Age Penalty for Postponed Retirement

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Retired FERS on 12/31/16 with MRA of 56 and with 26 years of service. My full retirement age is 60 since I had 20+ years instead of 62. I’m thinking of taking my retirement for the FEHB benefit. My question is…will I be penalized 10% (5% year until I’m 60 in two years) or will it be 20% for 62? I got two different answers from OPM of 20% and 10%.

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Asked on September 14, 2018 1:56 pm
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If I read your question correctly, you state you retired on 12/31/2016 at your MRA of age 56 however, when I continue reading I believe you meant you resigned your federal position at your MRA with 26 years of service and are trying to decide when to take your retirement and if you take it prior to age 60, what is the age penalty. Please correct me if I am wrong. If you take your postponed retirement at age 58, it will be penalized 20% because you are 4 years under the age of 62. If you take it at age 60, there is no penalty. I am sorry you have received conflicting responses from the Office of Personnel Management but it is very clear in both the Code of Federal Regulations (CFR) and the CSRS FERS Handbook.
§ 842.404 Reductions in basic annuity.
The annuity of an employee or Member retiring under § 842.204(a)(1) or § 842.212(b) is reduced by five-twelfths of 1 percent for each full month by which the commencing date of annuity precedes the 62nd birthday of the employee or Member, unless the individual –
(a) Has completed 30 years of service; or
(b)
(1) Has completed 20 years of service; and
(2) Is at least age 60 on the commencing date of annuity
Chapter 42, CSRS FERS Handbook, page 7
For employees under age 60 with 10 to 29 years of service, the basic unreduced annual annuity is reduced by five-twelfths of 1 percent for each full month by which the commencing date of annuity precedes the 62nd birthday of the employee. The reduction is 5 percent for each year the employee is under age 62. The reduction is permanent and does not stop when the retiree reaches age 62.

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Answered on September 14, 2018 3:12 pm
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Elaine, thank you for your response. You are correct in your interpretation. Technically, I resigned (I call it retired early) after reaching my MRA. It’s seems odd that I get penalized requesting the annuity before 60 and if I do, the age penalty goes up to 62 but if I take it at 60, I get the unpenalized amount. It is what it is. At least now it’s there if I need to start taking it. I think I’ll wait a year or two. Thanks again for your response.

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Answered on September 14, 2018 4:08 pm
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Craig, a Voluntary Retirement Option with no age penalty is available at the MRA with 30 or more years of service or age 60 with 20 or more years of service or age 62 with at least 5 years of creditable service. They make the MRA+10 available with the age penalty unless you reach the Voluntary Retirement age/service requirements. Sorry I didn’t have better news but at least you are armed with the correct information to make your decision.

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Answered on September 14, 2018 4:27 pm