There’s no such thing as a “retirement magic number.” Whatever age you decide to retire is highly personalized and based on your own unique retirement goals. With federal employment, there are milestones that can unlock specific benefits, and the more you can reach, the better set up you’ll be to navigate your retirement decisions.
Work Anniversaries
5 Years on the Job
The current changes facing the federal workforce have highlighted probationary employees and the lack of job security they have relative to longer-tenured employees. For those new to the government, reaching the five-year mark is important—this milestone qualifies you for a pension one day. While it may not necessarily be a large pension, or an immediate one following retirement, reaching five years of civilian service and the age of 62 qualifies you for a pension under the current rules.
10 Years on the Job
Similarly, reaching your 10-year anniversary may qualify you for a form of retirement referred to as minimum retirement age (MRA) plus 10. MRA is a range of ages based on your birth year (between 55 and 57), but if your circumstances force you away from federal employment and you have these two qualifications, you should be eligible for an immediate retirement, which means income and access to health insurance.
20 Years on the Job
With all the current talk about Voluntary Early Retirement Authority (VERA), Voluntary Separation Incentive Payments (VSIPs), Discontinued Service Retirement (DSR), and Reduction in Force (RIF), federal employees are assessing if they are even eligible to participate in these different retirement programs—let alone if they want to. These programs can make you qualified to retire and receive a pension earlier—when you reach age 50 with 20 years on the job or at any age with 25 years on the job.
30 Years on the Job
For those fortunate few who have reached or are near the 30-year mark (which happens a lot more in federal employment than the private sector), this milestone allows you to achieve immediate retirement—which, again, means a pension and access to health insurance—upon reaching one’s MRA. This doesn’t necessarily mean the people choose to fully retire. They might go on to private sector work and achieve the famous “double dipping,” where you have two sources of income.
Ages
55
55 can feel early for a retirement age, but it’s the first age on the MRA chart (for those born before 1948). 55 is also important for another reason—if you reach this age while employed, and then separate, you can take withdrawals from your Thrift Savings Plan (TSP) without the 10% penalty. This provides an important source of bridge liquidity until fully retiring. For federal employees offered these VERAs who happen to be about age 53, they are weighing the advantages versus disadvantages of acting now versus a planned-out approach.
Minimum Retirement Age (MRA)
This is a provision within federal employment rules that gives you the option to retire at a specific age. This age is based on your birth year, and once you reach this age while employed and have met one of the tenures mentioned above, you have the option to retire. Knowing your specific MRA is important and being younger than MRA during this time makes for some difficult decisions.
59 ½
Reaching age 59 ½ unlocks IRS rules that open the door to withdrawals from qualified accounts like TSPs, 401(k)s, and IRAs without a 10% penalty. Withdrawals may still be taxed as income, but they won’t have the additional penalty. This might be relevant to your retirement timeline if you are trying to stay long enough to access your planned retirement funds.
62
Age 62 offers two important milestones. If you are 62 with five years of service, then you are eligible for this immediate retirement. You also become eligible for Social Security. Starting Social Security at the earlier age of 62 may not be best for your long-term financial plan, as it grows the longer you wait, but the option is there if needed.
Life Milestones
When the Kids Move Out
Many people use understandable thresholds to feel comfortable retiring or leaving their jobs. These are often related to an expense they see “coming off the books,” like children leaving the home and moving out on their own. This milestone occurs at different times for different people, but it’s something to keep in mind as you consider all your end of work options. If you haven’t already done so, it can be helpful to engage with a financial advisor to discuss cash flow planning and determine if this is a feasible option for you.
When You Pay off the House
For many households, if your money isn’t going toward your children, it’s going toward your house. Paying off a mortgage can feel like an opportune time to retire, as you’ll no longer have a large house payment each month. Perhaps you intend to move, and the proceeds of the home after paying off the mortgage will help you pay cash for the new one. Perhaps you can retire despite having a mortgage payment for the first few years of retirement. Or perhaps there is other liquidity you can use to pay off the remainder of the mortgage.
No matter your current situation, a financial or tax advisor can help you assess your options and plan for your future. You should also seek out clarification and details regarding these benefits with your human resources department.
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