I know there are a lot of current and pending federal retirees on this board. Hopefully, one or more of you know the answers to some technical questions relating to the FERS annuity and the effect of the associated COLAs.
After retiring from the military, I went to work in the federal civil service under the FERS retirement/benefit system. Under FERS, you qualify for a minimal deferred annuity at age 62 if you have worked at least five years, calculated at one percent per year worked times your high three average salary. If you work at least ten years, you can take the annuity early, as early as age 56, but the annuity rate is reduced by half a percent per year (e.g., if you would have had a ten percent annuity rate at age 62, you only get seven percent if you take the annuity early at age 56).
What I am wondering about is how the COLAs fit into all this.
For simplicity, lets say I left the civil service at age 56 with a high three average salary of $100,000 and exactly ten years of service. Here are my questions:
1) If I wait until age 62 to collect the annuity, I think I will get $10,000 a year (ten percent times $100,000), COLA-adjusted going forward after age 62. Is this correct? Assuming there is some inflation before I hit age 62, do I also get COLAs for the time period between age 56 and 62 or is my first annual draw at age 62 fixed at $10,000? I know that social secuity benefits continue to bump up with inflation betwen the time you stop working and the time you draw them, so am wondering if this deferred FERS annuity amount bumps up as well.
2) If I take the immediate annuity at age 56, it will be reduced from $10,000 a year to $7,000 a year. When do COLAs kick in on that? Right away (that is, when I am age 56), or only when I get to age 62? And don't tell me never, I don't want to hear that . . . .
I realize that these are pretty esoteric questions, but I bet there is someone on this board who has researched or even experienced this issue.
Thanks in advance!!
After retiring from the military, I went to work in the federal civil service under the FERS retirement/benefit system. Under FERS, you qualify for a minimal deferred annuity at age 62 if you have worked at least five years, calculated at one percent per year worked times your high three average salary. If you work at least ten years, you can take the annuity early, as early as age 56, but the annuity rate is reduced by half a percent per year (e.g., if you would have had a ten percent annuity rate at age 62, you only get seven percent if you take the annuity early at age 56).
What I am wondering about is how the COLAs fit into all this.
For simplicity, lets say I left the civil service at age 56 with a high three average salary of $100,000 and exactly ten years of service. Here are my questions:
1) If I wait until age 62 to collect the annuity, I think I will get $10,000 a year (ten percent times $100,000), COLA-adjusted going forward after age 62. Is this correct? Assuming there is some inflation before I hit age 62, do I also get COLAs for the time period between age 56 and 62 or is my first annual draw at age 62 fixed at $10,000? I know that social secuity benefits continue to bump up with inflation betwen the time you stop working and the time you draw them, so am wondering if this deferred FERS annuity amount bumps up as well.
2) If I take the immediate annuity at age 56, it will be reduced from $10,000 a year to $7,000 a year. When do COLAs kick in on that? Right away (that is, when I am age 56), or only when I get to age 62? And don't tell me never, I don't want to hear that . . . .
I realize that these are pretty esoteric questions, but I bet there is someone on this board who has researched or even experienced this issue.
Thanks in advance!!
