Originally Published on Federal News Network. Read the Original Article on Federal News Network
Choosing your retirement date can be challenging with so many variables at play. Whether it’s being financially or emotionally ready, it can be difficult, or even scary, to move on from federal service.
“When would you like to retire?” A common question I ask any new prospective client.
“Yesterday, 60/65, or a milestone like 25 or 30 years of service,” they might say.
“What led you to that decision?” I ask, intrigued to see if they picked a number out of a hat or if they’d done their homework.
For many federal employees, this decision doesn’t get nearly enough attention. It’s one of the most important decisions you’ll ever make — and one you’ll live with for the rest of your life.
We also need to address the elephant in the room: The federal government isn’t the same workplace as it was several years ago. Stress, anxiety and uncertainty are at all-time highs, making it more tempting than ever to run for the exit the moment you become eligible for retirement. But before you make that decision, it’s important to understand exactly what you may be giving up by leaving earlier than planned.
In this article, I’m going to break down why you should consider retiring after 62, why it just got even more compelling, and how you can make this decision slightly less painful.
FERS Supplement
First, let’s look at what benefit you would be getting by retiring early — drumroll please — the Federal Employees Retirement System (FERS) supplement.
This benefit was created to help federal employees bridge the gap until they’re eligible to claim Social Security, provided they meet certain requirements. It matters here because it’s often the deciding factor for people weighing an earlier retirement in the first place. Without it, retiring before 62 can mean a large income gap before Social Security, not just a smaller pension. Understanding what you’re relying on — and how fragile that reliance might be — is a big part of why the 62+ decision deserves closer scrutiny.
This benefit was previously set to go away under the One Big Beautiful Bill Act, but Congress softened their tone and pushed out the effective date to January 1, 2028. It was removed from the bill entirely in the final days before it passed. While the benefit is still here for now, its future depends on political decisions that are impossible to predict, which makes leaning on it as your primary bridge strategy riskier than it looks.
Additional Years of Income & TSP matching
Now, let’s look at what you’d be giving up. For every extra year you work, you earn additional income and delay withdrawing funds from your retirement portfolio. Not only that, but you continue contributing toward your Thrift Savings Plan and receiving the government’s 5% TSP match. This means your gap period between retirement and starting Social Security shrinks and becomes less impactful, while your portfolio increases. This is the best-known reason to delay retirement, but as you’ll see, it’s far from the only one.
Cost-of-Living Adjustment (COLA)
One of the more surprising factors is the cost-of-living adjustment (COLA). If you retire before age 62, you won’t receive a COLA until at least age 62. In fact, the COLA becomes effective in December and is reflected in your January FERS annuity check. If you turn 62 in May 2026, for example, you don’t receive the COLA until January 2027. That could cost you approximately 2.2% in buying power each year (based on COLA averages between 1988 and 2025).
Some exceptions apply for those retired under disability, special provision employees (law enforcement, air traffic control, firefighters, et cetera), and those receiving survivor benefits from a deceased spouse.
10% FERS Annuity Increase
The biggest retirement milestone for federal service is a 10% increase to your FERS annuity. Once you reach age 62 with 20+ years of service, you receive 1.1% of your high-3 salary per year worked, rather than 1%. This benefit isn’t as widely known as it should be and should ideally serve as a benchmark to target.
Higher high-3 salary
For most federal employees, their final years of employment are their highest-earning years. Working longer can increase your high-3 and, ultimately, your FERS annuity. Salary increases may be modest, especially for GS-15s near the top of the pay range, but they still beat receiving no FERS COLA before age 62.
According to the Congressional Budget Office, the average federal employee receiving the FERS supplement retired at age 59. So, grab your coffee and calculator, because it’s math time.
Assumptions:
$100,000 salary at age 59
30 years of service at 59
No promotions or step increases
2% annual salary growth
$29,412 FERS annuity at 59
$37,767 FERS annuity at 62
If you retire at 59, you give up your $100,000 salary but begin receiving approximately $29,412 annually in pension income. By age 62, you’ve received about $88,236 in pension payments.
If you work until 62, your salary grows to approximately $106,120, providing roughly $300,000 in additional salary over those three years. You also start retirement with a pension that is approximately $8,355 higher per year, while receiving three additional years of agency TSP matching and making additional contributions to your TSP.
And that higher pension matters. With an additional $8,355 per year, plus future COLAs, that can add up to hundreds of thousands of dollars in additional lifetime income. The right answer depends on how you value those three years versus the additional income and your financial situation.
Spousal Benefits
Married individuals should strongly consider the increased pension benefits available at 62. If your pension is larger, it benefits not only you, but also your spouse, should you predecease them. This is magnified if the federal employee doesn’t expect to outlive their spouse, especially where there’s a decent age difference.
It Doesn’t Have To Be Painful
The benefits of waiting until 62 are significant. That can be a tough pill to swallow if you had a different number in mind for retirement, like 59.
However, there are ways to make this easier. Consider rewarding yourself for making this sacrifice in two ways:
Use sick/annual leave
Reward yourself
Treat the additional year(s) as a transition into retirement. Take vacations, make that home improvement, buy that dream car, take a personal or mental health day. Far too many people wait until retirement to really travel, when you’re just 80 hours of annual leave away from a two-week vacation in Europe.
Annual leave is going to pay you either way — for time you take off, or for time you don’t take off and later cash out. Either way, you’re being paid your hourly rate for hours you didn’t work. If you budget accordingly and have appropriate retirement savings, you won’t need to rely on that annual leave payout.
Waiting until 62 can lead to a more comfortable retirement, and the previously proposed changes to the FERS supplement and a shift from high-3 to high-5 salary calculations only strengthen that argument. But the numbers aren’t the whole story.
Retiring at 62 won’t be the right decision for everyone, and that’s okay. Your health, stress level, work environment, family circumstances, and, perhaps most importantly, your own sense of readiness all matter. Working longer will almost always look better on paper, but the question isn’t simply, “How much more will I have if I keep working?” It’s also, “What am I giving up by waiting?”
And even if you decide to work until you reach 62, financial readiness doesn’t automatically come with a birthday. Whether you do it yourself or with a financial professional, take the time to build a plan, stress-test it, and understand how your income, expenses, taxes, healthcare, portfolio withdrawals, and retirement benefits will all work together.
The goal is to get excited about retirement and focus on what you want to accomplish with the years ahead. That starts with understanding what you can afford, where your limits are, and what you want retirement to look like. This way you can step into it, whenever the time comes, with confidence and a clear sense of purpose.
About The Author
David Setia, AIF®, CMFC® is founder of FedWise Advisors.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy assures success or protects against loss.This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
