Q&A: Should I retire before the proposed legislation takes affect?
Question
I’m concerned about the recent legislative proposal regarding the possible elimination of the FERS Annuity Supplement, as well as changing from high-3 to high-5. My plan to retire this December could be negatively impacted if this passes. Do you think I should retire sooner to lock in my benefits and avoid losing out?
Here’s an excerpt from Fedweek:
Eliminate FERS Supplemental Retirement Payments
• This option would eliminate the supplement to FERS employees who retire before they are eligible for Social Security. Under current law, if an employee retires before 62, a supplemental FERS payment is made to bridge the employee until they are eligible for Social Security. This change will align federal retirement policies more closely with the private sector and encourage longer service.
Base FERS Retiree Benefit on High-5 Instead of High-3 Salary
• This policy option would change the FERS retirement formula to use the average of employees’ earnings over the five consecutive highest earning years as opposed to the currently used calculation of the highest three consecutive years. This shift, which would reflect employees’ career earnings more accurately and be more in line with private sector plans, would reduce FERS spending to ensure the system’s long-term sustainability.
Answer
As of now, I am not concerned at all. Here’s what I have been telling clients:
Three reasons why you probably don’t need to panic:
- Doubtful it’ll pass:
This proposal (or something like it) has surfaced repeatedly in recent years and never actually became law. - You may be grand-fathered in:
Even if passed, historically such changes usually apply only to new employees, not current federal employees. (It definitely seems immoral to change the rules on people who have been paying into the system for decades. - Delayed Implementation:
Even in the unlikely scenario it applies to current employees, significant benefit changes usually aren’t effective immediately—expect at least a one-to-two-year runway (likely 2026 or beyond). This should give you at least some lead-time to make a level-headed decision, instead of panic retiring.
So, if you were aiming to retire in December of this year, I think you’ll be fine waiting until then.
I’m keeping tabs on these proposed changes. I plan to blast out any news as it comes in.
I hope this helps!
Stephen
