Retirement After Separation
Understanding your retirement options after RIF separation is essential for making informed financial decisions. Learn about deferred retirement, discontinued service retirement, TSP options, and benefits continuation.
Retirement Options for RIF'd Employees
If you have been separated through RIF, your retirement options depend on your retirement system (FERS or CSRS), your age, and your years of creditable service. Even if you are not eligible for immediate retirement, you may qualify for a deferred annuity or discontinued service retirement. Understanding these options is critical for your long-term financial planning.
Important: Retirement decisions can have significant, long-term financial consequences. Consider consulting with a financial advisor or retirement specialist in addition to the information provided here. AFGE Local 2883 can help connect you with appropriate resources.
FERS (Federal Employees Retirement System)
Discontinued Service Retirement (DSR)
If you are separated by RIF involuntarily (not through resignation), you may be eligible for discontinued service retirement if you meet these age and service requirements:
- Age 50 with 20 years of service
- Any age with 25 years of service
DSR provides an immediate annuity, but with an important distinction: if you are under your Minimum Retirement Age (MRA), your annuity will be reduced by 2% for each year you are under age 55 (not the MRA). This reduction is permanent. Calculate the financial impact carefully before electing DSR.
Deferred Retirement
If you have at least 5 years of creditable civilian service but do not meet the age/service requirements for immediate or discontinued service retirement, you are eligible for a deferred FERS annuity. Your options are:
- At your MRA: You can begin receiving your annuity at your Minimum Retirement Age (55-57, depending on your birth year), but it will be reduced by 5% for each year you are under age 62
- At age 62: You can begin receiving your full, unreduced annuity
To preserve your deferred retirement eligibility, do not withdraw your FERS retirement contributions from the retirement fund. If you take a refund, you forfeit your right to a future annuity based on that service.
FERS Supplement
If you retire under discontinued service retirement before age 62, you may be eligible for the FERS Supplement (also called the Special Retirement Supplement or SRS). This benefit approximates the Social Security benefit you earned during your federal service and is paid from retirement until age 62, when you become eligible for actual Social Security benefits. Note that the FERS Supplement is subject to an earnings test if you have income from employment exceeding the Social Security exempt amount.
CSRS (Civil Service Retirement System)
If you are in the CSRS retirement system (or CSRS Offset), the rules for discontinued service retirement are similar but with some differences:
Discontinued Service Retirement Eligibility
Age 50 with 20 years of service, or any age with 25 years of service. The annuity is reduced by 2% for each year you are under age 55 (same as FERS DSR).
Deferred Retirement
With at least 5 years of creditable civilian service, you can receive a deferred annuity beginning at age 62. As with FERS, do not withdraw your retirement contributions if you want to preserve this benefit.
CSRS Annuity Calculation
The CSRS annuity is generally more generous than FERS because CSRS employees contributed more to the retirement fund and typically do not receive Social Security based on their federal service. The basic formula is 1.5% of high-3 average salary for the first 5 years, 1.75% for the next 5 years, and 2% for each year beyond 10.
Sick Leave and Retirement Credit
Under both FERS and CSRS, your unused sick leave balance at separation is credited toward your retirement annuity computation:
- FERS: Your full sick leave balance is added to your total service for annuity computation purposes (this has been fully phased in since 2014)
- CSRS: Your full sick leave balance is also credited toward your retirement computation
- Sick leave credit applies only to the annuity computation — it does not count toward meeting the minimum service requirements for retirement eligibility
- If you return to federal service later, any sick leave that was credited toward retirement will be restored to you as a sick leave balance
Keep records: Document your sick leave balance at separation. If you elect deferred retirement years later, you will need to provide this information when applying for your annuity. Your separation SF-50 should reflect your leave balances.
TSP Withdrawal Options
Your Thrift Savings Plan account is yours to keep after separation. You have several options:
Leave It in the TSP
Your money continues to grow tax-deferred. TSP fees are among the lowest in the industry. You can change your investment allocation at any time. Required Minimum Distributions (RMDs) begin at age 73.
Partial Withdrawal
You can take one or more partial withdrawals after separation. Each withdrawal must be at least $1,000. Partial withdrawals allow you to access some funds while keeping the rest invested.
Monthly Payments
You can set up monthly payments based on a dollar amount or based on life expectancy. You can change or stop monthly payments at any time.
Rollover
Roll your TSP balance into a traditional IRA, Roth IRA, or new employer's plan. Direct (trustee-to-trustee) rollovers avoid tax withholding and penalties. Consider comparing fees and investment options before rolling over.
Full Withdrawal
You can withdraw your entire balance as a lump sum. This will be subject to income tax and, if you are under 59½, a 10% early withdrawal penalty. The "Rule of 55" exception applies if you separate from service during or after the year you turn 55 (50 for certain public safety employees).
Health Insurance in Retirement
If you retire under discontinued service retirement (immediate annuity), you may be eligible to continue your FEHB coverage into retirement:
- Eligibility requirement: You must have been enrolled in FEHB (or covered as a family member) for the 5 years of service immediately preceding your retirement, or for all service since your first opportunity to enroll, if less than 5 years
- In retirement: If eligible, the government continues to pay the employer share of your FEHB premium, and your share is deducted from your annuity
- Deferred retirement: If you elect deferred retirement at age 62, you may also be eligible for FEHB continuation if you met the 5-year enrollment requirement at the time of your separation
Gap in coverage: If you separate and later begin a deferred retirement annuity, there may be a gap in your FEHB coverage between separation and the start of your annuity. Plan for alternative health insurance during this gap period (Healthcare Marketplace, spouse's plan, COBRA/TCC, etc.).
How to Apply for Retirement Benefits
Determine Your Eligibility
Review your service computation date, creditable service, and age to determine which retirement option (if any) you qualify for. Your agency HR office should provide you with retirement counseling before separation.
Request a Retirement Estimate
Ask your HR office for an estimate of your annuity under each option you may qualify for (immediate DSR, deferred at MRA, deferred at 62). Compare these with and without the 2% age reduction where applicable.
Complete the Application
For immediate or discontinued service retirement, submit your application (SF 2801 for CSRS, SF 3107 for FERS) to your servicing HR office before your separation date. For deferred retirement, you will apply directly to OPM when you reach the eligible age.
Make Elections
Choose your survivor benefit elections, FEHB continuation, FEGLI continuation, and tax withholding. These elections can have lasting financial impacts, so consider them carefully and seek professional advice if needed.
Need Retirement Guidance?
Retirement decisions are complex and permanent. AFGE Local 2883 can help connect you with retirement counseling resources and answer questions about your options.
Contact Us for Guidance