Immediate pension vs. deferred pension


Q. I am a 60-year-old FERS employee with 19 years and four months of service. I have 2,000 sick leave hours, which I know at Jan. 1, 2014, will get full credit. I have an opportunity to work in the private sector now with increased pay. Which is better: to retire now and receive my pension (although at a reduced rate) and maintain my enrollment in Federal Employees Health Benefits or to defer my annuity to age 62 and then re-enroll in FEHB?

A. You are asking for an opinion, which I can’t give you. You’ll have to work this out for yourself. Start by understanding how things would work financially. In either case, your annuity would be computed using the standard formula: .01 x your high-3 x your years and full months of service. If you began receiving it immediately, your annuity would be reduced by 5 percent for every year you were under age 62. Further, you wouldn’t be entitled to any cost-of-living adjustments until you reached age 62.

If you retired and postponed the receipt of your annuity to age 62, it would be the same amount you were entitled to on the day you retired. However, there wouldn’t be any age-based reduction in it. And you would be entitled to cost-of-living adjustments from that point forward.

In neither case would you be entitled to the special retirement supplement.

As for your health benefits, if you were enrolled in the program for the five consecutive years before you retired, you could carry that coverage into retirement. If you immediately began receiving your annuity, your coverage would be seamless. If you postponed its receipt, it would stop after 31 days, at which point you could continue it for up to 18 months under the temporary continuation of coverage provision, where you would pay the entire premium, plus 2 percent. If you postponed the receipt of your annuity, you could re-enroll when your annuity begins. Now get out your pencil and do the math.


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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to

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