Now or Later 

To say that the mood surrounding planning for retirement has taken a stressful turn over these past few months would be an understatement.  

For many employees, the rules surrounding the notices offering a voluntary and, in some cases, involuntary, premature ending of a federal career have been confusing to say the least. There are acronyms that may not be familiar when offers land in your email box of a of Deferred Resignation Programs (DRP) 1.0 and for some, DRP 2.0; Voluntary Early Retirement Authority (VERA) with and without the additional benefit of a Voluntary Separation Incentive Program (VSIP); and the worst one of all, a notice of a major Reduction in Force (RIF), which involves an involuntary separation with Discontinued Service Retirement for those who meet the minimum age and service requirements. Here are just a few of the comments that have been preceding desperate requests for assistance and answers to questions from employees facing offers: 

• Am I understanding it correctly? It’s overwhelming!   

• My stomach is in knots over this, and I just read we only have a few days to submit our request.   

• When should I hit that button to go? 

• I’ve just been hanging on to see what will happen! I can just feel it and they know I’m eligible to retire. 

• I’m concerned about our current political environment and wondering if our retirement and insurance benefits are safe. 

• I had long planned on retiring around 64, 65…maybe 67. But with all of the uncertainty these days with our jobs, I have to face the reality that I might not be allowed to stay until 62. 

• I am probably taking the DRP but wanted to get some information before signing in ink. It has been quite difficult to understand what rights I will be giving up if I accept the DRP, thus making it harder to make an informed decision in a limited period of time. 

• My concern is that I may have a better chance to preserve my benefits with immediate eligibility vice a VERA or DSR via a RIF. 

• I am about to take a "deferred resignation program" offer and it seems that our human resource department has gone into hiding and won't surface again until we DRP folks are all gone. 

Since Jan. 28, when the first DRP was announced in the infamous “Fork in the Road” memo, this column has been focused on providing some clarity to the confusion. Today’s column will address the level of worry about the pros and cons of leaving now or waiting until later. Here are a few tips to help you understand the risks of waiting and whether it is worth the worry. I am going to provide a possible solution as well as a “sleep at night” rating to indicate whether this is something worth worrying about or not a big deal in the whole scheme of things. I will rate the “sleep at night” at a “1” if it means being up all night and I will give it a rating of a “10” indicating you will be sleeping like a baby.   

Worry #1: What if the rules change and my retirement is computed on my high-five average salary instead of my high-three average salary? Should I leave now, just in case?  

Analysis: Here is a comparison of a high-three average salary for an employee who had a salary rate of $156,755 in 2025.  Here salary in 2020 was $126,620. She had step increases in June 2022, and another one is due in June 2025. Her high-three average salary on Sept. 30, 2025, will be $146,831.58 and her “high-five” average salary based on her two step increases and January pay adjustments would be $139,967.23. This is a difference of $6,864.35.   

Let’s say that she would have 25 years of service on Sept. 30, 2025, and is retiring on this date under a VERA (Voluntary Early Retirement Authority). Her retirement using the high-three average and 1% FERS multiplier would be computed as $146,831.58 x 25 x 1% = $36,707.89/year or $3,058/month. Her retirement using the high-five average and 1% FERS multiplier would be computed as $139,967.23 x 25 x 1% = $34,991.80/year or $2,915/month. This would make a difference of $143/month.   

Solution #1: Let’s say to avoid this possible change, she moves her retirement up to May 31, 2025. Her high-three on this date would be $144,500.68 and her length of service is 24 years and eight months instead of 25 years. Now her retirement would be computed as $144,500.68 x 24.6667 x 1% = $35,643.54/year or $2,970/month. The difference is $87/month from what it would have been on Sept. 30, 2025, using the high-three average. However, this is $55 more than the high-five computation on Sept. 30, 2025.   

Ability to sleep at night: I would give this a rank of 7-10. The low end if she is not sure she is ready to retire and 10 if she is happy to be able to retire early so that she can _____.  Fill in the blank with join her spouse who is already retired, take a job in the private sector with better pay and/or benefits, start her own business, spend more time with her children who are in high school, etc.   

Worry #2: What is going to happen if Congress eliminates the FERS Supplement? 

Analysis: This will have no impact on the following individuals: 

• An employee who is already 62 or older, since the supplement is only available to employees who retire under age 62. 

• An employee who is going to continue working after they retire from federal employment, since the supplement is subject to an earnings limit (currently $23,400) that reduces the supplement by $1 for every $2 earned above the annual limit. 

• An employee who is retiring younger than their Minimum Retirement Age (57 for those born in 1970 or later) because, under VERA, the supplement is not payable until the MRA. There is a good chance that this individual would be returning to work when they find another job and may continue to work after age 57 when the supplement would have been payable.   

Solution: It is not clear, first of all, whether this will happen (as none of the proposals have become law as of today). Remember, this has been proposed quite a few times since FERS became law in 1986. If you are eligible for the supplement and need this benefit to afford to retire, then you may want to retire sooner rather than later if you are eligible to do so. The supplement can be worth 50% of your Social Security benefit payable at age 62 if you have 20 years of service and more if you have more service. The difference in your retirement retiring three or four months early is not that great (as you could see in the first example above), 

Sleep at night: This one ranks as a 3 – 6 on the sleep at night scale, but only for those individuals who are eligible for this and who need this income to afford to retire. Since FERS provides no cost-of-living adjustments before age 62, it will mean that many employees retiring early will need to work after they retire from federal service in their 50s. 

Stay tuned for more information about the “what-if” situations that you may be facing this year.