Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Leaving Early

According to the Office of Personnel Management, more than 5,000 federal employees resign every month. If you've considered leaving your job before you're eligible to retire, have you considered what benefits you will take along?


Federal employees contribute to their retirement plans at the rate of 7 percent of salary (for CSRS) or 0.8 percent (for FERS). Employees who resign with less than five years of civilian service are not eligible for retirement benefits unless they return to federal service.

CSRS and FERS employees who resign with more than five years of civilian service (but before they are old enough or have enough service to retire with immediate benefits) may collect a deferred annuity. It begins the first day of the month after the employee reaches age 62. The benefit is computed based on the average of the employee's highest three years of federal salary and the length of service.

A former FERS employee who has at least 10 years of creditable service may elect to receive a deferred annuity as early as the first day of the month after reaching the minimum retirement age (which is 55 to 57, depending on the year of birth). Such annuities are reduced by 5 percent per year for each year the employee is younger than 62, with some exceptions.

Here's a quick way to compute the estimated value of a deferred annuity:

  • CSRS: Subtract two years from your years of creditable service, then multiply the resulting figure by 2 and add 0.25. The result is the percentage of your high-three salary that would become a deferred retirement annuity. For example, if a CSRS employee left with 15 years of service and a high-three average salary of $60,000, the calculation would be: (15 - 2) x 2 + .25 = 26.25% x $60,000 = $15,750.
  • FERS: Multiply your years of creditable service by 1 percent, then multiply the resulting figure by your high-three average salary. If you have more than 20 years of service and apply for retirement at age 62, the percentage used for computation is 1.1%. For example, if a FERS employee resigned with 15 years of service and a high-three average salary of $60,000, the calculation would be: 15 x 1% x $60,000 = $9,000.
If the FERS employee is married at the date of separation from service, survivor benefits would be payable to the spouse should the employee die before receiving the deferred annuity, as long as the employee had five years of civilian service and at least 10 years of total service. If there is not an eligible spouse who survives the former employee, retirement contributions would be refunded according to the standard order of precedence (as spelled out in last week's column).

Finally, as an alternative to a deferred retirement, you can choose to get a refund of your retirement contributions. CSRS employees may redeposit such refunded contributions with interest if they are rehired, but refunded FERS contributions can't be redeposited.


Departing employees are paid for unused annual leave in a lump sum. Agencies calculate such payments by multiplying the number of hours of accrued annual leave by the employee's hourly rate of pay, plus other types of pay the employee would have received while on annual leave.

Sick leave has no cash value for departing employees. But if you are rehired, you usually can have your sick leave credit reinstated.

Thrift Savings Plan

Your contributions to the government's 401(k)-style investment plan are yours. If you have at least three years of creditable service, the entire TSP account belongs to you, including the agency automatic 1 percent matching contribution. You can transfer your TSP funds to an IRA or keep the money in the TSP for future growth. If you leave before the year you turn 55, you may incur an early withdrawal penalty of 10 percent if you receive any of the money in your TSP account as a cash payment.

Remember, the money in TSP accounts has never been taxed, so any cash withdrawals will be subject to income tax in the year they are taken out. In most cases, employees can transfer their funds to their new employer's 401(k) plan without penalty or tax.

Social Security

You will continue to add to your Social Security wage record in the next phase of your career. Social Security taxes paid as a federal employee count the same as taxes paid in private sector jobs.

CSRS employees are exempt from paying Social Security taxes during their federal career, and may find that leaving government for the private sector will have an adverse effect on their future Social Security benefits. Social Security computes benefits on the highest 35 years of Social Security taxed wages. Having less than 35 years of Social Security covered wages will bring the average down by including years with no earnings.

Health Benefits

You can maintain coverage under the Federal Employees Health Benefits Program for up to 18 months. After that, you will not be able to reinstate coverage unless you return to federal employment. You must apply for the 18-month continued coverage at your agency's human resources office within 60 days from the date you leave government. Then, after a 31-day extension of your group coverage ends, you must pay the full premium (both the enrollee and government shares), plus a 2 percent administrative fee.

Life Insurance

You may convert all or part of your basic and optional insurance under the Federal Employees Group Life Insurance program to an individual policy. The policy will build cash value that you can borrow against. You cannot convert to term insurance. No medical examination is required to convert your coverage.

If you have assigned your insurance to someone else, the assignee, rather than you, is entitled to convert your basic, Option A and Option B coverage. You may still convert your Option C coverage.

Long-Term Care Insurance

Such insurance is fully portable; as long as you continue paying premiums, your coverage will continue at the same premium level. If you were paying premiums by payroll deduction, you'll have to make arrangements to start paying them directly or have them deducted from your bank account.

Flexible Spending Account

Your federal FSA will terminate as of the date you leave government. There are no extensions. For the health care FSA account, you can submit claims with dates of service from the effective date through your separation date. For the dependent care account, you can submit claims for the entire plan year. For example, suppose you left on Oct. 18, after receiving emergency care on Oct. 15. Even if you don't receive the bills until Oct. 31, you can be reimbursed for any eligible medical expense. But if you incurred expenses on Oct. 19 or later, you are not eligible for reimbursement even if there is still money in your FSA.


To Do

Keep all SF-50 forms showing your dates of service, including the one for your date of separation. Also, keep your last leave and earnings statement showing your sick leave balance and retirement contributions.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.


Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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