For federal employees who are eligible to retire at their MRA or at 60, waiting until age 62 comes with a handful of perks.
While early retirement may seem tempting, waiting until 62 under FERS can unlock a suite of financial advantages that significantly impact long-term stability and income.
1. Enhanced Pension Formula: The 1.1% Multiplier
Retiring at age 62 with at least 20 years of service boosts your pension multiplier from 1.0% to 1.1%. This seemingly small increase translates to a 10% permanent boost to your pension. For example, a high-3 average salary of $100,000 with 20 years of service yields:
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At 1.0%: $20,000/year
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At 1.1%: $22,000/year — an extra $2,000 annually for life.
This example also doesn’t account for the extra service that would come with holding off on retiring for a year or more, which would also most likely translate to a higher average salary used when computing the FERS annuity. Working longer also often means higher earnings, which directly impact your pension.
2. Immediate Cost-of-Living Adjustments (COLAs)
FERS retirees under age 62 do not receive COLAs until they reach 62. Waiting ensures your pension begins adjusting for inflation right away, preserving purchasing power. Skipping COLAs for 5 years (e.g., retiring at 57) can lead to thousands in lost income in the long run. Exceptions include:
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Disability retirees
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Survivor annuitants
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Special category employees (e.g., law enforcement, firefighters, air traffic controllers)
There’s also compounding growth to consider. Each year’s COLA builds on the previous year’s adjusted amount. Missing five years of COLAs means you lose out on compounding increases.
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3. Social Security Eligibility
Age 62 marks the earliest eligibility for Social Security benefits. While delaying Social Security can increase monthly payouts, retiring at 62 gives you flexibility to start benefits if needed. And although retiring early may mean collecting the special retirement supplement (SRS), coordinating FERS and Social Security can create a more robust income stream. -Delaying Social Security can also increase spousal or survivor benefits, which may be based on your higher delayed amount.
4. More Time to Grow Your TSP
Continued employment allows for additional contributions to your Thrift Savings Plan (TSP). You continue to benefit from the government matching and catch-up contributions. Similar to COLAs with the FERS annuity, this is compounded growth over extra years. Plus, delaying withdrawals means extending growth potential. When you retire later, you postpone accessing retirement savings in your TSP, meaning investments continue to earn returns, potentially increasing your balance significantly. The longer you wait to apply for retirement, the less pressure there is to draw down your savings, helping your TSP money last longer.
5. Delayed Onset of Retirement Expenses
When you extend the longevity of your retirement assets, you reduce financial strain. It’s not just about having a big nest egg, but making that nest egg last longer as well. The goal is to stretch your resources across a potentially 30+ year retirement. The longer assets last, the less strain on your financial goals. Strategic withdrawals can help federal retirees stay in lower tax brackets, and using Roth conversions can optimize taxable income over time.
Healthcare costs often spike in your 70s and 80s. Preserving assets ensures you’re not forced to sacrifice care or lifestyle when expenses rise. Knowing your assets are built to last reduces anxiety, giving you the freedom to enjoy retirement without constantly worrying about money.
Final Thought - Waiting until age 62 to retire under FERS isn’t just about patience; it’s a strategic move that can yield tens of thousands of dollars in additional retirement income.
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