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Pay & Benefits

Too young to retire? What to know about early retirement offers

If you're one of the many federal employees being offered early retirement but are still years away from your Minimum Retirement Age, you may be feeling uncertain and anxious about whether to accept the offer now or wait to see what unfolds.

Tammy Flanagan

April 10, 2025

Tammy Flanagan

Retirement Counseling and Training www.retirefederal.com

Are you one of the many employees being offered early retirement who are still years away from their Minimum Retirement Age (MRA) which is age 57 if you were born in 1970 or later? If so, you may be feeling worried and unsure about whether you should accept the current offer (if there is one) or to wait it out to see what happens next.

Many agencies are offering early retirement or a second chance at accepting a “deferred resignation” offer. As a refresher, early retirement is available at age 50 with 20 or more years of service and at any age if you have 25 or more years of service.

There are two types of early retirement; one is voluntary, and the other one is involuntary. The Voluntary Early Retirement Authority (VERA) is an offer to retire early that can be turned down since it is “voluntary!” However, early retirement can be an involuntary action due to a major Reduction in Force (RIF). An involuntary early retirement is called Discontinued Service Retirement (DSR).

Here are some things to know about VERA and DSR:

You must be offered a VERA or be subject to an involuntary separation to retire under the reduced age and service requirements of a VERA or DSR. In other words, without this offer, the regular retirement age and service requirements specify that you must be at your MRA with 30 or more years of service, 60 with 20 or more years of service, or age 62 with at least 5 years of civilian service to retire with immediate retirement with no age reduction. Also, anyone covered under FERS who is at their MRA with at least 10 years of service is eligible for an MRA + 10 retirement, but if they don’t meet the requirements for an unreduced retirement, they would be subject to a five percent penalty for every year they are under age 62 (but they may postpone applying for this benefit to avoid the age reduction).

To apply for retirement benefits, employees must submit their retirement applications (SF 3107 for FERS or SF 2801 for CSRS) to their HR service centers. This can be done at any time after receiving the notice and after you have decided on the date you will leave your federal career. It is important to request and receive an estimate of your retirement benefit along with answers to questions regarding your transition to retirement to be sure you are eligible to retire and to be sure all of your federal and military service will be properly credited towards the computation and eligibility for retirement.

Under FERS, there is no penalty for accepting early retirement whether it is voluntary or involuntary. This means that if you meet the age and service requirements for VERA or DSR, there will be no age reduction applied to your FERS retirement benefit. Remember if you are at or over your MRA, you must have at least 20 years of service to be eligible for VERA or DSR retirement benefits. As all current CSRS employees should be over age 55 since they must have federal service that was performed before 1984, there are no age reductions for CSRS employees who apply for retirement in the current downsizing that is being conducted.

The FERS benefit is computed by multiplying a factor of one percent by your years and months of service (including sick leave hours that have been converted to months and days of service) and then multiply the result by your high-three average salary. CSRS retirements are computed using a more generous 3-part formula.

There is a FERS Special Retirement Supplement (SRS) which is payable at your MRA. This means if you retire younger than your MRA the supplement will not be paid in your first retirement payments but will be automatically added when you reach your MRA. The SRS provides additional income that replicates the Social Security benefit you’ve earned based on your federal civilian employment.

There are no cost-of-living adjustments on your retirement under VERA or DSR until you reach the age of 62. This is also true of regular option retirement benefits under FERS. CSRS retirements receive immediate COLAs starting in the first year of retirement.

Here is a timeline that many employees have been facing so far this year:

Jan. 28: The Deferred Resignation Program began with the Fork in the Road memo. Employees had a short window to decide to accept this initially “unbelievable offer” to leave federal service on Sept. 30 and as of a “to-be-determined” date, they would be placed on paid administrative leave with full pay and benefits while waiting to be terminated after voluntarily accepting the DRP. Those who met the requirements for early retirement (VERA) could apply to begin immediate retirement benefit with a separation date as late as Sept.30 or up to Dec. 31 if they became eligible to retire before the end of the year.

An offer of this kind had never been offered in this way to federal workers in the past and the nature of it and the manner it was introduced sounded very un-government-like. For example, one of the FAQs stated that, “You are most welcome to stay at home and relax or to travel to your dream destination. Whatever you would like.” There also was an undercurrent of a threat of losing your job anyway if you turned down the “offer.” An estimated 75,000 federal employees took advantage of the first “Fork in the Road” and are now on paid leave waiting for their last day as a federal employee to arrive. Most HR offices have been overwhelmed with requests for assistance, and many employees were left hoping for the best based on the information they could find on their own.

VERA/VSIP Offers: As of March 15, a variety of agencies have begun to offer separation incentives to employees. This includes the departments of Commerce, Education, Health and Human Services and Veterans Affairs, as well as the General Services Administration and Transportation Security Administration. These agencies have requested or have already received authority to offer early retirement (VERA) and buyouts. The maximum amount of a VSIP is capped by law at $25,000 for OPM approved VSIPs (some agencies have their own VSIP authorities and may have higher caps). The Voluntary Separation Incentive Payment (VSIP) or “buyout” was offered instead of the DRP benefit of paid administrative leave. An employee of the Securities and Exchange Commission shared that the SEC offered a $50,000 buyout and it expected that more than 10% of the agency’s roughly 5,000 staff are expected to leave in the coming weeks and months.

Second round of DRP: Many agencies are giving employees another chance to accept a “deferred resignation” offer, before taking further steps to shrink its workforce. Notices have been emailed to affected employees offering a “second and final” chance to accept the deal, which continues to include going on paid administrative leave through the end of the fiscal year. Employees have a few weeks and, in some cases, a few days, to accept the offer.

RIF Notices: What will come next for some employees will be mass layoffs that will be involuntary separations that agencies will conduct under RIF procedures. In fact, this has already begun to affect many federal employees, including thousands of probationary employees. The Internal Revenue Service began issuing layoff notices to employees on April 4 in what is expected to be a sweeping reduction of the agency’s more than 90,000 employees. During a major RIF, employees who meet the early retirement age and service requirements could apply for DSR.

This can be very confusing and frankly very stressful when there are so many variations of retirement eligibility with varying degrees of benefits payable. For instance, here are some of the most common questions that employees have been asking in recent months:

Will I receive the FERS supplement if I am eligible for early retirement (VERA and/or DSR)? Yes, the supplement is payable, but not until your MRA.

Are there cost-of-living adjustments for FERS retirement benefits? Yes, but for retirement under FERS, not until you reach the age of 62. When you retire before age 62, the payment is not adjusted for inflation until the first December after your 62nd birthday. CSRS retirement benefits are adjusted annually beginning with the first year of retirement. There is an exception for special groups such as law enforcement officers and firefighters who receive COLAs immediately after retirement (if they meet the age and service requirements for their special retirement benefits which are different from VERA and DSR). Disability retirement benefits and survivor benefits also receive immediate COLAs.

If I don’t accept these early retirement offers, will Congress change the rules and make our benefits less generous? The answer to this is unknown, however, there are bills in Congress that, if passed into law, would make changes that would lessen the value of your retirement benefits. Normally, changes that would reduce the value of your retirement are generally a longshot at best and rarely are anything to worry about very much. This year has been anything but normal, so the possibility of a reduction in your retirement value is a possibility. The best you can do is to make your decisions on what the current law is and consider the risk of waiting by evaluating the impact of the proposed changes.

Congress has been at work trying to adopt the budget resolution.On ThursdayHouse Speaker Mike Johnson,R-La., was able to get a bill through that chamber though concerns were expressed about the budget blueprint, which directs the Senate to cut a minimum of $4 billion, while the House instructions tasked several committees with cutting at least $1.5 trillion in spending. In a letter to House lawmakers, National Active and Retired Federal Employees’ Association President Bill Shackelford argued that “at a time when the current administration is conducting massive and indiscriminate reductions in force and attempting to eliminate – or at least greatly erode – the merit-based civil service system, cuts to federal benefits would pile onto an already beleaguered and under-assault workforce, further undermining the appeal of public service on behalf of this nation.” Specific proposals that could be enacted pursuant to the budget resolution include the following: 

Shifting substantial heath care costs onto enrollees, by changing the FEHB program’s premium share model to a voucher system where the government would pay a flat amount that would not increase at the same rate as premiums,

Requiring all FERS employees to contribute 4.4% of their salary towards retirement with no additional benefit, a substantial increase from the current 0.8% contribution for pre-2013 hires.

Ending annuity supplement payments for FERS retirees who retire before age 62,

Basing annuities of future retirees on a High- 5 instead of the current High-3,

Although these benefit changes are not anything anyone would want to see happen, not all of them will apply to your situation. Consider what would happen if any of these proposals were passed into law and how they might impact the value of your retirement benefit.

The shift in health care costs would impact employees and retirees alike, so it wouldn’t have much influence over your decision to retire now or later.

The increased retirement contribution would not affect you after you have retired, so this may not be a big deal for people who decide to retire in 2025.

Ending the annuity supplement will not affect anyone applying for a deferred or MRA + 10 retirement since they are not eligible for this benefit. The supplement is only payable to employees who retire under age 62. For those who return to work, the supplement can be terminated due to the earnings limit for those who are entitled to this benefit.

A change to the high-five would reduce the value of your retirement, but if you work longer with more service, the impact would be minimal.

What are some things you can do to determine if you can afford to retire?

Estimate the value of your retirement benefits, including your government pension under CSRS or FERS; Social Security and the distributions you may be able to withdraw from your TSP.

Consider how much you spend every month. Are there any expenses that would decrease after you retire? How much debt do you have?

Consider consulting a financial advisor to find ways to maximize your benefits and minimize your taxes.

How will you find employment in the private sector if you leave federal service this year? If you need to work longer to afford to retire, you may need to put off your decision until you face an involuntary separation. With any luck, your position will be spared, and you will be able to finish your career. USA Jobs is where you can find information about the Career Transition Assistance Plan (CTAP) and the Interagency Career Transition Assistance Plan (ICTAP). CTAP is an intra-agency program that helps surplus or displaced federal employees improve their chances of finding a new job in their agency, by giving them selection priority over other applicants, if they're qualified for the job. ICTAP is an interagency program that helps surplus or displaced federal employees improve their chances of finding a new job at another agency (not their current or former agency), by giving them priority over other applicants from outside the agency. The problem with these programs is that a requirement is that the agency you're applying to must be accepting applications from outside of their workforce. One place to look for a new career may be in state or local government. Many state and local governments are hiring former federal workers with recruitment drives focused on employees who expected to spend their careers performing civil service duties with the federal government. According to the Indeed Hiring Lab:

Applications from workers at federal agencies under DOGE review surged by 50% in February.

Remote work is popular among federal workers actively looking at jobs, with 3.2% of job searches including the phrases “remote,” “work from home,” and/or “remote work from home.”

The shares of searches for horticulture and employee relations roles are more than 10 times above where they were last year, likely coming from impacted workers in diversity, equity & inclusion (DEI) roles, and workers coming from the US Department of Agriculture (USDA) workers.

The Indeed Hiring Lab also makes a very good, but unfortunate, point: Federal workers and contractors are highly educated and are looking for work at a time when there are likely fewer opportunities that match their education and experience.

As you know if you follow my column, I’ve been writing about the “Fork in the Road” since it started, so here are those columns over the past few months that you may want to refer to as well as today’s edition: