delay receiving retirement benefits to avoid the age reduction penalty.
What Are the Differences Between Deferred Retirement and Postponed Retirement?
Besides the eligibility requirements and the retirement benefits that we just mentioned, there are several other differences between deferred retirement and postponed retirement.
Insurance Benefits
One critical difference lies in health insurance and life insurance benefits.
Under FERS deferred retirement, you are not eligible to continue receiving either Federal Employees Health Benefits (FEHB) or Federal Employees Group Life Insurance (FEGLI) after you leave federal service.
If you choose to postpone your retirement, you can reinstate your FEHB and FEGLI when you begin to receive your annuity.
However, to receive these benefits, you need to show that you were enrolled in these programs at least five years before your separation.
Survivor Benefits
Another key difference involves survivor benefits. If you die while receiving a deferred retirement annuity, no survivor annuity is payable.
This is because you have to receive an immediate annuity that began within 30 days of your separation to be able to receive survivor benefits.
By contrast, FERS postponed retirement can sometimes pay out survivor benefits to your loved ones if you pass away before receiving your annuity.
Thrift Savings Plan
FERS deferred and postponed retirements also differ when it comes to the thrift savings plan (TSP). All employees under FERS benefit from the TSP.
Furthermore, deferred retirees and postponed retirees can withdraw their TSP funds. However, if deferred retirees can withdraw their TSP funds after they separate, they will have to pay the IRS’s early withdrawal penalty if they are below the age of 59 and 6 months.
However, postponed retirees do not have to pay the early withdrawal penalty because they are already at their MRA.
Cost of Living Adjustments
Lastly, FERS deferred retirement does not offer cost-of-living adjustments (COLAs) until the retiree reaches the age of 62.
Conversely, retirees under FERS postponed retirement can receive COLAs as soon as they begin receiving their annuity, even if they are under 62.
Is There a FERS Deferred Retirement Calculator I Can Use?
Many people find it helpful to visualize their retirement options with a retirement calculator.
While OPM offers a general formula for calculating your FERS retirement, they do not offer a calculator specifically for deferred retirement situations.
If you’re looking to calculate your potential retirement sums, it’s best to contact an experienced federal retirement attorney.
Let Us Help You Determine Whether FERS Deferred Retirement or Postponed Retirement Is a Better Option
While this article provides a basic understanding of the interplay between different kinds of retirement, it’s only a foundation. The truth is that retirement decisions can be complex.
In addition, the choices you make for your retirement will have tremendous effects on your life down the road.
Consequently, it’s prudent to reach out to a knowledgeable federal attorney who can give you the advice you need.
Our team of adept attorneys at the Federal Employment Law Firm of Aaron D. Wersing, PLLC, is deeply knowledgeable about the nuanced legal factors intrinsic to FERS deferred and postponed retirement cases.
In addition, we share an abiding passion for helping the dedicated civil servants who make our country’s government run effectively. Together, we can help you understand which retirement option is best for you in light of your circumstances.
We’ll then take the steps necessary to put your plan into motion, including helping you complete your application for deferred or postponed retirement under FERS.
If necessary, we’ll work with your agency to ensure that your legal rights are respected and that you receive the retirement benefits that you rightfully deserve.
Contact us today to set up your initial appointment by calling us at 866-612-5956. You can also visit our website online.
Aaron Wersing, Attorney at Law
Aaron Wersing is the founder of the Law Office of Aaron D. Wersing. Mr. Wersing graduated from the Georgia State University College of Law with a Doctorate in Jurisprudence and was the recipient of the CALI Excellence for the Future Award. Mr. Wersing previously attended the University of Georgia, where he received a Bachelor of Business Administration degree in Accounting. Mr. Wersing is an active member of his local community. Mr. Wersing acts as a volunteer attorney with Houston Volunteer Lawyers, the pro bono legal aid organization of the Houston Bar Association. He is also a member of professional legal organizations such as the National Employment Lawyers Association and the American Inns of Court. To reach Aaron for a consultation, please call him at (833) 833-3529.
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